Intangible Assets, net

3 Months Ended

Mar. 31, 2020

Intangible Assets, net

Intangible Assets, net

4. Intangible Assets, net

The following table presents the components of our intangible assets, net (in thousands):

	March 31, 2020		December 31, 2019
Indefinite-lived intangible assets:
Goodwill	$	1,451	$	78,355
Trade names and trademarks		233,567		337,027
Transferable alcoholic beverage licenses		8,545		8,575
Total indefinite-lived intangible assets		243,563		423,957
Definite-lived intangible assets, net:
Licensing agreements		7,627		10,060
Non-transferable alcoholic beverage licenses		3,211		3,190
Total definite-lived intangible assets		10,838		13,250
Total intangible assets, net	$	254,401	$	437,207

During the first quarter of fiscal 2020, we finalized our purchase accounting for the Acquisitions, increasing goodwill by $2.5 million with an offsetting decrease in trade names and trademarks.

Goodwill and other indefinite-lived intangible assets are tested for impairment annually as of the first day of our fiscal fourth quarter or on an interim basis if events or changes in circumstances between annual tests indicate a potential impairment. Definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on estimated undiscounted future cash flows.

Due to the decrease in our stock price coupled with the dining room closures related to the COVID-19 pandemic and significant decline to the equity value of our peers and overall U.S. stock market, we determined it was necessary to perform an interim assessment of our indefinite and definite-lived intangible assets during the first quarter of fiscal 2020. For the goodwill impairment test, the estimated fair value of the reporting units was determined using a blend of the income and market capitalization approaches. For the income approach, we performed a discounted cash flow analysis. The fair value of the other indefinite-lived assets was estimated using the relief from royalty method. There were a number of estimates and significant judgments made by management in performing these evaluations, such as future unit growth, average unit volumes, cash flows and discount rates. Accordingly, actual results could vary significantly from such estimates. Based on the results of these assessments, we recorded impairment expense of $79.4 million, $101.0 million and $2.3 million related to goodwill, trade names and trademarks, and licensing agreements, respectively. More than half of the total impairment amount was driven by the impact on our market capitalization, with the balance related to lower future cash flow estimates. The reduced projections stemmed primarily from our decision to delay fiscal 2020 unit development, thereby moving our expected unit growth trajectory out by one year. The cash flow estimates assumed that average unit volumes and margins would substantially return to pre-COVID-19 levels by mid-fiscal 2021.