XML 24 R10.htm IDEA: XBRL DOCUMENT
v3.20.2

Impairment and Credit Losses | 6 Months Ended
--- | ---
Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract] |
Impairment and Credit Losses | Impairment and Credit Losses 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 and six months ended June 30, 2020 (in thousands) are as follows:
| Royal Caribbean International |  | Celebrity Cruises |  | Silversea Cruises |  | Total
Balance at January 1, 2020 | $ | 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 | (52) |  |  | — |  |  | — |  |  | (52) |
Balance at June 30, 2020 | $ | 296,480 |  |  | $ | 4,326 |  |  | $ | 508,578 |  |  | $ | 809,384 |
We performed interim impairment evaluations of Royal Caribbean International’s goodwill in connection with the preparation of our financial statements for the quarters ended March 31, 2020 and June 30, 2020 due to the significant impact that COVID-19 has had on our projected cash flows. Our extended suspension of our operations and the possibility of further extensions have created some uncertainty in forecasting the operating results and future cash flows used in our impairment analyses. As a result of our evaluations, we determined that the fair value of the Royal Caribbean International reporting unit exceeded its carrying values as of March 31, 2020 and June 30, 2020 by approximately 30% and 8%, respectively, resulting in no impairment to the Royal Caribbean International goodwill. We will continue to monitor Royal Caribbean International's goodwill for any additional adverse impact of COVID-19 that may result in changes to the assumptions used in the impairment testing, and will perform interim testing impairment evaluations, if deemed necessary, prior to our annual impairment evaluation to be performed in the fourth quarter of 2020. We estimated the fair value of the Royal Caribbean International reporting unit using a probability-weighted discounted cash flow model in combination with a market based valuation approach. Significant assumptions used in these valuations include the weighted average cost of capital discount factor, revenue base, revenue growth rate and terminal rate. As of the three months ended June 30, 2020, the carrying amount of goodwill attributable to our Royal Caribbean International reporting unit was $296.5 million. We also performed an interim impairment evaluation of Silversea Cruises’ goodwill and trade name 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. Significant assumptions used in these valuations include the weighted average cost of capital discount factor, revenue growth rates and royalty rate. As a result of the analysis, we determined that the carrying value of the Silversea Cruises reporting unit exceeded its f air value as of March 31, 2020. Accordingly, we recognized a goodwill impairment charge of $576.2 million for the quarter ended March 31, 2020. For the quarter ended June 30, 2020, we had no further indication of impairment to the carrying amount of the Silversea Cruises goodwill and trade name. 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 June 30, 2020 and December 31, 2019 (in thousands):
|  |  |  | June 30, 2020 |  |  |  |  |  |
|  |  |  | Gross Carrying Value |  | Accumulated Amortization |  | Accumulated Impairment losses |  | Net Carrying Value
Finite-life intangible assets: |  |  |  |  |  |  |  |  |  |
Customer relationships |  |  |  | $ | 97,400 |  |  | $ | 10,822 |  |  | $ | — |  |  | $ | 86,578 |
Galapagos operating license |  |  |  | 47,669 |  |  | 6,927 |  |  | — |  |  | 40,742 |
Other finite-life intangible assets |  |  |  | 11,560 |  |  | 9,633 |  |  | — |  |  | 1,927 |
Total finite-life intangible assets |  |  |  | 156,629 |  |  | 27,382 |  |  | — |  |  | 129,247 |
Indefinite-life intangible assets |  |  |  | 352,275 |  |  | — |  |  | 30,800 |  |  | 321,475 |
Total intangible assets, net |  |  |  | $ | 508,904 |  |  | $ | 27,382 |  |  | $ | 30,800 |  |  | $ | 450,722 |
|  |  |  | 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 were $30.8 million for the six months ended June 30, 2020 and were recorded during the quarter ended Mach 31, 2020. Long-lived Assets During the quarter ended March 31, 2020, 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. During the quarter ended June 30, 2020, we terminated the agreements chartering Monarch of the Seas, Horizon of the Seas and Sovereign of the Seas to Pullmantur Holdings and agreed to sell the ships to a third party. Consequently, the ships met accounting criteria to be classified as held for sale which resulted in a further impairment charge of $15.2 million during the quarter ended June 30, 2020 to adjust the carrying value of the assets held for sale to their fair value, less cost to sell. As of June 30, 2020, the net book value of assets held for sale was not material to our consolidated balance sheet. As a result of the continuing effect of COVID-19 on our expected future operating cash flows, we determined certain impairment triggers had occurred. Accordingly, we updated and performed undiscounted cash flow analyses on certain ships in our fleet and right of use of assets as of June 30, 2020 and identified further impairment on two ships and one right of use asset, as the undiscounted cashflows were less than their carrying values. We determined that an additional impairment charge of $49.7 million was required to write down these assets to their estimated fair values as of June 30, 2020. These impairment charges were reported within Impairment and Credit Losses in our consolidated statements of comprehensive (loss) income. Notes Receivable We reviewed our notes receivable for credit losses in connection with the preparation of our financial statements. In evaluating the credit loss allowance, 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 during the quarter ended March 31, 2020, primarily due to loans and other net receivables related to Pullmantur Holdings. Refer to Note 6. Other Assets for further information regarding our investment in Pullmantur Holdings. During the quarter ended June 30, 2020, we incurred credit losses of $91.6 million due to loss provisions recognized on notes receivable related to our previous sale of property and equipment and on net receivables related to Pullmantur Holdings. The following table summarizes our credit loss allowance related to receivables for the six months ended June 30, 2020 (in thousands):
|  | Credit Loss Allowance |  |  |  |
Balance at January 1, 2020 |  | $ | 5,635 |  |  |  |  |
Loss provision for receivables |  | 168,858 |  |  |  |
Bad debt write-offs |  | (91,142) |  |  |  |
Balance at June 30, 2020 |  | $ | 83,351 |  |  |  |  |
Our credit loss allowance balance as of June 30, 2020 primarily related to a $73.3 million loss provision recognized during the three months ended June 30, 2020 on notes receivable related to our previous sale of property and equipment. 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, 20 20. For the quarter ended June 30, 2020, we had no further indication of impairment to our equity investment balances. Refer to Note 6. Other Assets for information regarding our significant equity investments. During the three and six months ended June 30, 2020, we recognized combined impairment and credit loss charges of $156.5 million and $1.3 billion, respectively. The impairment charges related to our goodwill, trademarks and trade names, vessels and right-of-use assets and the credit losses related to our notes receivable are reported within Impairment and credit losses within our consolidate d statements of comprehensive (loss) income. The impairment charge of $39.7 million related to our equity investments was reported within Equity investment (loss) income within our consolidate d statements of comprehensive (loss) income during the quarter ended March 31, 2020 and six months ended June 30, 2020. 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.

X
- Definition The entire disclosure for the details of the charge against earnings resulting from the aggregate write down of all assets from their carrying value to their fair value. Disclosure may also include a description of the impaired asset and facts and circumstances leading to the impairment, amount of the impairment loss and where the loss is located in the income statement, method(s) for determining fair value, and the segment in which the impaired asset is reported. + References No definition available. + Details
Name: | us-gaap_AssetImpairmentChargesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration