Quarterly report pursuant to Section 13 or 15(d)

Impairments

v3.21.1
Impairments
3 Months Ended
Mar. 31, 2021
Impairments [Abstract]  
Impairments

7.     Impairments



Goodwill



The activity in the balance of the Company’s goodwill was as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

For the Three Months Ended



 

March 31,



 

2021

 

2020

Balance, beginning of period

 

$

8,277 

 

 

37,248 

Impairment losses

 

 

 —

 

 

(22,384)

Colonial Elegance acquisition adjustments to provisional goodwill

 

 

(1,341)

 

 

 —

Balance, end of period

 

$

6,936 

 

 

14,864 



The Company tests goodwill associated with its reporting units for potential impairment on an annual basis as of December 31 or during interim periods if impairment indicators exist.



As of March 31, 2020, the Company concluded that the effects of the COVID-19 pandemic, including the recessionary economic environment and the impact on certain of the Company’s operations, indicated that it was more likely than not that the fair values of certain of its reporting units with goodwill had declined below the respective carrying amounts of such reporting units. As a result, the Company tested the goodwill associated with such reporting units for impairment by estimating the fair values of the respective reporting units as of March 31, 2020 and recognized goodwill impairment losses of $22.4 million associated primarily with IT’SUGAR and, to a lesser extent, certain of its other reporting units during the three months ended March 31, 2020. The Company deconsolidated IT’SUGAR on September 22, 2020 as a result of IT’SUGAR filing petitions for Chapter 11 bankruptcy and derecognized the remaining goodwill balance of approximately $14.9 million as of that date. The decline in the fair value of these reporting units from December 31, 2019 primarily resulted from the effects of the COVID-19 pandemic on these businesses. 



There were no impairment indicators relating to the Company’s goodwill during the three months ended March 31, 2021, and accordingly, the Company did not test its goodwill for impairment as of March 31, 2021. See the Company’s 2020 Annual Report for further discussion related to the Company’s accounting policies for goodwill and its method and assumptions used to estimate the fair value of its reporting units in connection with its goodwill impairment testing.



Long-Lived Assets



The Company’s long-lived assets include property and equipment, amortizable intangible assets, and right-of-use assets associated with its lease agreements. The Company tests its long-lived assets, or asset groups which include long-lived assets, for recoverability whenever events or changes in circumstances indicate that the carrying amount of such assets or asset groups may not be recoverable.



As of March 31, 2020, the Company concluded that the effects of the COVID-19 pandemic indicated that the carrying amount of certain of its long-lived assets may not be recoverable, including asset groups associated with certain of its retail locations which were temporarily closed as a result of the pandemic. As a result of the Company’s testing of its long-lived assets for impairment, the Company recognized impairment losses of $4.9 million during the three months ended March 31, 2020 related primarily to leasehold improvements and right-of-use assets associated with certain of IT’SUGAR’s retail locations. The recognition of these impairment losses primarily resulted from the effects of the COVID-19 pandemic on the estimated cash flows expected to be generated by the related assets.



There were no impairment indicators relating to the Company’s long lived assets during the three months ended March 31, 2021, and accordingly, the Company did not test its long-lived assets for impairment as of March 31, 2021. See the Company’s 2020 Annual Report for further discussion related to the Company’s accounting policies for long-lived assets and its method and assumptions used to estimate the future cash flows and fair values of its long-lived assets in connection with its impairment testing for such assets.