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GOODWILL AND INTANGIBLE ASSETS | 12 Months Ended
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Dec. 31, 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 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 discount rates, revenue growth rates, 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 for each of the reporting units were discounted using rates ranging between 9.0% to 11.5%. Further, 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. The revenue growth rate assumptions were developed in consideration of future expectations which include, but were not limited to, distribution channel changes, impact from competition, and new product development changes for these reporting units. The Company also considered the current and projected market and economic conditions amid the ongoing COVID-19 pandemic for the dental industry both in the U.S. and globally, when determining its assumptions. As a result of the annual tests of goodwill performed at April 30, 2020, no impairment was identified. The use of estimates and the development of assumptions results in uncertainties around forecasted cash flows. For this reason, in conjunction with the annual test, the Company applied a hypothetical sensitivity analysis to its reporting units. If the discount rate of these reporting units had been hypothetically increased by 100 basis points at April 30, 2020, or, in a separate test, each reporting unit were subject to a 10% hypothetical reduction in fair value, it is noted that the Implants reporting unit within the Company's Technologies & Equipment segment would have a fair value that would approximate book value. For the Equipment & Instruments reporting unit that recorded goodwill impairment at March 31, 2020 as described below, the implied fair value continues to approximate net book value at April 30, 2020, and therefore this reporting unit is sensitive to any unfavorable change in assumptions. Goodwill associated with the Implants and Equipment & Instruments reporting units was $1,232 million and $292 million, respectively as of December 31, 2020. During the time subsequent to the annual evaluation, and at December 31, 2020, the Company considered whether any events or changes in circumstances had resulted in the likelihood that the goodwill of any of its reporting units may have been impaired. It is management's assessment that no such events have occurred. A change in any of the estimates and assumptions used in the annual test, as well as further unfavorable changes in the ongoing COVID-19 pandemic, a decline 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 material charge to earnings. 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. The Company applied a hypothetical sensitivity analysis. With the exception of the previously impaired intangible assets, it was noted that is 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 previously impaired at March 31, 2020 as described below, which are comprised of certain tradenames and trademarks related to the Equipment & Instruments reporting unit, the implied fair values continue to approximate net book values at April 30, 2020 and are therefore sensitive to any unfavorable changes in assumptions. At December 31, 2020, the remaining indefinite-lived tradenames and trademarks related to the Equipment & Instruments reporting unit was $82 million, of which one business unit in the Equipment & Instruments reporting unit makes up a significant portion of the balance. 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 decline 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 material charge to earnings. March 31, 2020 Impairment In the first quarter of 2020, the Company concluded that due to the negative effects of the COVID-19 pandemic on revenue and profitability, a triggering event existed for four of the Company’s five reporting units containing a goodwill balance as of March 31, 2020. 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 discount rates 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 each of the four reporting units for which a triggering event was concluded to exist, the Company used a discounted cash flow model consistent with the valuation approach described above for the annual impairment test, and utilized discount rates for each of the reporting units which ranged between 9.5% to 11.5%. As a result of these models which included updates to the estimates and assumptions resulting from the ongoing COVID-19 pandemic the Company determined that the goodwill associated with the Equipment & Instruments reporting unit was impaired and recorded an impairment charge of $157 million. This reporting unit is within the Technologies & Equipment segment. 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. Additionally, the Company also concluded in the first quarter of 2020 that due to the negative effects of the COVID-19 pandemic on revenue and profitability, a triggering event also existed for all but two of the Company’s indefinite-lived intangible assets as of March 31, 2020. 