What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 189 added, 159 removed, 300 unchanged (54% of the section changed)

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For the year ended December 31, 2022,

• Net sales increased 27.2% compared to the prior year.

On an organic basis (a Non-GAAP measure as defined under the heading "Key Performance Measurements" below) net sales increased 24.6% for the year ended December 31, 2021 compared to prior year.

Net sales were positively impacted by approximately 2.9% due to the weakening of the U.S.

• Net sales decreased 7.3% compared to the prior year.

On an organic basis (a Non-GAAP measure as defined under the heading "Key Performance Measurements" below) net sales decreased 0.5% for the year ended December 31, 2022 compared to prior year.

Net sales were negatively impacted by approximately 6.8% due to the strengthening of the U.S.

dollar over the prior year period.

• Net income increased to $421 million as compared to the net loss of $83 million for the prior year.

Diluted earnings per share was $1.91 per share compared to a net loss per share of $0.38 in the prior year.

• Net loss was $950 million as compared to net income of $411 million for the prior year primarily due to an goodwill impairment charge of $1,187 million.

Diluted loss per share was $4.41 per share compared to net income per share of $1.87 in the prior year.

• Cash from operations was $517 million, as compared to $657 million in the prior year.

Material Weaknesses in Internal Control Over Financial Reporting Identified During the Recent Investigation

As previously disclosed, management determined there were material weaknesses in the Company’s internal control over financial reporting as of December 31, 2021, which have not been remediated as of December 31, 2022.

For more information about the identified material weaknesses in internal control over financial reporting and the Company’s remedial actions, please see Part II, Item 8 Management’s Report on Internal Control Over Financial Reporting and Part II, Item 9A Controls and Procedures of this Form 10-K.

Company Profile

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The Company also manufactures and markets healthcare consumable products.

As The Dental Solutions Company, Dentsply Sirona’s products provide innovative, high-quality and effective solutions to advance patient care and deliver better, safer and faster dentistry.

Dentsply Sirona’s products provide innovative, high-quality and effective solutions to advance patient care and deliver better, safer and faster dentistry.

Dentsply Sirona’s worldwide headquarters is located in Charlotte, North Carolina.

The Company’s shares of common stock are listed in the United States on Nasdaq under the symbol XRAY.

The Company’s shares of common stock are listed in the U.S.

on Nasdaq under the symbol XRAY.

The Company operates in two operating segments, Technologies & Equipment and Consumables.

The Technologies & Equipment segment is responsible for the design, manufacture, sales and distribution of products including dental implants, CAD/CAM systems, orthodontic clear aligner products, imaging systems, treatment centers, instruments, as well as certain healthcare device products, primarily catheters.

The Technologies & Equipment segment is responsible for the design, manufacture, sales and distribution of products including dental implants, CAD/CAM systems, orthodontic aligner products, imaging systems, treatment centers, instruments, as well as certain healthcare device products, primarily catheters.

The Consumables segment is responsible for the design, manufacture, sales and distribution of dental consumable products which include categories of preventive, restorative, endodontic, and dental laboratory application.

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The Company’s 2020 results were materially impacted by this disruption 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, transportation and shipping services, and labor.

The impacts of COVID-19 on the Company’s operations during 2021 were as follows:

• The Company has seen customer demand and dental patient traffic normalize in major markets.

Despite the resurgence of cases late in 2021 due to variants of the COVID-19 virus, public and private dental practices largely remain open, although many continue to operate at less than pre-pandemic capacities.

Certain of the Company's markets including regions of Southeast Asia have experienced setbacks in demand in the second half of the year as a result of renewed COVID-19 infections from recent variants of the virus.

While most government authorities have lifted many of their restrictions, the end dates for all restrictions being lifted are still unknown, and it is uncertain when customer demand will fully return to pre-COVID-19 levels upon lifting these restrictions, or whether future variants of the virus may have an adverse impact on demand in affected markets.

• During 2021, 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.

The Company continues to monitor the impact of global supply chain issues, including shipping disruption and inflation of material inputs, as well as labor shortages.

• The Company's COVID-19 infection crisis management process implemented in 2020 remains in effect during 2021.

During the pandemic, the Company has utilized this process to manage several incidents of exposure at facilities.

All potential and actual cases have been reviewed to ensure that the Company managed exposed employees appropriately, consistently and safely.

None of these incidents have resulted in a material loss of production or adverse impact to the Company’s operating results.

The Company has continued to prioritize employee safety, and preventing the possible spread of COVID-19 by encouraging ongoing work-from-home where possible and maintaining travel restrictions.

As an ongoing consequence of the public's response to the global pandemic, including the restrictive measures imposed to contain its spread, it is noted that dental practices have adapted to potentially long-term conventions of social distancing and remote working.

It is expected that the new conditions will continue to increase demand in dental care markets for the efficiencies and benefits that come from digital solutions.

In response to this trend which began before the pandemic, the Company has continued to make investments to promote the transformation of dentistry with advancements in digital workflows, software upgrades, 3D printing and other offerings such as clinical education that are allowing the Company to quickly respond to increased demand for digital dentistry.

As uncertainty surrounding the pandemic continues, as part of the strategic response to its longer-term implications including the increase in demand for digital solutions, the Company intends to continue targeting investments in this area including the related R&D and sales and marketing investments that will bring these innovations to customers.

The impact of recent developments in Ukraine

In February 2022, as a result of the invasion of Ukraine by Russia, economic sanctions were imposed by the U.S., the European Union, and certain other countries on Russian financial institutions and businesses.

While it is difficult to estimate the impact of current or future sanctions on the Company’s business and financial position, these sanctions could adversely impact the Company’s sales, cost of procuring raw materials, or distribution costs in future periods.

Refer to Part I, Item 1A, "Risk Factors" - Risks Related to Our International Operations .

As of December 31, 2021, the net assets of the Company’s subsidiaries in Russia and Ukraine were $63 million, and for the year ended December 31, 2021, the Company’s net sales in Russia and Ukraine were approximately 3% of its consolidated net sales.

During 2021, demand for the Company’s products largely recovered, although the Company continued to be impacted by shortages and higher prices for certain raw materials, as well as increasing distribution and labor costs.

The Company's financial results and operations continue to be affected by the COVID-19 pandemic and the pressure it has placed on inflation, supply chains, distribution networks and consumer behavior.

