What changed in this filing

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Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 179 added, 128 removed, 661 unchanged (32% of the section changed)

4 unchanged sentences

(in millions, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

13 unchanged sentences

Net income (loss) 103 54 319 ( 182 )

Net income (loss) attributable to noncontrolling interest — ( 1 ) — ( 1 )

Net income attributable to noncontrolling interest — 1 — —

Net income (loss) attributable to Dentsply Sirona $ 103 $ 53 $ 319 $ ( 182 )

10 unchanged sentences

(in millions)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Net income (loss) $ 103 $ 54 $ 319 $ ( 182 )

Other comprehensive income (loss), net of tax:

Foreign currency translation gain (loss) 37 75 ( 62 ) ( 44 )

Other comprehensive (loss) income, net of tax:

Foreign currency translation (loss) gain ( 68 ) 84 ( 130 ) 40

Net gain (loss) on derivative financial instruments 10 ( 19 ) 19 ( 22 )

Pension liability gain 2 2 8 5

Total other comprehensive income (loss), net of tax 43 68 ( 47 ) ( 44 )

Total other comprehensive (loss) income, net of tax ( 56 ) 67 ( 103 ) 23

Total comprehensive income (loss) 47 121 216 ( 159 )

6 unchanged sentences

(in millions, except per share amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current Assets:

26 unchanged sentences

Common stock, $ 0.01 par value;

400.0 million shares authorized, and 264.5 million shares issued at June 30, 2021 and December 31, 2020

218.5 million and 218.7 million shares outstanding at June 30, 2021 and December 31, 2020

400.0 million shares authorized, and 264.5 million shares issued at September 30, 2021 and December 31, 2020

218.6 million and 218.7 million shares outstanding at September 30, 2021 and December 31, 2020

Capital in excess of par value 6,659 6,604

1 unchanged sentence

Accumulated other comprehensive loss ( 567 ) ( 464 )

Treasury stock, at cost, 46.0 million and 45.8 million shares at June 30, 2021 and December 31, 2020, respectively

Treasury stock, at cost, 45.9 million and 45.8 million shares at September 30, 2021 and December 31, 2020, respectively

( 2,454 ) ( 2,409 )

35 unchanged sentences

Balance at June 30, 2021 $ 3 $ 6,638 $ 1,402 $ ( 511 ) $ ( 2,458 ) $ 5,074 $ 3 $ 5,077

Net income — — 103 — — 103 — 103

Other comprehensive (loss) income — — — ( 56 ) — ( 56 ) — ( 56 )

Exercise of stock options — — — — 1 1 — 1

Stock based compensation expense — 23 — — — 23 — 23

Funding of employee stock purchase plan — 1 — — 1 2 — 2

Restricted stock unit distributions — ( 4 ) — — 2 ( 2 ) — ( 2 )

Restricted stock unit dividends — 1 ( 1 ) — — — — —

Cash dividends ($ 0.11 per share)

— — ( 23 ) — — ( 23 ) — ( 23 )

Balance at September 30, 2021 $ 3 $ 6,659 $ 1,481 $ ( 567 ) $ ( 2,454 ) $ 5,122 $ 3 $ 5,125

DENTSPLY SIRONA INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (cont.)

(in millions, except per share amounts)

Stock Capital in

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Balance at June 30, 2020 $ 3 $ 6,576 $ 1,125 $ ( 644 ) $ ( 2,416 ) $ 4,644 $ 1 $ 4,645

Net income — — 53 — — 53 1 54

Other comprehensive income — — — 67 — 67 — 67

Stock based compensation expense — 17 — — — 17 — 17

Funding of employee stock purchase plan — 1 — — 2 3 — 3

Restricted stock unit distributions — ( 2 ) — — 1 ( 1 ) — ( 1 )

Cash dividends ($ 0.10 per share)

— — ( 22 ) — — ( 22 ) — ( 22 )

Balance at September 30, 2020 $ 3 $ 6,592 $ 1,156 $ ( 577 ) $ ( 2,413 ) $ 4,761 $ 2 $ 4,763

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

3 unchanged sentences

(in millions)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

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Cash received on derivative contracts 1 58

Cash paid on derivative contracts — ( 1 )

Proceeds from sale of property, plant, and equipment 2 —

Net cash (used in) provided by investing activities ( 279 ) 20

Net cash used in investing activities ( 319 ) ( 5 )

Cash flows from financing activities:

2 unchanged sentences

Cash dividends paid ( 68 ) ( 66 )

Cash paid for acquisition of noncontrolling interest of consolidated subsidiary — ( 2 )

Proceeds from long-term borrowings, net of deferred financing costs 15 1,449

Repayments on long-term borrowings, net ( 297 ) ( 701 )

Deferred financing costs — ( 6 )

Proceeds from exercised stock options 47 6

21 unchanged sentences

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period.

Actual results could differ materially from those estimates.

Revenue Recognition

At June 30, 2021, the Company had $ 47 million of deferred revenue recorded predominantly in Accrued liabilities in the Consolidated Balance Sheets, with an immaterial portion recorded in Other noncurrent liabilities.

The Company expects to recognize significantly all of this deferred revenue within the next 12 months.

At September 30, 2021, the Company had $ 43 million of deferred revenue recorded predominantly in Accrued liabilities in the Consolidated Balance Sheets, with an immaterial portion recorded in Other noncurrent liabilities.

The Company expects to recognize substantially all of this deferred revenue within the next 12 months.

Accounts and Notes Receivable

The Company records a provision for doubtful accounts, which is included in Selling, general, and administrative expenses in the Consolidated Statements of Operations.

Accounts and notes receivables – trade, net are stated net of allowances for doubtful accounts and trade discounts , which were $ 14 million at June 30, 2021 and $ 18 million at December 31, 2020.

As of June 30, 2021, all of the Company's inventories were determined by the first-in, first-out (“FIFO”) or average cost methods.

Accounts and notes receivables-trade, net are stated net of allowances for doubtful accounts and trade discounts, which were $ 14 million at September 30, 2021 and $ 18 million at December 31, 2020.

As of September 30, 2021, all of the Company's inventories were determined by the first-in, first-out (“FIFO”) or average cost methods.

As of the end of the first quarter of 2021, the Company had $ 1 million of inventories accounted for under the last-in first-out (“LIFO”) method of inventory costing.

Effective as of the beginning of the second quarter, the method of accounting for these inventories was changed from LIFO to FIFO.

This change in accounting is preferable as the value of inventory for which cost was previously determined using a LIFO cost flow assumption has declined from prior years due to changes in the business, and it also allows for a more consistent methodology being utilized across the Company, and provides improved comparability with industry peers.

This change in accounting is preferable as the value of inventory for which cost was previously determined using a LIFO cost flow assumption has declined from prior years due to changes in the business, it allows for a more consistent methodology to be utilized across the Company, and provides improved comparability with industry peers.

The change in accounting principle was recognized during the second quarter of 2021 by adjusting these inventories to cost as determined using the FIFO method, resulting in an increase in inventories of $ 4 million and a corresponding reduction to Cost of products sold in the Company's Consolidated Statements of Operations.

The impact of this change is not material to the Company’s financial position as of December 31, 2020, the Company’s results of operations for any previously reported prior periods nor is the cumulative effect of the change material to the results of operations for the second quarter of 2021.

The impact of this change was not material to the Company’s financial position as of December 31, 2020, or the Company’s results of operations for any previously reported prior periods nor is the cumulative effect of the change material to the results of operations for the six months ended June 30, 2021.

Therefore, prior period amounts have not been retrospectively adjusted.

Goodwill & Intangible Assets

Effective 2021 and prospectively, the Company will perform its required annual goodwill impairment test as of April 1 rather than on April 30 which was the Company’s previous practice.

Effective 2021 and prospectively, the Company is performing its required annual goodwill impairment test as of April 1 rather than as of April 30 which was the Company’s previous practice.

The Company believes this change is preferable as it more closely aligns with the timing of the Company’s strategic business planning process.

The Company does not believe this change resulted in any delay, acceleration or avoidance of impairment.

This change did not result in any delay, acceleration or avoidance of impairment.

Furthermore, a retrospective application to prior periods is impracticable as the Company is unable to objectively determine, without the use of hindsight, the assumptions which would be used in earlier periods.

Additional information related to the annual impairment test is provided in Note 13, Goodwill and Intangible Assets.

Accounting Pronouncements Not Yet Adopted

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NOTE 2 – STOCK COMPENSATION

Total stock based compensation expense for non-qualified stock options, restricted stock units ("RSU"), and the tax related benefit for the three and six months ended June 30, 2021 and 2020 were as follows:

Three Months Ended Six Months Ended

(in millions) 2021 2020 2021 2020

Stock option expense $ 1 $ 2 $ 3 $ 3

RSU expense 18 8 29 16

Total stock based compensation expense $ 19 $ 10 $ 32 $ 19

Related deferred income tax benefit $ 2 $ 1 $ 4 $ 2

The amount of stock compensation expense recorded in Cost of products sold, Selling, general, and administrative expense, and Research and development expense in the Company's Consolidated Statement of Operations for the three and six months ended June 30, 2021 and 2020, were as follows:

Three Months Ended Six Months Ended

The amounts of stock compensation expense recorded in the Company's Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 were as follows:

Three Months Ended Nine Months Ended

(in millions) 2021 2020 2021 2020

4 unchanged sentences

Total stock based compensation expense $ 22 $ 16 $ 54 $ 35

Related deferred income tax benefit $ 2 $ 2 $ 6 $ 4

NOTE 3 – COMPREHENSIVE INCOME (LOSS)

Changes in Accumulated other comprehensive income (loss) ("AOCI"), net of tax, by component for the six months ended June 30, 2021 and 2020 were as follows:

(in millions) Foreign Currency Translation Gain (Loss) Gain (Loss) on Cash Flow Hedges Gain (Loss) on Net Investment Hedges Pension Liability Gain (Loss) Total

Changes in Accumulated other comprehensive income (loss) ("AOCI"), net of tax, by component for the nine months ended September 30, 2021 and 2020 were as follows:

(in millions) Foreign Currency Translation Gain (Loss) Gain (Loss) on Cash Flow Hedges Gain (Loss) on Net Investment and Fair Value Hedges Pension Liability Gain (Loss) Total

Balance, net of tax, at December 31, 2020 $ ( 187 ) $ ( 25 ) $ ( 119 ) $ ( 133 ) $ ( 464 )

11 unchanged sentences

Balance, net of tax, at June 30, 2021 $ ( 249 ) $ ( 23 ) $ ( 112 ) $ ( 127 ) $ ( 511 )

(in millions) Foreign Currency Translation Gain (Loss) Gain (Loss) on Cash Flow Hedges Gain (Loss) on Net Investment Hedges Pension Liability Gain (Loss) Total

Other comprehensive (loss) income before reclassifications and tax impact ( 59 ) 6 3 — ( 50 )

Tax expense ( 9 ) ( 1 ) ( 1 ) — ( 11 )

Other comprehensive (loss) benefit, net of tax, before reclassifications ( 68 ) 5 2 — ( 61 )

Amounts reclassified from accumulated other comprehensive income, net of tax — 3 — 2 5

Net increase in other comprehensive (loss) income ( 68 ) 8 2 2 ( 56 )

