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GOODWILL AND INTANGIBLE ASSETS | 12 Months Ended
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Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS The Company assesses both goodwill and indefinite-lived intangible assets for impairment annually during the second quarter or more frequently if events or changes in circumstances indicate the asset might be impaired. The Company conducted its annual goodwill and indefinite-lived intangible assets impairment tests as of April 1, 2021. 2021 Annual Goodwill Impairment Testing The fair values of the Company’s five reporting units were computed using a discounted cash flow model with inputs developed using both internal and market-based data. The discounted cash flow model uses five- to ten- year forecasted cash flows plus a terminal value based on 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 (including perpetual growth rates), and operating margin percentages of the reporting unit’s business. These assumptions were developed in consideration of current market conditions. The total forecasted cash flows for each of the reporting units were discounted using rates ranging between 8.0% to 9.5%. 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 developments 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 as of April 1, 2021, 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. In conjunction with its annual goodwill impairment test, the Company applied a hypothetical sensitivity analysis to each of its reporting units by increasing the discount rate of these reporting units by 100 basis points and, in a separate test, reducing by 10% the fair value of those reporting units. All of the Company’s reporting units passed the hypothetical tests without the fair value being reduced below carrying value, and therefore it was noted that there were currently no reporting units deemed at risk of being impaired based on the sensitivity analysis. During the time subsequent to the annual evaluation, and at December 31, 2021, 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. 2021 Annual Indefinite-Lived Intangibles Impairment Testing The Company also assessed the annual impairment of indefinite-lived intangible assets at April 1, 2021, which largely consists of acquired tradenames and trademarks, in conjunction with the annual impairment tests of goodwill. The fair value of acquired tradenames and trademarks is estimated by the use of a relief from royalty method, which values an indefinite-lived intangible asset by estimating the royalties saved through ownership of an asset. Management judgment is necessary to determine key assumptions, including revenue growth rates, perpetual revenue growth rates, royalty rates, and discount rates. The Company utilized discount rates ranging from 8.5% to 10.0%. As a result of the annual impairment test of indefinite-lived intangible assets, no impairment was identified. The Company applied a hypothetical sensitivity analysis. It was noted that 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 1, 2021, the fair value of these assets would still exceed their book value. 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. 2020 Annual Goodwill and Indefinite-Lived Intangibles Impairment and Testing During the three months ended March 31, 2020, the Company recorded an impairment charge of $157 million related to the goodwill associated with the Equipment & Instruments reporting unit. The impairment was a result of changes in forecasted revenues, operating margins, and discount rates due to the negative impacts of the COVID-19 pandemic on customer demand for the Company’s products, which caused a decline in revenue and profitability in the first quarter of 2020. To determine the fair value of each of the reporting units for which a triggering event was concluded to exist as of March 31, 2020, the Company utilized 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 the goodwill associated with the Equipment & Instruments reporting unit was impaired. The impairment charge was recorded as a separate line in the Consolidated Statements of Operations. 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. The Company performed impairment tests for the indefinite-lived intangible assets 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, which ranged from 10.0% to 17.5%. The impairment test resulted in an impairment charge of $39 million related to certain tradenames and trademarks related to the Equipment & Instruments reporting unit during the three months ended March 31, 2020. 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 impairment charge was recorded in Restructuring and other costs in the Consolidated Statements of Operations. The Company further performed the required annual impairment tests of goodwill and indefinite-lived intangibles at April 30, 2020 consistent with the valuation approaches described above, which did not result in any additional impairment in 2020. 2019 Annual Goodwill and Indefinite-Lived Intangibles Impairment and 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. 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. 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 |  |  |  |  |  |
Goodwill |  | $ | 5,253 |  |  | $ | 881 |  |  | $ | 6,134 |
Accumulated impairment losses |  | (2,737) |  |  | — |  |  | (2,737) |
Goodwill, net |  | $ | 2,516 |  |  | $ | 881 |  |  | $ | 3,397 |
Acquisition related additions (a) |  | 631 |  |  | — |  |  | 631
Impairment |  | (157) |  |  | — |  |  | (157) |
Translation and other |  | 102 |  |  | 13 |  |  | 115 |
Balance at December 31, 2020 |  |  |  |  |  |
Goodwill |  | $ | 5,985 |  |  | $ | 894 |  |  | $ | 6,879 |
Accumulated impairment losses |  | (2,893) |  |  | — |  |  | (2,893) |
Goodwill, net |  | $ | 3,092 |  |  | $ | 894 |  |  | $ | 3,986 |
Acquisition related additions (a) |  | 109 |  |  | — |  |  | 109 |
Translation and other |  | (105) |  |  | (14) |  |  | (119) |
Balance at December 31, 2021 |  |  |  |  |  |
Goodwill |  | $ | 5,989 |  |  | $ | 880 |  |  | $ | 6,869 |
Accumulated impairment losses |  | (2,893) |  |  | — |  |  | (2,893) |
Goodwill, net |  | $ | 3,096 |  |  | $ | 880 |  |  | $ | 3,976 |
(a) Refer to Note 6, Business Combinations, for more information regarding recent acquisitions. Identifiable definite-lived and indefinite-lived intangible assets at were as follows:
|  | Year Ended December 31,
|  | 2021 |  | 2020
(in millions) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Developed technology and patents |  | $ | 1,729 |  |  | $ | (762) |  |  | $ | 967 |  |  | $ | 1,681 |  |  | $ | (677) |  |  | $ | 1,004 |
Tradenames and trademarks |  | 269 |  |  | (79) |  |  | 190 |  |  | 273 |  |  | (70) |  |  | 203 |
Licensing agreements |  | 36 |  |  | (32) |  |  | 4 |  |  | 37 |  |  | (30) |  |  | 7 |
Customer relationships |  | 1,091 |  |  | (545) |  |  | 546 |  |  | 1,142 |  |  | (494) |  |  | 648 |
Total definite-lived |  | $ | 3,125 |  |  | $ | (1,418) |  |  | $ | 1,707 |  |  | $ | 3,133 |  |  | $ | (1,271) |  |  | $ | 1,862 |
Indefinite-lived tradenames and trademarks |  | 598 |  |  | — |  |  | 598 |  |  | 642 |  |  | — |  |  | 642 |
In-process R&D (a) |  | 14 |  |  | — |  |  | 14 |  |  | — |  |  | — |  |  | — |
Total indefinite-lived |  | 612 |  |  | — |  |  | 612 |  |  | 642 |  |  | — |  |  | 642 |
Total identifiable intangible assets |  | $ | 3,737 |  |  | $ | (1,418) |  |  | $ | 2,319 |  |  | $ | 3,775 |  |  | $ | (1,271) |  |  | $ | 2,504 |
(a) Intangible assets acquired in a business combination that are in-process and used in research and development (“R&D”) activities are considered indefinite-lived until the completion or abandonment of the R&D efforts. The useful life and amortization of those assets will be determined once the R&D efforts are completed. Amortization expense for identifiable definite-lived intangible assets for the years ended December 31, 2021, 2020 and 2019 was $222 million, $192 million and $190 million, respectively. The annual estimated amortization expense related to these intangible assets for each of the five succeeding calendar years is $214 million, $216 million, $219 million, $224 million and $146 million for 2022, 2023, 2024, 2025 and 2026, respectively. During the second quarter of 2021, the Company purchased certain developed technology rights for an initial payment of $3 million. The purchase consideration also includes contingent payments of $17 million to be made upon reaching certain regulatory and commercial milestones, which were not yet deemed probable at December 31, 2021.

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