XML 33 R20.htm IDEA: XBRL DOCUMENT
v3.20.2

GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended
--- | ---
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS 2020 Annual Goodwill Impairment Testing The Company performed the required annual impairment tests of goodwill at April 30, 2020 on its five reporting units. To determine the fair value of these reporting units, the Company uses a discounted cash flow model with market-based support as its valuation technique to measure the fair value for its reporting units. The discounted cash flow model uses five-to-ten-year forecasted cash flows plus a terminal value based on a multiple of earnings or by capitalizing the last period’s cash flows using a perpetual growth rate. The Company's significant assumptions in the discounted cash flow models include, but are not limited to: the weighted average cost of capital, revenue growth rates, including perpetual revenue growth rates, and operating margin percentages of the reporting unit's business. The Company considered the current market conditions when determining its assumptions. The total forecasted cash flows were discounted based on a range between 9.0% to 11.5%, which included assumptions regarding the Company’s weighted average cost of capital ("WACC"). Lastly, the Company reconciled the aggregate fair values of its reporting units to its market capitalization, which included a reasonable control premium based on market conditions. These future expectations include, but are not limited to, the current and ongoing impact of the COVID-19 pandemic and new product development changes for these reporting units. The Company also considers the current and projected market and economic conditions amid the ongoing pandemic for the dental industry both in the U.S. and globally, when determining its assumptions. The use of estimates and the development of assumptions results in uncertainties around forecasted cash flows. As a result of the annual tests of goodwill, no impairment was identified. For the Company's goodwill that was not impaired at March 31, 2020 (see March 31, 2020 Impairment Testing below), the Company applied a hypothetical sensitivity analysis to its reporting units. If the WACC rate of these reporting units had been hypothetically increased by 100 basis points at April 30, 2020, one reporting unit within the Company's Technologies & Equipment segment would have a fair value that would approximate book value. If the fair value of each of these reporting units had been hypothetically reduced by 10% at April 30, 2020, one reporting unit within the Company's Technologies & Equipment segment would have a fair value that approximates net book value. Goodwill for this reporting unit totals $1.2 billion at September 30, 2020. For the Equipment & Instruments reporting unit that recorded goodwill impairment at March 31, 2020, the implied fair value continues to approximate net book value at April 30, 2020. Goodwill for this reporting unit totals $291.5 million at September 30, 2020. A change in any of these estimates and assumptions used in the annual test, as well as unfavorable changes in the ongoing COVID-19 pandemic, a degradation in the overall markets served by these reporting units, among other factors, could have a negative material impact to the fair value of the reporting units and could result in a future impairment charge. There can be no assurance that the Company’s future goodwill impairment testing will not result in a charge to earnings. This impairment charge could have a negative material impact on the Company’s results of operations. 2020 Annual Indefinite-Lived Intangibles Impairment Testing The Company also assessed the annual impairment of indefinite-lived intangible assets at April 30, 2020, which largely consists of acquired tradenames and trademarks, in conjunction with the annual impairment tests of goodwill. As a result of the annual impairment test of indefinite-lived intangible assets, no impairment was identified. For the Company's indefinite-lived intangible assets that were not impaired at March 31, 2020 (see March 31, 2020 Impairment Testing below), the Company applied a hypothetical sensitivity analysis. If the fair value of each of these indefinite-lived intangibles assets had been hypothetically reduced by 10% or the discount rate had been hypothetically increased by 100 basis points at April 30, 2020, the fair value of these assets would still exceed their book value. For the indefinite-lived intangible assets that were impaired at March 31, 2020, the implied fair values continue to approximate net book values at April 30, 2020. Should the Company’s analysis in the future indicate additional unfavorable impacts related to the ongoing COVID-19 pandemic, an