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GOODWILL AND INTANGIBLE ASSETS
 12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS GOODWILL AND INTANGIBLE ASSETS
Impairment Charges
The Company recorded the following impairment charges:
 
Year ended December 31,
 
2019
 
2018
 
2017
 
(in thousands)
Brand name
$
—

 
$
23,680

 
$
395,600

Goodwill
—

 
—

 
24,283

Property and equipment(1)
—

 
9,521

 
18,555

Lucky Vitamin (2)
—

 
—

 
19,356

Other store closing costs
—

 
5,035

 
—

Total long-lived asset impairment charges
$
—

 
$
38,236

 
$
457,794


(1) Refer to Note 7, "Property, Plant and Equipment, Net" for more information on the property and equipment charges.
(2) Includes goodwill, intangible assets and property and equipment as explained below.
Brand Name
During the fourth quarter of 2019, management performed its annual impairment test of the indefinite-lived brand intangible asset. The brand name impairment test was performed in totality as it represents a single unit of account and the Company concluded that the estimated fair value under the relief from royalty method (income approach) exceeded its carrying value. The methodology utilized for the impairment test of the indefinite-lived brand intangible asset has not changed materially from the prior year. Key assumptions included in the estimation of the fair value include the following:

•
Future cash flow assumptions - Future cash flow assumptions include retail sales from the Company’s corporate retail store operations, GNC.com retail sales, wholesale partner sales, China JV and HK JV retail sales, and domestic and international franchise retail sales. Sales were based on organic growth and were derived from historical experience and assumptions regarding future growth. The Company's analysis incorporated an assumed period of cash flows of 10 years with a terminal value.

•
Royalty rate - The royalty rates utilized consider external market evidence and internal financial metrics including a review of available returns after the consideration of property, plant and equipment, working capital and other intangible assets.

•
Discount rate - The discount rate was based on an estimated weighted average cost of capital ("WACC") for each business supported by the GNC brand name. The components of WACC are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. The Company developed its cost of equity estimate based on perceived risks and predictability of future cash flows. The WACC used to estimate the fair values of the Company's reporting units was within a range of 16% to 19%. Any difference between the WACC among reporting units is primarily due to the precision with which management expects to be able to predict the future cash flows of each reporting unit.

During the year ended December 31, 2018, the Company recognized an impairment charge of $23.7 million, which was allocated to the U.S. and Canada and International segments for $21.6 million and $2.1 million, respectively. During the year ended December 31, 2017, the Company recognized a $395.6 million impairment charge on its $720.0 million indefinite-lived brand intangible asset, which was allocated to the U.S. and Canada and International segments for $394.0 million and $1.6 million, respectively.
Goodwill
Management performed its annual impairment test of goodwill during the fourth quarter of 2019. Results of the impairment test indicated that all of the reporting units had fair values which were in excess of their respective carrying values and therefore there was no impairment for the year ended December 31, 2019.
The Company estimated the fair values of its reporting units in the fourth quarter of 2019 using a discounted cash flow method (income approach) weighted 50% and a guideline company method (market approach) weighted 50%. The methodology utilized for the goodwill impairment test has not changed materially from the prior year. The key assumptions used under the income approach include the following:

•
Future cash flow assumptions - The Company's projections for its reporting units were based on organic growth and were derived from historical experience and assumptions regarding future growth and profitability trends. The Company's analysis incorporated an assumed period of cash flows of 10 years with a terminal value.

•
Discount rate - The discount rate was based on an estimated weighted average cost of capital ("WACC") for each reporting unit. The components of WACC are the cost of equity and the cost of debt, each of which requires judgment by management to estimate. The Company developed its cost of equity estimate based on perceived risks and predictability of future cash flows. The WACC used to estimate the fair values of the Company's reporting units was within a range of 16% to 19%. Any difference between the WACC among reporting units is primarily due to the precision with which management expects to be able to predict the future cash flows of each reporting unit.

The guideline company method involves analyzing transaction and financial data of publicly-traded companies to develop multiples, which are adjusted to account for differences in growth prospects and risk profiles of the reporting unit and the comparable.

For the year ended December 31, 2018, no impairment was indicated as a result of the annual impairment test during the fourth quarter. For the year ended December 31, 2017, the Company recorded a goodwill impairment charge of $24.3 million related to the Wholesale reporting unit in the fourth quarter as a result of a triggering event based on a decline in the Company's share price and previous challenges associated with the Company's efforts to refinance its long-term debt.
Lucky Vitamin
During the second quarter of 2017, in order for the Company to focus on strategic changes around the One New GNC program, the Company considered strategic alternatives for the Lucky Vitamin e-commerce business, which was considered a triggering event requiring an interim goodwill impairment review of the Lucky Vitamin reporting unit as of June 30, 2017. The Company estimated the fair value of the Lucky Vitamin reporting unit using a discounted cash flow method (income approach) and a guideline company method (market approach), each of which took into account the expectations regarding the potential strategic alternatives for the Lucky Vitamin business being explored in the second quarter of 2017. As a result of the review, the Company concluded that the carrying value of the Lucky Vitamin reporting unit exceeded its fair value, which resulted in a goodwill impairment charge of $11.5 million being recorded in the second quarter of 2017. There was no remaining goodwill balance on the Lucky Vitamin reporting unit after the impact of this charge.

As a result of the impairment indicator described above, the Company also performed an impairment analysis with respect to its definite-lived intangible assets and other long-lived assets on the Lucky Vitamin reporting unit, consisting of a trade name and property and equipment. The fair value of the trade name was determined using a relief from royalty method (income approach) and the fair value of the property and equipment was determined using an income approach. Based on the results of the analyses, the Company concluded that the carrying value of the Lucky Vitamin trade name and property and equipment exceeded their fair values resulting in an impairment charge of $4.2 million and $3.7 million, respectively. All of the aforementioned non-cash charges totaling $19.4 million were recorded in long-lived asset impairments in the Consolidated Statement of Operations within the U.S. and Canada segment during the year ended December 31, 2017.

The Company completed an asset sale of Lucky Vitamin on September 30, 2017, resulting in a loss of $1.7 million recorded within other (income) loss, net on the Consolidated Statement of Operations consisting of the net assets sold subtracted from the purchase price of $6.4 million, which includes fees paid to a third-party. The proceeds were received in October 2017.
Goodwill Roll-Forward
The following table summarizes the Company's goodwill activity by reportable segment:
 
U.S. and Canada
 
International
 
Manufacturing / Wholesale
 
Total
 
(in thousands)
Goodwill at December 31, 2017
$
9,251

 
$
43,708

 
$
88,070

 
$
141,029

2018 Activity:
 
 
 
 
 
 
 
Translation effect of exchange rates
—

 
(265
)
 
—

 
(265
)
Total 2018 activity
—

 
(265
)
 
—

 
(265
)
Balance at December 31, 2018:
 
 
 
 
 
 
 
Gross
389,895

 
43,443

 
202,841

 
636,179

Accumulated impairments
(380,644
)
 
—

 
(114,771
)
 
(495,415
)
Goodwill
$
9,251

 
$
43,443

 
$
88,070

 
$
140,764

2019 Activity:
 
 
 
 
 
 
 
Translation effect of exchange rates
—

 
(113
)
 
—

 
(113
)
Nutra manufacturing net assets exchange
—

 
—

 
(61,542
)
 
(61,542
)
Total 2019 activity
—

 
(113
)
 
(61,542
)
 
(61,655
)
Balance at December 31, 2019:
 
 
 
 
 
 
 
Gross
389,895

 
43,330

 
141,299

 
574,524

Accumulated impairments
(380,644
)
 
—

 
(114,771
)
 
(495,415
)
Goodwill
$
9,251

 
$
43,330

 
$
26,528

 
$
79,109


Intangible Assets
The following table reflects the gross carrying amount and accumulated amortization for each major intangible asset:
 
 
 
December 31, 2019
 
December 31, 2018
 
Weighted-
Average
Life
 
Gross
 
Accumulated Amortization/ Impairment
 
Carrying Amount
 
Gross
 
Accumulated Amortization/ Impairment
 
Carrying Amount
 
 
 
(in thousands)
Brand name
Indefinite
 
$
720,000

 
$
(419,280
)
 
$
300,720

 
$
720,000

 
$
(419,280
)
 
$
300,720

Retail agreements
30.3
 
31,000

 
(13,619
)
 
17,381

 
31,000

 
(12,566
)
 
18,434

Franchise agreements
25.0
 
70,000

 
(35,817
)
 
34,183

 
70,000

 
(33,017
)
 
36,983

Manufacturing agreements (1)
25.0
 
40,000

 
(20,467
)
 
19,533

 
70,000

 
(33,017
)
 
36,983

Other intangibles
6.8
 
639

 
(529
)
 
110

 
652

 
(449
)
 
203

Franchise rights
3.0
 
7,566

 
(7,475
)
 
91

 
7,486

 
(7,362
)
 
124

Total

 
$
869,205

 
$
(497,187
)
 
$
372,018

 
$
899,138

 
$
(505,691
)
 
$
393,447


(1) In the first quarter of 2019, the Company transferred the Nutra manufacturing business net assets to the Manufacturing JV

Amortization expense during the years ended December 31, 2019, 2018 and 2017 was $5.9 million, $7.0 million and $7.4 million, respectively.
The following table represents future amortization expense of definite-lived intangible assets at December 31, 2019:
Years ending December 31,
Amortization expense
 
(in thousands)
2020
$
5,579

2021
5,488

2022
5,469

2023
5,469

2024
5,459

Thereafter
43,834

Total future amortization expense
$
71,298