Fair Value Measurements

Fair Value Hierarchy—Our assets and liabilities measured at fair value, either on a recurring or a non-recurring basis, are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the market place as discussed below:

•Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present our assets and liabilities measured at fair value on a recurring basis aggregated by the level within which measurements fall in the fair value hierarchy (in thousands):



	Quoted Market Prices (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)		Total
March 31, 2020
Assets
Restricted Investment:
Ashford Trust common stock	$	259		⁽²⁾	$	—			$	—	$	259
Braemar common stock	81			⁽²⁾	—				—		81
Total	$	340			$	—			$	—	$	340
Liabilities
Contingent consideration	$	(2,072	)	⁽¹⁾	$	—			$	—	$	(2,072	)
Subsidiary compensation plan	—				(42		)	⁽²⁾	—		(42		)
Deferred compensation plan	(1,150		)		—				—		(1,150		)
Total	$	(3,222	)		$	(42	)		$	—	$	(3,264	)
Net	$	(2,882	)		$	(42	)		$	—	$	(2,924	)

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⁽¹⁾Represents the fair value of the contingent consideration liability of $2.1 million related to the stock consideration collar associated with JSAV’s acquisition of BAV. The contingent consideration liabilities are reported as “other liabilities” in our condensed consolidated balance sheets. See notes 1 and 4.

⁽²⁾The assets acquired in our acquisition of Remington Lodging included shares of common stock of Ashford Trust and Braemar purchased by Remington Lodging on the open market and held for the purpose of providing compensation to certain employees. The compensation agreement liability is based on ratably accrued vested shares through March 31, 2020, which are exercisable upon vesting. The liability is the total accrued vested shares multiplied by the fair value of the quoted market price of the underlying investment.



	Quoted Market Prices (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
December 31, 2019
Assets
Restricted Investment:
Ashford Trust common stock	$	768		⁽³⁾	$	—			$	—			$	768
Braemar common stock	427			⁽³⁾	—				—				427
Total	$	1,195			$	—			$	—			$	1,195
Liabilities
Contingent consideration	$	(2,668	)	⁽¹⁾	$	—			$	(2,959	)	⁽²⁾	$	(5,627	)
Subsidiary compensation plan	—				(415		)	⁽³⁾	—				(415		)
Deferred compensation plan	(4,729		)		—				—				(4,729		)
Total	$	(7,397	)		$	(415	)		$	(2,959	)		$	(10,771	)
Net	$	(6,202	)		$	(415	)		$	(2,959	)		$	(9,576	)

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⁽¹⁾Represents the fair value of the contingent consideration liability of $1.6 million related to the stock consideration collar associated with JSAV’s acquisition of BAV and $1.0 million related to the stock consideration collar associated with RED’s acquisition of Sebago. The contingent consideration liabilities related to BAV and Sebago are reported as “other liabilities” in our consolidated balance sheets. See notes 1 and 4.

⁽²⁾Represents the fair value of the contingent consideration liability related to the achievement of certain performance targets associated with the acquisition of BAV, which is reported within “other liabilities” in our consolidated balance sheets. See notes 1 and 4.

⁽³⁾The assets acquired in our acquisition of Remington Lodging included shares of common stock of Ashford Trust and Braemar purchased by Remington Lodging on the open market and held for the purpose of providing compensation to certain employees. The compensation agreement liability is based on ratably accrued vested shares through December 31, 2019, which are exercisable upon vesting. The liability is the total accrued vested shares multiplied by the fair value of the quoted market price of the underlying investment.

The following tables presents the rollforward of our Level 3 contingent consideration liability (in thousands):



	Contingent Consideration Liability
Balance at December 31, 2019	$	(2,959	)
Acquisitions	—
Gains (losses) included in earnings ⁽¹⁾	(41		)
Dispositions and settlements	—
Transfers into/out of Level 3 ⁽²⁾	3,000
Balance at March 31, 2020	$	—

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⁽¹⁾	Reported as “other” operating expense in our condensed consolidated statements of operations.


⁽²⁾	Includes JSAV’s contingent consideration associated with the acquisition of BAV in March of 2019. As of March 31, 2020, BAV fully achieved the operating performance targets during the earn-out period, in accordance with the applicable agreement. The final liability owed to the sellers of BAV is reported in our condensed consolidated balance sheets within “other liabilities”.

Assets Measured at Fair Value on a Non-recurring Basis

Our non-financial assets, such as goodwill, indefinite-lived intangible assets and long-lived assets are adjusted to fair value when an impairment charge is recognized. Such fair value measurements are based predominately on Level 3 inputs.

