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Impairment and Credit Losses | 9 Months Ended
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Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract] |
Impairment and Credit Losses | Impairment and Credit Losses The increased challenges related to COVID-19 have 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 in 2020 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 nine months ended September 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 | 35 |  |  | — |  |  | — |  |  | 35 |
Balance at September 30, 2020 | $ | 296,567 |  |  | $ | 4,326 |  |  | $ | 508,578 |  |  | $ | 809,471 |
We performed interim impairment evaluations of Royal Caribbean International’s goodwill in connection with the preparation of our quarterly financial statements for the periods ended March 31, 2020 and June 30, 2020 due to the significant impact that COVID-19 has had on our projected cash flows and triggering events identified in those quarters. Our extended suspension of our operations and the possibility of further extensions 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 value 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 did not perform an interim impairment evaluation of Royal Caribbean International's goodwill during the quarter ended September 30, 2020 as no triggering events were identified. We will assess Royal Caribbean International's goodwill during our annual impairment evaluation to be performed in the fourth quarter of 2020 for any additional adverse impact of COVID-19 that may result in changes to the assumptions used in the June 30, 2020 impairment testing. For the quarters ended March 31, 2020 and June 30, 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 September 30, 2020, the carrying amount of goodwill attributable to our Royal Caribbean International reporting unit was $296.6 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 quarters ended June 30, 2020 and September 30, 2020, w e did not perform interim impairment evaluations of the Silversea Cruises goodwill and trade name, as no triggering events were identified. As of September 30, 2020, the carrying amount of goodwill attributable to our Silversea Cruises reporting unit was $508.6 million. 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 September 30, 2020 and December 31, 2019 (in thousands):
|  |  |  | September 30, 2020
|  |  |  | Gross Carrying Value |  | Accumulated Amortization |  | Accumulated Impairment losses |  | Net Carrying Value
Finite-life intangible assets: |  |  |  |  |  |  |  |  |  |
Customer relationships |  |  |  | $ | 97,400 |  |  | $ | 12,446 |  |  | $ | — |  |  | $ | 84,954 |
Galapagos operating license |  |  |  | 47,669 |  |  | 7,274 |  |  | — |  |  | 40,395 |
Other finite-life intangible assets |  |  |  | 11,560 |  |  | 11,078 |  |  | — |  |  | 482 |
Total finite-life intangible assets |  |  |  | 156,629 |  |  | 30,798 |  |  | — |  |  | 125,831 |
Indefinite-life intangible assets |  |  |  | 352,275 |  |  | — |  |  | 30,800 |  |  | 321,475 |
Total intangible assets, net |  |  |  | $ | 508,904 |  |  | $ | 30,798 |  |  | $ | 30,800 |  |  | $ | 447,306 |
|  |  |  | 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 nine months ended September 30, 2020 and were recorded during the quarter ended March 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. We sold the ships to third parties during the three months ended September 30, 2020 for amounts approximating their carrying values. As a result of the continuing effect of COVID-19 on our expected future operating cash flows, we determined certain impairment triggers had occurred during the quarter ended June 30, 2020. Accordingly, we updated and performed undiscounted cash flow analyses on certain ships in our fleet and right-of-use of assets 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. We performed undiscounted cash flow recoverability evaluations for three ships with a combined net book value of approximately $400.0 million in connection with the preparation of our financial statements during the quarter ended September 30, 2020. As a result of these recoverability evaluations, it was determined the carrying value of these three ships were recoverable at September 30, 2020. Our assessment applied probability scenario cash flows by using a 50% weighting to undiscounted cash flows through the remaining life of the ships and 50% to cash flows assuming disposal of the ships. In the event that our intent to continue to operate the ships changes, or the probability of disposing increases to approximately 75%, the vessels would need to be fair valued and we expect that a material impairment charge would be recorded. We will continue to monitor these ships and our intent to use these ships in light of the COVID-19 environment. For the quarter ended September 30, 2020, we had no further indication of impairment to the carrying amount of our other ships and our right-of-use assets. During the quarter ended September 30, 2020, we determined that certain construction in progress projects would be reduced in scope or would no longer be completed as a result of capital cost containment measures due to the impact COVID-19 has had on our operations. This led to the impairment of $83.9 million of construction in progress assets previously reported in Property and equipment, net. 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 $72.8 million during the quarter ended March 31, 2020, primarily due to loans and other receivables related to Pullmantur Holdings. Refer to Note 6. Other Assets for further information regarding our investment in Pullmantur Holdings. During the quarters ended June 30, 2020 and September 30, 2020, we incurred credit losses of $91.6 million and $6.0 million, respectively, due to loss provisions recognized on notes receivable related to our previous sale of property and equipment and on receivables mostly related to Pullmantur Holdings. The following table summarizes our credit loss allowance related to receivables for the nine months ended September 30, 2020 (in thousands):
|  | Credit Loss Allowance |  |
Balance at January 1, 2020 |  | $ | 5,635 |  |  |  |  |
Loss provision for receivables |  | 172,286 |  |  |  |
Write-offs |  | (97,092) |  |  |  |
Balance at September 30, 2020 |  | $ | 80,829 |  |  |  |  |
Our credit loss allowance balance as of September 30, 2020 primarily related to a $73.2 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 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 quarters ended June 30, 2020, and September 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 nine months ended September 30, 2020, we recognized combined impairment and credit loss charges of $89.9 million and $1.4 billion, respectively. The impairment charges primarily related to our goodwill, trademarks and trade names, property and equipment, net and right-of-use assets and the credit losses related to our notes receivable were 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 nine months ended September 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 our assets in the future.

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- 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
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