GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

The Company assesses both goodwill and indefinite-lived intangible assets for impairment annually as of April 1 or more frequently if events or changes in circumstances indicate the asset might be impaired. Based on the Company’s 2022 impairment test, it was determined that the fair values of its reporting units and indefinite-lived intangible assets more likely than not exceeded their respective carrying values, resulting in no impairment.

The fair values of reporting units were computed using a discounted cash flow model with inputs developed using both internal and market-based data. Intangible assets were evaluated for impairment using an income approach, specifically a relief from royalty method, or using a qualitative assessment. A change in any of the estimates and assumptions used in the annual test, a decline in the overall markets or in the use of intangible assets among other factors, could have a material adverse effect to the fair value of either the reporting units or intangible assets and could result in a future impairment charge. There can be no assurance that the Company’s future asset impairment testing will not result in a material charge to earnings. The Company’s significant assumptions in the discounted cash flow model included, but were not limited to, the weighted average cost of capital, revenue growth rates (including perpetual growth rates), and operating margin percentages of the reporting unit’s business. While we consider these assumptions to be reasonable and appropriate, they are subjective, and additional adverse changes in these key assumptions, as well as unfavorable changes in the overall markets served by these reporting units, among other factors, would have a negative material impact to the fair value of the reporting units and indefinite-lived intangible assets and would result in a future impairment charge.

As disclosed in Note 16- Subsequent Events, the company anticipates recording a pre-tax charge for the impairment of goodwill and indefinite-lived intangible assets in the range of $1.0 billion - $1.3 billion in the third quarter 2022. The timing of this impairment charge in the third quarter was the result of the following factors:

•

Current macroeconomic conditions, including the rising interest rate environment and broad declines in equity valuations. Since the second quarter, core underlying market interest rates, which serve as the basis for the discount rate assumptions in our impairment models, rose by approximately 200 basis points.

•

Reduced earnings forecasts for several reporting units as these forecasts were impacted by ongoing macroeconomic forces. First, global demand has weakened for certain products in the third quarter as inflationary pressures impacted the discretionary spending behavior of our customers, which has introduced new competitive challenges. Additionally, raw materials, supply chain, and service costs have all increased due to changes in our business model and broad inflationary trends.

For additional information on evaluations subsequent to June 30, 2022, including the likely impairment of goodwill and indefinite-lived intangibles identified during the third quarter of 2022, refer to the Note 16- Subsequent Events.

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, 2021
Goodwill	$	5,989	$	880	$	6,869
Accumulated impairment losses	(2,893)		—		(2,893)
Goodwill, net	$	3,096	$	880	$	3,976


Translation and other	(99)		(19)		(118)

Balance at June 30, 2022
Goodwill	$	5,890	$	861	$	6,751
Accumulated impairment losses	(2,893)		—		(2,893)
Goodwill, net	$	2,997	$	861	$	3,858

Identifiable definite-lived and indefinite-lived intangible assets were as follows:


	June 30, 2022						December 31, 2021
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount

Developed technology and patents	$	1,632	$	(774)	$	858	$	1,729	$	(762)	$	967
Tradenames and trademarks	273		(89)		184		269		(79)		190
Licensing agreements	31		(26)		4		36		(32)		4
Customer relationships	1,050		(562)		488		1,091		(545)		546
Total definite-lived	$	2,986	$	(1,451)	$	1,534	$	3,125	$	(1,418)	$	1,707

Indefinite-lived tradenames and trademarks	$	552	$	—	$	552	$	598	$	—	$	598
In-process R&D (a)	14		—		14		14		—		14
Total indefinite-lived	$	566	$	—	$	566	$	612	$	—	$	612

Total identifiable intangible assets	$	3,552	$	(1,451)	$	2,100	$	3,737	$	(1,418)	$	2,319

(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.

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 minimum guaranteed contingent payments of $17 million to be made upon reaching certain regulatory and commercial milestones. The contingent payments are not yet considered probable of payment as of June 30, 2022.