Goodwill and Other Intangible Assets

3 Months Ended

Mar. 29, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets:

Goodwill and other indefinite-lived intangible assets, including trade names, are reviewed for impairment annually, or more frequently if indicators of impairment exist. Due to the negative impact of the COVID-19 pandemic on our expected future operating results, we tested our goodwill and indefinite-lived intangible assets for impairment as of March 29, 2020. We concluded the estimated fair value of goodwill at the Schlitterbahn parks and Dorney Park reporting units, and the estimated fair value of the Schlitterbahn trade name no longer exceeded their carrying values. Therefore, we recorded a $73.6 million, $6.8 million and $7.9 million impairment of goodwill at the Schlitterbahn parks, goodwill at Dorney Park, and the Schlitterbahn trade name, respectively, during the first quarter of 2020. The impairment charges were equal to the amount by which the carrying amounts exceeded the assets' fair value and were recorded in "Loss on impairment of goodwill and other intangibles" within the unaudited condensed consolidated statement of operations and comprehensive income.

The fair value of our reporting units was established using a combination of an income (discounted cash flow) approach and market approach. The income approach used each reporting unit's projection of estimated operating results and discounted cash flows using a weighted-average cost of capital that reflected current market conditions. Estimated operating results were established using our best estimates of economic and market conditions over the projected period including growth rates in revenues and costs, estimates of future expected changes in operating margins and cash expenditures, the anticipated time frame to re-open our parks following the COVID-19 pandemic, and the related demand upon re-opening our parks following the COVID-19 pandemic. Other significant estimates and assumptions included terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. The market approach estimated fair value by applying cash flow multiples to each reporting unit's operating performance. The multiples were derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting units. The impairment charge recognized was for the amount by which the reporting unit's carrying amount exceeded its fair value.

Our indefinite-lived intangible assets consist of trade names. The fair value of our trade names was calculated using a relief-from-royalty model. The impairment charge recognized was for the amount by which the trade name's carrying amount exceeded its fair value.

Management made significant estimates in calculating the fair value of our reporting units and trade names. Actual results could materially differ from these estimates.

Changes in the carrying value of goodwill for the three months ended March 29, 2020 and March 31, 2019 were:



(In thousands)	Goodwill
Balance as of December 31, 2019	$	359,654
Impairment	(80,331		)
Foreign currency translation	(4,664		)
Balance as of March 29, 2020	$	274,659

Balance as of December 31, 2018	$	178,719
Foreign currency translation	1,220
Balance as of March 31, 2019	$	179,939

Goodwill included $104.4 million and $178.0 million as of March 29, 2020 and December 31, 2019, respectively, of goodwill related to the Schlitterbahn parks which were acquired on July 1, 2019, see Note 3.

As of March 29, 2020, December 31, 2019, and March 31, 2019, other intangible assets consisted of the following:



(In thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
March 29, 2020
Other intangible assets:
Trade names	$	50,361	$	—		$	50,361
License / franchise agreements	4,255		(2,958		)	1,297
Total other intangible assets	$	54,616	$	(2,958	)	$	51,658

December 31, 2019
Other intangible assets:
Trade names	$	59,249	$	—		$	59,249
License / franchise agreements	3,583		(2,933		)	650
Total other intangible assets	$	62,832	$	(2,933	)	$	59,899

March 31, 2019
Other intangible assets:
Trade names	$	35,665	$	—		$	35,665
License / franchise agreements	3,389		(2,412		)	977
Total other intangible assets	$	39,054	$	(2,412	)	$	36,642

Other intangible assets included $15.4 million and $23.2 million as of March 29, 2020 and December 31, 2019, respectively, for the Schlitterbahn trade name acquired on July 1, 2019, see Note 3. The Schlitterbahn trade name is an indefinite-lived intangible asset. Amortization expense of finite-lived other intangible assets is expected to continue to be immaterial going forward.