NOTE 2 – INVESTMENTS IN JOINT VENTURES:

In 2007, a subsidiary of UES entered into an agreement with Maanshan Iron & Steel Company Limited (Maanshan) to form a joint venture company in China. UES owns 49% of the joint venture company and Maanshan owns 51%. Both companies contributed cash for their respective interests (which equated to $14,700 for UES). The joint venture company principally manufactures and sells forged backup rolling mill rolls of a size and weight currently not able to be produced by UES. A significant portion of its sales have been to Maanshan or entities controlled by Maanshan. Additionally, the majority of its raw materials are purchased from Maanshan or entities controlled by Maanshan. UES has not guaranteed any of the obligations of the joint venture; accordingly, its maximum exposure of loss is limited to its investment. Since UES is the minority shareholder and allocation of earnings and voting rights are proportional to ownership interests, UES is not considered the primary beneficiary and, accordingly, accounts for its 49% interest in the joint venture under the equity method of accounting.

Losses of the joint venture approximated $(2,165), $(4,203) and $(3,254) for the twelve month period ended September 30, 2014, 2013 and 2012, respectively, of which the Corporation has recognized its share (49%) in its consolidated statements of operations. The joint venture has been adversely impacted by the global economy, with significantly depressed pricing, reduced demand and excess roll inventories of its potential customer base in China - all hindering profitability. Losses have been incurred since 2009, in which we have recognized our share (49%) in our consolidated statements of operations, and are expected to continue in 2015. Additionally, the overall financial strength of the joint venture continues to deteriorate with a greater reliance on the 51% partner or entities controlled by the 51% partner to provide financing and working capital. In the fourth quarter of 2013, the Corporation, with the help of outside consultants and appraisers, concluded that the estimated fair value of its investment was less than its carrying amount and that the decline was “other than temporary.” Accordingly, the Corporation recognized an impairment charge of $6,407 reducing the carrying amount of its investment to $3,670. The carrying amount of the investment at December 31, 2014 is $2,574. The Corporation will continue to monitor the carrying value of the investment to determine if additional impairment charges are necessary.

Assets, liabilities and shareholders’ equity of the joint venture as of September 30, 2014 and 2013 are summarized below. The differences between the carrying amount of the investment and the value of the underlying equity in the net assets of the joint venture relates primarily to the impairment charge recognized in 2013 and elimination of 49% of the profit (“intercompany profit”) on the sale of technology from UES to the joint venture in earlier years which will be recognized when realized outside of the controlled group.


	2014		2013
Assets:
Current assets (includes receivables from related parties of $524 and $636, respectively)	$	10,743	$	9,431
Noncurrent assets		32,948		36,840
	$	43,691	$	46,271
Liabilities and Shareholders’ Equity:
Current liabilities (include liabilities to related parties of $22,039 and $19,278, respectively)	$	22,156	$	22,498
Shareholders’ equity		21,535		23,773
	$	43,691	$	46,271

The Corporation also has a 25% investment in a Chinese cast roll joint venture company which is recorded at cost, or $1,340. The Corporation does not participate in the management or daily operation of the joint venture company, has not guaranteed any of its obligations and has no ongoing responsibilities to it. Dividends may be declared by the Board of Directors of the joint venture company after allocation of after-tax profits to various “funds” equal to the minimum amount required under Chinese law. No dividends were declared or received in 2014, 2013 or 2012.