Balance, net of tax, at September 30, 2021 $ ( 317 ) $ ( 15 ) $ ( 110 ) $ ( 125 ) $ ( 567 )

(in millions) Foreign Currency Translation Gain (Loss) Gain (Loss) on Cash Flow Hedges Gain (Loss) on Net Investment and Fair Value Hedges Pension Liability Gain (Loss) Total

Balance, net of tax, at December 31, 2019 $ ( 368 ) $ ( 11 ) $ ( 101 ) $ ( 120 ) $ ( 600 )

3 unchanged sentences

Amounts reclassified from accumulated other comprehensive income, net of tax — — — 2 2

Net (decrease) increase in other comprehensive loss ( 119 ) ( 12 ) 17 2 ( 112 )

Net (decrease) increase in other comprehensive income ( 119 ) ( 12 ) 17 2 ( 112 )

Balance, net of tax, at March 31, 2020 $ ( 487 ) $ ( 23 ) $ ( 84 ) $ ( 118 ) $ ( 712 )

3 unchanged sentences

Amounts reclassified from accumulated other comprehensive income, net of tax — — — 1 1

Net increase (decrease) in other comprehensive loss 75 — ( 8 ) 1 68

Net increase (decrease) in other comprehensive income 75 — ( 8 ) 1 68

Balance, net of tax, at June 30, 2020 $ ( 412 ) $ ( 23 ) $ ( 92 ) $ ( 117 ) $ ( 644 )

These amounts are recorded in AOCI, net of any related tax adjustments.

At June 30, 2021 and December 31, 2020, the cumulative tax adjustments were $ 193 million and $ 216 million, respectively, primarily related to foreign currency translation gains and losses.

The cumulative foreign currency translation adjustments included translation losses of $ 113 million and $ 25 million at June 30, 2021 and December 31, 2020, respectively, and cumulative losses on loans designated as hedges of net investments of $ 135 million and $ 162 million, respectively.

Other comprehensive income (loss) before reclassifications and tax impact 67 ( 3 ) ( 17 ) — 47

Tax benefit (expense) 17 ( 2 ) 2 — 17

Other comprehensive income (loss), net of tax, before reclassifications 84 ( 5 ) ( 15 ) — 64

Amounts reclassified from accumulated other comprehensive income, net of tax — 1 — 2 3

Net increase (decrease) in other comprehensive income 84 ( 4 ) ( 15 ) 2 67

Balance, net of tax, at September 30, 2020 $ ( 328 ) $ ( 27 ) $ ( 107 ) $ ( 115 ) $ ( 577 )

At September 30, 2021 and December 31, 2020, the cumulative tax adjustments were $ 182 million and $ 216 million, respectively, primarily related to foreign currency translation gains and losses.

The cumulative foreign currency translation adjustments included translation losses of $ 113 million and $ 25 million at September 30, 2021 and December 31, 2020, respectively, and cumulative losses on loans designated as hedges of net investments of $ 204 million and $ 162 million, respectively.

These foreign currency translation losses were partially offset by movements on derivative financial instruments.

Reclassifications out of AOCI to the Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 were insignificant.

Reclassifications out of AOCI to the Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 were insignificant.

NOTE 4 – EARNINGS PER COMMON SHARE

The computation of basic and diluted earnings per common share for the three and six months ended June 30, 2021 and 2020 were as follows:

Basic Earnings (Loss) Per Common Share Three Months Ended Six Months Ended

The computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2021 and 2020 were as follows:

Basic Earnings (Loss) Per Common Share Three Months Ended Nine Months Ended

(in millions, except per share amounts) 2021 2020 2021 2020

2 unchanged sentences

Earnings (loss) per common share - basic $ 0.47 $ 0.25 $ 1.46 $ ( 0.83 )

Diluted Earnings (Loss) Per Common Share Three Months Ended Six Months Ended

Diluted Earnings (Loss) Per Common Share Three Months Ended Nine Months Ended

(in millions, except per share amounts) 2021 2020 2021 2020

4 unchanged sentences

Earnings (loss) per common share - diluted $ 0.47 $ 0.25 $ 1.45 $ ( 0.83 )

The calculation of weighted average diluted common shares outstanding excluded 0.7 million and 1.0 million of potentially diluted common shares because the Company reported a net loss for the three and six months ended June 30, 2020, respectively.

For the three and six months ended June 30, 2021, the Company excluded from the computation of weighted average diluted shares outstanding 0.5 million and 0.7 million of equivalent shares of common stock from stock options and RSUs because their effect would be antidilutive.

For the three and six months ended June 30, 2020, the company excluded 4.2 million and 3.1 million equivalent shares of common stock outstanding from stock options and RSUs because their effect would be antidilutive.

During the six months ended June 30, 2021, the Company repurchased approximately 1.5 million shares pursuant to its open market shares repurchase plan for a net cost of $ 90 million at an average price of $ 60.62 .

For the three and nine months ended September 30, 2021, the Company excluded from the computation of weighted average diluted shares outstanding 0.9 million and 0.9 million, respectively, of equivalent shares of common stock from stock options and RSUs because their effect would be antidilutive.

For the three and nine months ended September 30, 2020, the Company excluded 3.5 million and 3.2 million, respectively, of equivalent shares of common stock outstanding from stock options and RSUs because their effect would be antidilutive.

The calculation of weighted average diluted common shares outstanding excluded 0.9 million of potentially diluted common shares because the Company reported a net loss for the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, the Company repurchased approximately 1.5 million shares pursuant to its open market shares repurchase plan for a net cost of $ 90 million at an average price of $ 60.62 .

On July 28, 2021, the Board of Directors of the Company approved an increase in the value of shares of common stock that may be repurchased under the share repurchase program, up to $ 1.0 billion.