Key impacts for the year ended December 31, 2022 are as follows:

• As further described in the "Results of Operations" discussion below, the Company continues to experience supply chain challenges resulting from the pandemic including increased lead times, limited availability of certain components, raw material price increases, and higher procurement and shipping costs.

As a result of supply chain constraints, the Company has worked during the course of the year to reduce an elevated backlog primarily in connection with orders on hand for imaging equipment which it is unable to fill due to continued shortages of electronic components.

The Company is continuing to take steps to mitigate the impact of these trends, including seeking alternative supplier sources for key raw materials.

• Sales continue to be impacted in certain geographic areas by public response to the COVID-19 pandemic.

Towards the end of the first quarter of 2022, authorities in China started to periodically re-impose severe restrictions on individual and business activities in response to the resurgence of COVID-19 infections from variants of the virus, resulting in a loss of sales due to distribution constraints and lower demand from reduced patient traffic locally.

Primarily as a result of these factors, sales in China declined by $93 million during 2022 relative to 2021.

Adverse trends in certain regions could persist if these restrictions are renewed as a result of additional outbreaks.

While most government authorities have not re-imposed restrictions with significant impacts, it continues to be unclear when the remaining constraints will be lifted, and to what degree future variants of the virus or renewed restrictions in other markets may impact short-term demand for the Company's products more broadly.

The impact of developments in Ukraine

In February 2022, as a result of the invasion of Ukraine by Russia, economic sanctions were imposed by the U.S., the EU, and certain other countries on Russian financial institutions and businesses.

Due to the medical nature of our products, the current sanctions have not materially restricted the Company's ability to continue selling many of our products to customers located in Russia.

The Company also sources certain raw materials and components from Russia and Ukraine, and to minimize the adverse impacts from disrupted supply chains related to these items, the Company has purchased sufficient quantities for the near term, and are in process of identifying alternate sources for the longer term.

The Company’s operations in Ukraine consist primarily of R&D activities, which continue uninterrupted from other locations in order to focus on the safety of employees.

Overall, the Company's operations in Russia and Ukraine have not been materially impacted by the conflict, and consequently, the Company has not recorded any allowance for doubtful accounts, inventory reserves, or asset impairments during the year ended December 31, 2022 as a result of these developments.

For the year ended December 31, 2022, net sales in Russia and Ukraine were approximately 3% of our consolidated net sales, and net assets in these countries were $83 million.

T hese net assets include $71 million of cash and cash equivalents held within Russia as of December 31, 2022.

Due to currency control measures imposed by the Russian government which include restrictions on the ability of companies to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia, we may be limited in our ability to transfer this cash balance out of Russia without incurring substantial costs, if at all.

While neither Russia nor Ukraine constitutes a material portion of our business, a significant escalation or expansion of economic disruption or the conflict's current scope could result in a loss of sales, disrupt our supply chain, broaden inflationary costs, and have a material adverse effect on our results of operations.

For additional discussion of associated risks, refer to Part I, Item 1A, "Risk Factors" - Risks Related to Our International Operations .

The impact of global economic conditions

In addition to the residual impacts of the COVID-19 pandemic and the war in Ukraine, markets in several regions particularly in Europe have experienced varying degrees of recessionary pressures and face continued concerns about the systemic impacts of adverse economic conditions and geopolitical issues.

In addition, changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, and the conflict in Ukraine have all contributed to a period of higher inflation across the industry and the regions in which the Company operates.

As a result, the Company has experienced higher prices for certain of our raw materials, particularly for electronic components which have in some cases required incremental procurement costs such as brokers' fees during the year, and a consequently negative impact to margins.

The Company has also experienced delays in converting our backlog due to continued supply chain disruptions, which has negatively impacted both revenues and margins.

Although the Company has experienced recent improvement in its supply chain, we expect a continuation of these trends including disruptions and inflationary pressure on the cost of both raw material and wages, the effect of which will depend on the Company’s ability to successfully mitigate and offset the related impacts.

The deterioration in macroeconomic conditions has also negatively affected demand for the Company's products and may continue to do so into the future.

Specifically, the increase in interest rates during the year has put pressure on the ability of our customers to obtain financing for equipment purchases which affects volumes for these products.

Additionally, the recessionary environment in general particularly for certain regions such as southern Europe has depressed demand for elective procedures including sales of implants and aligner solutions.

In anticipation of a continued inflationary trend and potentially deteriorating macroeconomic environment, the Company has attempted to mitigate these pressures through the following actions:

• Driving strategic procurement initiatives to leverage alternative sources of raw materials and transportation;

• Implementing cost-containment measures, as well as intensifying continuous improvement and restructuring programs in our manufacturing and distribution facilities;

• Optimizing our customer management and implementing strategic investments in our commercial sales organization in key markets, particularly the U.S.

As explained further in the Results of Operations section below, the Company has partly offset these elevated costs in certain areas of the business with price increases during the year.

Should the higher inflationary environment continue, the Company may be likely to continue to be unable to raise the prices of our products and services sufficiently to keep up with the rate of inflation which could have a material adverse effect on our results of operations and financial condition.

Key Performance Measurements

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The performance of the Company is measured on this metric along with other performance metrics.

The Company discloses organic sales to allow investors to evaluate the performance of the Company’s operations exclusive of certain items that impact the comparability of results from period to period and may not be indicative of past or future performance of the normal operations of the Company.

The Company believes that this information is helpful in understanding underlying net sales trends.

The Company discloses organic sales to allow investors to evaluate the performance of the Company’s operations exclusive of the items listed above that impact the comparability of results from period to period and may not be indicative of past or future performance of the normal operations of the Company.

The Company believes that this supplemental information is helpful in understanding underlying net sales trends.

Business Drivers

The primary drivers of organic sales include macroeconomic factors, global dental market demand, innovation and new product launches by the Company, as well as continued investments in sales and marketing resources to drive demand creation, including clinical education.

Management believes that the Company’s ability to execute its strategies should allow it to grow faster than the underlying dental market over time.

On a short-term basis, sudden changes in the macroeconomic environment such as those caused by the impacts of COVID-19, supply chain challenges, changes in strategy, or distributor inventory levels can and have impacted the Company's sales.

The Company has a focus on maximizing operational efficiencies on a global basis.

The primary drivers of organic sales include macroeconomic factors, global dental industry demand, innovation and new product launches by the Company, as well as continued investments in sales and marketing resources to drive demand creation, including clinical education.

Management believes that the Company’s ability to execute its strategies should allow it to grow faster than the underlying dental industry over time.

