What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-01 · 349 added, 383 removed, 1613 unchanged (31% of the section changed)

27 unchanged sentences

Note 18 - Benefit Plans

Note 19 - Restructuring and Other Costs 108

Note 19 - Intangible Asset Impairment and Other Costs

Note 20 - Financial Instruments and Derivatives

1 unchanged sentence

Note 22 - Commitments and Contingencies

Note 23 - Subsequent Event

Financial Statement Schedule for the Years Ended December 31, 2022, 2021, and 2020.

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The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

A Company’s internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

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In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.

Management of the Company assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.

In making its assessment, management used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

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 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.

/s/ Donald M.

Chief Executive Officer Executive Vice President and

Management has concluded that the material weaknesses described herein, which were previously identified and reported in the 2021 Form 10-K/A, continue to exist as of December 31, 2022.

As a result, management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified the following material weaknesses in the Company's internal control over financial reporting:

The Company did not design and maintain an effective internal control environment as former management failed to set an appropriate tone at the top.

Specifically, certain members of senior management, including the Company’s former Chief Executive Officer and former Chief Financial Officer, engaged in conduct that was inconsistent with the Company’s culture of compliance and Code of Ethics and Business Conduct.

The Company did not maintain a sufficient complement of personnel with an appropriate level of knowledge about accounting for variable consideration related to customer incentive arrangements in a manner commensurate with our financial reporting requirements.

These material weaknesses contributed to the following additional material weakness:

The Company did not design and maintain effective controls associated with approving, communicating, and accounting for incentive arrangements with customers, impacting the completeness and accuracy of revenues, including variable consideration.

These material weaknesses previously resulted in the restatement of our consolidated financial statements for the year ended December 31, 2021, and the unaudited interim financial information for the three and nine months ended September 30, 2021.

These material weaknesses also resulted in adjustments to substantially all of our accounts and disclosures for the interim and annual periods related to 2019, 2020, and 2021.

Additionally, each of these material weaknesses could result in a misstatement of substantially all of our account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, as stated in their report, which appears herein.

Campion /s/ Glenn G.

Campion Glenn G.

President and Chief Executive Officer Executive Vice President and

Chief Financial Officer

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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).

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, 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, 2022, including the related notes 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, 2022, based 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 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.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date related to lack of an effective internal control environment as former management failed to set an appropriate tone at the top, lack of a sufficient complement of personnel with an appropriate level of knowledge about accounting for variable consideration related to customer incentive arrangements in a manner commensurate with the Company’s financial reporting requirements, and lack of effective controls over approving, communicating, and accounting for incentive arrangements with customers, impacting the completeness and accuracy of revenues, including variable consideration.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses referred to above are described in the accompanying Management's Report on Internal Control Over Financial Reporting.

We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

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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 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 – 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.

Annual and Interim Goodwill Impairment Assessments – Certain Reporting Units

As described in Notes 1 and 12 to the consolidated financial statements, the Company’s consolidated net goodwill balance was $2,688 million as of December 31, 2022, of which a significant portion relates to certain reporting units.

Goodwill is tested for impairment at the reporting unit level annually 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.

Management uses a discounted cash flow model as its valuation technique to measure the fair value for its reporting units.

In the third quarter of 2022, management identified indicators of a "more likely than not" impairment related to its Digital Dental Group and Equipment & Instruments reporting units within the Technologies & Equipment segment.

The Company has 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 are contributing to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows.

As a result of the interim test, management 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.

As disclosed by management, 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 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 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.

As disclosed by management, the significant assumptions in the application of the discounted cash flow model include, but are not limited to, the discount rates, revenue growth rates, perpetual revenue growth rates, operating margin percentages, and net working capital changes of the reporting unit’s business.

The principal considerations for our determination that performing procedures relating to the annual and interim goodwill impairment assessments of certain reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the reporting units, (ii) 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 for the annual assessment and discount rates, revenue growth rates, perpetual revenue growth rates, operating margin percentages, and net working capital changes for the interim assessment, and (iii) 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 certain reporting units.

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

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

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

evaluating the appropriateness of the discounted cash flow models;

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.