Share repurchases may be made through open market purchases, Rule 10b5-1 plans, accelerated share repurchases, privately negotiated transactions or other transactions in such amounts and at such times as the Company deems appropriate based upon prevailing market and business conditions and other factors.

NOTE 5 – BUSINESS COMBINATIONS

2021 Transactions

On July 1, 2021, the effective date of the transaction, the Company paid $ 7 million to acquire the remaining interest in the dental business of a partially owned affiliate based in Switzerland that primarily develops highly specialized software with a focus on CAD/CAM systems.

The acquisition is expected to further accelerate the development of the Company's specialized software related to CAD/CAM systems.

The preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of the affiliate included $ 4 million of Other current assets, $ 3 million of Intangible assets and $ 1 million of Other long-term liabilities.

The purchase price and the $ 4 million fair value of the previously-held interest in the entity prior to the acquisition has been allocated on the basis of the preliminary estimates of fair values of assets acquired and liabilities assumed, resulting in the recording of $ 5 million in goodwill.

This goodwill is considered to represent the value associated with the acquired workforce and synergies the two companies anticipate realizing as a combined company and is not expected to be deductible for tax purposes.

Management is continuing to finalize its valuation of certain assets including other intangible assets and will conclude its valuation no later than one year from the acquisition date.

Identifiable intangible assets acquired were as follows:

Weighted Average

(in millions, except for useful life) Amount (in years)

In-process R&D $ 3 Indefinite

On June 1, 2021, the effective date of the transaction, the Company paid $ 132 million to acquire substantially all of the assets of Propel Orthodontics LLC, a privately-held company based in New York and California.

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Management is continuing to finalize its valuation of certain assets including other intangible assets and will conclude its valuation no later than one year from the acquisition date.

Measurement period adjustments made to the fair values of the assets acquired and liabilities assumed during three months ended September 30, 2021 were immaterial to the financial statements, resulting in a reduction to goodwill of $ 2 million.

Identifiable intangible assets acquired were as follows:

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The goodwill is not deductible for tax purposes.

Measurement period adjustments made to the fair values of the assets acquired and liabilities assumed during the first six months of 2021 were immaterial to the financial statements, resulting in an increase to goodwill of $ 6 million.

Measurement period adjustments made to the fair values of the assets acquired and liabilities assumed during the first nine months of 2021 were immaterial to the financial statements, resulting in an increase to goodwill of $ 6 million.

Management is continuing to finalize its valuation of certain assets including other intangible assets and will conclude its valuation no later than one year from the acquisition date.

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The amount of goodwill is considered to represent the value associated with the acquired workforce and synergies the two companies anticipate realizing as a combined company, including alignment with the Company’s existing clear aligner business, and is deductible for tax purposes.

Intangible assets acquired were as follows:

4 unchanged sentences

Tradenames and trademarks 190 20

The results of operations for the Byte, Datum, and Propel businesses upon the effective date of each transaction have been included in the accompanying financial statements.

These results, as well as the historical results for the above acquired businesses for the periods ended June 30, 2021 and 2020, are not material in relation to the Company’s net sales and earnings for those periods.

The results of operations for each of the acquired businesses above upon the effective date of each transaction have been included in the accompanying financial statements.

These results, as well as the historical results for the above acquired businesses for the periods ended September 30, 2021 and 2020, are not material in relation to the Company’s net sales and earnings for those periods.

The Company therefore does not believe these acquisitions represent material transactions either individually or in the aggregate requiring the supplemental pro-forma information prescribed by ASC 805 and accordingly, this information is not presented.

Investments in Affiliates

On June 4, 2021, the effective date of the transaction, the Company paid $ 16 million to acquire a minority interest in a privately-held provider of healthcare consumables.

On June 4, 2021, the effective date of the transaction, the Company paid $ 16 million to acquire a minority interest in a U,K.-based, privately-held provider of healthcare consumables.

The Company records this investment and subsequent profit or losses under equity method accounting within Other noncurrent assets.

On April 1, 2021, the Company disposed of certain orthodontics businesses based in Japan previously included as part of the Technologies and Equipment segment in exchange for a cash receipt of $ 8 million.

The divestiture resulted in an immaterial loss recorded in Other expense (income), net in the Consolidated Statements of Operations for the three and six months ended June 30, 2021.

The divestiture resulted in an immaterial loss recorded in Other expense (income), net in the Consolidated Statements of Operations for the nine months ended September 30, 2021.

On February 1, 2021, the Company disposed of an investment casting business previously included as part of the Consumables segment in exchange for a cash receipt of $ 19 million.

The divestiture resulted in a pre-tax gain of $ 13 million recorded in Other expense (income), net in the Consolidated Statements of Operations for the six months ended June 30, 2021.

The divestiture resulted in a pre-tax gain of $ 13 million recorded in Other expense (income), net in the Consolidated Statements of Operations for the nine months ended September 30, 2021.

NOTE 6 – SEGMENT INFORMATION

8 unchanged sentences

This segment is responsible for the design, manufacture, and sales of the Company’s Dental Consumable Products which include preventive, restorative, endodontic, and dental laboratory products.

