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GOODWILL AND INTANGIBLE ASSETS | 6 Months Ended
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Jun. 30, 2023
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 as of April 1 or more frequently if events or changes in circumstances indicate the asset might be impaired. On April 1, 2023 the Company realigned its reporting due to a change in organizational structure. Reporting units under the former structure were tested for impairment prior to the realignment, and no impairment was identified. As a result of the realignment, the Company reallocated its goodwill to align its new reporting units which resulted from the change in its operating segments. Goodwill was reassigned to each of the new reporting units using a relative fair value approach. The Company assessed the goodwill of the new reporting units and its indefinite-lived intangible assets for impairment as of April 1, 2023. Based on this test, it was determined that the fair values of its reporting units and indefinite-lived intangible assets more likely than not exceeded their carrying values, resulting in no impairment. For both the former and new structure goodwill impairment tests as of April 1, 2023, the fair values of 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 model included, but were not limited to, discount rates (ranging from 9.0% to 10.5%) revenue growth rates (including perpetual growth rates), operating margin percentages, and net working capital changes of the reporting unit's business. Indefinite-lived intangible assets were assessed either through a computation of fair value using an income approach, specifically a relief from royalty method, or through a qualitative assessment. The Company's significant assumptions in the relief from royalty method include, but were not limited to, discount rates (ranging from 9.5% to 14%), revenue growth rates (including perpetual growth rates) and royalty rates. These assumptions for both the goodwill and indefinite-lived intangible asset tests were developed in consideration of current market conditions and future expectations which include, but were not limited to, impact from competition and new product developments. For the three months ended June 30, 2023, the Company considered qualitative and quantitative factors to determine whether any events or changes in circumstances had resulted in the likelihood that the goodwill or indefinite-lived intangible assets may have become more likely than not impaired during the course of the quarter, and concluded there were no such indicators. The Company performed a hypothetical sensitivity analysis by increasing the discount rate by 100 basis points. An increase of the discount rate by 100 basis points would result in a material impairment of the Connected Technology Solutions reporting unit within the Connected Technologies Solutions segment. Goodwill associated with this reporting unit was $293 million at June 30, 2023. Additionally under this sensitivity, certain indefinite-lived intangibles within the Connected Technologies Solutions, Orthodontic and Implant Solutions, and Essential Dental Solutions segments would have a fair value less than 10% in excess of carrying value. The carrying value of these indefinite-lived intangible assets within the aforementioned segments was $227 million, $25 million, and $7 million, respectively, at June 30, 2023. Any deviation in actual financial results compared to the forecasted financial results or valuation assumptions used in the annual or interim tests, a decline in equity valuations, increases in interest rates, or changes 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. In the third and fourth quarters of 2022, the Company identified indicators of a more likely than not impairment related to its former Digital Dental Group and Equipment & Instruments reporting units and indefinite-lived intangible assets, included within the former Technologies & Equipment segment, and indicators of a more likely than not impairment related to its indefinite-lived intangible assets for the former Consumables reporting unit within the former Consumables segment. The Company recorded a pre-tax goodwill impairment charge related to its former Digital Dental Group and Equipment & Instruments reporting units within the former Technologies & Equipment segment of $1,100 million and $87 million, respectively, and an indefinite-lived intangible asset impairment charge of $66 million and $28 million for the former Digital Dental Group and Equipment & Instruments reporting units, respectively, within the former Technologies & Equipment segment and a $6 million impairment charge for the former Consumables reporting unit within the former Consumables segment for the year ended December 31, 2022. Refer to Part II, Item 8, Note 12, Goodwill and Intangible Assets, in the 2022 Form 10-K/A for further information regarding prior year impairments.
A reconciliation of changes in the Company’s goodwill by reportable segment were as follows:
(in millions) |  | Technologies & Equipment |  | Consumables |  | Connected Technology Solutions |  | Essential Dental Solutions |  | Orthodontic and Implant Solutions |  | Wellspect Healthcare |  | Total
Balance at December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  | $ | 5,902 |  |  | $ | 866 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 6,768 |
Accumulated impairment losses |  | (4,080) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,080) |
Goodwill, net December 31, 2022 |  | $ | 1,822 |  |  | $ | 866 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,688 |
Translation |  | 9 |  |  | 4 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13 |
Balance at March 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  | $ | 5,911 |  |  | $ | 870 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 6,781 |
Accumulated impairment losses |  | (4,080) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,080) |
Goodwill, net March 31, 2023 |  | $ | 1,831 |  |  | $ | 870 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,701 |
Realignment of goodwill |  | $ | (1,831) |  |  | $ | (870) |  |  | $ | 293 |  |  | $ | 835 |  |  | $ | 1,303 |  |  | $ | 270 |  |  | $ | — |
Translation |  | — |  |  | — |  |  | — |  |  | 1 |  |  | (5) |  |  | 6 |  |  | 2 |
Goodwill, net June 30, 2023 |  | $ | — |  |  | $ | — |  |  | $ | 293 |  | $ | — |  | $ | 836 |  | $ | — |  | $ | 1,298 |  | $ | — |  | $ | 276 |  | $ | — |  | $ | 2,703 |
Identifiable definite-lived and indefinite-lived intangible assets were as follows:
|  | June 30, 2023 |  | December 31, 2022
(in millions) |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Developed technology and patents |  | $ | 1,682 |  |  | $ | (929) |  |  | $ | 753 |  |  | $ | 1,658 |  |  | $ | (848) |  |  | $ | 810 |
Tradenames and trademarks |  | 271 |  |  | (97) |  |  | 174 |  |  | 273 |  |  | (96) |  |  | 177 |
Licensing agreements |  | 30 |  |  | (26) |  |  | 4 |  |  | 30 |  |  | (26) |  |  | 4 |
Customer relationships |  | 1,059 |  |  | (638) |  |  | 421 |  |  | 1,057 |  |  | (600) |  |  | 457 |
Total definite-lived |  | $ | 3,042 |  |  | $ | (1,690) |  |  | $ | 1,352 |  |  | $ | 3,018 |  |  | $ | (1,570) |  |  | $ | 1,448 |
Indefinite-lived tradenames and trademarks |  | $ | 451 |  |  | $ | — |  |  | $ | 451 |  |  | $ | 450 |  |  | $ | — |  |  | $ | 450 |
In-process R&D (a) |  | 5 |  |  | — |  |  | 5 |  |  | 5 |  |  | — |  |  | 5 |
Total indefinite-lived |  | $ | 456 |  |  | $ | — |  |  | $ | 456 |  |  | $ | 455 |  |  | $ | — |  |  | $ | 455 |
Total identifiable intangible assets |  | $ | 3,498 |  |  | $ | (1,690) |  |  | $ | 1,808 |  |  | $ | 3,473 |  |  | $ | (1,570) |  |  | $ | 1,903 |
(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, 2023.

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