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;

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

Evaluating management’s assumptions related to revenue growth rates, perpetual revenue growth rates, operating margin percentages, and net working capital changes 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 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.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s discounted cash flow models and (ii) the reasonableness of the assumptions related to the discount rates, perpetual revenue growth rates, and net working capital changes.

Uncertain Tax Position Related to a Worthless Stock Deduction

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

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.

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 (i) the significant judgment by management when determining the uncertain tax position, (ii) 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, and (iii) 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.

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Goodwill impairment 1,187 — 157

Restructuring and other costs 17 77 81

Operating income (loss) 622 ( 12 ) 361

Intangible asset impairment and other costs 114 17 77

Operating (loss) income ( 937 ) 608 ( 3 )

Other income and expenses:

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Other expense (income), net 58 8 1

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

Provision for income taxes 138 23 82

Net income (loss) 421 ( 83 ) 263

(Loss) income before income taxes ( 1,055 ) 545 ( 50 )

(Benefit) provision for income taxes ( 105 ) 134 23

Net (loss) income ( 950 ) 411 ( 73 )

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

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

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

Net (loss) income attributable to Dentsply Sirona $ ( 950 ) $ 411 $ ( 73 )

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

Basic $ ( 4.41 ) $ 1.88 $ ( 0.33 )

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2022 2021 2020

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

Net (loss) income $ ( 950 ) $ 411 $ ( 73 )

Other comprehensive (loss) income, net of tax:

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Total other comprehensive (loss) income ( 36 ) ( 130 ) 139

Total comprehensive income 291 54 143

Total comprehensive (loss) income ( 986 ) 281 66

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

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

Comprehensive (loss) income attributable to Dentsply Sirona $ ( 986 ) $ 283 $ 65

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

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Balance at December 31, 2019 $ 3 $ 6,587 $ 1,359 $ ( 602 ) $ ( 2,301 ) $ 5,046 $ 2 $ 5,048

Net income — — 263 — — 263 — 263

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

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

Net loss — — ( 73 ) — — ( 73 ) — ( 73 )

Other comprehensive income — — — 138 — 138 1 139

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

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Balance at December 31, 2020 $ 3 $ 6,604 $ 1,198 $ ( 464 ) $ ( 2,409 ) $ 4,932 $ 3 $ 4,935

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

Other comprehensive income — — — 136 — 136 1 137

Net income — — 411 — — 411 — 411

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

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

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Restricted stock unit distributions — ( 65 ) — — 34 ( 31 ) — ( 31 )

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

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

Cash dividends declared ($ 0.43 per share)

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Balance at December 31, 2021 $ 3 $ 6,606 $ 1,514 $ ( 592 ) $ ( 2,535 ) $ 4,996 $ 1 $ 4,997

Net income — — 421 — — 421 — 421

Net loss — — ( 950 ) — — ( 950 ) — ( 950 )

Other comprehensive loss — — — ( 36 ) — ( 36 ) — ( 36 )

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Restricted stock unit distributions — ( 38 ) — — 25 ( 13 ) — ( 13 )

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

Cash dividends declared ($ 0.50 per share)

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Cash flows from operating activities:

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

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

Net (loss) income $ ( 950 ) $ 411 $ ( 73 )

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

Depreciation 119 124 142

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Stock based compensation expense 59 48 47

Equity in earnings from unconsolidated affiliates 36 10 —

Other non-cash (income) expense 60 24 3

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

Loss (gain) on sale or disposal of non-strategic businesses and product lines 3 ( 14 ) 1

Changes in operating assets and liabilities, net of acquisitions:

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Effect of exchange rate changes on cash and cash equivalents ( 24 ) ( 19 ) 14

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

Net increase (decrease) in cash and cash equivalents 26 ( 99 ) 33

Cash and cash equivalents at beginning of period 339 438 405

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Non-cash investing activities:

Property, plant and equipment in accounts payable at end of period $ 33 $ 14 $ 14

Exchange of inventory for naming rights 2 4 3

Change in accounts payable related to capital expenditures $ ( 6 ) $ 19 $ —

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

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The Company sells its products in over 150 countries under some of the most well-established brand names in the industry.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period.