On a short-term basis, sudden changes in the macroeconomic environment, supply chain challenges, or changes in distributor inventory levels can and have impacted the Company's sales.

Demand can also fluctuate based on the timing of dental tradeshows where promotions are offered, major new product introductions, and variability in dental patient traffic, which can be exacerbated by seasonal or severe weather patterns, or other demographic disruptions such as the recent COVID-19 pandemic.

The Company has a focus on maximizing operational excellence on a global basis.

The Company has expanded the use of technology as well as process improvement initiatives to enhance global efficiency.

In addition, management continues to evaluate the worldwide consolidation of operations and functions to further reduce costs.

While the Company continues consolidation initiatives which can have an adverse impact on reported results in the short term, the Company expects that the continued benefits from these global efficiency efforts will improve its cost structure.

Subject to the pace of the post-pandemic recovery, the Company intends to continue pursuing opportunities to expand the Company’s product offerings, technologies, and sales and service infrastructure through partnerships and acquisitions.

In addition, management continues to evaluate the worldwide consolidation and simplification of operations and functions to further reduce costs.

Meanwhile, the Company intends to continue pursuing opportunities to expand the Company’s product offerings, technologies, and sales and service infrastructure through partnerships.

Although the professional dental market has experienced consolidation, it remains fragmented.

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The Company’s business is subject to quarterly fluctuations in net sales and operating income.

Price increases, promotional activities, as well as changes in inventory levels at distributors contribute to this fluctuation.

The Company typically implements most of its price increases in January or October of a given year across most of its businesses.

Distributor inventory levels tend to increase in the period leading up to a price increase and decline in the period following the implementation of a price increase.

Required minimum purchase commitments under agreements with key distributors may increase inventory levels in excess of retail demand.

Annual price increases, promotional activities, as well as changes in inventory levels at distributors contribute to this fluctuation.

Distributor inventory levels tend to increase in the period leading up to a price increase and decline in the period following the implementation of a price increase, although these fluctuations are mitigated by limits on purchases ahead of these increases.

Changes in dealer inventory levels have impacted the Company’s consolidated net sales in the past, and may continue to do so in the future.

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There can be no assurance that the Company’s dealers and customers will maintain levels of inventory or patterns of build and liquidation timing in accordance with the Company’s predictions or past history.

As of December 31, 2021, certain dealers’ inventory of the Company’s CAD/CAM products was higher than at the end of the prior year, by approximately $50 million.

These higher levels of dealer inventory are due to lower-than-expected retail sales in the fourth quarter and may pose headwinds to the Company’s net sales for these products in 2022.

The Company anticipates that inventory levels may continue to fluctuate as dealers and customers manage the effects of COVID-19 and supply chain constraints on their businesses.

As of January 1, 2022, certain dealers’ inventory of the Company’s CAD/CAM products in the U.S.

were higher than at the beginning of fiscal year 2021 by approximately $50 million due to lower-than-expected retail sales as well as timing-related purchases by dealers in the fourth quarter of 2021, partly driven by incentives offered during the latter half of 2021.

During 2022, the levels of inventory at our distributors were reduced by approximately $60 million, returning to a level more aligned with our historical expectations.

The Company anticipates that inventory levels may continue to fluctuate as dealers and customers manage the effects of supply chain constraints on their businesses.

Any of these fluctuations could be material to the Company’s consolidated financial statements.

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Restructuring Programs

In 2018, the Board of Directors approved a plan to restructure and simplify the Company’s business, which was expanded in 2020 for certain portfolio optimization objectives including the exit of the Company’s traditional orthodontics business as well as portions of its laboratory business.

A primary goal of the restructuring has been to drive annualized net sales growth of 4% to 5% and adjusted operating income margins of 22% by the fourth quarter of 2022.

The operating expense reductions have come as a result of additional leverage from continued integration and simplification of the business.

The expanded program is expected to result in total charges of approximately $345 million and annual cost savings of approximately $250 million.

Since 2018, the Company has incurred expenditures of approximately $321 million under these programs, of which approximately $123 million were non-cash charges.

The Company expects most of the remaining charges will be recorded during the first quarter of 2022.

The Company has not seen and does not expect a significant impact to net sales as a result of these actions.

The businesses being exited as part of the portfolio optimization have been experiencing declining sales and were dilutive to the Company’s operating income margin.

The Company’s traditional orthodontics business, which includes brackets, bands, tubes and wires, had net sales of $92 million in 2020 and $132 million in 2019.

The portion of the laboratory business the Company is exiting manufactures removable dentures and related products and had net sales of $30 million in 2020 and $44 million in 2019.

The net income of these businesses is not material to the Company’s consolidated results.

On February 14, 2023, the Board of Directors of the Company approved a plan to restructure the Company’s business to improve operational performance and drive shareholder value creation.

This plan consists of the following planned measures:

(a) implement a new operating model with five global business units designed to drive enterprise integration and align the product portfolio with our growth strategy;

(b) commencement of central functions and infrastructure optimization to support efficiency of the overall organization;

(c) creation of a Senior Vice President of the Quality and Regulatory role, designed to elevate the quality and regulatory affairs function within the management team;

(d) simplify the management structure to bring the Company in-line with industry best practices;

and (e) deliver cost savings to fund critical investments in 2023 and beyond to position the Company for sustainable future growth.

The restructuring plan anticipates a reduction in the Company’s global workforce of approximately 8% to 10%, subject to co-determination processes with employee representative groups in countries where required.

The Company expects to incur up to $165 million in one-time charges, comprising $130 million in restructuring expenditures and charges, the majority of which will be expensed as cash expenditures in 2023, primarily related to employee transition, severance payments and employee benefits;

and $35 million in other non-recurring costs related to the restructuring activity which mostly consist of legal, consulting and other professional service fees.

The Company anticipates that the restructuring plan will be substantially completed within the next eighteen months and result in $200 to $225 million in net annual cost savings.

Impact of Foreign Currencies

Due to the Company’s global footprint, movements in foreign currency exchange rates may have a material impact on its reported net sales and pre-tax income.

With approximately two-thirds of the Company’s net sales originating from regions outside the United States, the Company’s net sales and results from operation are negatively impacted by the strengthening, or positively impacted by the weakening of the U.S.

With approximately two-thirds of the Company’s net sales originating from regions outside the U.S, the Company’s net sales and results of operations are negatively impacted by the strengthening, or positively impacted by the weakening, of the U.S.

dollar compared to the primary currencies in which the Company operates.