increase in discount rates, or a degradation in the use of the tradenames and trademarks, any of which could have a negative material impact to the implied fair values and could result in a future impairment to the carrying value of the indefinite-lived intangible assets. There can be no assurance that the Company’s future indefinite-lived intangible asset impairment testing will not result in a charge to earnings. This impairment charge could have a negative material impact on the Company’s results of operations. March 31, 2020 Impairment Testing In preparing the financial statements for the three months ended March 31, 2020, the Company identified an impairment triggering event related to four of its reporting units. The Company had experienced a meaningful decrease in customer demand for its products as a result of stay-at-home orders, travel restrictions, and social distancing guidelines set forth by governmental authorities throughout the world in response to the COVID-19 pandemic. These actions meaningfully impacted end-user demand for routine dental procedures in most of the Company's markets. The Company updated its future forecasted revenues, operating margins, and weighted average cost of capital for all four of the reporting units which were impacted by the continuing pandemic. Based on the Company's best estimates and assumptions at March 31, 2020, the Company believed forecasted future revenue growth related to the Equipment & Instruments reporting unit will experience an extended recovery period in returning to the pre-COVID-19 levels. The Company believed that dental practitioners will focus their initial post-COVID-19 equipment spending on products that deliver short-term revenue gains for their practices before replacing the Imaging, Treatment Center, and Instruments products that comprise the Equipment & Instruments reporting unit. After this extended recovery period, the Company expects the growth rates of the Equipment & Instruments reporting unit to return to pre-COVID-19 levels. To determine the fair value of these four reporting units, the Company used a discounted cash flow model with market-based support as its valuation technique to measure the fair value for its reporting units. The discounted cash flow model used five-to-ten-year forecasted cash flows plus a terminal value based on a multiple of earnings or by capitalizing the last period’s cash flows using a perpetual growth rate. The Company's significant assumptions in the discounted cash flow models included, but are not limited to: the weighted average cost of capital, revenue growth rates, including perpetual revenue growth rates, and operating margin percentages of the reporting unit's business. The Company considered the current market conditions when determining its assumptions. The total forecasted cash flows were discounted based on a range between 9.5% to 11.5%, which included assumptions regarding the Company’s weighted average cost of capital. Lastly, the Company reconciled the aggregate fair values of its reporting units to its market capitalization, which included a reasonable control premium based on market conditions. These future expectations included, but are not limited to, the current and ongoing impact of the COVID-19 pandemic and new product development changes for these reporting units. The Company also considered the current and projected market and economic conditions amid the ongoing pandemic for the dental industry both in the U.S. and globally, when determining its assumptions. The use of estimates and the development of assumptions results in uncertainties around forecasted cash flows. A change in any of these estimates and assumptions, as well as unfavorable changes in the ongoing pandemic, could produce a different fair value, which could have a negative impact and result in a future impairment charge and could have a negative material impact on the Company’s results of operations. As a result of updating the estimates and assumptions in the ongoing COVID-19 pandemic and with the preparation of the financial statements for the three months ended March 31, 2020, the Company determined that the goodwill associated with the Equipment & Instruments reporting unit was impaired. As a result, the Company recorded a goodwill impairment charge of $156.6 million. This reporting unit is within the Technologies & Equipment segment. At March 31, 2020, the remaining goodwill related to the Equipment & Instruments reporting unit was $290.5 million. Based on the quantitative assessments performed for the three other reporting units, the Company believed that its adjusted long-term forecasted cash flows did not indicate that the fair value of these reporting units may be below their carrying value. In preparing