Goodwill

During the first quarter of 2020, we recognized goodwill impairment charges of $170.6 million, of which $121.0 million related to our Remington segment, and $49.5 million related to our Premier segment. As a result of our reduced cash flow projections and the significant decline in our market capitalization due to the COVID-19 pandemic, we concluded that sufficient indicators existed to require us to perform an interim quantitative assessment of goodwill as of March 31, 2020, in which we compared the fair value of the reporting units to their carrying value. We engaged a third-party valuation expert to assist us in performing this assessment. The fair value estimates for all reporting units were based on a blended analysis of the present value of future discounted cash flows and the market value approach, Level 3 inputs. The significant estimates used in the discounted cash flows model included our weighted average cost of capital, projected cash flows and the long-term rate of growth. Our cash flow assumptions were based on the actual historical performance of the reporting unit and took into account the recent severe and continued weakening of operating results as well as the anticipated rate of recovery due to the COVID-19 pandemic. The projected cash flows were based on management’s expectation of the timing of recovery from the economic downturn under various scenarios. The significant estimates used in the market approach model included identifying public companies engaged in businesses that are considered comparable to those of the reporting unit and assessing comparable revenue and earnings multiples in estimating the fair value of the reporting unit. The excess of the reporting unit's carrying value over our estimate of the fair value was recorded as the goodwill impairment charge in the first quarter of 2020. As of March 31, 2020, our Remington segment had $54.6 million goodwill remaining and our Premier segment had no goodwill remaining. We may continue to record impairment charges in the future due to the long-term economic impact and near-term financial impacts of the COVID-19 pandemic.

Indefinite-Lived Intangible Assets

As a result of our reduced cash flow projections and the significant decline in our market capitalization due to the COVID-19 pandemic, we concluded that sufficient indicators existed to require us to perform an interim quantitative assessment of intangible assets as of March 31, 2020. During the first quarter of 2020, we engaged a third-party valuation expert to assist in determining the fair value of our indefinite-lived trademarks. We recognized intangible asset impairment charges of $7.6 million related to trademarks within our Remington and JSAV segments which resulted from changes in estimated future revenues. The Remington and JSAV trademarks were written down to $4.9 million and $1.5 million, respectively, based on a valuation using the relief-from-royalty method, which includes unobservable inputs including royalty rates and projected revenues.

Long-Lived Assets

Long-lived assets include property and equipment, finance and operating lease assets, and definite-lived intangible assets which primarily include Remington and Premier management contracts, JSAV customer relationships and RED boat slip rights resulting from our acquisitions. We performed a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the asset to its carrying value. The undiscounted cash flows exceeded the carrying value and therefore the assets were not impaired as of March 31, 2020, and no further evaluation was required.

Effect of Fair Value Measured Assets and Liabilities on Our Condensed Consolidated Statements of Operations

The following table summarizes the effect of fair value measured assets and liabilities on our condensed consolidated statements of operations (in thousands):



	Gain (Loss) Recognized
	Three Months Ended March 31,
	2020			2019
Assets
Restricted investment: ⁽¹⁾
Ashford Trust common stock	$	(214	)	$	—
Braemar common stock	(161		)	—
Goodwill	(170,572		)	—
Intangible assets, net	(7,641		)	—
Total	$	(178,588	)	$	—
Liabilities
Contingent consideration ⁽²⁾	$	(463	)	$	(18	)
Subsidiary compensation plan ⁽³⁾	202			—
Deferred compensation plan ⁽³⁾	3,577			(740		)
Total	$	3,316		$	(758	)
Net	$	(175,272	)	$	(758	)

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⁽¹⁾	Represents the realized loss on shares of common stock of Ashford Trust and Braemar purchased by Remington on the open market and held for the purpose of providing compensation to certain employees.


⁽²⁾	Represents the changes in fair value of the contingent consideration liabilities related to the achievement of certain performance targets and stock consideration collars associated with the acquisition of BAV. Changes in the fair value of contingent consideration are reported within “other” operating expense in our condensed consolidated statements of operations. See note 4.

⁽³⁾Reported as a component of “salaries and benefits” in our condensed consolidated statements of operations.

Restricted Investment

The historical cost and approximate fair values, together with gross unrealized gains and losses, of securities restricted for use in our subsidiary compensation plan are as follows (in thousands):



	Historical Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
March 31, 2020
Equity securities ⁽¹⁾	$	1,196	$	—	$	(856	)	$	340

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⁽¹⁾	Distribution of $171,000 of available-for-sale securities were recognized in the three months ended March 31, 2020. Unrealized losses of $856,000 associated with the available-for-sale securities are included within “accumulated other comprehensive income” in our condensed consolidated balance sheets.



	Historical Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
December 31, 2019
Equity securities ⁽¹⁾	$	1,309	$	—	$	(114	)	$	1,195

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⁽¹⁾	No distributions of available-for-sale securities occurred as of December 31, 2019. Unrealized losses of $114,000 associated with the available-for-sale securities included within “accumulated other comprehensive income” in our condensed consolidated balance sheets.