The Company’s segment information for the three and six months ended June 30, 2021 and 2020 was as follows:

Three Months Ended Six Months Ended

The Company’s segment information for the three and nine months ended September 30, 2021 and 2020 was as follows:

Three Months Ended Nine Months Ended

(in millions) 2021 2020 2021 2020

3 unchanged sentences

Segment Adjusted Operating Income

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(in millions) 2021 2020 2021 2020

6 unchanged sentences

All other (b)

66 91 198 175

Goodwill impairment — — — 157

3 unchanged sentences

Amortization of intangible assets 56 49 167 143

Depreciation resulting from the fair value step-up of property, plant, and equipment from business combinations 3 — 5 2

Depreciation and other adjustments resulting from the fair value step-up of property, plant, and equipment from business combinations ( 1 ) 2 4 4

Income (loss) before income taxes $ 138 $ 67 $ 421 $ ( 183 )

(a) Certain charges related to discontinuance of product lines which were previously reported in adjusted operating income for the reportable segments, $ 7 million for the three and six months June 30, 2020, respectively, have been reclassified to the "All other" category to conform to current year presentation and the Company's internal reporting in the Chief Operating Decision Maker package.

(a) Certain charges related to discontinuance of product lines which were previously reported in adjusted operating income for the reportable segments, $ 33 million and $ 34 million for the three and nine months ended September 30, 2020, respectively, have been reclassified to the "All other" category to conform to current year presentation and the Company's internal reporting in the Chief Operating Decision Maker package.

These amounts are not material to the measure of segment results for the years presented.

2 unchanged sentences

Inventories, net were as follows:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

Finished goods $ 327 $ 264

2 unchanged sentences

Inventories, net $ 532 $ 466

The Company's inventory reserve was $ 93 million and $ 117 million at June 30, 2021 and December 31, 2020, respectively.

The Company's inventory reserve was $ 89 million and $ 117 million at September 30, 2021 and December 31, 2020, respectively.

Inventories are stated at the lower of cost and net realizable value.

NOTE 8 – RESTRUCTURING AND OTHER COSTS

During the three and six months ended June 30, 2021, the Company recorded net restructuring and other costs of $ 7 million and $ 8 million, respectively, which consists of severance and other restructuring costs of $ 8 million and $ 11 million offset by adjustments to inventory reserves of $ 1 million and $ 3 million, respectively.

During the three and six months ended June 30, 2020, the Company recorded restructuring and other costs of $ 1 million and $ 44 million, respectively, which consists of asset impairments of $ 39 million for the six months ended, and severance costs of $ 1 million and $ 5 million for the periods respectively.

The details of total restructuring and other costs for the three and six months ended June 30, 2021 and 2020 were as follows:

Affected Line Item in the Consolidated Statements of Operations Three Months Ended Six Months Ended

During the three and nine months ended September 30, 2021, the Company recorded net restructuring and other costs of $ 6 million and $ 14 million, respectively, which consists of severance and other restructuring costs of $ 6 million and $ 17 million, respectively, offset by adjustments to inventory reserves of $ 3 million for the nine months ended September 30, 2021.

During the three and nine months ended September 30, 2020, the Company recorded restructuring and other costs of $ 52 million and $ 96 million, respectively, which consists of inventory write-downs of $ 25 million for both the three and nine months ended, severance costs of $ 16 million and $ 21 million, respectively, accelerated depreciation of $ 9 million for both the three and nine months ended, and asset impairments of $ 2 million and $ 41 million, respectively.

The details of total restructuring and other costs for the three and nine months ended September 30, 2021 and 2020 were as follows:

Affected Line Item in the Consolidated Statements of Operations Three Months Ended Nine Months Ended

(in millions) 2021 2020 2021 2020

3 unchanged sentences

Total restructuring and other costs $ 6 $ 52 $ 14 $ 96

The Company announced on August 6, 2020 that it will exit its traditional orthodontics business as well as both exit and restructure certain portions of its laboratory business.

Restructuring Programs and Accruals

The Company announced on August 6, 2020 that it will exit its traditional orthodontics business as well as both exit and restructure certain portions of its laboratory business (the "2020 Plan").

The traditional orthodontics business is part of the Technologies & Equipment segment and the laboratory business is part of the Consumables segment.

2 unchanged sentences

The Company recorded total expenses of approximately $ 58 million related to these actions which consists primarily of inventory write-downs of approximately $ 28 million, accelerated depreciation of approximately $ 14 million, and severance costs of approximately $ 11 million.

For the six months ended June 30, 2021, the Company made a $ 3 million adjustment related to inventory reserves and recorded severance costs of $ 1 million.

For the nine months ended September 30, 2021, the Company made a $ 3 million adjustment related to inventory reserves and recorded severance costs of $ 2 million.

The Company expects nearly all of the remaining restructuring charges to be completed by the first quarter of 2022.

The Company’s restructuring accruals at June 30, 2021 were as follows:

The Company’s restructuring accruals at September 30, 2021 were as follows:

(in millions) 2019 and

4 unchanged sentences

Change in estimates ( 1 ) ( 5 ) — ( 6 )

Balance at June 30, 2021 $ 5 $ 15 $ 4 $ 24

Balance at September 30, 2021 $ 5 $ 5 $ 4 $ 14

Other Restructuring Costs

4 unchanged sentences

Amounts applied ( 2 ) ( 4 ) ( 2 ) ( 8 )

Balance at June 30, 2021 $ 3 $ 1 $ 1 $ 5

Change in estimate — ( 1 ) — ( 1 )

Balance at September 30, 2021 $ 3 $ — $ 1 $ 4

The cumulative amounts for the provisions and adjustments and amounts applied for all the plans by segment were as follows:

(in millions) December 31, 2020 Provisions Amounts

Applied Change in Estimates June 30, 2021

Applied Change in Estimates September 30, 2021

Technologies & Equipment $ 16 $ 6 $ ( 13 ) $ ( 5 ) $ 4

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Derivative Instruments

The following summarizes the notional amounts of cash flow hedges, hedges of net investments, fair value hedges, and derivative instruments not designated as hedges for accounting purposes by derivative instrument type at June 30, 2021 and the notional amounts expected to mature during the next 12 months.

