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Goodwill, Impairment of Assets, and Loss on Sale of Business
 12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill, Impairment of Assets and Loss on Sale of Business Goodwill, Impairment of Assets, and Loss on Sale of Business
Goodwill
The following table details the carrying amount of our goodwill:
 
 December 31,
 (in thousands)20202019
Goodwill$166,774 $173,070 
Accumulated impairment losses(7,578)(7,578)
Disposition— (6,296)
Goodwill, net carrying amount$159,196 $159,196 
The following is a summary of changes in the carrying amount of goodwill:
(in thousands)December 31, 2019AcquisitionsForeign ExchangeImpairmentDispositionDecember 31, 2020
Hotel Franchising$159,196 $— $— $— $— $159,196 
Other— — — — — — 
Total$159,196 $— $— $— $— $159,196 
(in thousands)December 31, 2018AcquisitionsForeign ExchangeImpairmentDispositionDecember 31, 2019
Hotel Franchising$159,196 $— $— $— $— $159,196 
Other9,800 — (407)(3,097)(6,296)— 
Total$168,996 $— $(407)$(3,097)$(6,296)$159,196 
Goodwill has historically been allocated to two reporting units: (1) Hotel Franchising and (2) SaaS for vacation rentals ("Other" in the table above). Activity by reporting unit in the current and prior periods is organized by reporting unit below.
Hotel Franchising
The Company assessed the qualitative factors attributable to the Hotel Franchising reporting unit and determined it is not more likely than not that the fair value of the reporting unit is less than its carrying amount. The Hotel Franchising reporting unit is included in the Hotel Franchising reportable segment in Note 20.
SaaS for vacation rentals
Fourth Quarter of 2018 evaluation
The Company acquired the SaaS for vacation rentals reporting unit on August 11, 2015 as a complementary adjacent business line to its Vacation Rentals initiative with the intention of leveraging the established SaaS based platform to acquire new customers and expand into new markets. During the period from acquisition through 2017, the performance of the reporting unit was in line with the assumptions at the time the acquisition was consummated. In the fourth quarter of 2018, the Company concluded the reporting unit did not achieve the annual revenue and customer acquisition targets. As part of the Company’s long range planning process, the Company assessed the long-term prospects for the reporting unit, determining certain investments are required to maintain the growth trajectory and achieve the customer acquisition assumed at the time of the acquisition. The Company elected not to make these investments as there was no longer a strategic alignment with the Vacation Rentals initiative. In contemplation of this strategic shift in combination with lower than expected revenues and customer acquisition in 2018, the Company revised its future outlook for the reporting unit. To estimate a fair value for the reporting unit, the Company utilized a combination of market and income approach valuation methods via quoted market prices, market multiples of comparable businesses, and performance of a discounted cash flow analysis.
During 2018, the Company early adopted ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which eliminated Step 2 from the goodwill impairment test. Based on the guidance in
ASU 2017-04, the Company recognized a non-cash pre-tax impairment charge on the SaaS for vacation rentals reporting unit's goodwill in the amount by which the carrying amount exceeded fair value of $4.3 million.
Prior to performing the goodwill impairment test, the Company assessed if any indicators of impairment were present in the long-lived assets related to the SaaS for vacation rentals reporting unit, including intangible assets. We concluded the reporting unit’s long-lived assets were not impaired as of December 31, 2018.
As of December 31, 2018, the $9.8 million of carrying value remaining in Other goodwill was fully attributable to the SaaS for vacation rentals reporting unit.
First Quarter of 2019 evaluation
On January 29, 2019, the Company became aware that a key customer of the SaaS for vacation rentals reporting unit provided the unit’s management team with a letter purporting to terminate the customer’s contract. The unit’s management team asserted, and the Company believed, that the purported termination notice was not valid. The customer was contemplated in the SaaS for vacation rentals reporting unit's projected revenues, and the Company determined that the unit’s receipt of the purported termination notice, even though the validity of the notice was being actively contested by the unit, represented a triggering event which required an interim reevaluation of the reporting unit's long-lived assets group and goodwill in the first quarter of 2019.