While the Company employs financial instruments to hedge some of its transactional foreign exchange exposure, these activities do not insulate it completely from those exposures, particularly from the currency exposure arising from translation of non-U.S.

dollar functional currency subsidiaries.

During fiscal year 2022, both net sales and gross profit were adversely impacted due to the significant strengthening of the U.S.

dollar against foreign currencies.

The continued strength of the U.S.

dollar could continue to adversely impact the Company's results.

RESULTS OF OPERATIONS

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Net sales $ 3,922 $ 4,231 $ (309) (7.3 %)

Favorable foreign exchange impact 2.9 %

Foreign exchange impact (6.8 %)

Acquisitions 0.1 %

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Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was attributable to both the Technologies & Equipment and Consumables segments and was primarily due to a recovery in demand from the prior year impact of the COVID-19 pandemic on volumes.

In addition to the overall increases due to more normalized demand across the product lines, the Company achieved additional topline growth as a result of successful product launches during 2021 and geographic expansion in the Implants, Orthodontics, and Endodontic & Restorative Consumables businesses.

The decrease in organic sales was primarily due to overall weaker performance in the U.S., as explained below, including sales of CAD/CAM and Endodontic & Restorative consumables products, and the ongoing impact of global supply chain constraints and reduction in volumes due to product availability, particularly for certain Equipment & Instruments products which rely on electronic components.

Sales were also negatively impacted by reduced demand from patient traffic in certain markets as a result of COVID-19 v ariants and related restrictions, particularly in China.

These negative drivers were mostly offset by strong regional performance in the Europe and demand for Orthodontic products, as well as a benefit from price increases.

Net Sales by Segment

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Net sales $ 2,318 2,504 $ (186) (7.4 %)

Favorable foreign exchange impact 2.9 %

Foreign exchange impact (7.9 %)

Acquisitions 0.1 %

Divestitures and discontinued products (6.4 %)

Organic sales 0.4 %

Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales occurred across all product categories and was primarily due to the easing of the adverse impact of the COVID-19 pandemic, as well as new product launches and geographic expansion of existing products.

These increases in organic sales were partly offset by supply chain issues that delayed shipments of certain products to customers until the following year.

The increase in organic sales was primarily due to higher demand for Orthodontics and Equipment & Instruments, as well as a benefit from price increases.

These positive drivers were offset by the impact of ongoing global supply chain constraints and lower volumes due to product availability, particularly for certain Equipment & Instruments products which rely on electronic components , as well as the impact of COVID-19 reducing demand in certain markets, particularly China.

Sales of CAD/CAM products in the U.S.

were also negatively impacted by high dealer inventory levels at the start of fiscal year 2022, as explained below.

A reconciliation of net sales to organic sales for the year ended December 31, 2022 was as follows:

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Net sales $ 1,604 $ 1,727 $ (123) (7.1 %)

Favorable foreign exchange impact 2.8 %

Acquisitions — %

Foreign exchange impact (5.2 %)

Divestitures and discontinued products (0.2 %)

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Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales occurred across all regions and was the result of overall higher volumes during the year ended December 31, 2021, primarily due to demand recovery from the impact of the COVID-19 pandemic.

The segment also benefited from successful launches of new Endodontic and Restorative products, and favorable price increases.

The decrease in organic sales was due to lower Endodontic & Restorative volumes, particularly in the U.S.

and China, with sales volumes in the latter having been affected by COVID-19 variants and the impact of government regulations stemming from the pandemic.

Sales during the comparative twelve months of 2021 benefited from our customers restocking their inventory of consumables products as part of the overall recovery from the pandemic.

The decline in sales volume was partly offset by strong performance for preventive consumables products an d a benefit from price increases across the segment.

Net Sales by Region

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Net sales $ 1,392 $ 1,480 $ (88) (5.9 %)

Favorable foreign exchange impact 0.3 %

Foreign exchange impact (1.4 %)

Acquisitions 0.2 %

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Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was attributable to both the Technologies & Equipment and the Consumables segments and was primarily due to overall higher volumes during the year ended December 31, 2021, following periods of lower demand resulting from the COVID-19 pandemic.

In addition to the overall increases due to more normalized demand across the product lines, the Company achieved additional topline growth domestically as a result of successful product launches in the Implants, Orthodontics, and Endodontic & Restorative Consumables businesses, partly offset by delays in shipments of some products late in the year due to supply chain constraints.

The decrease in organic sales was attributable to both the Technologies & Equipment and the Consumables segments and was primarily due to weaker retail performance in several product groups overall and lower wholesale volumes for CAD/CAM products, due in part to higher dealer inventory at the beginning of fiscal year 2022 which was subsequently reduced throughout the year.

The level of inventory for CAD/CAM units held by dealers was reduced by approximately $60 million during 2022, compared to a build in inventory levels of approximately $50 million in 2021 partly as a result of incremental incentives offered during the latter half of that period which did not recur in 2022.

Sales volumes were also negatively impacted by ongoing global supply chain constraints affecting the ability to fulfill certain Equipment & Instruments orders, particularly for imaging products.

These negative drivers were partly offset by growth in demand for Orthodontics products.

A reconciliation of net sales to organic sales for the year ended December 31, 2022 was as follows:

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Net sales $ 1,559 $ 1,675 $ (116) (6.9 %)

Favorable foreign exchange impact 4.7 %

Acquisitions — %

Foreign exchange impact (9.8 %)

Divestitures and discontinued products (0.1 %)

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Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was attributable to both the Technologies & Equipment and Consumables segments and was primarily due to overall higher volumes during the year ended December 31, 2021, following periods of lower demand resulting from the COVID-19 pandemic.

In addition to the overall increases due to more normalized demand across the product lines, the Company achieved additional topline growth in Europe as a result of increased sales volumes of CAD/CAM units, as well as successful product launches and geographic expansion in the Implants, Orthodontics, and Restorative Consumables businesses, partly offset by delays in shipments of some Equipment & Instruments products late in the year due to supply chain constraints.

The increase in organic sales was primarily due to overall higher demand for Endodontic & Restorative products.

Sales for Equipment & Instruments, CAD/CAM, and Orthodontics products were higher as a result of favorable market trends and demand in the first three quarters of the year, as well as a benefit from price increases.

Organic sales growth in Europe declined during the fourth quarter, partly as a result of lower demand for Implants products.