Actual results could differ materially from those estimates.

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.

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 in future periods 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, 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.

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.

Use of Estimates

Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include deposits with banks as well as highly liquid time deposits with original maturities of ninety days or less.

The balance as of December 31, 2022 includes $ 71 million of cash and cash equivalents located in Russia which is available for use in local operations but limited in its ability to be transferred out of the country due to control measures currently in place by the Russian government.

Short-term Investments

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For customers on credit terms, the Company performs ongoing credit evaluation of those customers’ financial condition and generally does not require collateral from them.

Accounts receivable are stated net of allowances for doubtful accounts of $ 13 million and $ 18 million at December 31, 2021 and 2020, respectively.

For the years ended December 31, 2021 and 2020, the Company wrote-off $ 2 million and $ 12 million, respectively, of accounts receivable that were previously reserved.

The Company increased the provision for doubtful accounts by $ 2 million and $ 1 million during 2021 and 2020, respectively.

See Note 2, Revenue for additional information on Accounts Receivable.

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 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 cost of inventories is based upon the first-in, first out method ( “ FIFO ” ) or average cost methods, except for $ 3 million of inventories that was determined by the last-in, first out method ( “ LIFO ” ) method as of December 31, 2020.

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

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.

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired and liabilities assumed in a business combination.

Goodwill is not amortized.

The Company 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.

This impairment assessment includes an evaluation of reporting units, which the Company has determined are either an operating segment or one level below its operating segments, as determined in accordance with ASC 350.

Goodwill is not subject to amortization but is tested for impairment at the reporting unit level annually in accordance with ASC 350 as of April 1 of each year, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired.

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

If the carrying value of a reporting unit with goodwill exceeds its fair value, an impairment charge is recognized for the excess amount.

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 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.

The Company considers the current market conditions when determining its assumptions.

Lastly, the Company reconciles the aggregate fair values of its reporting units to its market capitalization, which include a reasonable control premium based on market conditions.

Additional information related to the testing for goodwill impairment including results of the annual test performed at April 1, 2021 is provided in Note 12, Goodwill and Intangible Assets.

If the carrying value of a reporting unit with goodwill exceeds its respective fair value, an impairment charge is recognized for the excess amount.

Additional information related to the testing for goodwill impairment, including results of the annual test performed as of April 1, 2022 and the interim impairment assessment performed in the third quarter of 2022, is provided in Note 12, Goodwill and Intangible Assets.

Indefinite-Lived Intangible Assets

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.

The Company conducts an impairment test as of April 1 of each year, or more frequently if events or circumstances indicate that the carrying value of indefinite-lived intangible assets may be impaired.

Indefinite-lived intangible assets consist primarily of tradenames and trademarks and in-process research and development ("R&D") acquired in business combinations, and these are not subject to amortization.

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

The Company conducts an impairment test in accordance with ASC 350 as of April 1 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.

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.

Additional information related to the testing for indefinite-lived intangible asset impairment including results of the annual test performed at April 1, 2021 is provided in Note 12, Goodwill and Intangible Assets.

Additional information related to the testing for indefinite-lived intangible asset impairment, including results of the annual test performed as of April 1, 2022 and the interim assessments performed in the third and fourth quarter of 2022, is provided in Note 12, Goodwill and Intangible Assets.

Definite-Lived Intangible Assets

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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.

2016-02, Leases (Topic 842) with subsequent amendments (collectively, “ASC 842”).

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

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

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

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.

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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.

Any new real estate and equipment operating lease agreements with lease and non-lease components, are accounted for as a single lease component;

auto leases are accounted for as separate lease components.

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.

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Some of the employees of the Company and its subsidiaries are covered by government or Company-sponsored defined benefit plans and defined contribution plans.

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

Additionally, certain union and salaried employee groups in the U.S.

are covered by postemployment healthcare plans.

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.

26 unchanged sentences

During the year ended December 31, 2022, the Company had translation loss of $ 188 million and a gain of $ 32 million on its loans designated as hedges of net investments.

During the year ended December 31, 2021, the Company had translation loss of $ 225 million and gains 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.