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. The first quarter impairment test resulted in an impairment charge of $39 million related to certain tradenames and trademarks related to the Equipment & Instruments reporting unit. This impairment charge 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 rates. 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 material future impairment charge to the Company's results of operations. 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. 2019 Annual Goodwill Impairment Testing 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 further performed the required annual impairment tests of goodwill at April 30, 2019 on all five reporting units. The performance of the Company’s annual impairment test did not result in any impairment of the Company’s goodwill. 2019 Indefinite-Lived Intangibles Impairment During the three months ended March 31, 2019, the Company impaired $5 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 further assessed the annual impairment of the remaining 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. 2018 Goodwill Impairment In connection with the April 30, 2018 annual impairment test of goodwill the Company determined that the goodwill associated with the CAD/CAM, Imaging, and Orthodontics businesses, all within the Technologies & Equipment segment, was impaired. As a result, the Company recorded a goodwill impairment charge of $1,086 million. The 2018 goodwill impairment charges were driven by lower than expected sales growth and operating margins, in turn driven by transition of distribution relationships for the equipment businesses and increased price competition. 2018 Indefinite-Lived Intangibles Impairment As a result of the annual impairment tests of indefinite-lived intangible assets as of April 30, 2018, the Company previously recorded an impairment charge of $179 million in the twelve months ended December 31, 2018 which was recorded in Restructuring and other costs in the Consolidated Statements of Operations. The impaired indefinite-lived intangible assets were 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. 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, 2018 |  | $ | 2,545 |  |  | $ | 886 |  |  | $ | 3,431 |
Acquisition activity |  | 3 |  |  | — |  |  | 3 |
Divestiture of business |  | (4) |  |  | — |  |  | (4) |
Effect of exchange rate changes |  | (28) |  |  | (5) |  |  | (33) |
Balance at December 31, 2019 |  | $ | 2,516 |  |  | $ | 881 |  |  | $ | 3,397 |
Acquisition activity |  | 631 |  |  | — |  |  | 631 |
Impairment |  | (157) |  |  | — |  |  | (157) |
Effect of exchange rate changes |  | 102 |  |  | 13 |  |  | 115 |
Balance at December 31, 2020 |  | $ | 3,092 |  |  | $ | 894 |  |  | $ | 3,986 |
The gross carrying amount of goodwill and the cumulative goodwill impairment were as follows:
|  | Year Ended December 31,
|  | 2020 |  | 2019
(in millions) |  | Gross Carrying Amount |  | Cumulative Impairment |  | Net Carrying Amount |  | Gross Carrying Amount |  | Cumulative Impairment |  | Net Carrying Amount
Technologies & Equipment |  | $ | 5,985 |  |  | $ | (2,893) |  |  | $ | 3,092 |  |  | $ | 5,253 |  |  | $ | (2,737) |  |  | $ | 2,516 |
Consumables |  | 894 |  |  | — |  |  | 894 |  |  | 881 |  |  | — |  |  | 881 |
Total effect of cumulative impairment |  | $ | 6,879 |  |  | $ | (2,893) |  |  | $ | 3,986 |  |  | $ | 6,134 |  |  | $ | (2,737) |  |  | $ | 3,397 |
Identifiable definite-lived and indefinite-lived intangible assets at were as follows:
|  | Year Ended December 31,
|  | 2020 |  | 2019
(in millions) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Patents |  | $ | 1,681 |  |  | $ | (677) |  |  | $ | 1,004 |  |  | $ | 1,371 |  |  | $ | (518) |  |  | $ | 853 |
Tradenames and trademarks |  | 273 |  |  | (70) |  |  | 203 |  |  | 79 |  |  | (63) |  |  | 16 |
Licensing agreements |  | 37 |  |  | (30) |  |  | 7 |  |  | 36 |  |  | (28) |  |  | 8 |
Customer relationships |  | 1,142 |  |  | (494) |  |  | 648 |  |  | 1,070 |  |  | (399) |  |  | 671 |
Total definite-lived |  | $ | 3,133 |  |  | $ | (1,271) |  |  | $ | 1,862 |  |  | $ | 2,556 |  |  | $ | (1,008) |  |  | $ | 1,548 |
Indefinite-lived tradenames and trademarks |  | $ | 642 |  |  | $ | — |  |  | $ | 642 |  |  | $ | 628 |  |  | $ | — |  |  | $ | 628 |
Total identifiable intangible assets |  | $ | 3,775 |  |  | $ | (1,271) |  |  | $ | 2,504 |  |  | $ | 3,184 |  |  | $ | (1,008) |  |  | $ | 2,176 |
Amortization expense for identifiable definite-lived intangible assets for the years ended December 31, 2020, 2019 and 2018 was $192 million, $190 million and $198 million, respectively. The annual estimated amortization expense related to these intangible assets for each of the five succeeding calendar years is $216 million, $215 million, $217 million, $219 million and $223 million for 2021, 2022, 2023, 2024 and 2025, respectively.

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- 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
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