O rganic sales for fiscal year 2022 was partly suppressed by ongoing global supply chain constraints, particularly for certain Equipment & Instruments products which rely on electronic components.

Rest of World

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Net sales $ 971 $ 1,076 $ (105) (9.8 %)

Favorable foreign exchange impact 3.2 %

Acquisitions 1.0 %

Foreign exchange impact (9.6 %)

Divestitures and discontinued products (0.1 %)

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Percentages are based on actual values and may not recalculate due to rounding.

In addition to the overall increases due to more normalized demand across the product lines, the Company achieved additional topline growth in the Rest of World markets as a result of increased sales volumes of Implants, CAD/CAM units and the Company's Orthodontics products.

Organic sales showed a slight decline driven primarily by lower demand in China resulting from the adverse impact of COVID-19 and government restrictions affecting patient traffic.

Beginning in the third quarter of 2022, we began to see softer demand for Implants products in China ahead of the local volume based procurement program taking effect in the first half of 2023.

For additional details see Part I, Item I, "Business." These negative drivers were mostly offset due to overall growth in sales for CAD/CAM products.

Absent the significant decline in sales for China, we also saw strong retail demand across the region for restorative and preventive consumables products.

Year Ended December 31,

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Percentages are based on actual values and may not recalculate due to rounding.

The increase in the gross profit rate as a percentage of net sales was primarily driven by the increase in net sales for higher margin products, including those related to new product launches.

Mix relative to prior year has benefited from portfolio optimization including the discontinuation of certain lower margin products associated with the traditional orthodontic and laboratory businesses, and the strategic investments in higher margin products such as specialized implants solutions and clear aligners.

These favorable increases to gross profit as a percentage of sales were offset by pricing incentives for certain products and increased supply chain related expenses including distribution costs in the current year.

The decrease in the gross profit rate as a percentage of net sales was primarily driven by foreign currency headwinds, increased inflationary pressures on material and distribution costs in the current year, and unfavorable mix driven by lower demand for higher margin products.

This was partially offset by price increases, a reduction in customer sales incentives for certain products, and lower warranty provisions relative to the prior year.

Inflationary pressure on direct material remained strong throughout the second half of 2022, resulting in an increased inventory balance which is expected to negatively impact cost of goods sold in 2023 as the inventory is sold.

Operating Expenses

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Goodwill impairment 1,187 — 1,187 NM

Restructuring and other costs 17 77 (60) NM

Intangible asset impairment and other costs 114 17 97 NM

SG&A as a percentage of net sales 40.5 % 36.6 % 390 bps

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SG&A Expenses

SG&A expenses increased primarily due to strategic investments in sales and marketing resources in key growth areas, as well as a decrease in COVID-19 related relief from foreign governments.

The decrease in SG&A expenses as a percentage of net sales was primarily driven by greater absorption of expenses due to higher sales, as well as expense discipline.

The increase in R&D expenses was primarily due to an increase in spend within the T&E segment driven by increased investments in digital workflow solutions, product development initiatives, software development including clinical application suite and cloud deployment.

Additionally, the Company made investments in a new Consumables innovation center in Charlotte, North Carolina.

The Company expects to continue to maintain an expanded level of investment in research and development that is at least 4% of annual net sales.

SG&A expen ses increased pri marily due t o costs related to the recently concluded internal investigation conducted by the Audit and Finance Committee and related remediation activities, including various legal, accounting and other professional services fees, as well as turnover and other employee-related costs.

We also incurred higher headcount and travel expenses during the current year following the recovery from the COVID-19 pandemic.

These increases were partly o ffset by lower expense for sales commissions and a benefit from foreign currency translation.

R&D expenses showed a slight increase due to increased investments in digital workflow solutions, product development initiatives, software development including clinical application suite and cloud deployment.

R&D expense as a percentage of net sales increased primarily due to lower sales in 2022 as compared to the prior year.

We expect to continue to maintain a level of investment in R&D that is at least 4% of annual net sales.

Goodwill Impairment

For the year ended December 31, 2022, the Company recorded a goodwill impairment charge of $1,187 million related to two reporting units within the Technologies & Equipment segment.

There were no impairments recorded in the year ended December 31, 2021.

During the year ended December 31, 2020, as a result of the impact of the COVID-19 pandemic, the Company determined that the goodwill associated with the Equipment & Instruments reporting unit within the Technologies & Equipment segment was impaired.

As a result, the Company recorded a goodwill impairment charge of $157 million.

As the fair value of these reporting units continues to approximate carrying value as of December 31, 2022, any further decline in key assumptions could result in additional impairments in future periods.

For further details see Item 8, Note 12, Goodwill and Intangible Assets, in the Notes to the Audited Consolidated Financial Statements of this Form 10-K.

Restructuring and Other Costs

During the year ended December 31, 2021, the Company recorded net expense of $17 million of restructuring costs in connection with the various restructuring initiatives.

For further details see Item 8, Note 19, Restructuring and Other Costs, in the Notes to the Audited Consolidated Financial Statements of this Form 10-K.

During the year ended December 31, 2020, the Company recorded $26 million of restructuring costs primarily related to the expansion of the restructuring plan announced in August 2020.

The Company also recorded $51 million of other costs, which consist primarily of impairment charges of $39 million related to indefinite-lived intangible assets and other impairments of $8 million.

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

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

The Company expects to record total ending restructuring charges in a range of $60 million to $70 million for inventory write-downs, severance costs, fixed asset write-offs, and other facility closure costs.

The Company estimates that $45 million to $55 million of the total final restructuring charges will be non-cash charges related to inventory write-downs and fixed asset write-offs.

To date through December 31, 2021, the Company recorded expenses of approximately $58 million related to these actions, of which approximately $46 million were non-cash charges.

Intangible Asset Impairment and Other Costs

During the year ended December 31, 2022, we recorded net expense of $114 million of intangible asset impairment and other costs which consist primarily of an impairment charge of $100 million related to certain tradenames and trademarks within both the Technology & Equipment segment and Consumables segment and $14 million of other costs, which consist primarily of restructuring costs in connection with the various restructuring initiatives.

During the year ended December 31, 2021, we recorded net expense of $17 million of restructuring costs in connection with the various restructuring initiatives.

As the fair value of these indefinite-lived intangible assets continues to approximate carrying value as of December 31, 2022, any further decline in key assumptions could result in additional impairments in future periods.

