NOTE 4—Goodwill Impairment

During 2012, domestic and international metallurgical coal markets deteriorated as a result of slowing economic activity in Europe and Asia, an oversupply of coal due to the settlement of labor unrest issues in Australia and a decline in the production of steel. The changes to the near-term market outlook resulted in the Company reviewing its operating strategy and related capital investment projects during the third quarter of 2012. Based on this review, the Company decided to reduce capital spending for the remainder of 2012 and 2013 and to temporarily curtail mining operations at certain mines in its Canadian and U.K. Operations segment.

The changes to the near-term market outlook combined with planned reductions in capital spending, plans to curtail mining operations at certain mines in our Canadian and U.K. Operations segment, and a significant decrease in our common stock price indicated that the fair value of the Company's goodwill could be less than its carrying value. Accordingly, the Company performed an interim goodwill impairment test as of July 31, 2012 and recorded a goodwill impairment charge of $1.1 billion to reduce the carrying value of goodwill to its implied fair value for two reporting units in the U.S. Operations segment and two reporting units in the Canadian and U.K. Operations segment.

The market approach was utilized to estimate the fair value of three of our four reporting units and the income approach was used for one reporting unit where there were no market comparable data available. The market approach is based on a guideline public company methodology. Under the guideline public company method, certain operating metrics from a selected group of publicly traded guideline companies that have operations similar to the Company's reporting units were used to estimate the fair value of the reporting units. The income approach is based on a discounted cash flow methodology in which expected future net cash flows are discounted to present value, using an appropriate after-tax weighted average cost of capital. The valuation methodology utilized to allocate the estimated fair value of the reporting units to the underlying assets and liabilities contained within the individual reporting units for the goodwill impairment test was primarily based on an income approach. The income approach uses future discounted cash flow estimates in which future net cash flows projected to result from such assets were discounted to present value using an appropriate after-tax weighted average cost of capital. The table below summarizes the impact of the goodwill impairment for the impacted reporting segments.

	Balance as of December 31, 2011		Other—Primarily Currency Translation			Impairments			Balance as of December 31, 2012

Goodwill, net:
U.S. Operations	$	74,320	$	—		$	(74,320	)	$	—
Canadian and U.K. Operations		992,434		(2,345	)		(990,089	)		—


Total goodwill	$	1,066,754	$	(2,345	)	$	(1,064,409	)	$	—