Note 9 - Long-Lived Assets and Goodwill

12 Months Ended

Dec. 31, 2012

Long Lived Assets [Text Block]

Note 9.    Long-Lived Assets and Goodwill

Property and Equipment, Net

The components of property and equipment, net, at December 31, 2012 and 2011 are as follows:

	December 31,
	2012			2011
	(in thousands)
Rigs and workover equipment	$	42,945		$	11,750
Buildings and improvements		6,110			-
Land		1,068			-
Leasehold improvements		5,909			5,677
Other equipment		25,440			3,205
Vehicles		1,639			648
Furniture and fixtures		308			100
Assets in progress		2,342			-
		85,761			21,380
Accumulated depreciation		(7,993	)		(320	)
Property and equipment, net	$	77,768		$	21,060

Assets in progress as of December 31, 2012 include a new indoor facility and restaurant building renovations at Baseball Heaven and a rig, service trucks and a building at Sun Well. The estimated cost to complete these assets is $1.3 million.

Depreciation expense for fiscal 2012 was $7.8 million, with $6.4 million and $1.4 million being included in “Cost of revenues” and “Selling, general and administrative” expenses, respectively, in the Consolidated Statements of Operations. Depreciation expense for fiscal 2011 was $0.3 million, with $0.1 million and $0.2 million being included in “Cost of revenues” and “Selling, general and administrative” expenses, respectively, in the Consolidated Statements of Operations. Depreciation expense in the Transition Period was $0.3 million and was included in “Loss from discontinued operations, net of taxes.” The Company impaired certain of its assets in the Transition Period, resulting in a write-down of $4.1 million, which was also included in “Loss from discontinued operations.”

Goodwill

A reconciliation of the changes to the Company’s carrying amount of goodwill for fiscal 2012 and 2011 are as follows:

	Amount
	(in thousands)
Balance, December 31, 2010	$	-
Goodwill acquired in the acquisition of Baseball Heaven		192
Goodwill acquired in the acquisition of The Show		1,796
Goodwill acquired in the acquisition of Rogue		6,256
Balance, December 31, 2011		8,244
Goodwill acquired in the acquisition of Eagle		10,126
Goodwill acquired in the acquisition of Sun Well		36,557
Goodwill acquired in the acquisition of CrossFit South Bay		154
Impairment of goodwill of The Show		(1,796	)
Impairment of goodwill of Baseball Heaven		(192	)
Balance, December 31, 2012	$	53,093

The components of goodwill at December 31, 2012 and 2011 are as follows:

	December 31,
	2012				2,011
	(in thousands)
Goodwill	$	55,081		$	8,244
Accumulated impairment		(1,988	)		-
Net goodwill	$	53,093		$	8,244

Intangible Assets, Net

The acquisitions made in fiscal 2012 and 2011 resulted in customer relationships and trade names aggregating $47.4 million as of December 31, 2012.

The components of intangible assets, net, at December 31, 2012and their amortization details are as follows:

	December 31, 2012
	Cost		Accumulated Amortization			Net		Amortization Method	Estimated Useful Life (years)
	(in thousands)
Steel Sports:
Customer relationships	$	235	$	(67	)		168	Straight-line	5
Steel Energy:
Customer relationships		43,100		(6,356	)		36,744	Accelerated	10
Trade names		4,100		(1,125	)		2,975	Accelerated	5
		47,200		(7,481	)		39,719
	$	47,435	$	(7,548	)	$	39,887

The components of intangible assets, net, at December 31, 2011and their amortization details are as follows:

	December 31, 2011
	Cost		Accumulated Amortization			Net		Amortization Method	Estimated Useful Life (years)
	(in thousands)
Steel Sports:
Customer relationships	$	235	$	(20	)		215	Straight-line	5
Steel Energy:
Customer relationships		4,700		(29	)		4,671	Accelerated	10
Trade names		900		-			900	Accelerated	5
		5,600		(29	)		5,571
	$	5,835	$	(49	)	$	5,786

Estimated aggregate future amortization expenses for the next five years for the intangible assets are as follows:

	Steel Sports		Steel Energy		Total
	(in thousands)
For the year ended December 31:
2013	$	47	$	8,534	$	8,581
2014		47		6,565		6,612
2015		47		5,267		5,314
2016		27		4,216		4,243
2017		-		3,158		3,158
Thereafter		-		11,979		11,979
	$	168	$	39,719	$	39,887

Amortization expense for fiscal 2012 was $7.5 million, which is included in “Selling, general and administrative” expenses in the Consolidated Statement of Operations. Amortization expense for fiscal 2011 was $49,000, which is included in “Selling, general and administrative” expenses in the Consolidated Statements of Operations. Amortization expense for the Transition Period was $9.9 million and is included in “Loss from discontinued operations, net of taxes” in the Consolidated Statements of Operations.

Impairment Review

In June 2010, the Company made a decision to wind down its Aristos Business and notified its customers that final shipments would occur by the end of September 2010. The Company also planned to put its building up for sale towards the end of the Transition Period. As a result of these actions, the Company evaluated the carrying value of its long-lived assets at July 2, 2010 and determined that the carrying value of such assets may not be fully recoverable. The Company then measured the impairment loss and recognized the amount in which the carrying value exceeded the estimated fair value by recording an impairment charge of $10.2 million in the Transition Period, which is included in “Loss from discontinued operations, net of taxes,” in the Consolidated Statements of Operations. Of the $10.2 million impairment charge, $6.1 million related to the write off of intangible assets and the remaining $4.1 million related to the reduction of the carrying value of its property and equipment, net, to its estimated fair value. The estimated fair value was based on the market approach and considered the perspective of market participants using or exchanging the Company’s long-lived assets. The estimation of the impairment involved assumptions that required judgment by the Company.