For further details see Item 8, Note 19, Intangible Asset Impairment and O ther Costs, in the Notes to the Audited Consolidated Financial Statements of this Form 10-K.

Segment Adjusted Operating Income

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(a) See Note 7, Segment and Geographic Information, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for a reconciliation from segment adjusted operating income to consolidated US GAAP income.

The increase in adjusted operating income for both Technologies & Equipment and Consumables was primarily driven by the increase in net sales, favorable mix including increased volumes for higher margin products, and continued expense discipline during 2021, offset by higher supply chain related expenses, including distribution costs.

The decrease in adjusted operating income for both Technologies & Equipment and Consumables was primarily driven by the decrease in sales volumes and the higher costs for raw materials, labor, and distribution costs in the current year as a result of supply chain constraints and global currency inflation, offset by benefits from price increases.

Other Income and Expenses

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Interest expense, net

Net interest expense for the year ended December 31, 2021 increased by $8 million as compared to the year ended December 31, 2020, driven primarily by higher average debt levels in 2021 relative to the prior year period.

Net interest expense for the year ended December 31, 2022 increased by $5 million as compared to the year ended December 31, 2021, driven primarily by higher interest rates on short-term and other borrowings partially offset by lower average borrowings in 2022 relative to the prior year period.

Other expense (income), net

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(in millions, except percentages) 2022 2021 $ Change

(Gain) loss on sales of non-core businesses $ (7) $ 2 $ (9)

Foreign exchange gains (a)

Loss (gain) on sales or disposal of non-core businesses $ 3 $ (7) $ 10

Foreign exchange losses (gains) (a)

Loss from equity method investments 36 10 26

Defined benefit pension plan expenses 10 9 1

Other non-operating loss (gain) 1 2 (1)

Defined benefit pension plan expenses (income) 7 10 (3)

Other non-operating loss 1 1 —

Other expense (income), net $ 58 $ 8 $ 50

(a) Foreign exchange gains are primarily related to the revaluation of intercompany payables and loans.

Income Taxes and Net Income (Loss)

(a) Foreign exchange losses (gains) are primarily related to the revaluation of intercompany payables and loans.

Loss from equity method investments for the year ended December 31, 2022 increased by $26 million as compared to the year ended December 31, 2021 and primarily relates to a write-off of the Company's ownership position in a privately-held dental investment company following impairment of underlying investments held by the investment company and the Company's determination that the remaining investment is not recoverable.

Income Taxes and Net (Loss) Income

Year Ended December 31,

(in millions, except per share data and percentages) 2022 2021 $ Change

Provision for income taxes $ 138 $ 23 $ 115

(Benefit) provision for income taxes $ (105) $ 134 $ (239)

Effective income tax rate 9.9 % 24.6 %

Net income (loss) attributable to Dentsply Sirona $ 421 $ (83) $ 504

Net income (loss) per common share - diluted (a)

Net (loss) income attributable to Dentsply Sirona $ (950) $ 411 $ (1,361)

Net (loss) income per common share - diluted (a)

$ (4.41) $ 1.87

Percentages are based on actual values and may not recalculate due to rounding.

(a) For the year ended December 31, 2020, the Company's net loss per share was calculated on a non-diluted basis.

Provision for income taxes

For the year ended December 31, 2021, income taxes were a net expense of $138 million.

During the year ended December 31, 2021, the Company recorded discrete tax expense items of $10 million related to statutory rate changes and $4 million for other discrete tax matters.

The Company also recorded $5 million of tax expense as a discrete item related to business divestitures.

The increase in the effective tax rate is due to the overall improvement in the Company’s performance and its corresponding mix of higher-taxed foreign income.

The Company continues to reassess the realizability of its deferred tax assets and, after weighing all positive and negative evidence, continues to maintain a valuation allowance on certain deferred tax assets.

For the year ended December 31, 2020, income taxes were a net expense of $23 million.

During the year ended December 31, 2020, the Company recorded $9 million of tax expense for other discrete tax matters.

The Company also recorded an $11 million tax benefit as a discrete item related to the indefinite-lived intangible asset impairment charge and $2 million related to the asset impairment charge.

(a) For the year ended December 31, 2022, our net loss per share was calculated on a non-diluted basis.

(Benefit) provision for income taxes

We recorded an income tax benefit of $105 million and an income tax expense of $134 million for the year ended December 31, 2022 and December 31, 2021, respectively.

The decrease in the effective tax rate from 24.6% to 9.9% is primarily due to the impairment of goodwill recorded in 2022.

Further information regarding the details of income taxes is presented in Note 17, Income Taxes, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Discussion of the results of operations for the year ended December 31, 2020 was included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K for the year ended December 31, 2021, as amended and filed with the SEC on November 7, 2022.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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In particular, the determination of fair value involves uncertainties around the forecasted cash flows as it requires management to make assumptions and apply judgment to estimate future business expectations.

Those future expectations include, but are not limited to, the current and ongoing impact of the COVID-19 pandemic and new product developments.

The Company also considers the current and projected market and economic conditions amid the ongoing pandemic for the dental industry, both in the U.S.

Those future expectations include, but are not limited to, the current and ongoing impact of the COVID-19 pandemic, distribution channel changes, impact from competition, and new product developments for these reporting units.

The Company also considers the current and projected market and economic conditions for dental and medical device industries, both in the U.S.

and globally, when determining its assumptions.

Operating cash flow assumptions may also be impacted by assumptions regarding costs and benefits from restructuring initiatives, tax rates, foreign exchange rates, capital spending and working capital changes.

A change in any of these estimates and assumptions used in the annual test, as well as unfavorable changes in the ongoing COVID-19 pandemic, or in the overall markets served by these reporting units, among other factors, could have a negative material impact to the fair value of the reporting units and indefinite-lived intangible assets and could result in a future impairment charge.

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The Company’s reporting units are either an operating segment or one level below its operating segments, as determined in accordance with ASC 350.

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 quantitative evaluation of impairment involves comparing the current fair value of each reporting unit to its net book value, including goodwill.

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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 significant assumptions and estimates involved in the application of the DCF model to forecast operating cash flows include, but are not limited to the discount rates, revenue growth rates (including perpetual growth rates), and future operating margin percentages of the reporting unit’s business.

The significant assumptions and estimates involved in the application of the DCF model to forecast operating cash flows include, but are not limited to the discount rates, revenue growth rates (including perpetual growth rates), future operating margin percentages, and net working capital changes of the reporting unit’s business.