The following summarizes the notional amounts of cash flow hedges, hedges of net investments, fair value hedges, and derivative instruments not designated as hedges for accounting purposes by derivative instrument type at September 30, 2021 and the notional amounts expected to mature during the next 12 months.

(in millions) Aggregate Notional Amount Aggregate Notional Amount Maturing within 12 Months

7 unchanged sentences

Fair Value Hedges

Interest Rate Swaps $ 250 $ —

Foreign exchange forward contracts 217 134

17 unchanged sentences

Overall, the derivatives designated as cash flow hedges are considered to be highly effective for accounting purposes.

At June 30, 2021, the Company expects to reclassify $ 6 million of deferred net losses on cash flow hedges recorded in AOCI in the Consolidated Statements of Operations during the next 12 months.

At September 30, 2021, the Company expects to reclassify $ 1 million of deferred net losses on cash flow hedges recorded in AOCI in the Consolidated Statements of Operations during the next 12 months.

For the rollforward of derivative instruments designated as cash flow hedges in AOCI see Note 3, Comprehensive (Loss) Income.

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The contracts have quarterly maturity dates through March 31, 2023.

On July 2, 2021, the Company entered into a cross currency basis swap totaling a notional amount of $ 300 million which matures on June 3, 2030.

The cross currency basis swap is designated as a hedge of net investments.

This contract effectively converts a portion of the $ 750 million bond coupon from 3.3 % to 1.7 %, which will result in a net reduction of interest expense in 2021.

Fair Value Hedges

9 unchanged sentences

The foreign exchange forwards are designated as fair value hedges.

On July 1, 2021, the Company entered into variable interest rate swaps with a notional amount of $ 250 million, which effectively converts a portion of the underlying fixed rate of 3.3 % on the $ 750 million Senior Notes due June 2030 to a variable interest rate.

Of the $ 250 million notional amount, $ 100 million has a term of five-years maturing on June 1, 2026 and $ 150 million has a term of nine years maturing on March 1, 2030.

Derivative Instruments Not Designated as Hedges

3 unchanged sentences

Any cash flows associated with these instruments are included in cash from operating activities in the Consolidated Statements of Cash Flows.

Gains and (losses) recorded in the Company’s Consolidated Statements of Operations related to the economic hedges not designated as hedges for the three and six months ended June 30, 2021 and 2020 were insignificant.

Gains and (losses) recorded in the Company’s Consolidated Statements of Operations related to the economic hedges not designated as hedges for the three and nine months ended September 30, 2021 and 2020 were insignificant.

Derivative Instrument Activity

The amount of gains and losses recorded in AOCI in the Consolidated Balance Sheets, Costs of products sold, Interest expense, net, and Other expense (income), net in the Company's Consolidated Statement of Operations related to all derivative instruments for the three months ended June 30, 2021 and 2020 were as follows:

Three Months Ended June 30, 2021

(in millions) Gain (Loss) in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)

The amount of gains and losses recorded in the Company's Consolidated Balance Sheets and Consolidated Statements of Operations related to all derivative instruments for the three months ended September 30, 2021 and 2020 were as follows:

Three Months Ended September 30, 2021

(in millions) Gain (Loss) recognized in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)

Cash Flow Hedges

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Fair Value Hedges

Interest rate swaps $ — Interest expense, net $ — $ 1

Foreign exchange forward contracts — Other expense (income), net — 6

Total for fair value hedging $ — $ — $ 7

Three Months Ended June 30, 2020

(in millions) Gain (Loss) in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)

Three Months Ended September 30, 2020

(in millions) Gain (Loss) recognized in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)

Cash Flow Hedges

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Cross currency basis swaps $ ( 17 ) Interest expense, net $ — $ 2

Foreign exchange forward contracts ( 10 ) Other expense (income), net — 1

Total for net investment hedging $ ( 17 ) $ — $ 2

The amount of gains and losses recorded in AOCI in the Consolidated Balance Sheets, Costs of products sold, Interest expense, net, and Other expense (income), net in the Company's Consolidated Statement of Operations related to all derivative instruments for the six months ended June 30, 2021 and 2020 were as follows:

Six Months Ended June 30, 2021

(in millions) Gain (Loss) in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)

The amount of gains and losses recorded in AOCI in the Consolidated Balance Sheets and Consolidated Statement of Operations related to all derivative instruments for the nine months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended September 30, 2021

(in millions) Gain (Loss) recognized in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)

Cash Flow Hedges

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Fair Value Hedges

Interest rate swaps $ — Interest expense, net $ — $ 1

Foreign exchange forward contracts — Other expense (income), net — 18

Total for fair value hedging $ — $ — $ 19

Six Months Ended June 30, 2020

(in millions) Gain (Loss) in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)

Nine Months Ended September 30, 2020

(in millions) Gain (Loss) recognized in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)

Cash Flow Hedges

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Total for net investment hedging $ ( 7 ) $ — $ 13

For the rollforward of derivative instruments designated as cash flow hedges in AOCI see Note 3, Comprehensive Income (Loss).

Consolidated Balance Sheets Location of Derivative Fair Values

The fair value and the location of the Company's derivatives in the Consolidated Balance Sheets were as follows:

June 30, 2021

September 30, 2021

(in millions) Prepaid Expenses and Other Current Assets Other Noncurrent Assets Accrued Liabilities Other Noncurrent Liabilities

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Foreign exchange forward contracts $ 13 $ 11 $ 2 $ —

Interest rate swaps 3 — — 5

Cross currency basis swaps 3 — — 14

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While these contracts contain the enforceable right to offset through netting arrangements with the same counterparty, the Company elects to present them on a gross basis in the Consolidated Balance Sheets.

Offsetting of financial assets and liabilities under netting arrangements at June 30, 2021 were as follows:

Offsetting of financial assets and liabilities under netting arrangements at September 30, 2021 were as follows:

Gross Amounts Not Offset in the Consolidated Balance Sheets

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Foreign exchange forward contracts $ 25 $ — $ 25 $ ( 10 ) $ — $ 15

Interest rate swaps 3 — 3 ( 3 ) — —

Cross currency basis swaps 3 — 3 ( 3 ) — —

Total assets $ 31 $ — $ 31 $ ( 16 ) $ — $ 15

Foreign exchange forward contracts $ 4 $ — $ 4 $ ( 3 ) $ — $ 1

Interest rate swaps 5 — 5 ( 3 ) — 2

Cross currency basis swaps 14 — 14 ( 10 ) — 4

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NOTE 10 – FAIR VALUE MEASUREMENT

The Company estimated the fair value and carrying value of its total long term debt, including current portion was $ 2,411 million and $ 2,251 million, respectively, at June 30, 2021.

At December 31, 2020, the Company estimated the fair value and carrying value of this debt were $ 2,509 million and $ 2,281 million, respectively.

The fair value of long-term debt is based on recent trade information in the financial markets of the Company’s public debt or is determined by discounting future cash flows using interest rates available at June 30, 2021 and December 31, 2020 to companies with similar credit ratings for issues with similar terms and maturities.

The estimated fair value and carrying value of the Company's total debt was $ 2,227 million and $ 2,076 million, respectively, at September 30, 2021.

At December 31, 2020, the estimated fair value and carrying value were $ 2,509 million and $ 2,281 million, respectively.

The fair value of long-term debt is based on recent trade information in the financial markets of the Company’s public debt or is determined by discounting future cash flows using interest rates available at September 30, 2021 and December 31, 2020 to companies with similar credit ratings for issues with similar terms and maturities.

It is considered a Level 2 fair value measurement.

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The Company’s financial assets and liabilities set forth by level within the fair value hierarchy that were accounted for at fair value on a recurring basis were as follows:

June 30, 2021

September 30, 2021

(in millions) Total Level 1 Level 2 Level 3

Interest rate swaps $ 3 $ — $ 3 $ —

Cross currency basis swaps 3 — 3 —

Foreign exchange forward contracts 25 — 25 —

Long-term debt 2 — 2 —

Total assets $ 33 $ — $ 33 $ —

Interest rate swaps $ 5 $ — $ 5 $ —

Cross currency basis swaps 14 — 14 —

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Total liabilities $ 40 $ — $ 35 $ 5

There have been no transfers between levels during the six months ended June 30, 2021.

There have been no transfers between levels during the nine months ended September 30, 2021.

NOTE 11 – INCOME TAXES

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Other Tax Matters

During the three months ended June 30, 2021, the Company recorded $ 3 million of tax expense for other discrete tax matters.

During the three months ended June 30, 2020, the Company recorded $ 1 million of tax expense for discrete tax matters.

During the three months ended September 30, 2021, the Company recorded $ 4 million of tax expense for discrete tax matters.

During the three months ended September 30, 2020, the Company recorded $ 2 million of tax expense for discrete tax matters.

NOTE 12 – FINANCING ARRANGEMENTS

At June 30, 2021, the Company had $ 744 million of borrowing available under lines of credit, including lines available under its short-term arrangements and revolving credit facility.

At September 30, 2021, the Company had $ 607 million of borrowing available under lines of credit, including lines available under its short-term arrangements and revolving credit facility.

The Company has a $ 500 million commercial paper program.

The $ 700 million multi-currency revolving credit facility serves as a back-stop credit facility for the Company's commercial paper program.

At June 30, 2021 and December 31, 2020, there were no outstanding borrowings under the multi-currency revolving credit facility.

The company had no outstanding borrowings under the commercial paper facility at June 30, 2021 and December 31, 2020.

At September 30, 2021 and December 31, 2020, there were no outstanding borrowings under the multi-currency revolving credit facility.

The Company had $ 139 million outstanding borrowings under the commercial paper facility at September 30, 2021 and no outstanding borrowings under the commercial paper facility at December 31, 2020.

As of September 30, 2021, the weighted-average interest rate for this short-term debt was 0.2 %.

On July 2, 2021 the Company pre-paid the fixed rate Senior Notes totaling $ 296 million that were scheduled to mature on August 16, 2021 using cash and short-term commercial paper.

The Company’s revolving credit facilities and senior unsecured notes contain certain affirmative and negative debt covenants relating to the Company's operations and financial condition.

At June 30, 2021, the Company was in compliance with all affirmative and negative debt covenants.

At September 30, 2021, the Company was in compliance with all affirmative and negative debt covenants.

NOTE 13 – GOODWILL AND INTANGIBLE ASSETS

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There can be no assurance that the Company’s future asset impairment testing will not result in a material charge to earnings.

Subsequent to the annual impairment test, as of June 30, 2021, the Company considered whether any events or changes in circumstances had resulted in the likelihood that the goodwill or indefinite-lived intangible assets may have become impaired during the course of the quarter, and concluded that there were no such indicators.

During the first six months ended June 30, 2020, as a result of updating the estimates and assumptions pertaining to the impact of the ongoing COVID-19 pandemic, the Company recorded a goodwill impairment charge of $ 157 million related to the goodwill associated with the Technologies & Equipment segment.

Additionally, during the same first six months of 2020, the Company recorded an indefinite-lived intangible asset impairment charge of $ 39 million within the Technologies & Equipment segment which was driven by a decline in forecasted sales as a result of the COVID-19 pandemic and an unfavorable change in the discount rate.

Subsequent to the annual impairment test, as of September 30, 2021, the Company considered whether any events or changes in circumstances had resulted in the likelihood that the goodwill or indefinite-lived intangible assets may have become impaired during the course of the quarter, and concluded that there were no such indicators.

During the three months ended March 31, 2020, as a result of updating the estimates and assumptions pertaining to the impact of the ongoing COVID-19 pandemic, the Company recorded a goodwill impairment charge of $ 157 million related to the goodwill associated with the Technologies & Equipment segment.

Additionally, during the three months ended March 31, 2020, the Company recorded an indefinite-lived intangible asset impairment charge of $ 39 million within the Technologies & Equipment segment which was driven by a decline in forecasted sales as a result of the COVID-19 pandemic and an unfavorable change in the discount rate.

A reconciliation of changes in the Company’s goodwill by reportable segment were as follows:

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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) 107 — 107

Translation and other ( 140 ) 47 ( 93 )

Balance at June 30, 2021 $ 3,148 $ 885 $ 4,033

Balance at September 30, 2021

Goodwill $ 5,952 $ 941 $ 6,893

Accumulated impairment losses ( 2,893 ) — ( 2,893 )

Goodwill, net $ 3,059 $ 941 $ 4,000

(a) Refer to Note 5, "Business Combinations" for more information regarding recent acquisitions.

The gross carrying amount of goodwill and the cumulative goodwill impairment were as follows:

June 30, 2021 December 31, 2020

(in millions) Gross Carrying Amount Cumulative Impairment Net Carrying Amount Gross Carrying Amount Cumulative Impairment Net Carrying Amount

Technologies & Equipment $ 6,041 $ ( 2,893 ) $ 3,148 $ 5,985 $ ( 2,893 ) $ 3,092

Consumables 885 — 885 894 — 894

Total effect of cumulative impairment $ 6,926 $ ( 2,893 ) $ 4,033 $ 6,879 $ ( 2,893 ) $ 3,986

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(in millions) Gross

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The useful life and amortization of those assets will be determined once the R&D efforts are completed.

During the second quarter, 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 June 30, 2021.

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 September 30, 2021.

NOTE 14 – COMMITMENTS AND CONTINGENCIES

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The Company has agreed to resolve all three actions (Olivares, Holt, and Cato).

The court in Cato approved the settlement in that case, the settlement payment has been made, and the court is expected to dismiss the lawsuit.

The parties to Olivares and Holt are in the process of finalizing the settlement terms, and the parties will then seek court approval of that settlement.

The expected settlement amount, which is immaterial to the financial statements, has been recorded as an accrued liability within the Company's consolidated balance sheet as of June 30, 2021.

The court in Cato approved the settlement in that case, the settlement payment has been made, and the court dismissed the lawsuit.

The parties to Olivares and Holt are in the process of seeking court approval of that settlement.

The expected settlement amount, which is immaterial to the financial statements, has been recorded as an accrued liability within the Company's consolidated balance sheet as of September 30, 2021.

On June 7, 2018, and August 9, 2018, two putative class action suits were filed, and later consolidated, in the Supreme Court of the State of New York, County of New York claiming that the Company and certain individual defendants, violated U.S.

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The European Union Commission has taken the view that Sweden’s interest deduction limitation rules are incompatible with European Union law and supporting legal opinions, and therefore the Company has not paid the tax or made provision in its financial statements for such potential expense.

This view has now been confirmed by the European Union Court of Justice in a preliminary ruling requested by the Swedish Supreme Administrative Court in a pending case.

This view has now been confirmed by the European Union Court of Justice in a preliminary ruling requested by the Swedish Supreme Administrative Court.

Subsequently, the Swedish Tax Authority has conceded in pending court proceedings that the Company should be granted further interest expense deductions, but still claims that interest expense deductions incurring a maximum additional tax expense of $ 12 million should be disallowed on grounds not relating to European Union law.

The Company intends to vigorously defend its position and pursue related appeals.

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From time to time, the Company enters into long-term inventory purchase commitments with minimum purchase requirements for raw materials and finished goods to ensure the availability of products for production and distribution.

Future minimum annual payments for inventory purchase commitments were immaterial as of June 30, 2021.

NOTE 15 – SUBSEQUENT EVENTS

On July 1, 2021, the effective date of the transaction, the Company paid $ 10 million to acquire the remaining interest in the dental business of a partially owned affiliate based in Switzerland that primarily develops highly specialized software with a focus on CAD/CAM systems.

The Company is in the process of determining fair values of assets acquired and liabilities assumed.

Of the $ 250 million notional amount, $ 100 million has a term of five-years maturing on June 1, 2026 and $ 150 million has a term of nine-years maturing on March 1, 2030.

On July 2, 2021, the Company entered into a cross currency basis swap totaling a notional amount of $ 300 million which matures on June 3, 2030.

The cross currency basis swap is designated as a hedge of net investments.

This contract effectively converts a portion of the $ 750 million bond coupon from 3.3 % to 1.7 %, which will result in a net reduction of interest expense in 2021.

On July 2, 2021 the Company pre-paid the fixed rate Senior Notes totaling $ 296 million that were scheduled to mature on August 16, 2021 using cash and short-term commercial paper.

On July 28, 2021, the Board of Directors of the Company approved an increase in the value of shares of common stock that may be repurchased under the share repurchase program, up to $ 1.0 billion.

Share repurchases will be made through open market purchases, Rule 10b5-1 plans, accelerated share repurchases, privately negotiated transactions or other transactions in such amounts and at such times as the Company deems appropriate based upon prevailing market and business conditions and other factors.

Future minimum annual payments for inventory purchase commitments were immaterial as of September 30, 2021.

DENTSPLY SIRONA Inc.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements