What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-01 · 642 added, 654 removed, 1354 unchanged (49% of the section changed)

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Consolidated Statements of Cash Flows - Years ended December 31, 2021, 2020, and 2019

Notes to Consolidated Financial Statements

Note 1 - Significant Accounting Policies 60

Note 2 - Revenue 71

Note 3 - Stock Compensation 72

Note 4 - Earnings Per Common Share 75

Note 5 - Comprehensive (Loss) Income 76

Note 6 - Business Combinations 78

Note 7 - Segment and Geographic Information 81

Note 8 - Other Expense (Income), Net 84

Note 9 - Inventories, Net 86

Note 10 - Property, Plant and Equipment, Net 87

Note 11 - Leases 88

Note 12 - Goodwill and Intangibles Assets 90

Note 13 - Prepaid Expenses and Other Current Assets 93

Note 14 - Accrued Liabilities 95

Note 15 - Financing Arrangements 96

Note 16 - Equity 97

Note 17 - Income Taxes 98

Note 18 - Benefit Plans 101

Note 19 - Restructuring and Other Costs 108

Note 20 - Financial Instruments and Derivatives 109

Note 21 - Fair Value Measurement 117

Note 22 - Commitments and Contingencies 119

Financial Statement Schedule for the Years Ended December 31, 2021, 2020, and 2019.

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Based on its assessment management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting was effective based on the criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

In conducting management's evaluation as described above, the operations of the Byte business acquired December 31, 2020, which were excluded from management's assessment of internal control over financial reporting, represent less than 1% of consolidated total assets, excluding the preliminary value of goodwill and intangible assets related to Byte, and less than 1% of the Company's consolidated revenues and operating income for the fiscal year ended December 31, 2020.

In conducting management's evaluation as described above, the operations of the Propel Orthodontics and Datum Dental businesses acquired June 1, 2021 and January 21, 2021 respectively, which were excluded from management's assessment of internal control over financial reporting, together represent less than 1% of consolidated total assets, excluding the preliminary value of goodwill and intangible assets related to these acquisitions, and less than 1% of the Company's consolidated revenues and operating income for the fiscal year ended December 31, 2021.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears herein.

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the consolidated financial statements, including the related notes and financial statement schedule, of DENTSPLY SIRONA Inc.

and its subsidiaries (the “Company”) as listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have audited the accompanying consolidated balance sheets of DENTSPLY SIRONA Inc.

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related no tes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2021, b ased on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Straight Smile LLC (“Byte”) from its assessment of internal control over financial reporting as of December 31, 2020 because it was acquired by the Company in a purchase business combination during 2020.

We have also excluded Byte from our audit of internal control over financial reporting.

Byte is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting each represent less than 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2020.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Propel Orthodontics and Datum Dental from its assessment of internal control over financial reporting as of December 31, 2021, because they were acquired by the Company in purchase business combinations during 2021.

We have also excluded Propel Orthodontics and Datum Dental from our audit of internal control over financial reporting.

Propel Orthodontics and Datum Dental are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

Definition and Limitations of Internal Control over Financial Reporting

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Assessments – Implants and Equipment & Instruments Reporting Units

As described in Notes 1 and 10 to the consolidated financial statements, the Company’s consolidated goodwill balance was $3,986 as of December 31, 2020, and the goodwill associated with the Implants and Equipment & Instruments reporting units were $1,232 million and $292 million, respectively.

Goodwill Impairment Assessments – Certain Reporting Units

As described in Notes 1 and 12 to the consolidated financial statements, the Company’s consolidated goodwill balance was $3,976 million as of December 31, 2021.

Management conducts an impairment test as of April 1 of each year, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired.

Management performs impairment tests by comparing the fair value of each reporting unit to its carrying amount to determine if there is a potential impairment.

In the first quarter of 2020, management 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 first quarter goodwill impairment test resulted in an impairment charge of $157 million in the Equipment & Instruments reporting unit.

Management 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 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.

Management’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 principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Implants and Equipment & Instruments reporting units is a critical audit matter are the significant judgment by management when developing the fair value of the reporting units.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s cash flow projections and significant assumptions related to the discount rates, revenue growth rates, perpetual revenue growth rates, and operating margin percentages.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of certain reporting units is a critical audit matter are the significant judgment by management when developing the fair value of the reporting units, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the discount rates, revenue growth rates, perpetual revenue growth rates, and operating margin percentages.

Also, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Implants and Equipment & Instruments reporting units.

These procedures also included, among others, testing management’s process for developing the fair value estimates;

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of certain reporting units.

These procedures also included, among others, testing management’s process for developing the fair value of certain reporting units;

evaluating the appropriateness of the discounted cash flow models;

testing the completeness, accuracy, and relevance of underlying data used in the models;

and evaluating the significant assumptions used by management related to discount rates, revenue growth rates, perpetual revenue growth rates, and operating margin percentages.

Evaluating management’s assumptions related to revenue growth rates, perpetual revenue growth rates, and operating margin percentages involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow models and the assumptions related to the discount rates and perpetual revenue growth rates.

Indefinite-lived Intangible Assets Impairment Assessments – Tradenames and Trademarks for one Business Unit in the Equipment & Instruments Reporting Unit

As described in Notes 1 and 10 to the consolidated financial statements, the Company’s consolidated indefinite-lived intangible asset balance, consisting of tradenames and trademarks, was $642 million as of December 31, 2020.

The balance as of December 31, 2020 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.

Management conducts an impairment test as of April 30 of each year, or more frequently if events or circumstances indicate that the carrying value of indefinite-lived intangible assets may be impaired.

Potential impairment is identified by comparing the fair value of an intangible asset to its carrying value.

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 all but two of the Company’s indefinite-lived intangible assets as of March 31, 2020.

The first quarter impairment test resulted in an intangible asset impairment charge of $39 million related to certain tradenames and trademarks related to the Equipment & Instruments reporting unit, for which the tradenames and trademarks for one business unit in the Equipment & Instruments reporting unit makes up a significant portion of the Company’s total $39 million intangible asset impairment charge.

Management performs impairment tests using an income approach, more specifically a relief from royalty method.

In the development of the forecasted cash flows, management applies significant judgment to determine key assumptions, including revenue growth rates, perpetual revenue growth rates, royalty rates, and discount rates.

The principal considerations for our determination that performing procedures relating to the indefinite-lived intangible assets impairment assessments for tradenames and trademarks for one business unit in the Equipment & Instruments reporting unit is a critical audit matter are the significant judgment by management when developing the fair value of the tradenames and trademarks.

This in turn led to a high degree of auditor judgment, subjectivity and audit effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rates, perpetual revenue growth rate, royalty rate, and discount rate.

Also, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s indefinite-lived intangible asset impairment assessments, including controls over development of the significant assumptions.

These procedures also included, among others, testing management’s process for developing the fair value estimates;

evaluating the appropriateness of the relief from royalty method;

testing the completeness and accuracy of underlying data used in the models, and evaluating the significant assumptions used by management related to the revenue growth rates, perpetual revenue growth rate, royalty rate and discount rate.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s relief from royalty method models and the assumptions related to the perpetual revenue growth rate, royalty rate, and discount rate.

Certain Tax Positions Related to the IRS and Swedish Tax Agency

testing the completeness and accuracy of underlying data used in the discounted cash flow models;

and evaluating the reasonableness of significant assumptions used by management related to the discount rates, revenue growth rates, perpetual revenue growth rates, and operating margin percentages.

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s discounted cash flow models and the reasonableness of the assumptions related to the discount rates and perpetual revenue growth rates.

Uncertain Tax Position Related to a Worthless Stock Deduction

As described in Notes 1 and 22 to the consolidated financial statements, management applies a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Management recognizes in the consolidated financial statements the impact of a tax position if that position is more likely than not of being sustained upon examination by the taxing authorities based on the technical merits of the position.

Management has recorded the full benefit of certain tax deductions taken in the United States and Sweden.

Management has recorded the full benefit of the tax deduction taken associated with a worthless stock deduction.

As a result of an audit by the Internal Revenue Service (IRS) for 2013, the Company’s worthless stock deduction of $546 million has been disallowed.

In March 2019, the Company submitted a formal protest disputing on multiple grounds the proposed taxes and have not accrued a liability relating to the proposed tax adjustments.

If the worthless stock deduction was ultimately disallowed, the Company would be subject to additional income tax expense.

In addition, the Swedish Tax Agency has disallowed certain of the Company’s interest expense deductions for the tax years from 2013 to 2018.

If such interest expense deductions were disallowed, the Company would be subject to additional income tax expense of $57 million.

The principal considerations for our determination that performing procedures relating to certain tax positions related to the IRS and Swedish Tax Agency is a critical audit matter are the significant judgment by management when determining uncertain tax positions, which in turn led to a high degree of auditor judgment, effort and subjectivity in performing procedures and evaluating audit evidence related to management’s timely identification and accurate measurement of uncertain tax positions.

Also, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the identification, recognition and measurement of the uncertain tax positions.

These procedures also included, among others, assessing the appropriateness of management’s assessment by reviewing the technical merits of the tax positions taken, evaluating the tax documentation provided by management and evaluating the status and results of income tax audits with the relevant tax authorities.

Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s interpretation and application of relevant tax laws in United States and Swedish jurisdictions and in evaluating the reasonableness of management’s assessments of whether the tax positions are more-likely-than-not of being sustained.

Acquisition of Straight Smile LLC (“Byte”) - Valuation of Technology Know-how and Tradenames and Trademarks Intangible Assets

As described in Notes 1 and 4 to the consolidated financial statements, the Company completed the acquisition of Byte for net consideration of $1.0 billion on December 31, 2020, which resulted in $416 million of intangible assets being recorded.

The intangible assets associated with the technology know-how and tradenames and trademarks were $210 million and $190 million, respectively.

Management values identified intangible assets using an income approach.

Technology know-how is valued using an excess earnings method and tradename and trademark assets are valued using a relief-from-royalty method.

Management applied significant judgment in estimating the fair value of intangible assets acquired, which involved the use of significant estimates and assumptions with respect to revenue growth rates, EBITDA margin percentages, royalty rate, technology obsolescence factors, useful lives of the assets and discount rates used in computing present values.

The principal considerations for our determination that performing procedures relating to the valuation of technology know-how and tradenames and trademarks intangible assets in the acquisition of Byte is a critical audit matter are the significant judgment by management when developing the fair value measurement of the technology know-how and tradenames and trademarks intangible assets acquired.

This in turn lead to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rates, EBITDA margin percentages, royalty rate, technology obsolescence factors, useful lives and discount rates.

The principal considerations for our determination that performing procedures relating to the uncertain tax position related to a worthless stock deduction is a critical audit matter are the significant judgment by management when determining the uncertain tax position, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s accurate measurement of the uncertain tax position.

Also, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of technology know-how and tradenames and trademarks intangible assets and controls over the development of the revenue growth rates, EBITDA margin percentages, royalty rate, technology obsolescence factors, useful lives and discount rates assumptions utilized in the valuation of the intangible assets.

These procedures also included, among others (i) reading the purchas e agreement and (ii) testing management’s process for developing the fair value estimates .

Testing management’s process included evaluating the appropriateness of the excess earnings and relief-from-royalty valuation methods, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness o f significant assumptions related to revenue growth rates, EBITDA margin percentages, royalty rate, technology obsolescence factors, useful lives, and discount rates.

Evaluating management’s assumptions related to the revenue growth rates, EBITDA margin percentages, technology obsolescence factors, discount rates, royalty rate, and useful lives involved evaluating whether the assumptions were reasonable considering (i) past performance of the acquired businesses, (ii) economic and industry forecasts, (iii) benchmarking of peer companies, and (iv), and considering whether they were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s excess earnings and relief-from-royalty valuation methods and the assumptions related to the technology obsolescence factors, discount rates, royalty rate, and useful lives.

These procedures included testing the effectiveness of controls relating to the recognition and measurement of the uncertain tax position related to the worthless stock deduction.

These procedures also included, among others, evaluating the appropriateness of management’s assessment by reviewing the technical merits of the tax position taken;

evaluating the tax documentation provided by management;

and evaluating the status and results of the income tax audit, and correspondence with the IRS.

Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s interpretation and application of relevant tax laws in the United States and in evaluating the reasonableness of management’s assessment of whether the tax position will be sustained.

/s/ PricewaterhouseCoopers LLP

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Selling, general and administrative expenses 1,551 1,312 1,580

Research and development expenses 171 123 143

Goodwill impairment — 157 —

Restructuring and other costs 17 77 81

Operating (loss) income ( 12 ) 361 ( 958 )

Operating income (loss) 622 ( 12 ) 361

Other income and expenses:

Interest expense 48 30 37

Interest income ( 1 ) ( 2 ) ( 2 )

Interest expense, net 55 47 28

Other expense (income), net 8 1 ( 12 )

(Loss) income before income taxes ( 60 ) 345 ( 958 )

Income (loss) before income taxes 559 ( 60 ) 345

Provision for income taxes 138 23 82

Net (loss) income ( 83 ) 263 ( 1,011 )

Net income (loss) 421 ( 83 ) 263

Net income (loss) attributable to noncontrolling interests — — —

Net (loss) income attributable to Dentsply Sirona $ ( 83 ) $ 263 $ ( 1,011 )

Net (loss) income per common share attributable to Dentsply Sirona:

Net income (loss) attributable to Dentsply Sirona $ 421 $ ( 83 ) $ 263

Net income (loss) per common share attributable to Dentsply Sirona:

Basic $ 1.93 $ ( 0.38 ) $ 1.18

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2021 2020 2019

Net (loss) income $ ( 83 ) $ 263 $ ( 1,011 )

Other comprehensive income (loss), net of tax:

Net income (loss) $ 421 $ ( 83 ) $ 263

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments ( 181 ) 182 ( 83 )

Net (loss) gain on derivative financial instruments ( 32 ) ( 1 ) 29

Net unrealized holding gain on available-for-sale securities — — ( 44 )

Net gain (loss) on derivative financial instruments 25 ( 32 ) ( 1 )

Pension liability adjustments 26 ( 13 ) ( 36 )

Total other comprehensive income (loss) 137 ( 120 ) ( 188 )

Total comprehensive income (loss) 54 143 ( 1,199 )

Comprehensive income attributable to noncontrolling interests 1 1 —

Comprehensive income (loss) attributable to Dentsply Sirona $ 53 $ 142 $ ( 1,199 )

Total other comprehensive (loss) income ( 130 ) 137 ( 120 )

Total comprehensive income 291 54 143

Comprehensive (loss) income attributable to noncontrolling interests ( 2 ) 1 1

Comprehensive income attributable to Dentsply Sirona $ 293 $ 53 $ 142

The accompanying notes are an integral part of these consolidated financial statements.

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Inventories, net 504 466

Prepaid expenses and other current assets, net 214 251

Prepaid expenses and other current assets 247 214

Total Current Assets 1,837 1,791

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Goodwill, net 3,976 3,986

Other noncurrent assets, net 94 69

Other noncurrent assets 122 94

Total Assets $ 9,220 $ 9,342

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Total Liabilities 4,177 4,372

Commitments and contingencies (Note 22)

Preferred stock, $ 1.00 par value;

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Balance at December 31, 2018 $ 3 $ 6,522 $ 1,226 $ ( 479 ) $ ( 2,151 ) $ 5,121 $ 12 $ 5,133

Net loss — — ( 1,011 ) — — ( 1,011 ) — ( 1,011 )

Other comprehensive loss — — — ( 188 ) — ( 188 ) — ( 188 )

Net income — — 263 — — 263 — 263

Other comprehensive (loss) income — — — ( 121 ) — ( 121 ) 1 ( 120 )

Divestiture of noncontrolling interest — — — — — — ( 11 ) ( 11 )

Exercise of stock options — 13 — — 96 109 — 109

Cumulative effect on adoption of ASC 606 — — ( 6 ) — — ( 6 ) — ( 6 )

Reclassification on adoption of ASU No.

2016-16 — — ( 3 ) — — ( 3 ) — ( 3 )

Reclassification on adoption of ASU No.

2018-02 — — 8 — — 8 — 8

Stock based compensation expense — 66 — — — 66 — 66

Funding of employee stock purchase plan — 1 — — 4 5 — 5

Treasury shares purchased — — — — ( 260 ) ( 260 ) — ( 260 )

Restricted stock unit distributions — ( 16 ) — — 10 ( 6 ) — ( 6 )

Cash dividends ($ 0.35 per share)

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

Cash dividends declared ($ 0.38 per share)

— — ( 84 ) — — ( 84 ) — ( 84 )

Balance at December 31, 2019 $ 3 $ 6,587 $ 1,404 $ ( 600 ) $ ( 2,301 ) $ 5,093 $ 2 $ 5,095

Net income — — 263 — — 263 — 263

Other comprehensive (loss) income — — — ( 121 ) — ( 121 ) 1 ( 120 )

Divesture of noncontrolling interest — — — — — — ( 11 ) ( 11 )

Net loss — — ( 83 ) — — ( 83 ) — ( 83 )

Other comprehensive income — — — 136 — 136 1 137

Exercise of stock options — 1 — — 10 11 — 11

Stock based compensation expense — 47 — — — 47 — 47

Funding of employee stock ownership plan — 1 — — 4 5 — 5

Funding of employee stock purchase plan — 2 — — 3 5 — 5

Treasury shares purchased — — — — ( 140 ) ( 140 ) — ( 140 )

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Restricted stock units dividends — 1 ( 1 ) — — — — —

Cash dividends ($ 0.375 per share)

Cash dividends declared ($ 0.40 per share)

— — ( 87 ) — — ( 87 ) — ( 87 )

Balance at December 31, 2020 $ 3 $ 6,604 $ 1,233 $ ( 464 ) $ ( 2,409 ) $ 4,967 $ 3 $ 4,970

Net loss — — ( 83 ) — — ( 83 ) — ( 83 )

Other comprehensive income — — — 136 — 136 1 137

Net income — — 421 — — 421 — 421

Other comprehensive loss — — — ( 128 ) — ( 128 ) ( 2 ) ( 130 )

Exercise of stock options — 15 — — 37 52 — 52

Stock based compensation expense — 49 — — — 49 — 49

Funding of Employee Stock Ownership Plan — 2 — — 3 5 — 5

Funding of employee stock purchase plan — 2 — — 3 5 — 5

Treasury shares purchased — — — — ( 200 ) ( 200 ) — ( 200 )

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Restricted stock units dividends — 1 ( 1 ) — — — — —

Cash dividends ($ 0.400 per share)

Cash dividends declared ($ 0.43 per share)

— — ( 93 ) — — ( 93 ) — ( 93 )

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Cash flows from operating activities:

Net (loss) income $ ( 83 ) $ 263 $ ( 1,011 )

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ 421 $ ( 83 ) $ 263

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation 124 142 133

Amortization of intangible assets 222 192 190

Amortization of deferred financing costs 5 3 3

Fixed asset impairment — 3 33

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Indefinite-lived intangible asset impairment — 39 9

Definite-lived intangible asset impairment — 4 —

Deferred income taxes ( 20 ) ( 64 ) ( 37 )

Stock based compensation expense 48 47 66

Restructuring and other costs - non-cash 10 16 23

Gain on sale of equity security — — ( 44 )

Other non-cash (income) expense 34 2 ( 6 )

Loss on disposal of property, plant and equipment 1 4 5

Gain on divestiture of noncontrolling interest — ( 9 ) —

Loss on sale on non-strategic businesses and product lines 1 2 —

(Gain) loss on sale on non-strategic businesses and product lines ( 14 ) 1 2

Changes in operating assets and liabilities, net of acquisitions:

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Prepaid expenses and other current assets, net ( 35 ) 42 13

Other noncurrent assets, net 1 ( 9 ) ( 13 )

Other noncurrent assets ( 10 ) 1 ( 9 )

Accounts payable ( 46 ) ( 23 ) 26

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Cash received on sale of non-strategic businesses or product lines 28 1 11

Purchases of short term investments — — ( 4 )

Liquidation of short term investments — 1 —

Capital expenditures ( 142 ) ( 87 ) ( 123 )

Cash received on derivative contracts 2 58 40

Cash paid on derivative contracts ( 1 ) — ( 2 )

Expenditures for identifiable intangible assets — — ( 5 )

Proceeds from the sale of equity security — — 54

Proceeds from sale of property, plant and equipment, net 1 5 9

Other investing activities, net 2 — 6

Net cash used in investing activities ( 358 ) ( 1,106 ) ( 69 )

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Proceeds from long-term borrowings, net of deferred financing costs 16 1,448 120

Cash paid for deferred financing costs ( 6 ) ( 1 ) —

Repayments on long-term borrowings, net ( 701 ) ( 251 ) ( 9 )

Repayments on long-term borrowings ( 297 ) ( 701 ) ( 251 )

Net borrowings (repayments) on short-term borrowings 179 2 ( 69 )

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Proceeds from exercised stock options 51 11 109

Cash paid for acquisition of noncontrolling interests of consolidated subsidiaries ( 2 ) — —

Cash paid for contingent consideration on prior acquisitions ( 4 ) ( 33 ) —

Cash paid for treasury stock ( 200 ) ( 140 ) ( 260 )

Cash dividends paid ( 92 ) ( 88 ) ( 81 )

Net cash provided by (used in) financing activities 490 ( 466 ) ( 250 )

Other financing activities, net ( 36 ) ( 12 ) ( 34 )

Net cash (used in) provided by financing activities ( 379 ) 490 ( 466 )

Effect of exchange rate changes on cash and cash equivalents ( 19 ) 14 ( 3 )

Net increase (decrease) in cash and cash equivalents 33 95 ( 11 )

Net (decrease) increase in cash and cash equivalents ( 99 ) 33 95

Cash and cash equivalents at beginning of period 438 405 310

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Actual results could differ materially from those estimates.

Specifically, for the year ended December 31, 2020, some of these estimates and assumptions were based on the potential impacts of the COVID-19 pandemic.

The full extent to which the COVID-19 pandemic will directly or indirectly have a negative material impact on the Company's financial condition, liquidity, or results of operations, is highly uncertain and difficult to predict.

More specifically, the demand for the Company's products has been, and continues to be, affected by social distancing guidelines, newly implemented dental practice safety protocols which reduce patient traffic, and patient reluctance to seek dental care.

At this time, it is uncertain how long these impacts will continue.

During the year the Company's business was impacted by COVID-19.

The impact began in the early part of the first quarter as the Company began to experience declines in customer demand in Asia and then further in mid-March where it was most pronounced in Europe and where the Company experienced partial or country-wide business lockdowns in various markets, including China, France, and Italy.

The United States was most impacted in April and May.

Most regions throughout the world continue to experience localized surges of COVID-19 cases which are being responded to by governmental authorities with partial lockdowns.

While the duration and severity of this continuing p andemic is uncertain, the Company currently expects that the COVID-19 pandemic may have a negative impact on its operations in 2021.

As a result of the economic uncertainties caused by the COVID-19 pandemic, the Company implemented several measures to improve liquidity and operating results, including reduction of employee hours and salaries, furloughs, suspended hiring, travel bans, delaying some of its planned capital expenditures, and deferring other discretionary spending for 2020.

Many of these measures have been eased during the second half of the year as demand for the Company's products has improved.

The Company continues to monitor the COVID-19 pandemic and may need to reduce operations in the event of a resurgence of COVID-19 or in the event of actions from governmental authorities to combat a resurgence.

The Company believes it will be able to generate sufficient liquidity to satisfy its obligations and remain in compliance with the Company's existing debt covenants for the next twelve months.

At December 31, 2020, the Company's liquidity includes $ 438 million of cash and has access to a $ 700 million 2018 Credit Facility as well as other short-term credit facilities of approximately $ 400 million.

(See Note 13, Financing Arrangements).

At December 31, 2020, the Company is in compliance with all of its debt covenants and expects to remain in compliance with all covenants for the next twelve months.

However, if recovery from the pandemic takes longer than currently estimated, the Company may not be able to comply with its debt covenants and may have to seek covenant waivers.

Inability to obtain debt covenant waivers may lead to default and acceleration of all of its outstanding debt, which could have a material adverse effect on liquidity.

Specifically, for the year ended December 31, 2021, some of these estimates and assumptions continue to be based on an ongoing evaluation of expected future impacts from the COVID-19 pandemic.

More specifically, the demand for the Company's products has been, and continues to be, affected by social distancing guidelines, dental practice safety protocols which reduce patient traffic, and some lingering patient reluctance to seek dental care.

The Company’s 2020 results were materially impacted by the preventative measures implemented at the outset of the pandemic, including the closure or reduced operations of dental practices.

During 2021, demand for the Company’s products has largely recovered, although impacts from the pandemic continue to be experienced as evidenced by the more recent shortages and higher prices of raw materials such as electronic components, higher related transportation costs, and labor shortages.

In the current year, the Company has experienced supply chain constraints, which has impacted its ability to timely produce and deliver certain products, and has also resulted in increases in shipping rates.

To address these issues, the Company has taken steps to mitigate the impact of these trends, including continued emphasis on cost reduction and supply chain efficiencies.

However, uncertainties remain regarding how long these impacts will continue, whether customer demand will fully return to pre-COVID-19 levels upon lifting of remaining government restrictions, or whether future variants of the virus may have an adverse impact on demand in affected markets.

Basis of Presentation

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All significant intercompany accounts and transactions are eliminated in consolidation.

For the year ended December 31, 2020, amounts recorded in the Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income reflect certain adjustments pertaining to prior periods, the impact of which are not material to the financial statements for the years presented.

These corrections, which primarily include adjustments to accruals

recorded through cost of products sold and selling, general, and administrative expenses, resulted in a net $ 9 million and $ 7 million decrease to pre-tax income and net income, respectively, in the twelve months ended December 31, 2020.

Investments in non-consolidated affiliates, joint ventures and partnerships where the Company maintains significant influence over an entity are accounted for using the equity method.

Amounts recorded in the Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income reflect certain adjustments pertaining to prior periods, the impact of which are not material to the financial statements for the years presented.

Research and development (“R&D”) expenses for the years ended December 31, 2020 and 2019 have been separately presented on the Consolidated Statement of Operations to conform to the current year presentation.

Additionally, results for the year ended December 31, 2020, included adjustments to accruals from prior years which resulted in a net $ 9 million and $ 7 million decrease to pre-tax income and net income respectively in that period.

Cash and Cash Equivalents

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Short-term investments are highly liquid time deposits with original maturities greater than ninety days and with remaining maturities of one year or less.

Accounts and Notes Receivable

Accounts Receivable

The Company recognizes a receivable when it has an unconditional right to payment, which represents the amount the Company expects to collect in a transaction.

Payment terms are typically 30 days in the U.S.

but may be longer in international markets.

In general, contracts containing significant financing components are not material to the Company’s financial statements.

The Company establishes an allowance for doubtful accounts based on an estimate of current expected credit losses resulting from the inability of its customers to make required payments.

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

The cost of inventories is based upon the First In First Out Method ("FIFO") or average cost methods, except for $ 3 million and $ 5 million of inventories was determined by the last-in, first-out (“LIFO”) method as of December 31, 2020 and 2019, respectively.

If the FIFO method had been used to determine the cost of LIFO inventories, the amounts at which net inventories are stated would be higher than reported at December 31, 2020 and 2019 by $ 22 million and $ 14 million, respectively.

The cost of inventories is based upon the First In First Out Method ("FIFO") or average cost methods, except for $ 3 million and $ 5 million of inventories that was determined by the last-in, first-out (“LIFO”) method as of December 31, 2020 and 2019, respectively.

During the current fiscal year 2021, 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 principle was effected during the second quarter, and resulted in an increase in inventories of $ 4 million and a corresponding reduction to Cost of products sold.

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

Therefore, prior year amounts have not been retrospectively adjusted.

The Company establishes reserves for inventory estimated to be excess, obsolete or unmarketable based upon assumptions about future demand, market conditions, and expiration of products.

Valuation of Goodwill and Indefinite-Lived and Definite-Lived Intangible Assets

Assessment of the potential impairment of goodwill and indefinite-lived and definite-lived intangible assets is an integral part of the Company’s normal ongoing review of operations.

Testing for potential impairment of these assets is significantly dependent on assumptions and reflects management’s best estimates at a particular point in time.

The dynamic economic environments in which the Company’s businesses operate and key economic and business assumptions with respect to projected selling prices, increased competition and introductions of new technologies can significantly affect the outcome of impairment tests.

Estimates based on these assumptions may differ significantly from actual results.

Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time at which such impairments are recognized.

If there are unfavorable changes in these assumptions, future cash flows, a key variable in assessing the impairment of these assets, may decrease and as a result the Company may be required to recognize impairment charges.

Future changes in the environment and the economic outlook for the assets being evaluated could also result in additional impairment charges being recognized.

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.

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.

The following information outlines the Company’s significant accounting policies on long-lived assets by type.

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To determine the fair value of the Company’s 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 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, perpetual revenue growth rates, and operating margin percentages of the reporting unit's business.

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Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets consist of tradenames and trademarks acquired during business combinations, and these are not subject to amortization.

Indefinite-lived intangible assets consists primarily of tradenames and trademarks and in-process research and development acquired during business combinations, and these are not subject to amortization.

Valuations of indefinite life intangibles assets acquired are based on information and assumptions available at the time of their acquisition, using income and market approaches to determine fair value.

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Potential impairment is identified by comparing the fair value of an intangible asset to its carrying value.

The Company performs impairment tests using an income approach, more specifically a relief from royalty method.

For most indefinite-lived intangible assets, the Company performs impairment tests using an income approach, more specifically a relief from royalty method.

In the development of the forecasted cash flows, the Company applies significant judgment to determine key assumptions, including revenue growth rates, perpetual revenue growth rates, royalty rates, and discount rates.

For certain indefinite-lived intangible assets, the Company performs a qualitative assessment.

If the carrying value exceeds the fair value, an impairment loss in the amount equal to the excess is recognized.

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Definite-Lived Intangible Assets

Definite-lived intangible assets primarily consist of patents, tradenames, trademarks, licensing agreements, technology know-how, and customer relationships.

Definite-lived intangible assets primarily consist of patents, tradenames, trademarks, licensing agreements, developed technology, and customer relationships.

Valuation of definite-lived intangibles assets acquired in business combinations are based on information and assumptions available at the time of acquisition, using income and market model approaches to determine fair value.

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Customer relationships Up to 15 years

Technology know-how Up to 10 years

Developed technology Up to 15 years

When the expected useful life of an intangible is not known, the Company will estimate its useful life based on similar asset or asset groups, any legal, regulatory, or contractual provision that limits the useful life, the effect of economic factors, including obsolescence, demand, competition, and the level of maintenance expenditures required to obtain the expected future economic benefit from the asset.

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Assets acquired through acquisitions are recorded at fair value .

Except for leasehold improvements, depreciation is computed by the straight-line method over the assets' estimated useful lives:

The Company capitalizes costs incurred in the development or acquisition of software, whether for internal or external use.

The Company expenses costs incurred in the preliminary project planning stage.

E xcept for leasehold improvements, depreciation and amortization is computed by the straight-line method over the assets' estimated useful lives:

Property, Plant, and Equipment Assets Type Useful Life

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Machinery and Equipment 4 to 15 years

Capitalized Software 2 to 10 years

Leasehold Improvements Shorter of the estimated useful life or the term of the lease

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replacements and major improvements are capitalized.

If events or circumstances exist which suggest that the carrying amount of the asset group may not be recoverable the asset group is reviewed for impairment whenever impairment is calculated based upon an evaluation of the identifiable undiscounted cash flows as compared to the carrying value of the asset.

If impaired, the resulting charge reflects the excess of the asset group’s carrying cost over its fair value.

If events or circumstances exist which suggest that the carrying amount of the asset group may not be recoverable, the identifiable undiscounted cash flows of the asset group are compared to the carrying value of the asset.

If the carrying value is in excess of the identifiable undiscounted cash flows, the excess of the asset group's carrying cost over its fair value is recorded as an impairment charge.

In February 2016, the FASB issued ASU No.

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The Company adopted the new leasing standards on January 1, 2019 using the modified retrospective approach transition method.

Results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior periods are not adjusted and continue to be reported in accordance with historic accounting under ASC 840.

The Company elected the package of practical expedients permitted under the transition guidance within the standard, which eliminates the reassessment of past leases, their classification and initial direct costs for existing leases.

The Company did not elect to adopt the hindsight practical expedient.

The Company recognized material right-of-use assets and liabilities in the Consolidated Balance Sheets for its operating lease commitments with terms greater than 12 months.

The adoption of this standard was not material to retained earnings.

2018 lease expense under ASC 840 was $39 million.

The Company leases real estate, automobiles and equipment under various operating and finance leases.

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As the implicit rate is not readily determinable in most of the Company’s lease agreements, the Company uses its estimated secured incremental borrowing rate, based on the information available, at commencement of the lease to determine the present value of lease payments.

Lease expense is recognized on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Beginning January 1, 2019, any new real estate and equipment operating lease agreements with lease and non-lease components, were accounted for as a single lease component;

auto leases were accounted for as separate lease components.

The Company determines if an arrangement is a lease or contains a lease at inception.

The Company’s leases have remaining lease terms of approximately 1 year to 10 years.

Many of the Company's real estate and equipment leases have one or more options to renew, with terms that can extend primarily from 1 year to 3 years, which are not included in the initial lease term until deemed probable of renewal.

The Company does not have lease agreements with residual value guarantees, sale-and-leaseback terms, or material restrictive covenants.

The Company does not have any material sublease arrangements.

See Note 11, Leases for additional information.

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The Company employs derivative financial instruments to hedge certain anticipated transactions, firm commitments, and assets and liabilities denominated in foreign currencies.

Additionally, the Company utilizes interest rate swaps to convert floating rate debt to fixed rate.

Additionally, the Company manages exposures to changes in interest rates by utilizing interest rate swaps that have the effect of converting floating rate debt to fixed rate, or vice versa.

The Company records all derivative instruments at fair value and changes in fair value are recorded each period in the consolidated statements of operations or accumulated other comprehensive income (“AOCI”).

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Should the Company enter into a derivative instrument that included an other-than-insignificant financing element then all cash flows will be classified as financing activities in the Consolidated Statements of Cash Flows as required by US GAAP.

See Note 20, Financial Instruments for additional information on derivative instruments.

Pension and Other Postemployment Benefits

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Additionally, certain union and salaried employee groups in the United States are covered by postemployment healthcare plans.

Costs for Company-sponsored defined benefit and postemployment benefit plans are based on expected return on plan assets, discount rates, employee compensation increase rates and health care cost trends.

Projected benefit obligations and net periodic costs for Company-sponsored defined benefit and postemployment benefit plans are based on an annual actuarial valuation that includes assessment of key assumptions relating to expected return on plan assets, discount rates, employee compensation increase rates and health care cost trends.

Expected return on plan assets, discount rates and health care cost trend assumptions are particularly important when determining the Company’s benefit obligations and net periodic benefit costs associated with postemployment benefits.

Changes in these assumptions can impact the Company’s earnings.

In determining the cost of postemployment benefits, certain assumptions are established annually to reflect market conditions and plan experience to appropriately reflect the expected costs as actuarially determined.

These assumptions include medical inflation trend rates, discount rates, employee turnover and mortality rates.

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If no point within the range represents a better estimate of the probable loss, then the low point in the range is accrued.

The ranges established by management are based on analysis made by internal and external legal counsel who considers information known at the time.

The ranges established by management are based on analysis made by internal and external legal counsel who considers the best information known at the time.

If the Company determines that a contingency is reasonably possible, it considers the same information to estimate the possible exposure and discloses any material potential liability.

These loss contingencies are monitored regularly for a change in fact or circumstance that would require an accrual adjustment.

The Company believes it has estimated liabilities for probable losses appropriately in the past;

however, the unpredictability of litigation and court decisions could cause a liability to be incurred in excess of estimates.

Legal costs related to these lawsuits are expensed as incurred.

Foreign Currency Translation

The functional currency for foreign operations, except for those in highly inflationary economies, generally has been determined to be the local currency.

The local currency of foreign operations, except for those in highly inflationary economies, generally are considered to be their functional currency.

Assets and liabilities of foreign subsidiaries are translated at foreign exchange rates on the balance sheet date;

revenue and expenses are translated at the average year-to-date foreign exchange rates.

The effects of these translation adjustments are reported in Equity within AOCI in the Consolidated Balance Sheets.

During the year ended December 31, 2020, the Company had losses of $ 54 million on its loans designated as hedges of net investments and translation gains of $ 235 million.

During the year ended December 31, 2019, the Company had gains of $ 4 million on its loans designated as hedges of net investments and translation losses of $ 87 million.

Foreign currency gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved and remeasurement adjustments in countries with highly inflationary economies are included in income.

During the year ended December 31, 2020, 2019, 2018, net foreign currency gain of $ 13 million, gain of $ 27 million in 2019, and loss of $ 6 million in 2018, respectively, are included in Other expense (income), net in the Consolidated Statements of Operations.

revenue and expenses are translated at the monthly average foreign exchange rates.

The effects of these translation adjustments are reported within AOCI in the Consolidated Balance Sheets.

During the year ended December 31, 2021, the Company had translation loss of $ 225 million and a gain of $ 46 million on its loans designated as hedges of net investments.

During the year ended December 31, 2020, the Company had translation gains of $ 235 million and losses of $ 54 million on its loans designated as hedges of net investments.

Foreign currency gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included within Other expense (income), net in the Consolidated Statements of Operations.

During the years ended December 31, 2021, 2020, 2019, net foreign currency gains were $ 6 million, $ 13 million and $ 27 million, respectively.

Revenue Recognition

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

Revenues are derived primarily from the sale of dental equipment and dental and healthcare consumable products.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services in accordance with ASC 606-10, Revenues from Contracts with Customers .

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied;

generally this occurs with the transfer of risk and/or control of products to its customers.

this occurs with the transfer of control of products and services to its customers, which for products generally occurs when title and risk of loss transfers to the customer, and for services generally occurs as the customer receives and consumes the benefit.

Sales, value-added, and other taxes collected concurrent with revenue-producing activities are excluded from revenue.

For most of consumable, technology, and equipment products, the Company transfers control and recognizes revenue when products are shipped from the Company's manufacturing facility or warehouse to the customer (distributors and direct to dentists).

For contracts with customers that contain destination shipping terms, revenue is not recognized until risk has transferred and the goods are delivered to the agreed upon destination.

The amount of consideration received and revenue recognized varies with changes in marketing incentives (e.g.

discounts, rebates, free goods) and returns offered to customers and their customers.

When the Company gives customers the right to return eligible products and receive credit, returns are estimated based on an analysis of historical experience.

However, returns of products, excluding warranty-related returns, are infrequent and insignificant.

Certain of our contracts with customers include promises to transfer multiple products and services to a customer.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately may require significant judgment.

The Company generally uses an observable price, typically average selling price, to determine the stand-alone selling price for separate performance obligations.

The Company determines the stand-alone selling price, based on Company geographic sales locations' database of pricing and discounting practices for the specific product or service when sold separately, and utilizes this data to arrive at average selling prices by product.

In cases where an average selling price is not observable, the Company determines the stand-alone selling price using relevant information and applies suitable estimation methods including, but not limited to, the cost plus a margin approach.

Revenue is then allocated proportionately, based on the determined stand-alone selling price, to each distinct performance obligation.

The Company exercises judgment in estimating variable consideration, which primarily includes volume discounts, sales rebates, and product returns.

The Company adjusts the estimate of revenue at the earlier of when the most likely amount of consideration can be estimated, the amount expected to be received changes, or when the consideration becomes fixed.

The Company estimates volume discounts by evaluating specific inputs and assumptions, including the individual customer’s historical and estimated future product purchases.

Discounts are deducted from revenue at the time of sale or when the discount is offered, whichever is later.

In estimating sales rebates, the Company evaluates inputs such as customer-specific trends, terms of the customers’ contracted rebate program, historical experience, and the forecasted performance of a customer and their expected level of achievement within the rebate programs.

The accruals for these rebate programs are updated as actual results and updated forecasts impact the estimated achievement for customers within the rebate programs.

When the Company gives customers the right to return eligible products and receive credit, returns are estimated based on an analysis of historical experience.

However, returns of products, excluding warranty-related returns, are not material.

To the extent the transaction price includes variable consideration, the Company applies judgment in constraining the estimated variable consideration due to factors that may cause reversal of revenue recognized.

The Company evaluates constraints based on its historical and projected experience with similar customer contracts.

For most of its products, the Company transfers control and recognizes revenue when products are shipped from the Company's manufacturing facility or warehouse to the customer.

For contracts with customers that contain destination shipping terms, revenue is not recognized until the goods are delivered to the agreed upon destination.

As such, the Company’s performance obligations related to product sales are satisfied at a point in time as this is when the customer obtains the use of and substantially all of the benefit of the product.

The Company recognizes revenue from support and maintenance contracts, extended warranties, and other certain contract performance obligations over time based on the period of the contracts or as the services are performed, as the customer simultaneously receives and consumes the benefits provided by the Company's performance of the services.

In general, the total amount of revenue recognized over time is not material to the Company’s financial statements.

Depending on the terms of its contracts, the Company may defer the recognition of a portion of revenue on a relative stand-alone selling price basis when certain performance obligations are not yet satisfied.

Consideration received from customers in advance of revenue recognition is classified as deferred revenue.

Depending on the terms of the arrangement, the Company may also defer the recognition of a portion of revenue on a relative stand-alone selling price basis when performance obligations are not yet satisfied (e.g., free extended maintenance/service contracts, software and licenses, customer loyalty points and coupon programs).

The Company uses an observable price, typically average selling price, to determine the stand-alone selling price for separate performance obligations.

Revenue is then allocated proportionately, based on the determined stand-alone selling price, to the unsatisfied performance obligation, which is deferred until satisfied.

At December 31, 2020, the Company had $ 41 million of deferred revenue recorded in Accrued liabilities in the Consolidated Balance Sheets.

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

The prior year amount of $ 29 million was recognized in the current year.

The Company has elected to account for shipping and handling activities as a fulfillment cost within the cost of products sold, and records shipping and handling costs collected from customers in net sales.

The Company has adopted two practical expedients:

the “right to invoice” practical expedient, which allows us to recognize revenue in the amount of the invoice when it corresponds directly with the value of performance completed to date;

and relief from considering the existence of a significant financing component when the payment for the good or service is expected to be one year or less.

The Company offers discounts to its customers and distributors if certain conditions are met.

Discounts are primarily based on the volume of products purchased or targeted to be purchased by the customer or distributor.

Discounts are deducted from revenue at the time of sale or when the discount is offered, whichever is later.

The Company estimates volume discounts based on the individual customer’s or distributor's historical and estimated future product purchases.

Certain of the Company’s customers are offered cash rebates based on targeted sales increases.

The Company estimates rebates based on the forecasted performance of a customer and their expected level of achievement within the rebate programs.

In accounting for these rebate programs, the Company records an accrual and reduces net sales ratably as sales occur over the rebate period.

The Company updates the accruals for these rebate programs as actual results and updated forecasts impact the estimated achievement for customers within the rebate programs.

A portion of the Company’s net sales is comprised of sales of precious metals generated through its precious metal dental alloy product offerings.

As the precious metal content of the Company’s sales is largely a pass-through to customers, the Company uses its cost of precious metal purchased as a proxy for the precious metal content of sales, as the precious metal content of sales is not separately tracked and invoiced to customers.

The Company believes that it is reasonable to use the cost of precious metal content purchased in this manner since precious metal alloy sale prices are typically adjusted when the prices of underlying precious metals change.

The Company has adopted one practical expedient:

relief from considering the existence of a significant financing component when the payment for the good or service is expected to be one year or less.

Additional information and disclosure regarding revenue recognition is provided in Note 2, Revenue.

Cost of Products Sold

Cost of products sold represents costs directly related to the manufacture and distribution of the Company’s products.

Primary costs include raw materials, packaging, direct labor, overhead, shipping and handling, warehousing and the depreciation of manufacturing, warehousing and distribution facilities.

Cost of products sold represents costs directly related to the manufacture and distribution of the Company’s products, and include costs of raw materials, packaging, direct labor, overhead, shipping and handling, warehousing and the depreciation of manufacturing, warehousing and distribution facilities and amortization of intangible assets.

Overhead and related expenses include salaries, wages, employee benefits, utilities, lease costs, maintenance and property taxes.

The Company provides warranties on certain equipment products.

The Company provides manufacturer's warranties on certain equipment products.

Estimated warranty costs are accrued when sales are made to customers.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses represent indirect costs associated with generating revenues and in managing the business of the Company.

Such costs include advertising and other marketing expenses, salaries, employee benefits, incentive compensation, research and development, travel, office expenses, lease costs, amortization of capitalized software and depreciation of administrative facilities.

Selling, general and administrative expenses ("SG&A") represent indirect costs associated with generating revenues and in managing the business of the Company.

Such costs include advertising and marketing expenses, salaries, employee benefits, incentive compensation, travel, office expenses, lease costs, amortization of capitalized software developed for internal use, and depreciation of administrative facilities.

Advertising cost are expensed as incurred.

Research and Development Costs

Research and development (“R&D”) costs relate primarily to salaries and direct overhead expenses associated with R&D activities.

Research and development (“R&D”) costs primarily include costs associated with developing products, including software.

These costs include internal labor costs, material costs, consulting expenses, and certain overheads, such as facilities and information technology costs.

In addition, the Company contracts with outside vendors to conduct R&D activities.

All such R&D costs are charged to expense when incurred.

The Company capitalizes the costs of equipment that have general R&D uses and expenses such equipment that is solely for specific R&D projects.

The depreciation expense related to this capitalized equipment is included in the Company’s R&D costs.

All costs incurred prior to feasibility of technology are expensed.

The Company capitalizes the costs of equipment that have general R&D uses and expenses any equipment that is solely for specific R&D projects.

The depreciation expense related to capitalized equipment, including any software directly supporting R&D activities is included in the Company’s R&D costs.

Software development costs related to software to be sold, leased, or otherwise marketed incurred prior to the attainment of technological feasibility are considered R&D and are expensed as incurred.

Once technological feasibility is established, software development costs are capitalized until the product is available for general release to customers.

Once technological feasibility is established, the cost of software developed for external use is capitalized until the product is available for general release to customers.

Amortization of these costs are included in Cost of products sold over the estimated life of the products.

R&D costs were $ 115 million, $ 131 million and $ 161 million for the years ended December 31, 2020, 2019 and 2018, respectively, and are included in Selling, general and administrative expenses in the Consolidated Statements of Operations.

Stock Compensation

Stock-based compensation is measured at the grant date, fair value, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity awards).

Stock-based compensation is measured at the grant date at fair value, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity awards).

The compensation cost is only recognized for the portion of the awards that are expected to vest.

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The adjusted operating income margin performance target approximates the adjusted operating income margin targets previously disclosed by the Company as part of its effort to support revenue growth and margin expansion.

For vesting to occur an adjusted operating income margin target must be achieved over a period of four consecutive quarters, and an adjusted operating income margin above that target threshold as measured at the end of the subsequent quarter, all calculated on a trailing four quarter basis.

The performance period began on January 1, 2019 and concludes on December 31, 2022.

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Acquired businesses are accounted for using the acquisition method of accounting which requires the Company to record assets acquired and liabilities assumed at their respective fair values with the excess of the purchase price over estimated fair values recorded as goodwill.

The assumptions made in determining the fair value of acquired assets and assumed liabilities as well as asset lives can materially impact the results of operations.

The Company obtains information during due diligence and through other sources to establish respective fair values.

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tangible and intangible asset valuations and appraisals, and evaluations of existing contingencies, liabilities, and product line information.

If the initial valuation for an acquisition is incomplete by the end of the reporting period in which the acquisition occurred, the Company will record a provisional estimate in the financial statements.

The provisional estimate will be finalized as soon as information becomes available, but will only occur up to one year from the acquisition date.

If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges.

On December 31, 2020, the Company acquired Straight Smile LLC ("Byte"), a leading provider in the direct-to-consumer, doctor-directed clear aligner market.

The Company acquired all of the outstanding membership interests of Byte for total cash consideration of approximately $ 1.0 billion.

The purchase price allocation resulted in the recording of $ 631 million of goodwill and $ 416 million of amortizable intangible assets, including tradenames, technology know-how, and non-compete agreements.

The Company values identified intangible assets using an income approach.

If the initial valuation for an acquisition is incomplete by the end of the reporting period in which the acquisition occurred, the Company will record provisional estimates in the financial statements.

The provisional estimates will be finalized as soon as information becomes available, but not later than one year from the acquisition date.

As part of purchase accounting for acquisitions, the Company values identified intangible assets using an income approach.

Technology know-how is valued using an excess earnings method.

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Non-compete agreements are valued using a with-and-without method.

The Company applied significant judgment in estimating the fair value of intangible assets acquired, which involved the use of significant estimates and assumptions with respect to revenue growth rates, EBITDA margin percentages, royalty rate, technology obsolescence factors, useful lives of the assets and discount rates used in computing present values.

The Company applies judgment in estimating the fair value of intangible assets acquired, which involves the use of estimates and assumptions with respect to revenue growth rates, EBITDA margin percentages, royalty rate, technology obsolescence factors, useful lives of the assets and discount rates used in computing present values.

In addition, the estimates of useful lives of these acquired intangibles are used to calculate depreciation and amortization expense.

If the estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could be impaired.

For additional information related to accounting for acquisitions, see Note 6, Business Combinations.

Investments in Unconsolidated Affiliates

Investments in non-consolidated affiliates, joint ventures and partnerships where the Company maintains significant influence over an entity, but does not have control are accounted for using the equity method.

The Company records the carrying value of these investments within Other noncurrent assets in the Consolidated Balance Sheets, and records the Company's proportional share of the investees' net earnings or losses within Other expense (income).

Investments in which the Company does not exercise significant influence are recorded at cost, and assessed for any other-than-temporary impairment when events or changes in circumstances indicate the carrying amount of the investment might not be recoverable.

The Company's equity-method net losses were $ 10 million and $ 1 million, for the years ended December 31, 2021 and 2020, respectively and negligible for the year ended December 31, 2019.

Noncontrolling Interests

The Company reports noncontrolling interest (“NCI”) in a subsidiary as a separate component of Equity in the Consolidated Balance Sheets.

Additionally, the Company reports the portion of net income (loss) and comprehensive income (loss) attributed to the Company and NCI separately in the Consolidated Statements of Operations.

Additionally, the Company reports the portion of net income (loss) and comprehensive income (loss) attributed to the Company and NCI separately in the Consolidated Statements of Operations, and in the Consolidated Statements of Comprehensive Income.

Segment Reporting

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In March 2020, the FASB issued ASU No.

2020-04 "Reference Rate Reform (Topic 828), Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which was subsequently amended by ASU No.

2021-01 "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting." Specifically, there is risk of cessation of the London Interbank Offer Rate ("LIBOR").

The Company has certain variable interest rate debt that uses LIBOR as a reference rate.

The guidance provided by this accounting standard may be used for contracts entered into on or before December 31, 2022 on a prospective basis.

The Company is currently assessing the impact that this standard will have on its consolidated financial statements and related disclosures.

Scope" in January 2021.

The new standard provides optional expedients and exceptions to contracts, hedging relationships, and other transactions that reference the London Interbank Offer Rate ("LIBOR") or another rate expected to be discontinued due to the reference rate reform.

This standard is permitted to be adopted any time through December 31, 2022, and does not apply to contract modifications made or hedging relationships entered into or evaluated after December 31, 2022.

The Company does not expect this standard to have a material impact on its consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU No.

2021-08, "Business Combinations:

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" (Topic 805), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts.

The current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value differs from the current approach.

This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted.

The Company is currently assessing the impact of this standard on its consolidated financial statements and related disclosures.

NOTE 2 - REVENUE

Net sales disaggregated by product category were as follows:

Year Ended December 31,

(in millions) 2021 2020 2019

Equipment & Instruments $ 733 $ 580 $ 693

CAD/CAM 590 457 527

Orthodontics 274 161 191

Implants 624 476 592

Healthcare 303 287 280

Technology & Equipment segment revenue $ 2,524 $ 1,961 $ 2,283

Endodontic & Restorative $ 1,260 $ 964 $ 1,202

Other Consumables 467 417 544

Consumables segment revenue $ 1,727 $ 1,381 $ 1,746

Total net sales $ 4,251 $ 3,342 $ 4,029

Technologies & Equipment Segment

Equipment & Instruments

The Equipment & Instruments product category consists of basic and high-tech dental equipment such as treatment centers, imaging equipment, motorized dental handpieces, and other instruments for dental practitioners and specialists.

Imaging equipment serves as the starting point for the Company’s digital workflow offerings and consists of a broad range of diagnostic imaging systems for 2D or 3D, panoramic, and intra-oral applications.

Treatment centers comprise a broad range of products from basic dentist chairs to sophisticated chair-based units with integrated diagnostic, hygiene and ergonomic functionalities, as well as specialist centers used in preventive treatment and for training purposes.

This product group also includes other lab equipment such as amalgamators, mixing machines and porcelain furnaces.

Dental CAD/CAM technologies are products designed for dental offices to support numerous digital dental procedures including dental restorations.

This product category includes a full-chairside economical restoration of aesthetic ceramic dentistry offering called CEREC, as well as stand-alone CAD/CAM, digital impressions ("DI") intraoral scanners, mills, and services.

The full-chairside offering enables dentists to practice same day or single visit dentistry.

The company’s orthodontic product group primarily includes a dentist-directed clear aligner solution, SureSmile, and a direct-to-consumer clear aligner solution, Byte.

The orthodontics product category also includes a High Frequency Vibration ("HFV") technology device known as VPro or as HyperByte within Byte's product offering.

The clear aligners offerings include software technology that enables clear aligner treatment planning and for SureSmile seamless connectivity of a digital workflow from diagnostics through treatment delivery.

The Implants product offering includes technology to support signature digital workflows for implant systems, a portfolio of innovative dental implant products, bone regenerative and restorative solutions, and educational programs, all of which provide dental professionals with a completely new way of practicing implantology.

The Implants business is supported by key technologies including custom abutments, advanced tapered immediate load screws and regenerative bone growth factor.

This category consists mainly of urology catheters and other healthcare-related consumable products.

Consumables Segment

Dental consumable products consist of value-added dental supplies and small equipment used in dental offices for the treatment of patients.

It also includes specialized treatment products used within the dental office and laboratory settings including products used in the preparation of dental appliances by dental laboratories.

Endodontic & Restorative Products

The Company's Endodontic and Restorative products frequently work together to provide a tandem solution in high-tech dental procedures.

The Endodontic products include drills, filers, sealers, irrigation needles and other tools or single-use solutions which support root canal procedures.

Restorative products include dental prosthetics, such as artificial teeth, dental ceramics, digital dentures, precious metal dental alloys, and crown and bridge porcelain products.

Other Consumables

The remaining consumables products include small equipment products such as intraoral curing light systems, dental diagnostic systems and ultrasonic scalers and polishers, as well as other dental supplies including dental anesthetics, prophylaxis paste, dental sealants, impression materials, tooth whiteners and topical fluoride.

Net sales disaggregated by geographic region were as follows:

Year Ended December 31,

(in millions) 2021 2020 2019

United States $ 1,497 $ 1,109 $ 1,373

Europe 1,685 1,387 1,614

Rest of World 1,069 846 1,042

Total net sales $ 4,251 $ 3,342 $ 4,029

Contract Assets and Liabilities

The Company normally does not have contract assets in the course of its business.

Contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advanced billings for customer aligner treatment where the performance obligation has not yet been fulfilled.

At December 31, 2021, the Company had $ 51 million of deferred revenue recorded in Accrued liabilities in the Consolidated Balance Sheets.

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

Prior year deferred revenue of $ 41 million was recognized in the current year.

NOTE 3 - STOCK COMPENSATION

The Company maintains the 2016 Omnibus Incentive Plan (the “Plan”) under which it may grant non-qualified stock options (“NQSOs”), incentive stock options, restricted stock, RSUs and stock appreciation rights, collectively referred to as “Awards.” Awards are granted at exercise prices that are equal to the closing stock price on the date of grant.

The Company authorized grants under the Plan of 25 million shares of common stock, plus any unexercised portion of canceled or terminated stock options granted under the legacy DENTSPLY International Inc.

2010 and 2002 Equity Incentive Plans, as amended, and under the legacy Sirona Dental Systems, Inc.

2015 and 2006 Equity Incentive Plans, as amended.

Each restricted stock and RSU issued is counted as a reduction of 3.09 shares of common stock available to be issued under the Plan.

No key employee may be granted awards in excess of 1 million shares of common stock in any calendar year.

The number of shares available for grant under the 2016 Plan at December 31, 2021 is 20 million.

The amounts of stock compensation expense recorded in the Company's Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019 were as follows:

Year Ended December 31,

(in millions) 2021 2020 2019

Cost of products sold

Selling, general, and administrative expense 44 44 61

Research and development expense 2 1 2

Total stock based compensation expense $ 49 $ 46 $ 65

Related deferred income tax benefit $ 6 $ 5 $ 8

The Company uses the Black-Scholes option-pricing model to estimate the fair value of each option awarded.

The average assumptions used to determine compensation cost for the Company’s NQSOs issued were as follows:

Year Ended December 31,

2021 2020 2019

Weighted average fair value per share $ 15.90 $ 10.03 $ 12.20

Expected dividend yield 0.68 % 0.84 % 0.71 %

Risk-free interest rate 0.79 % 0.77 % 2.36 %

Expected volatility 31.5 % 24.0 % 22.6 %

Expected life (years) 5.08 5.49 6.00

The total intrinsic value of options exercised for the years ended December 31, 2021, 2020 and 2019 was $ 16 million, $ 3 million and $ 37 million, respectively.

The total fair value of shares vested for the years ended December 31, 2021, 2020 and 2019 was $ 76 million, $ 54 million and $ 44 million, respectively.

The NQSO transactions for the year ended December 31, 2021 were as follows:

Outstanding Exercisable

(in millions, except per share amounts) Shares Weighted

Shares Weighted

December 31, 2020 4.0 $ 50.01 $ 17 2.7 $ 50.28 $ 12

Granted 0.5 58.85

Exercised ( 1.1 ) 46.81

Forfeited ( 0.2 ) 53.03

December 31, 2021 3.2 $ 52.44 $ 15 2.2 $ 52.05 $ 11

There were 1.0 million NQSOs unvested at December 31, 2021.

The remaining unamortized compensation cost related to NQSOs is $ 9 million, which will be expensed over the weighted average remaining vesting period of the options, or 1.8 years.

The weighted average remaining contractual term of all outstanding options is 5.6 years and the weighted average remaining contractual term of exercisable options is 4.2 years.

Information about NQSOs outstanding for the year ended December 31, 2021 were as follows:

Outstanding Exercisable

December 31, 2021

Range of Exercise Prices

(in millions, except per share amounts and life)

30.01 - 40.00 0.1 1.4 $ 37.29 0.1 $ 37.29

40.01 - 50.00 1.4 5.9 47.31 0.8 46.73

50.01 - 60.00 1.4 6.0 56.32 0.9 55.05

60.01 - 70.00 0.3 4.3 62.37 0.4 62.24

The unvested RSU transactions for the year ended December 31, 2021 were as follows:

Unvested Restricted Stock Units

Shares Weighted Average

(in millions, except per share amounts)

Unvested at December 31, 2020

Granted 1.0 63.61

Vested ( 1.5 ) 45.08

Forfeited ( 0.6 ) 50.01

Unvested at December 31, 2021

The unamortized compensation cost related to RSUs is $ 42 million, which will be expensed over the remaining weighted average restricted period of the RSUs, or 2.0 years.

NOTE 4 - EARNINGS PER COMMON SHARE

The computation of basic and diluted earnings (loss) per common share for the years ended December 31 were as follows:

Basic (Loss) Earnings Per Common Share

Basic Earnings (Loss) Per Common Share

(in millions, except per share amounts) 2021 2020 2019

Net (loss) income attributable to Dentsply Sirona $ ( 83 ) $ 263 $ ( 1,011 )

Net income (loss) attributable to Dentsply Sirona $ 421 $ ( 83 ) $ 263

Weighted average common shares outstanding 218.4 219.2 223.1

(Loss) earnings per common share - basic $ ( 0.38 ) $ 1.18 $ ( 4.51 )

Diluted (Loss) Earnings Per Common Share

Earnings (loss) per common share - basic $ 1.93 $ ( 0.38 ) $ 1.18

Diluted Earnings (Loss) Per Common Share

(in millions, except per share amounts) 2021 2020 2019

Net (loss) income attributable to Dentsply Sirona $ ( 83 ) $ 263 $ ( 1,011 )

Net income (loss) attributable to Dentsply Sirona $ 421 $ ( 83 ) $ 263

Weighted average common shares outstanding 218.4 219.2 223.1

1 unchanged sentence

Total weighted average diluted shares outstanding 220.2 219.2 224.4

(Loss) earnings per common share - diluted $ ( 0.38 ) $ 1.17 $ ( 4.51 )

The calculation of weighted average diluted common shares outstanding excluded 0.9 million and 1.6 million of potentially diluted common shares because the Company reported a net loss for year ended December 31, 2020 and 2018, respectively.

Stock options and RSUs of 3.1 million, 3.1 million, and 3.5 million equivalent shares of common stock that were outstanding during the years ended December 31, 2020, 2019, and 2018, respectively were excluded from the computation of weighted average diluted shares outstanding because their effect would be antidilutive.

On March 9, 2020, the Company entered into an accelerated share repurchase agreement with a financial institution pursuant to an Accelerated Share Repurchase Transaction (“ASR Agreement") to purchase $ 140 million of the Company's common stock.

Pursuant to the terms of the ASR Agreement, the Company delivered $ 140 million cash to a financial institution and received an initial delivery of 2.7 million shares of the Company’s common stock on March 9, 2020 based on a closing market price of $ 42.12 per share and the applicable contractual discount.

The Company received an additional 1.0 million shares on May 12, 2020, upon termination of the ASR Agreement.

The average price per share for the total shares purchased under the ASR Agreement was $ 38.88 per share.

Earnings (loss) per common share - diluted $ 1.91 $ ( 0.38 ) $ 1.17

For the years ended December 31, 2021, 2020, and 2019, the Company excluded from the computation of weighted average diluted shares outstanding of 1.0 million, 3.1 million, and 3.1 million, respectively of equivalent shares of common stock 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 year ended December 31, 2020.

NOTE 5 - COMPREHENSIVE (LOSS) INCOME

AOCI includes foreign currency translation adjustments related to consolidation of the Company’s foreign subsidiaries, fair value adjustments related to the Company’s derivative financial instruments, and actuarial gains and losses related to the Company's pension plans.

AOCI includes cumulative foreign currency translation adjustments related to consolidation of the Company’s foreign subsidiaries, fair value adjustments related to the Company’s derivative financial instruments, and actuarial gains and losses related to the Company's pension plans.

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

For the years ended December 31, 2021, 2020 and 2019, these tax adjustments were $ 168 million, $ 216 million and $ 173 million, respectively, primarily related to foreign currency translation adjustments.

The cumulative foreign currency translation adjustments included translation losses of $ 25 million and $ 260 million at December 31, 2020 and 2019, respectively, and which included losses of $ 162 million and $ 108 million, at December 31, 2020 and 2019, respectively, on loans designated as hedges of net investments.

The cumulative foreign currency translation adjustments included translation losses of $ 250 million and $ 25 million at December 31, 2021 and 2020, respectively, and which included losses of $ 116 million and $ 162 million, at December 31, 2021 and 2020, respectively, on inter-company loans designated as hedges of net investments.

Changes in AOCI, net of tax, by component for the years ended December 31, 2021 and 2020 were as follows:

1 unchanged sentence

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

Other comprehensive income (loss) before reclassifications and tax impact 151 ( 17 ) ( 23 ) ( 26 ) 85

Tax benefit 30 1 5 7 43

Other comprehensive income (loss), net of tax, before reclassifications $ 181 $ ( 16 ) $ ( 18 ) $ ( 19 ) $ 128

Other comprehensive (loss) income before reclassifications and tax impact ( 156 ) 3 22 26 ( 105 )

Tax expense ( 23 ) ( 1 ) ( 6 ) ( 8 ) ( 38 )

Other comprehensive (loss) income, net of tax, before reclassifications $ ( 179 ) $ 2 $ 16 $ 18 $ ( 143 )

Amounts reclassified from accumulated other comprehensive income, net of tax — 7 — 8 15

Net increase (decrease) in other comprehensive income 181 ( 14 ) ( 18 ) ( 13 ) 136

Net (decrease) increase in other comprehensive income ( 179 ) 9 16 26 ( 128 )

Balance, net of tax, at December 31, 2021 $ ( 366 ) $ ( 16 ) $ ( 103 ) $ ( 107 ) $ ( 592 )

1 unchanged sentence

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

Other comprehensive (loss) income before reclassifications and tax impact ( 88 ) ( 17 ) 18 ( 54 ) ( 141 )

Tax benefit (expense) 4 4 ( 7 ) 14 15

Other comprehensive (loss) income, net of tax, before reclassifications $ ( 84 ) $ ( 13 ) $ 11 $ ( 40 ) $ ( 126 )

Other comprehensive income (loss) before reclassifications and tax impact 151 ( 17 ) ( 23 ) ( 26 ) 85

Tax benefit 30 1 5 7 43

Other comprehensive income (loss), net of tax, before reclassifications $ 181 $ ( 16 ) $ ( 18 ) $ ( 19 ) $ 128

Amounts reclassified from accumulated other comprehensive income, net of tax — 2 — 6 8

Net (decrease) increase in other comprehensive income ( 84 ) ( 12 ) 11 ( 36 ) ( 121 )

Net increase (decrease) in other comprehensive income 181 ( 14 ) ( 18 ) ( 13 ) 136

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

Reclassification out of AOCI to the Consolidated Statements of Operations for the years ended December 31, 2021, 2020, and 2019 were as follows:

Details about AOCI Components Amounts Reclassified from AOCI Affected Line Item in the

Amounts Reclassified from AOCI Affected Line Item in the

Consolidated Statements of Operations

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Loss on derivative financial instruments:

Interest rate swaps $ ( 4 ) $ ( 2 ) $ ( 2 ) Interest expense

Interest rate swaps $ ( 4 ) $ ( 4 ) $ ( 2 ) Interest expense, net

Foreign exchange forward contracts ( 3 ) 2 1 Cost of products sold

2 unchanged sentences

Net loss after tax $ ( 7 ) $ ( 2 ) $ ( 1 )

Realized gain on available-for-sale securities:

Available -for-sale-securities $ — $ — $ 45 Other expense (income), net

Tax impact — — ( 1 ) Provision for income taxes

Net gain after tax $ — $ — $ 44

Amortization of defined benefit pension and other postemployment benefit items:

8 unchanged sentences

2021 Transactions

On December 31, 2020, the effective date of the transaction, the Company acquired 100 % of the outstanding interests of Byte, a privately-held company, for approximately $ 1.0 billion using cash on hand.

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, $ 2 million of Current Liabilities and $ 1 million of Other long-term liabilities.

The cash paid 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 $ 7 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.

Measurement period adjustments made to the fair values of the assets acquired and liabilities assumed during the year ended December 31, 2021 were immaterial to the financial statements, resulting in an increase to goodwill of $ 2 million.

Management is continuing to finalize its valuation of certain assets and liabilities 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.

Propel Orthodontics manufactures and sells orthodontic devices and provides in-office and at-home orthodontic accessory devices to orthodontists and their patients primarily within the clear aligner market.

The acquisition is expected to further accelerate the growth and profitability of the Company's combined clear aligners business.

The preliminary fair values of the assets acquired and liabilities assumed in connection with the Propel Orthodontics acquisition were as follows:

(in millions)

Other current assets $ 4

Intangible assets 66

Current liabilities ( 1 )

Net assets acquired 69

Purchase consideration $ 132

The purchase price has been allocated on the basis of the preliminary estimates of fair values of assets acquired and liabilities assumed, resulting in the recording of $ 63 million in goodwill, which is considered to represent the value associated with the acquired workforce and synergies the two companies anticipate realizing as a combined company.

The goodwill is 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)

Developed technology $ 66 10

On January 21, 2021, the effective date of the transaction, the Company paid $ 94 million with the potential for additional earn-out provision payments of up to $ 10 million, to acquire 100 % of the outstanding shares of Datum Dental, Ltd., a privately-held producer and distributor of specialized regenerative dental material based in Israel.

The fair value of the earn-out provision has been valued at $ 9 million as of the transaction date, resulting in a total purchase price of $ 103 million.

The fair values of the assets acquired and liabilities assumed in connection with the Datum acquisition were as follows:

(in millions)

Cash and cash equivalents $ 2

Other current assets 2

Intangible assets 76

Current liabilities ( 2 )

Other long-term assets (liabilities), net ( 14 )

Net assets acquired 64

Purchase consideration $ 103

The purchase price has been allocated on the basis of the estimates of fair values of assets acquired and liabilities assumed, resulting in the recording of $ 39 million in goodwill, which is considered to represent the value associated with the acquired workforce and synergies the two companies anticipate realizing as a combined company.

The goodwill is not deductible for tax purposes.

Identifiable intangible assets acquired were as follows:

Weighted Average

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

Developed technology $ 66 15

In-process R&D 10 Indefinite

2020 Transactions

On December 31, 2020, the effective date of the transaction, the Company acquired 100 % of the outstanding interests of Straight Smile, LLC ("Byte"), a privately-held company, for approximately $ 1.0 billion using cash on hand.

Byte is a doctor-directed, direct-to-consumer, clear aligner business.

The acquisition is expected to enhance scale and accelerate the growth and profitability of the Company's combined clear aligners business.

The preliminary fair values of the assets acquired and liabilities assumed in connection with the Byte acquisition for the year ended December 31, 2020 were as follows:

The fair values of the assets acquired and liabilities assumed in connection with the Byte acquisition for the year ended December 31, 2020 were as follows:

(in millions)

3 unchanged sentences

Current liabilities ( 28 )

Long-term assets (liabilities), net 2

Net assets acquired 418

Purchase consideration $ 1,045

The purchase price has been allocated on the basis of the preliminary estimates of fair values of assets acquired and liabilities assumed, which resulted in the recording of $ 631 million in goodwill.

The amount of goodwill is considered to represent the value associated with 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.

Final consideration is subject to a post-closing adjustment for the change in working capital to the date of closing, which is expected to be completed by the end of the first quarter of 2021.

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.

The purchase price has been allocated on the basis of the estimates of fair values of assets acquired and liabilities assumed, which resulted in the recording of $ 627 million in goodwill.

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 this business upon the effective date of the transaction have been included in the accompanying financial statements.

These results, as well as the historical results for the Byte business for the both the years ended December 31, 2020 and 2019, are not material in relation to the Company’s net sales and earnings for those periods.

The Company therefore does not believe this acquisition represents a material transaction requiring the supplemental pro-forma information prescribed by ASC 805 and accordingly, this information is not presented.

2018 Transactions

On May 1, 2018, the Company acquired all of the outstanding shares of privately held OraMetrix, Inc.

for $ 120 million, with an additional payment totaling $ 30 million, subject to meeting certain earn-out provisions.

During the year ended December 31, 2019, the Company paid the earn-out provision.

OraMetrix specializes in orthodontic treatment planning software, wire bending, and clear aligner manufacturing and is headquartered in Richardson, Texas.

The Company recorded $ 58 million in goodwill related to the fair value of assets acquired and liabilities assumed and the consideration given for the acquisition.

The purchase price has been assigned on the basis of the fair values of assets acquired and liabilities assumed.

Goodwill is considered to represent the value associated with workforce and synergies the two companies anticipate realizing as a combined company.

The goodwill is not expected to be deductible for tax purposes.

Intangible assets acquired were as follows:

Weighted Average

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

Customer relationships $ 18 15

Developed technology and patents 65 15

Tradenames and trademarks 14 Indefinite

The results of operation for this business have been included in the accompanying financial statements as of the effective date of the transaction.

The purchase price has been assigned on the basis of the fair values of assets acquired and liabilities assumed.

This transaction was not material to the Company’s net sales and net loss attributable to Dentsply Sirona for the year ended December 31, 2018.

Acquisition-related costs incurred for the year ended December 31, 2020 were $ 16 million, consisting primarily of legal and professional fees in relation to the Byte acquisition, and are recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations.

Acquisition-related costs were immaterial for the years ended December 31, 2019 and 2018.

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 years ended December 31, 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.

Acquisition-related costs incurred for the year ended December 31, 2021 and 2020 were $ 8 million and $ 16 million, respectively, consisting primarily of legal and professional fees in relation to the Propel and Byte acquisitions, for their respective year of acquisition, and are recorded in SG&A expenses in the Consolidated Statements of Operations.

Investment in Affiliates

During the three months ended December 31, 2020, the Company paid $ 45 million for a minority ownership position in a privately-held dental services company.

The investment is recorded as an equity-method investment and recorded in Other non-current assets, net in the Consolidated Balance Sheets.

The Company's share of earnings from this investment, which are immaterial to the year ended December 31, 2020, are included in the Other income and expense line item within the Consolidated Statements of Operations.

During the year ended December 31, 2018, the Company sold its direct investment in DIO Corporation, which resulted in a gain of $ 44 million was recorded in Other expense (income), net in the Consolidated Statements of Operations.

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 investment is recorded as an equity method investment within Other noncurrent assets in the Consolidated Balance Sheets.

During the three months ended December 31, 2020, the Company paid $ 45 million for interest in a privately-held dental services company.

The investment is recorded as an equity-method investment and recorded in Other noncurrent assets in the Consolidated Balance Sheets.

On April 1, 2021, the Company disposed of certain orthodontics businesses based in Japan previously included as part of the Technologies & 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 year ended December 31, 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 year ended December 31, 2021.

NOTE 7 - SEGMENT AND GEOGRAPHIC INFORMATION

The Company’s two operating segments are organized primarily by product and generally have overlapping geographical presence, customer bases, distribution channels, and regulatory oversight.

These operating segments also comprise the Company’s reportable segments in accordance with how the Company’s chief operating decision-maker regularly reviews financial results and uses this information to evaluate the Company’s performance and allocate resources.

The Company has two operating segments that are organized primarily by product and generally have overlapping geographical presence, customer bases, distribution channels, and regulatory oversight.

These operating segments are also the Company’s reportable segments in accordance with how the Company’s chief operating decision-maker regularly reviews financial results and uses this information to evaluate the Company’s performance and allocate resources.

The Company evaluates performance of the segments based on the net sales and adjusted operating income.

2 unchanged sentences

Technologies & Equipment

This segment is responsible for the design, manufacture, and sales of the Company’s Dental Technology and Equipment Products and Healthcare Consumable Products.

These products include dental implants, CAD/CAM systems, orthodontic clear aligners products, imaging systems, treatment centers, instruments, as well as consumable medical device products.

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.

This segment is responsible for the design, manufacture, and sales of the Company’s dental technology and equipment products and healthcare products.

These products include dental implants, CAD/CAM systems, orthodontic clear aligners, imaging systems, treatment centers, instruments, as well as medical devices.

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

The Company’s segment information for the years ended December 31 was as follows:

21 unchanged sentences

Restructuring and other costs 17 77 81

Interest expense 48 30 37

Interest income ( 1 ) ( 2 ) ( 2 )

Interest expense, net 55 47 28

Other expense (income), net 8 1 ( 12 )

2 unchanged sentences

plant, and equipment from business combinations

(Loss) income before income taxes $ ( 60 ) $ 345 $ ( 958 )

(a) Certain charges related to discontinuance of product lines which were previously reported in adjusted operating income for the reportable segments, $ 38 million in 2019 and $ 36 million in 2018, have been reclassified to the “All other” category to conform to current year presentation and our internal reporting to our Chief Operating Decision Maker package ("CODM").

Income (loss) before income taxes $ 559 $ ( 60 ) $ 345

(a) $ 38 million of charges related to discontinuance of product lines, incurred in 2019, which were previously reported in adjusted operating income for the reportable segments, have been reclassified to the “All other” category to conform to current year presentation and our internal reporting to our Chief Operating Decision Maker package ("CODM").

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

15 unchanged sentences

Geographic Information

The following table sets forth information about the Company’s operations in different geographic areas for the years ended December 31, 2020, 2019, and 2018.

Net sales reported below represent revenues for shipments made by operating businesses located in the country or territory identified, including export sales.

Property, plant and equipment, net, represents those long-lived assets held by the operating businesses located in the respective geographic areas.

(in millions) United

Germany Sweden Other

Net sales $ 1,109 $ 439 $ 53 $ 1,741 $ 3,342

Property, plant, and equipment, net 145 337 110 199 791

Net sales $ 1,375 $ 478 $ 56 $ 2,120 $ 4,029

Property, plant, and equipment, net 168 327 99 208 802

Net sales $ 1,270 $ 494 $ 55 $ 2,167 $ 3,986

Property, plant, and equipment, net 211 340 99 221 871

Product and Customer Information

Net sales by product category were as follows:

The following tables set forth information about the Company’s significant operations by geographic areas, for the years ended December 31, 2021, 2020, and 2019.

Net Sales reported below represent revenues from external customers in those respective countries based on the destination of shipments.

Year Ended December 31,

(in millions) 2021 2020 2019

Dental technology and equipment products $ 1,674 $ 2,005 $ 1,897

Dental consumables products 1,337 1,688 1,740

Healthcare consumable products 331 336 349

United States $ 1,494 $ 1,109 $ 1,375

Germany 499 439 478

Other Foreign 2,258 1,794 2,176

Total net sales $ 4,251 $ 3,342 $ 4,029

Dental Technology and Equipment Products

Dental technology products consist of basic and high-tech dental equipment such as treatment centers, imaging equipment, dental handpieces and computer aided design and machining "CAD/CAM" systems equipment for dental practitioners.

The product category also includes high-tech and state-of-art dental implants and related scanning equipment and treatment software, orthodontic clear aligner products and appliances for dental practitioners and specialists.

The Company offers the broadest line of products to fully outfit a dental practitioner’s office.

Imaging systems consist of a broad range of diagnostic imaging systems for 2D or 3D, panoramic, and intra-oral applications.

Dental CAD/CAM Systems are products designed for dental offices used for dental restorations, which includes several types of restorations, such as inlays, onlays, veneers, crowns, bridges, copings and bridge frameworks made from ceramic, metal or composite blocks.

This product line also includes high-tech CAD/CAM techniques of chairside economical restoration of aesthetic ceramic dentistry, or CEREC equipment.

This equipment allows for in-office application that enables dentists to produce high quality restorations from ceramic material and insert them into the patient’s mouth during a single appointment.

CEREC has a number of advantages compared to the traditional out-of-mouth pre-shaped restoration method, as CEREC does not require a physical model, restorations can be created in the dentist’s office and the procedure can be completed in a single visit.

Dental Consumable Products

Dental consumable products consist of value-added dental supplies and small equipment used in dental offices for the treatment of patients.

It also includes specialized treatment products used within the dental office and laboratory settings including products used in the preparation of dental appliances by dental laboratories.

Dentsply Sirona’s dental supplies include endodontic (root canal) instruments and materials, dental anesthetics, prophylaxis paste, dental sealants, impression materials, restorative materials, tooth whiteners and topical fluoride.

Small equipment products include intraoral curing light systems, dental diagnostic systems and ultrasonic scalers and polishers.

The Company’s products used in dental laboratories include dental prosthetics, including artificial teeth, precious metal dental alloys, dental ceramics and crown and bridge materials.

Dental laboratory equipment products include laboratory-based CAD/CAM milling systems, amalgamators, mixing machines and porcelain furnaces.

Healthcare Consumable Products

Healthcare consumable products consist mainly of urology catheters, medical drills and other non-medical products.

Property, plant and equipment, net, represents those long-lived assets held by the operating businesses located in the respective geographic areas.

Year Ended December 31,

(in millions) 2021 2020 2019

Property, plant, and equipment, net

United States $ 166 $ 145 $ 168

Germany 309 337 327

Sweden 107 110 99

Other Foreign 191 199 208

Total property, plant, and equipment, net $ 773 $ 791 $ 802

Product and Customer Information

For information on the Company's net sales by product category, including a description of the revenue streams comprising each of the reportable segments, see Note 2, Revenue.

Concentration Risk

For the year ended December 31, 2020, two customers each accounted for approximately 14 % and 10 % of consolidated net sales.

At December 31, 2020, one customer accounted for approximately 18 % of the consolidated accounts receivable balance.

For the year ended December 31, 2019, one customer accounted for approximately 13 % of consolidated net sales.

At December 31, 2019, two customers accounted for approximately 12 % and 17 % of the consolidated accounts receivable balance.

For the year ended December 31, 2018, one customer accounted for approximately 10 % of consolidated net sales.

At December 31, 2018, two customers accounted for approximately 10 % and 13 % of the consolidated accounts receivable balance.

For the year ended December 31, 2021, no customer accounted for 10% or more of consolidated net sales or consolidated accounts receivable balance.

Customers that accounted for 10% or more of net sales and accounts receivable for the years ended December 31, 2020 and 2019 were as follows:

Year Ended December 31,

% of net sales % of accounts receivable % of net sales % of accounts receivable

Henry Schein, Inc.

14 % N/A 13 % 12 %

Patterson Companies, Inc.

10 % 18 % N/A 17 %

For the years ended December 31, 2021, 2020, and 2019, third party export sales from the U.S.

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NOTE 9 - INVENTORIES, NET

Inventories, net of inventory valuation reserves, were as follows:

Inventories, net were as follows:

Year Ended December 31,

(in millions) 2021 2020

Finished goods $ 264 $ 356

Work-in-process 68 83

Raw materials and supplies $ 139 $ 134

Work-in-process 72 68

Finished Goods 293 264

Inventories, net $ 504 $ 466

The Company’s inventory valuation reserve was $ 117 million and $ 85 million at December 31, 2020 and 2019, respectively.

The increase in the inventory reserve is primarily due to the full year 2020 restructuring plans, see Note 17, Restructuring and Other Costs.

The Company’s inventory reserve was $ 86 million and $ 117 million at December 31, 2021 and 2020, respectively.

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

NOTE 10 - PROPERTY, PLANT AND EQUIPMENT, NET

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(in millions) 2021 2020

Assets, at cost:

Land $ 51 $ 54

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Machinery and equipment 982 1,075

Capitalized Software 353 339

Construction in progress 134 120

$ 2,081 $ 2,183

Accumulated depreciation 1,392 1,233

Accumulated depreciation and amortization 1,308 1,392

Property, plant and equipment, net $ 773 $ 791

NOTE 11 - LEASES