These assumptions may vary significantly among the reporting units.

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The revenue growth rate assumptions were developed in consideration of future expectations which included, but were not limited to, the current and ongoing impact of the COVID-19 pandemic, distribution channel changes, impact from competition, and new product developments for these reporting units.

The Company also considers the current and projected market conditions for dental and medical device industries, both in the U.S.

and globally, when determining its assumptions.

Operating cash flow assumptions may also be impacted by assumptions regarding benefits from restructuring initiatives, tax rates, capital spending and working capital changes.

Discount rates are estimated for geographic regions and applied to the reporting units located within the regions.

These rates are developed based on market participant data, which included assumptions regarding the Company’s weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows.

The Company reconciled the aggregate fair values of its reporting units to its market capitalization, which included a reasonable control premium based on market conditions.

As part of the annual test, the Company reconciled the aggregate fair values of its reporting units to its market capitalization, which included a reasonable control premium based on market conditions.

The Company has not materially changed its methodology for goodwill impairment testing for the years presented.

Indefinite-Lived Intangible Asset Impairment

Indefinite-lived intangible assets consist of tradenames, trademarks and in-process research and development and are not subject to amortization;

Indefinite-lived intangible assets consist of tradenames, trademarks and in-process R&D and are not subject to amortization;

instead, they are tested for impairment annually or more frequently if events or circumstances indicate that the carrying value of indefinite-lived intangible assets may be impaired or if a decision is made to sell a business.

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It is important to note that fair values that could be realized in an actual transaction may differ from those used to evaluate the impairment of indefinite-lived assets.

The Company performed this annual impairment test as of April 1, 2021, in conjunction with the goodwill impairment annual test.

The fair value of acquired tradenames and trademarks is estimated by the use of a relief from royalty method, which values an indefinite-lived intangible asset by estimating the royalties saved through the ownership of an asset.

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Goodwill and Indefinite-Lived Intangible Asset Impairment Results

No goodwill or indefinite-lived intangible impairment was identified at April 1, 2021 in conjunction with the annual test and no subsequent triggering events were identified.

For further information, see Note 12, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

During the three months ended March 31, 2020, prior to performance of the annual impairment test, the Company 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 and all but two of the Company's indefinite-lived intangible assets 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, and an impairment charge of $39 million related to certain tradenames and trademarks related to the Equipment & Instruments reporting unit.

The intangible asset impairment charge was recorded in Restructuring and other costs in the Consolidated Statements of Operations.

The Company further performed the required annual impairment tests of goodwill and indefinite-lived intangible assets at April 30, 2020, which did not result in any additional impairment in 2020.

During the twelve months ended December 31, 2019, the Company impaired $5 million of product tradenames and trademarks within the Technologies & Equipment segment.

The impaired indefinite-lived intangible assets are tradenames and trademarks held within the Equipment and Instrument reporting unit.

The impairment was the result of a change in forecasted sales related to divestitures of non-strategic product lines.

No goodwill or indefinite-lived intangible impairment was identified as of April 1, 2022 in conjunction with the annual test.

In the third quarter of 2022, the Company experienced adverse macroeconomic factors as a result of weakened global demand, higher cost of capital, unfavorable foreign currency impacts, and increased raw material, supply chain and service costs, which contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows.

As a result, the Company identified indicators of a "more likely than not" impairment related to its Digital Dental Group and Equipment & Instruments reporting units and indefinite-lived intangible assets, included within the Technologies & Equipment segment, and indicators of a "more likely than not" impairment related to its indefinite-lived intangibles assets for the Consumables reporting unit within the Consumables segment.

As such, an interim impairment test was performed ("the interim test").

The Company recorded a pre-tax goodwill impairment charge related to the Digital Dental Group and Equipment & Instruments reporting units within the Technologies & Equipment segment of $1,100 million and $87 million, respectively, and an indefinite-lived intangible asset impairment charge of $66 million and $26 million for the Digital Dental Group and Equipment & Instruments reporting units, respectively, within the Technologies & Equipment segment and a $2 million impairment charge for the Consumables reporting unit within the Consumables reporting unit for the three months ended September 30, 2022.

In the fourth quarter of 2022, reductions in near-term forecasts for specific tradenames and continued adverse macroeconomic factors, including the impact of foreign exchange rates, resulted in indicators of a "more likely than not" impairment for certain indefinite-lived intangible assets within the Equipment & Instruments reporting unit within the Technologies & Equipment segment and the Consumables reporting unit within the Consumables segment.

As such, an impairment test was performed during the fourth quarter, resulting in an intangible asset impairment charges of $2 million and $4 million for indefinite-lived intangible assets within the Equipment & Instruments and Consumables reporting units, respectively, for the three months ended December 31, 2022.

For 2022, the goodwill impairment charge was recorded in Goodwill impairment in the Consolidated Statements of Operations, and the intangibles impairment charges were recorded in Intangible asset impairment and other costs in the Consolidated Statements of Operations.

For further information on our annual and interim tests, see Note 12, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

No goodwill or indefinite-lived intangible impairment was identified for the year ended December 31, 2021.

In 2020, the Company recorded impairment charges of $157 million and $39 million related to goodwill and certain tradenames and trademarks, respectively, for the Equipment & Instruments reporting unit within the Technologies & Equipment segment as a result of changes in forecasted revenues, operating margins, and discount rates due to the negative impacts of the COVID-19 pandemic.

The goodwill impairment charge was recorded in Goodwill impairment in the Consolidated Statements of Operations, and the intangibles impairment charge was recorded in Intangible asset impairment and other costs in the Consolidated Statements of Operations.

Income taxes are determined using the liability method of accounting for income taxes.

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and international income taxes plus the provision for U.S.

taxes on undistributed earnings of international subsidiaries not deemed to be permanently invested.

taxes on undistributed earnings of international subsidiaries not considered to be permanently invested.

The Company 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.

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(in millions) 2022 2021 $ Change

Cash (used in) provided by:

Cash provided by (used in):

Operating activities $ 517 $ 657 $ (140)

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Effect of exchange rate changes on cash and cash equivalents (24) (19) (5)

Net (decrease) increase in cash and cash equivalents $ (99) $ 33 $ (132)

The increase in cash provided by operating activities was driven primarily by higher sales in the current period, partially offset by unfavorable changes in working capital including a slower trend in collections relative to the prior year, timing of payments to vendors, and a build-up in inventory during the current period to meet recovered demand for the Company's products.

