Impairment and Credit Losses

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

The increased challenges related to COVID-19 has significantly impacted our expected investments, operating plans and projected cash flows. Refer to Note 1. General for further information regarding COVID-19 and its impact to the Company. As a result of these developments, we performed interim impairment evaluations on certain assets as further discussed below.

Goodwill & Intangible Assets

The following are the carrying amounts of goodwill attributable to our Royal Caribbean International, Celebrity Cruises and Silversea Cruises reporting units and the changes in such balances during the quarter ended March 31, 2020 (in thousands) are as follows:


	Royal Caribbean International		Celebrity Cruises		Silversea Cruises		Total





Balance at December 31, 2019	$	299,226	$	1,632	$	1,084,786	$	1,385,644
Impairment charge	—		—		(576,208)		(576,208)

Transfer of goodwill attributable to the 2019 purchase of photo operations onboard our ships	(2,694)		2,694		—		—
Foreign currency translation adjustment	(220)		—		—		(220)
Balance at March 31, 2020	$	296,312	$	4,326	$	508,578	$	809,216

We performed an interim impairment evaluation of Royal Caribbean International’s goodwill in connection with the preparation of our financial statements during the quarter ended March 31, 2020. As a result of the test, we determined that the fair value of the Royal Caribbean International reporting unit exceeded its carrying value by approximately 32% resulting in no impairment to the Royal Caribbean International goodwill. As of March 31, 2020, the carrying amount of goodwill attributable to our Royal Caribbean reporting unit was $296.3 million.

We also performed an interim impairment evaluation of Silversea Cruises’ goodwill in connection with the preparation of our financial statements for the quarter ended March 31, 2020. We estimated the fair value of the Silversea Cruises reporting unit using a probability-weighted discounted cash flow model in combination with a market based valuation approach. As a result of this analysis, we determined that the carrying value of the Silversea Cruises reporting unit exceeded its fair value. Accordingly, we recognized a goodwill impairment charge of $576.2 million during the quarter ended March 31, 2020, which is also the accumulated impairment charge as of March 31, 2020.

Intangible assets consist of finite and indefinite life assets and are reported within Other assets in our consolidated balance sheets. The following is a summary of our intangible assets as of March 31, 2020 and December 31, 2019 (in thousands):


	March 31, 2020
	Gross Carrying Value		Accumulated Amortization		Accumulated Impairment losses		Net Carrying Value
Finite-life intangible assets:
Customer relationships	$	97,400	$	9,199	$	—	$	88,201
Galapagos operating license	47,669		6,506		—		41,163
Other finite-life intangible assets	11,560		8,188		—		3,372
Total finite-life intangible assets	156,629		23,893		—		132,736
Indefinite-life intangible assets	352,275		—		30,800		321,475
Total intangible assets, net	$	508,904	$	23,893	$	30,800	$	454,211


	December 31, 2019
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Finite-life intangible assets:
Customer relationships	$	97,400	$	7,576	$	89,824
Galapagos operating license	47,669		6,010		41,659
Other finite-life intangible assets	11,560		6,743		4,817
Total finite-life intangible assets	156,629		20,329		136,300
Indefinite-life intangible assets	352,275		—		352,275
Total intangible assets, net	$	508,904	$	20,329	$	488,575

Impairment charges related to the Silversea Cruises trade name included within Indefinite-life intangible assets in the table above was $30.8 million as of March 31, 2020.

Long-lived Assets

We identified that the undiscounted cash flows of certain long-lived assets, consisting of 8 ships and certain right-of-use assets, were less than their carrying values. Events surrounding the COVID-19 pandemic negatively impacted the expected undiscounted cash flows of these assets. As a result of this determination, we evaluated these assets pursuant to our long -lived asset impairment test, which resulted in an impairment charge of $463.0 million to write down these assets to their estimated fair values during the quarter ended March 31, 2020.

Notes Receivable

We reviewed our notes receivable for credit losses in connection with the preparation of our financial statements for the quarter ended March 31, 2020. In evaluating the allowance for loan losses, management considered factors such as historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. Based on these credit loss estimation factors, we recorded and subsequently wrote-off loan loss allowances of $38.1 million primarily due to loans and other net receivables related to Pullmantur Holdings S.L. ("Pullmantur Holdings"). Refer to Note 6. Other Assets for further information regarding our investment in Pullmantur Holdings.

Equity Investments

For an equity method investment that experiences a loss in fair value determined to be other than temporary, we will reduce our basis in the investment to fair value and record an impairment loss. Given the recent impact of the COVID-19 pandemic to our business, we evaluated whether our equity method investments were other than temporarily impaired. Based on our review of each of the investment's most recent financial results and projections, we determined that certain of our equity method investments, primarily Grand Bahama Shipyard Ltd. (“Grand Bahama”), were other than temporarily impaired, which resulted in an impairment charge of $39.7 million during the quarter ended March 31, 2020. Refer to Note 6. Other Assets for information regarding our significant equity investments.

The combined impairment and credit loss charge of $1.1 billion related to our goodwill, trademarks and trade names, vessels, right-of-use assets and notes receivable was recognized in earnings during the quarter ended March 31, 2020 and is reported within Impairment and credit losses within our consolidated statements of comprehensive (loss) income. The impairment charge of $39.7 million related to our equity investments was recognized in earnings during the quarter ended March 31, 2020 and is reported within Equity investment (loss) income within our consolidated statements of comprehensive (loss) income. For further information on the measurements used to estimate the fair value of these assets, refer to Note 13. Fair Value Measurements and Derivative Instruments. These impairment assessments and the resulting charges were determined based on management’s current estimates and projections using information through the time of the issuance of these financial statements. The adverse impact COVID-19 will continue to have on our business, operating results, cash flows and overall financial condition is uncertain and may result in changes to the assumptions used in the impairment tests discussed above, which may result in additional impairments to these assets in the future.