the financial statements for the three months ended March 31, 2020 in conjunction with the goodwill impairment, the Company tested the indefinite-lived intangible assets related to the businesses within the four reporting units for impairment. The Company performed impairment tests using an income approach, more specifically a relief from royalty method. In the development of the forecasted cash flows, the Company applied significant judgment to determine key assumptions, including royalty rates and discount rates. Royalty rates used are consistent with those assumed for the original purchase accounting valuation. If the carrying value exceeds the fair value, an impairment loss in the amount equal to the excess is recognized. As a result, the Company identified that certain tradenames and trademarks related to businesses in the Equipment & Instruments reporting unit, within the Technologies & Equipment segment, were impaired. The Company recorded an impairment charge of $38.7 million for the three months ended March 31, 2020, which was recorded in Restructuring and other costs in the Consolidated Statements of Operations. The impairment charge was driven by a decline in forecasted sales as a result of the COVID-19 pandemic as discussed above, as well as an unfavorable change in the discount rate. The Company utilized discount rates ranging from 10.0% to 17.5%. The assumptions and estimates used in determining the fair value of the indefinite-lived intangible assets contain uncertainties and any changes to these assumptions and estimates, including unfavorable changes related to the COVID-19 pandemic, could have a negative impact and result in a future impairment charge and could have a negative material impact on the Company's results of operations. At March 31, 2020, the remaining indefinite-lived tradenames and trademarks related to the Equipment & Instruments reporting unit was $75.0 million. Based on the quantitative assessments performed for the indefinite-lived intangible assets related to the businesses in the three other reporting units, the Company believed that its adjusted long-term forecasted cash flows did not indicate that the fair value of the indefinite-lived intangible assets may be below their carrying value. A reconciliation of changes in the Company’s goodwill by reportable segment were as follows:
(in millions) |  | Technologies & Equipment |  | Consumables |  | Total
Balance at December 31, 2019 |  | $ | 2,515.7 |  |  | $ | 880.8 |  |  | $ | 3,396.5 |
Impairment |  | (156.6) |  |  | — |  |  | (156.6) |
Effects of exchange rate changes |  | 44.3 |  |  | (1.5) |  |  | 42.8 |
Balance at September 30, 2020 |  | $ | 2,403.4 |  |  | $ | 879.3 |  |  | $ | 3,282.7 |
The gross carrying amount of goodwill and the cumulative goodwill impairment were as follows:
|  | September 30, 2020 |  | December 31, 2019
(in millions) |  | Gross Carrying Amount |  | Cumulative Impairment |  | Net Carrying Amount |  | Gross Carrying Amount |  | Cumulative Impairment |  | Net Carrying Amount
Technologies & Equipment |  | $ | 5,296.5 |  |  | $ | (2,893.1) |  |  | $ | 2,403.4 |  |  | $ | 5,252.3 |  |  | $ | (2,736.6) |  |  | $ | 2,515.7 |
Consumables |  | 879.3 |  |  | — |  |  | 879.3 |  |  | 880.8 |  |  | — |  |  | 880.8 |
Total effect of cumulative impairment |  | $ | 6,175.8 |  |  | $ | (2,893.1) |  |  | $ | 3,282.7 |  |  | $ | 6,133.1 |  |  | $ | (2,736.6) |  |  | $ | 3,396.5 |
Identifiable definite-lived and indefinite-lived intangible assets were as follows:
|  | September 30, 2020 |  | December 31, 2019
(in millions) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Patents |  | $ | 1,420.3 |  |  | $ | (623.5) |  |  | $ | 796.8 |  |  | $ | 1,371.9 |  |  | $ | (517.9) |  |  | $ | 854.0 |
Tradenames and trademarks |  | 81.3 |  |  | (68.2) |  |  | 13.1 |  |  | 79.0 |  |  | (63.4) |  |  | 15.6 |
Licensing agreements |  | 36.4 |  |  | (29.4) |  |  | 7.0 |  |  | 36.0 |  |  | (27.9) |  |  | 8.1 |
Customer relationships |  | 1,091.5 |  |  | (461.5) |  |  | 630.0 |  |  | 1,070.5 |  |  | (399.2) |  |  | 671.3 |
Total definite-lived |  | $ | 2,629.5 |  |  | $ | (1,182.6) |  |  | $ | 1,446.9 |  |  | $ | 2,557.4 |  |  | $ | (1,008.4) |  |  | $ | 1,549.0 |
Indefinite-lived tradenames and trademarks |  | $ | 611.2 |  |  | $ | — |  |  | $ | 611.2 |  |  | $ | 627.3 |  |  | $ | — |  |  | $ | 627.3 |
Total identifiable intangible assets |  | $ | 3,240.7 |  |  | $ | (1,182.6) |  |  | $ | 2,058.1 |  |  | $ | 3,184.7 |  |  | $ | (1,008.4) |  |  | $ | 2,176.3 |
During the nine months ended September 30, 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 divestitures of non-strategic product lines.

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

X
- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration