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GOODWILL AND INTANGIBLE ASSETS | 12 Months Ended
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Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS 2019 Annual Goodwill Impairment Testing As discussed in Note 5, Segment Information, effective January 1, 2019, the Company realigned certain businesses between segments resulting in a change from eleven reporting units to five. As a result, the Company transferred goodwill between segments due to these changes. Affected reporting units, including the CAD/CAM and Treatment Center reporting units in the Technologies & Equipment segment, were tested for potential impairment of goodwill before the transfers. No goodwill impairment was identified due to the realignment. The Company performed the required annual impairment tests of goodwill at at April 30, 2019 on five reporting units. The performance of the Company’s annual impairment test did not result in any impairment of the Company’s goodwill. 2019 Annual Indefinite-Lived Intangibles Impairment Testing During the three months ended March 31, 2019, the Company impaired $5.3 million of product tradenames and trademarks within the Technologies & Equipment segment. The impairment was the result of a change in forecasted sales related to the divestitures of non-strategic product lines. The Company assessed the annual impairment of indefinite-lived intangible assets at April 30, 2019, which largely consists of acquired tradenames and trademarks, in conjunction with the annual impairment tests of goodwill. The performance of the Company’s annual impairment test did not result in any impairment of the Company’s indefinite-lived intangible assets. Unfavorable developments in the market for the dental or medical device industries, an increase in discounts rates, unfavorable changes in earnings multiples or a decline in future cash flow projections, among other factors, may cause a change in circumstances indicating that the carry value of the indefinite-lived assets and goodwill within the Company’s reporting units may not be recoverable. 2018 Annual Goodwill Impairment Testing In connection with the updating of the estimates and assumptions with the April 30, 2018 annual impairment test of goodwill and the preparation of the financial statements for the three months ended June 30, 2018, the Company determined that the goodwill associated with the CAD/CAM, Imaging and Orthodontics businesses, all within the Technologies & Equipment segment, was impaired. Additionally, near the end of the quarter, the Company recognized that the CAD/CAM and Imaging businesses’ (“equipment businesses”) revenue and operating margins would not meet forecasted expectations for the quarter as a result of several significant unfavorable developments which also affected the business's projections for future revenue and operating margins. As a result, the Company recorded a goodwill impairment charge of $1,085.8 million. The significant unfavorable developments in the current period which are reflected in the Company’s April 30, 2018 goodwill impairment testing model, are as follows: •The equipment businesses were negatively affected in connection with the continued transition of the Company’s distribution relationships primarily in the U.S. from exclusive to non-exclusive. The Company’s expectations for revenue growth from its non-exclusive distribution relationships, which replaced its former long-term exclusive distribution relationship, were not met. As a result, the Company’s forecasts of current and future third-party demand have been reduced as the Company’s U.S. distributors continue to offer and promote competitive alternatives to the Company’s full CAD/CAM systems and lower-priced alternatives to the Imaging business products. •The Imaging business observed revenue and operating margins being negatively impacted by aggressive competition with a focus on value-based products in the marketplace as opposed to the business's premium products. This has resulted in increased competition from low-cost products in certain regions throughout the world causing the business to offer additional product features at the current price levels and to offer additional promotions and reduce its future sales forecasts. •The CAD/CAM and Imaging businesses have also experienced lower than expected sales with respect to higher margin products as well as a regional shift in sales to emerging markets each of which has negatively impacted the businesses overall operating margins as compared to the original forecasts for the period and for future sales forecasts. •The equipment businesses were also further impacted by the unfavorable change in the discount rate due primarily to a higher risk factor, which represents management’s assessment of increased risk with respect to the CAD/CAM and Imaging businesses’ forecasts primarily due to the factors described above, and to a lesser extent a higher risk-free interest rate for all businesses. •The increased reduction of inventory being held by the Company’s U.S. distributors in the second quarter, which was larger than anticipated for the period, and planned further reductions of inventory, impacts the Company’s near-term results. As a result of the factors described above, and the resulting reduced revenue and profitability expectations for these businesses, we forecasted reductions in unit volume growth rates and operating margins and lower future cash flows used to estimate the fair value of these businesses, which resulted in a determination that an impairment adjustment was required. The Orthodontics business goodwill impairment charge was primarily driven by lower operating margins and lower sales growth. The products manufactured and sold within this business have consisted mainly of traditional orthodontic treatment products, (i.e., brackets, bands and wires). The impairment charge is unrelated to the Company’s acquisition of OraMetrix. The Company has observed a continuing decline in operating margins as the marketplace has seen higher than expected price competition primarily due to increased supply of traditional orthodontic products in the market. In addition, the Company has seen lower than expected revenue growth which is reflected in its future forecast. The Company believes the revenue trend is the result of competition as well as the growing end-user demand for newer orthodontic treatment options. At December 31, 2018, the Company did not identify any impairment triggers related to the businesses noted above. For the Company’s businesses that were not impaired, the Company applied a hypothetical sensitivity analysis. Had the discount rate of each of these businesses been hypothetically increased by 100 basis points at April 30, 2018, the fair value of one business, Treatment Centers, would not exceed net book value. If the fair value of each of these businesses had been hypothetically reduced by 10% at April 30, 2018, the fair value of one business, Treatment Centers, would not exceed net book value. Goodwill for the Treatment Centers business totals $292.4 million at December 31, 2018. In conjunction with the goodwill and indefinite-lived intangibles impairment test, the Company utilized its best estimate of future cash flows as of April 30, 2018, which include significant management assumptions such as future revenue growth rates, operating margins, weighted average cost of capital, and future economic and market conditions affecting the dental and medical device industries. Any changes to these assumptions and estimates could have a negative impact on the fair value of these businesses and may result in further impairment. Given the uncertainty in the marketplace and other factors affecting management’s assumptions underlying the Company’s discounted cash flow model, these estimates could vary significantly in the future, which may result in a goodwill impairment charge at that time. The goodwill impairment charge is not expected to result in future cash expenditures. 2018 Annual Indefinite-Lived Intangibles Impairment Testing The Company also assessed the annual impairment of indefinite-lived intangible assets as of April 30, 2018, which largely consist of acquired tradenames and trademarks, in conjunction with the annual impairment tests of goodwill. As a result of the annual impairment tests of indefinite-lived intangible assets, the Company recorded an impairment charge of $179.2 million for the three months ended June 30, 2018 which was recorded in Restructuring and other costs in the Consolidated Statements of Operations. The impaired indefinite-lived intangible assets are tradenames and trademarks related to the CAD/CAM, Imaging, and Instrument businesses. The impairment charge was primarily driven by a decline in forecasted sales resulting from increased competition and the impact of low-cost competitive products, as discussed above with respect to goodwill. In addition, the unfavorable impact of an increase in the equipment business's respective risk factors, along with increases in the risk-free rate, increased the discount rate. At December 31, 2018, the Company did not identify any impairment triggers for the indefinite-lived asset related to the businesses noted above. 2017 Goodwill Impairment Testing In preparing the financial statements for the year ended December 31, 2017, the Company identified an impairment triggering event related to the CAD/CAM, Imaging and Treatment Center equipment businesses. Forecasted revenues and operating margins for these businesses were impacted by continued unfavorable developments in the marketplace which included an increase in competition. These developments resulted in significantly lower sales to end-users than expected in the fourth quarter of 2017 in the North America and Rest of World regions as well as declines in expected gross profit rates which included the unfavorable impacts from changes in the foreign exchange rates. The impacts from foreign exchange rate changes were primarily driven by the strengthening of the euro versus the U.S. dollar as a result of the higher euro denominated costs and net assets associated with these businesses as compared to the lower amount of euro denominated sales. While the Company considered unfavorable market developments and foreign exchange rate changes, in its April 30, 2017 assessment, the impact of these developments were at levels beyond those anticipated by the Company despite moving away from a non-exclusive distribution channel in the United States and the execution of new distribution agreements with Patterson and Henry Schein in May and June of 2017. In addition to the unfavorable market and foreign exchange rate developments, the income tax rate forecast used in the annual goodwill test was unfavorably impacted by the recent tax legislation in the U.S. and other foreign jurisdictions. As a result the Company tested these businesses for impairment in preparation of the financial statements for the year ended December 31, 2017 and determined that the goodwill associated with the CAD/CAM, Imaging and Treatment Center businesses, all within the Technologies & Equipment segment, was impaired. The impairment was the result of a change in forecasted sales and gross profit as well as changes in foreign exchange rates and the income tax rate. As a result, the Company recorded a goodwill impairment charge of $558.0 million for the three months ended December 31, 2017. The combination of impairment charges for the second and fourth quarters of 2017 resulted in a total goodwill impairment charge of $1,650.9 million for the year ended December 31, 2017. 2017 Indefinite-Lived Intangibles Impairment Testing The Company also assessed the annual impairment of indefinite-lived intangible assets as of April 30, 2017, which largely consists of acquired tradenames and trademarks, in conjunction with the annual impairment tests of goodwill. As a result of the annual impairment tests of indefinite-lived intangible assets, the Company recorded an impairment charge of $79.8 million for the three months ended June 30, 2017 which was recorded in Restructuring and other cost in the Consolidated Statements of Operations. The impaired indefinite-lived intangible assets are tradenames and trademarks related to the CAD/CAM and Imaging equipment businesses. The impairment charge was driven by a decline in forecasted sales at that time. In preparing the financial statements for the year ended December 31, 2017, the Company, as result of the triggering event, tested the indefinite-lived intangible assets related to these businesses for impairment. As a result, the Company identified that certain tradenames and trademarks related to the CAD/CAM, Imaging and Treatment Center equipment businesses, all within the Technologies & Equipment segment, were impaired. The Company recorded an impairment charge of $266.9 million for the three months ended December 31, 2017 which was recorded in Restructuring and other cost in the Consolidated Statements of Operations. The combination of impairment charges for the second and fourth quarters of 2017 resulted in a total impairment charge for the year ended December 31, 2017 of $346.7 million related to indefinite-lived assets. The impairment charge was driven by a continuing decline in forecasted sales at that time. A reconciliation of changes in the Company’s goodwill by reportable segment were as follows (the segment information below reflects the current structure for all periods shown):
(in millions) |  | Technologies & Equipment |  | Consumables |  | Total
Balance at December 31, 2017 |  | $ | 3,634.4 |  |  | $ | 904.8 |  |  | $ | 4,539.2 |
Acquisition activity |  | 58.0 |  |  | 3.7 |  |  | 61.7 |
Adjustment of provisional amounts on prior acquisitions |  | — |  |  | 0.7 |  |  | 0.7 |
Impairment |  | (1,085.7) |  |  | — |  |  | (1,085.7) |
Effect of exchange rate changes |  | (61.8) |  |  | (22.8) |  |  | (84.6) |
Balance at December 31, 2018 |  | $ | 2,544.9 |  |  | $ | 886.4 |  |  | $ | 3,431.3 |
Acquisition activity |  | 3.3 |  |  | — |  |  | 3.3 |
Divestiture of business |  | (4.1) |  |  | — |  |  | (4.1) |
Effect of exchange rate changes |  | (28.4) |  |  | (5.6) |  |  | (34.0) |
Balance at December 31, 2019 |  | $ | 2,515.7 |  |  | $ | 880.8 |  |  | $ | 3,396.5 |
The gross carrying amount of goodwill and the cumulative goodwill impairment were as follows:
|  | Year Ended December 31, |  |  |  |  |  |  |  |  |  |
|  | 2019 |  |  |  |  |  | 2018 |  |  |  |
(in millions) |  | Gross Carrying Amount |  | Cumulative Impairment |  | Net Carrying Amount |  | Gross Carrying Amount |  | Cumulative Impairment |  | Net Carrying Amount
Technologies & Equipment |  | $ | 5,252.3 |  |  | $ | (2,736.6) |  |  | $ | 2,515.7 |  |  | $ | 5,281.5 |  |  | $ | (2,736.6) |  |  | $ | 2,544.9 |
Consumables |  | 880.8 |  |  | — |  |  | 880.8 |  |  | 886.4 |  |  | — |  |  | 886.4 |
Total effect of cumulative impairment |  | $ | 6,133.1 |  |  | $ | (2,736.6) |  |  | $ | 3,396.5 |  |  | $ | 6,167.9 |  |  | $ | (2,736.6) |  |  | $ | 3,431.3 |
Identifiable definite-lived and indefinite-lived intangible assets at were as follows:
|  | Year Ended December 31, |  |  |  |  |  |  |  |  |  |
|  | 2019 |  |  |  |  |  | 2018 |  |  |  |
(in millions) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Patents |  | $ | 1,351.3 |  |  | $ | (517.9) |  |  | $ | 833.4 |  |  | $ | 1,376.4 |  |  | $ | (407.1) |  |  | $ | 969.3 |
Tradenames and trademarks |  | 79.0 |  |  | (63.4) |  |  | 15.6 |  |  | 81.1 |  |  | (62.5) |  |  | 18.6 |
Licensing agreements |  | 36.0 |  |  | (27.9) |  |  | 8.1 |  |  | 36.1 |  |  | (26.3) |  |  | 9.8 |
Customer relationships |  | 1,070.5 |  |  | (399.2) |  |  | 671.3 |  |  | 1,085.3 |  |  | (334.4) |  |  | 750.9 |
Total definite-lived |  | $ | 2,536.8 |  |  | $ | (1,008.4) |  |  | $ | 1,528.4 |  |  | $ | 2,578.9 |  |  | $ | (830.3) |  |  | $ | 1,748.6 |
Indefinite-lived tradenames and trademarks |  | $ | 647.9 |  |  | $ | — |  |  | $ | 647.9 |  |  | $ | 671.7 |  |  | $ | — |  |  | $ | 671.7 |
Total identifiable intangible assets |  | $ | 3,184.7 |  |  | $ | (1,008.4) |  |  | $ | 2,176.3 |  |  | $ | 3,250.6 |  |  | $ | (830.3) |  |  | $ | 2,420.3 |
Amortization expense for identifiable definite-lived intangible assets for the years ended December 31, 2019, 2018 and 2017 was $189.6 million, $197.9 million and $189.1 million, respectively. The annual estimated amortization expense related to these intangible assets for each of the five succeeding calendar years is $187.1 million, $185.7 million, $183.3 million, $182.3 million and $181.8 million for 2020, 2021, 2022, 2023 and 2024, respectively.

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