The long-lived assets of the SaaS for vacation rentals reporting unit were comprised of $4.3 million of intangible assets, $1.7 million of operating lease ROU assets, and $1.3 million of property and equipment. The long-lived asset group was determined to be at the SaaS for vacation rentals reporting unit level. Recoverability of the long-lived asset group was assessed based on undiscounted expected cash flows of the asset group, which were less than the carrying amount of the asset group. An impairment charge was recorded for the excess of the carrying value over the fair value of the asset group. To estimate the fair value of the long-lived asset group, the Company utilized a combination of income and market approach valuation methods via performance of a discounted cash flow analysis and quoted market prices. The Company recognized a non-cash pre-tax long-lived asset group impairment charge for the full amount of SaaS for vacation rentals long-lived assets of $7.3 million.
The carrying value of the SaaS for vacation rentals reporting unit was adjusted after the $7.3 million long-lived asset impairment. The adjusted carrying value exceeded the fair value of the reporting unit by $3.1 million, resulting in an additional non-cash pre-tax impairment charge on the SaaS for vacation rentals reporting unit's goodwill in this amount. As of March 31, 2019, the carrying value of the reporting unit's goodwill was $6.4 million.
Second Quarter of 2019 evaluation
On June 3, 2019, the SaaS for vacation rentals reporting unit was sold. As a result of costs incurred in completing the disposition and the derecognition of net assets of the reporting unit, including the remaining goodwill of $6.3 million, the Company recognized a loss on sale of $4.7 million.
The results of the SaaS for vacation rentals reporting unit prior to the disposition are included in the Corporate & Other segment in Note 20. The impairment charges and loss on sale did not have an impact on the Company's liquidity or calculation of financial covenants under existing debt arrangements.
Long-lived asset group impairments
Commercial office building
On December 30, 2014, a court awarded the Company title to a commercial office building as settlement of a portion of an outstanding loan receivable for which the building was pledged as collateral. At the time of settlement, a single tenant fully occupied the building. The initial lease term expiration was in December 2020 and the tenant had extension options for up to 30 years.
Prior to initial lease term expiration, the tenant provided notice that the lease renewal options would not be exercised. Management identified this as a triggering event requiring the interim reevaluation of the commercial office building's long-lived assets. The long-lived asset group had a carrying value prior to recoverability evaluation of $11.1 million in property and equipment and $0.2 million in intangible assets as of September 30, 2020. During the third quarter of 2020, recoverability of the long-lived asset group was assessed based on undiscounted expected cash flows of the asset group aligned with management’s present long-term strategy for the building, and management concluded the undiscounted expected cash flows were less than the carrying amount of the asset group.
An impairment charge was recorded for the excess of the carrying value over the fair value of the asset group. To estimate the fair value of the long-lived asset group, the Company utilized a combination of market and income approach valuation methods.
The Company recognized a non-cash pretax long-lived asset group impairment charge in the amount of $4.3 million during the third quarter of 2020.
The results of the commercial office building are included in the Corporate & Other segment in Note 20. The impairment charge does not have an impact on the Company's liquidity or compliance with financial covenants under existing debt arrangements.
Real estate parcel
The Company purchases real estate as part of its program to incent franchise development in strategic markets for the Cambria brand. The real estate is classified in other assets to the extent it is not presently under active construction. During the third quarter of 2018, the Company purchased the remaining membership interests in a VIE previously accounted for under the equity method of accounting. The VIE held a real estate parcel and the purchase was accounted for an asset acquisition. The financial results of the 100% owned entity have been consolidated in the Company's financial statements since August 2018. The real estate parcel represents a long-lived asset group with a carrying value prior to recoverability evaluation of $29.5 million in other assets as of December 31, 2020.
Based on the impact of the COVID-19 pandemic, the Company’s assessment of the highest and best use of the real estate parcel changed and, therefore, the recoverability of the long-lived asset group was re-assessed based on undiscounted expected cash flows of the asset group from a sale, which were less than the carrying value of the asset group. An impairment charge was recorded for the excess of the carrying value over the fair value of the asset group. To estimate the fair value of the long-lived asset group, the Company utilized market approach valuation methods. The Company recognized a non-cash pre-tax long-lived asset group impairment charge in the amount of $9.2 million during the fourth quarter of 2020.
The results of the real estate parcel are included in the Corporate & Other segment in Note 20. The impairment charge does not have an impact on the Company's liquidity or compliance with financial covenants under existing debt arrangements.