For the year ended December 31, 2021, the number of days for sales outstanding in accounts receivable increased by 7 days to 61 days as compared to 54 days at December 31, 2020, and the number of days of sales in inventory increased by 6 days to 108 days at December 31, 2021 as compared to 102 days at December 31, 2020.

The decrease in cash used in investing activities was primarily due to lower cash paid for acquisitions by $830 million, partially offset by higher capital expenditures of $55 million, and less cash proceeds from liquidation of net investment hedges of $56 million.

The Company estimates capital expenditures to be in the range of approximately $150 million to $170 million for the full year 2022 and expects these investments to include expansion of facilities to provide incremental space for growth and to consolidate operations for enhanced efficiencies.

The increase in cash used in financing activities was primarily driven by lower net borrowings of $851 million during 2021 compared to prior year, higher stock repurchases of $60 million, partially offset by greater proceeds from exercises of stock options of $40 million.

Net increase (decrease) in cash and cash equivalents $ 26 $ (99) $ 125

Cash provided by operating activities decreased primarily as a result of lower sales during the current period, as well as a build-up in inventory partly as a consequence of temporary COVID-19 related shutdowns in China.

These decreases in operating cash were offset by other changes in working capital including higher liabilities for trade accounts payables and lower accounts receivable.

For the year ended December 31, 2022, the number of days for sales outstanding in accounts receivable decreased by 5 days to 55 days at December 31, 2022 as compared to 60 days at December 31, 2021, and the number of days of sales in inventory increased by 27 days to 137 days at December 31, 2022 as compared to 110 days at December 31, 2021.

The decrease in cash used in investing activities was primarily due to activity in 2021 including lower cash paid for acquisitions of $248 million, partially offset by lower proceeds from the sale of non-strategic businesses or product lines of $28 million, higher capital expenditures of $7 million, and higher cash proceeds from net investment hedges of $11 million.

The Company estimates capital expenditures to be in the range of approximate ly $150 million to $170 million for the full year 2023 and expects these investments to include expansion of facilities to provide incremental space for growth and to consolidate operations for enhanced efficiencies.

The decrease in cash used in financing activities was primarily driven by lower net payments on debt of $42 million during 2022 compared to prior year, lower stock repurchases of $50 million and lower proceeds from exercises of stock options of $45 million.

Primarily as a result of this activity, combined with a decrease of $60 million due to exchange rate fluctuations on debt denominated in foreign currencies, the Company's total borrowings decreased by a net $151 million during the year ended December 31, 2022.

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At December 31, 2022, $740 million of authorization remains available for future share repurchases.

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

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

At December 31, 2022, the Company held 49.3 million shares of treasury stock.

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At December 31, 2022, the Company was in compliance with these covenants.

Additionally, the Company is required under certain of its debt agreements to deliver or make available to borrowers its unaudited financial statements on a timely basis each quarter along with the necessary certifications.

As a result of the Company’s temporary failure to file its unaudited financial statements for the fiscal quarters ended March 31, 2022 and June 30, 2022 by the reporting deadlines, the Company obtained the consents of the requisite lenders and noteholders of its outstanding indebtedness to extend the time period for delivery of such unaudited financial statements until November 14, 2022.

Those financial statements were delivered on November 9, 2022 and therefore, the Company did not suffer an event of default as a result of the previously delayed filings.

The Company expects on an ongoing basis to be able to finance operating cash require ments, capital expenditures, and debt service from the current cash, cash equivalents, cash flows from operations and amounts available under its existing borrowing facilities.

The Company's credit facilities are further discussed in Note 15, Financing Arrangements, to the Consolidated Financial Statements in Item 8 of this Form 10-K.

The Company's credit facilities are further discussed in Note 15, Financing Arrangements, to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operating activities and future foreign investments.

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state income taxes, and the impact of foreign currency movements.

At December 31, 2021 , management believed that sufficient liquidity was available in the United States and expects this to remain for the next twelve months.

At December 31, 2022 , management believed that sufficient liquidity was available in the U.S.

and expects this to remain for the next twelve months.

The Company has repatriated and expects to continue repatriating certain funds from its non-U.S.

subsidiaries that are not needed to finance local operations, however, these particular repatriation activities have not and are not expected to result in a significant incremental tax liability to the Company.

The Company continues to review its debt portfolio and may refinance additional debt or add debt in the near-term as interest rates remain at historically low levels.

The Company continues to review its debt portfolio and may refinance additional debt or add debt in the near-term based on strategic capital management.

The Company believes there is sufficient liquidity available for the next twelve months.

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In the event that the financial institutions would discontinue offering these consignment arrangements, and if the Company could not obtain other comparable arrangements, the Company may be required to obtain third party financing to fund an ownership position to maintain precious metal inventory at operational levels.

For additional details, see Item 7A "Quantitative and Qualitative Disclosure About Market Risk - Consignment Arrangements" of this Form 10-K.

For additional details, see Item 7A "Quantitative and Qualitative Disclosure About Market Risk - Consignment Arrangements."

Contractual Obligations

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Due to the uncertainty with respect to the timing of future cash flows associated with the Company's unrecognized tax benefits at December 31, 2022, the Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority;

therefore, $42 million of the unrecognized tax benefit has been excluded from the contractual obligations table above.

therefore, $55 million of unrecognized tax benefits has been excluded from the contractual obligations table above.

See Note 17, Income Taxes, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Material Trends in Capital Resources

Beginning in the second quarter of 2022, the Company's financial results have been impacted by the costs associated with the internal investigation conducted by the Audit and Finance Committee and assisted by independent legal counsel and forensic accountants.

These costs have included professional service fees associated with the investigation itself, as well as third party accounting and legal costs incurred by management to make assessments and revisions and begin remediation activities in response to the investigation's findings.

Additionally, the Company has incurred severance costs associated with its remedial personnel actions, as well as costs in connection with retention of key personnel.

These costs totaled approximately $61 million for the year ended December 31, 2022.

Although the internal investigation has been completed, related costs are expected to continue as a material trend into 2023 as the Company works to complete its remediation activities described in Part II, Item 9A Controls and Procedures of this Form 10-K, and incurs legal defense costs pertaining to the matters described in Note 22 Commitments and Contingencies to the financial statements included in Part II, Item 8.

NEW ACCOUNTING PRONOUNCEMENTS

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

What changed 10-K

Item 7. Management’s Discussion and Analysis