During the years ended December 31, 2022, 2021, and 2020, net foreign currency loss of $ 11 million, gain of $ 6 million and gain of $ 13 million, respectively.

Revenue Recognition

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

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

Certain contracts with our 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.

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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.

26 unchanged sentences

Research and Development Costs

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 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.

R&D costs, including internal labor costs, material costs, consulting expenses, and certain overheads, such as facilities and information technology costs directly attributable to R&D activities, are expensed in the period in which they are incurred.

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.

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The Company records forfeitures on stock-based compensation as the participant terminates rather than estimating forfeitures.

During 2019, the Company granted certain performance-based RSUs issued under the 2016 Omnibus Incentive Plan to provide performance targets for the Company's previously disclosed three year restructuring program announced in November 2018.

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.

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

Under this program the Company could issue up to 3 million shares of common stock if all performance targets are met within the period.

See Note 16 Equity for more information.

The Company’s tax expense includes U.S.

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.

Tax credits and other incentives reduce tax expense in the year the credits are claimed.

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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.

The Company's equity-method net losses were $ 36 million, $ 10 million, and $1 million for the years ended December 31, 2022, 2021, and 2020 respectively.

Loss from equity method investments for the year ended December 31, 2022 includes $ 36 million recorded in Other expense (income), net in the Consolidated Statements of Operations for 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.

Noncontrolling Interests

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2016-13 “Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments." This newly issued accounting standard changes the recognition and measurement of credit losses, including trade accounts receivable.

Under current accounting standards, a loss is recognized when loss becomes probable of occurring.

The new standard broadens the information that an entity must consider when developing expected credit loss estimates.

The amendments in this update are effective for fiscal years and interim periods ending after December 15, 2019.

Early adoption is permitted.

The amendments in this update should be applied on a prospective basis for all periods presented with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

Measurement of Credit Losses on Financial Instruments.” This accounting standard changed the recognition and measurement of credit losses, including trade accounts receivable.

Under previous accounting standards, a loss was recognized when the loss became probable of occurring.

The new standard broadened the information that an entity must consider when developing expected credit loss estimates.

The amendments in this update were effective for the fiscal years and interim periods ending after December 15, 2019.

The amendments in this update were applied on a prospective basis for all periods presented with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance was effective.

The Company adopted this accounting standard on January 1, 2020.

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2018-14 “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20):

Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." This newly issued accounting standard changes disclosure requirements for defined benefit plans, including removal and modification of existing disclosures.

The amendments in this update are effective for fiscal years ending after December 15, 2020.

Early adoption is permitted.

The amendments in this update should be applied on a retrospective basis for all periods presented.

Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” This accounting standard changed disclosure requirements for defined benefit plans, including removal and modification of existing disclosures.

The amendments in this update were effective for the fiscal years ending after December 15, 2020.

The amendments in this update were applied on a retrospective basis for all periods presented.

The Company adopted this accounting standard on January 1, 2020.

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2019-12 “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes." This newly issued accounting standard simplifies key provisions for accounting for income taxes, as part of the FASB's initiative to reduce complexity in accounting standards.

The amendments eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The amendments also clarify and simplify other aspects of the accounting for income taxes.

The amendments in this update are effective for interim and fiscal period beginning after December 31, 2020.

Simplifying the Accounting for Income Taxes.” This accounting standard simplified key provisions for accounting for income taxes, as part of the FASB's initiative to reduce complexity in accounting standards.

The amendments eliminated certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The amendments also clarified and simplified other aspects of the accounting for income taxes.

The amendments in this update were effective for interim and fiscal period beginning after December 31, 2020.

The Company adopted this accounting standard on January 1, 2020.

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

Scope" in January 2021.

Scope” in January 2021 and by ASU No.

2022-06 “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848” in December 2022.

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.

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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.

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

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

NOTE 2 - REVENUE

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Equipment & Instruments $ 678 $ 728 $ 577

Implants 570 626 475

CAD/CAM 503 574 455

Orthodontics 297 273 160

Implants 624 476 592

Healthcare 270 303 287

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

Technology & Equipment segment net sales $ 2,318 $ 2,504 $ 1,954

Endodontic & Restorative $ 1,167 $ 1,261 $ 961

Other Consumables 437 466 424

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

Consumables segment net sales $ 1,604 $ 1,727 $ 1,385

Total net sales $ 3,922 $ 4,231 $ 3,339

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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.

