Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Other Intangible Assets

v3.20.1
Goodwill and Other Intangible Assets
3 Months Ended
Mar. 31, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets

12.

Goodwill and Other Intangible Assets

The Company’s goodwill was as follows:

 

 

 

U.S.

Operating

Segment

 

 

International

Operating

Segment

 

 

Total

 

Balance at January 1, 2020 (1)

 

$

1,182,853

 

 

$

100,518

 

 

$

1,283,371

 

Foreign currency translation adjustments

 

 

 

 

 

(14,812

)

 

 

(14,812

)

Balance at March 31, 2020 (1)

 

$

1,182,853

 

 

$

85,706

 

 

$

1,268,559

 

 

 

(1)

Balances are presented net of accumulated impairment losses of $214,031 for the U.S. operating segment and $27,622 for the international operating segment.

The Company evaluates goodwill for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of the goodwill may not be fully recoverable.  Due to the temporary closure of the Company’s domestic theatres effective March 17, 2020 and international theatres effective March 18, 2020 as a result of the COVID-19 pandemic (see Note 2), the Company performed a quantitative goodwill impairment evaluation for all reporting units during the three months ended March 31, 2020.  The Company evaluates goodwill for impairment at the reporting unit level and has allocated goodwill to the reporting unit based on an estimate of its relative fair value. Management considers the reporting unit to be each of its twenty regions in the U.S. and seven countries internationally with Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Guatemala considered one reporting unit (the Company does not have goodwill recorded for all of its international locations).  Under the quantitative analysis, the Company estimated the fair value of each reporting unit and compared it with its carrying value.   Fair value was determined using the market approach and based on a multiple of cash flows for each reporting unit, which was eight times for the evaluations performed during the three months ended March 31, 2020.   The market approach is the most common valuation approach for the Company’s industry.  The Company also performed its goodwill impairment analysis using the income approach to further validate the results of the assessment results under the market approach. Significant judgment, including management’s estimate of the impact of temporary theatre closures and other considerations as a result of COVID-19, was involved in estimating cash flows and fair value.  The Company’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, are based on projected operating performance of each reporting unit, market transactions and industry trading multiples.   The carrying value of the Company’s reporting units did not exceed estimated fair values at March 31, 2020. The estimated fair value of one of the Company’s reporting units exceeded its carrying value by less than 10%.  

Intangible assets consisted of the following:

 

 

 

Balance at

January 1, 2020

 

Amortization

 

Other (1)

 

Balance at March 31, 2020

 

Intangible assets with finite lives:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

$

85,007

 

$

 

$

(1,798

)

$

83,209

 

Accumulated amortization

 

 

(63,924

)

 

(1,241

)

 

 

 

(65,165

)

Total net intangible assets with finite lives

 

$

21,083

 

$

(1,241

)

$

(1,798

)

$

18,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets with indefinite lives:

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradename and other

 

 

300,686

 

 

 

 

(73

)

 

300,613

 

Total intangible assets — net

 

$

321,769

 

$

(1,241

)

$

(1,871

)

$

318,657

 

 

(1)

Amount primarily represents foreign currency translation adjustments.

Due to the temporary closure of the Company’s theatres effective March 18, 2020 as a result of the COVID-19 pandemic (see Note 2), the Company performed a quantitative impairment evaluation for all definite and indefinite-lived tradename assets during the three months ended March 31, 2020.  Under the quantitative analysis, the Company compared the carrying values of tradename assets to their estimated fair values.  Fair values were estimated by applying an estimated market royalty rate that could be charged for the use of the tradenames to forecasted future revenues, with an adjustment for the present value of such royalties.  Significant judgment, including management’s estimate of the impact of temporary theatre closures and other considerations as a result of COVID-19, was involved in estimating market royalty rates and long-term revenue forecasts.  Management’s estimates, which fall under Level 3 of the U.S. GAAP fair value hierarchy as defined by FASB ASC Topic 820-10-35, were based on projected revenue performance and expected industry trends. The carrying values of the Company’s tradename assets did not exceed estimated fair values at March 31, 2020.

Estimated aggregate future amortization expense for intangible assets is as follows:

 

For the nine months ended December 31, 2020

 

$

3,655

 

For the twelve months ended December 31, 2021

 

 

2,801

 

For the twelve months ended December 31, 2022

 

 

2,648

 

For the twelve months ended December 31, 2023

 

 

2,550

 

For the twelve months ended December 31, 2024

 

 

2,550

 

Thereafter

 

 

3,840

 

Total

 

$

18,044