Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Other Intangible Assets

v3.20.2
Goodwill and Other Intangible Assets
6 Months Ended
Jun. 30, 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

 

 

 

 

 

(16,434

)

 

 

(16,434

)

Balance at June 30, 2020 (1)

 

$

1,182,853

 

 

$

84,084

 

 

$

1,266,937

 

 

 

(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.  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 its quantitative goodwill impairment analysis, the Company estimates the fair value of each reporting unit and compares it with its carrying value.   Fair value is determined using the market approach, which is the most common valuation approach for the Company’s industry and based on a multiple of cash flows for each reporting unit.  

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 using the market approach, and an estimated multiple of eight times cash flows.  During the three months ended March 31, 2020, the Company also performed its quantitative goodwill impairment analysis using the income approach to further validate the results of the assessment 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, is involved in estimating future 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 Company performed a qualitative assessment of goodwill for each reporting unit as of June 30, 2020, considering the anticipated timing of theatre reopenings on its cash flow estimates, as well as market transactions and industry trading multiples.  Based on its qualitative assessment, no goodwill impairment was recorded during the three months ended June 30, 2020.

Intangible assets consisted of the following:

 

 

Balance at

January 1, 2020

 

Amortization

 

Other (1)

 

Balance at June 30, 2020

 

Intangible assets with finite lives:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

$

85,007

 

$

 

$

(1,672

)

$

83,335

 

Accumulated amortization

 

 

(63,924

)

 

(2,431

)

 

 

 

(66,355

)

Total net intangible assets with finite lives

 

$

21,083

 

$

(2,431

)

$

(1,672

)

$

16,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets with indefinite lives:

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradename and other

 

 

300,686

 

 

 

 

(551

)

 

300,135

 

Total intangible assets — net

 

$

321,769

 

$

(2,431

)

$

(2,223

)

$

317,115

 

 

(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, considering the temporary closure of its theatres.

The Company performed a qualitative impairment analysis on its definite and indefinite-lived intangible assets as of June 30, 2020, considering the anticipated timing of theatre reopenings on its revenue forecasts.  As a result of the qualitative assessment, no impairment of tradename assets was recorded during the three months ended June 30, 2020.

The estimated aggregate future amortization expense for intangible assets is as follows:

 

For the six months ended December 31, 2020

 

$

2,457

 

For the twelve months ended December 31, 2021

 

 

2,828

 

For the twelve months ended December 31, 2022

 

 

2,674

 

For the twelve months ended December 31, 2023

 

 

2,576

 

For the twelve months ended December 31, 2024

 

 

2,576

 

Thereafter

 

 

3,869

 

Total

 

$

16,980