Treatment centers comprise a broad range of products from basic dental 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.

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.

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.

This product category includes a full-chairside economical restoration of esthetic 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 company’s Orthodontics product category primarily includes a dentist-directed aligner solution, SureSmile, and a direct-to-consumer 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 business is supported by key technologies including custom abutments, advanced tapered immediate load screws and regenerative bone growth factor.

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

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

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Endodontic & Restorative Products

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

The Company's Endodontic & 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.

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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.

The Company had $ 84 million and $ 68 million of deferred revenue recorded in Accrued liabilities in the Consolidated Balance Sheets at December 31, 2022 and 2021, respectively.

The Company recognized revenue deferred as of December 31, 2021 of approximately $ 53 million during the current year.

The Company expects to recognize a significant majority of the deferred revenue within the next twelve months.

Allowance for Doubtful Accounts

Accounts and notes receivable-trade, net are stated net of allowances for doubtful accounts and trade discounts, which were $ 14 million and $ 13 million at December 31, 2022 and 2021, respectively.

For the years ended December 31, 2022 and 2021, changes to the provision for doubtful accounts including write-offs of accounts receivable that were previously reserved were insignificant.

Changes to this provision are included in Selling, general, and administrative expenses in the Consolidated Statements of Operations.

NOTE 3 - STOCK COMPENSATION

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The NQSO transactions for the year ended December 31, 2022 were as follows:

Outstanding Exercisable

Outstanding Exercisable Expected to Vest

(in millions, except per share amounts) Shares Weighted

Shares Weighted

Price Aggregate

December 31, 2021 3.2 $ 52.44 $ 15 2.2 $ 52.05 $ 11 1.0 $ 53.29 $ 4

1 unchanged sentence

Exercised ( 0.2 ) 42.57

Cancelled ( 0.5 ) 53.53

Forfeited ( 0.3 ) 53.42

2 unchanged sentences

The remaining unamortized compensation cost related to NQSOs is $ 7 million, which will be expensed over the weighted average remaining vesting period of the options, or 2.1 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.

The weighted average remaining contractual term of all outstanding options, exercisable options and options expected to vest are 5.7 years, 4.2 years and 8.6 years, respectively.

Information about NQSOs outstanding for the year ended December 31, 2022 were as follows:

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(in millions, except per share amounts) 2022 2021 2020

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

Net (loss) income attributable to Dentsply Sirona $ ( 950 ) $ 411 $ ( 73 )

Weighted average common shares outstanding 215.5 218.4 219.2

2 unchanged sentences

(in millions, except per share amounts) 2022 2021 2020

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

Net (loss) income attributable to Dentsply Sirona $ ( 950 ) $ 411 $ ( 73 )

Weighted average common shares outstanding 215.5 218.4 219.2

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For the years ended December 31, 2022, 2021, and 2020, the Company excluded from the computation of weighted average diluted shares outstanding of 3.6 million, 1.0 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.

The calculation of weighted average diluted common shares outstanding excluded 0.5 million and 0.9 million of potentially diluted common shares because the Company reported a net loss for the years ended December 31, 2022 and 2020, respectively.

NOTE 5 - COMPREHENSIVE (LOSS) INCOME

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For the years ended December 31, 2022, 2021 and 2020, these tax adjustments were $ 100 million, $ 168 million and $ 216 million, respectively, primarily related to foreign currency translation adjustments.

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.

The cumulative foreign currency translation adjustments included translation losses of $ 438 million and $ 250 million at December 31, 2022 and 2021, respectively, and which included losses of $ 84 million and $ 116 million, at December 31, 2022 and 2021, respectively, on loans designated as hedges of net investments.

Changes in AOCI, net of tax, by component for the years ended December 31, 2022 and 2021 were as follows:

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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 ( 146 ) 3 22 26 ( 95 )

Tax expense ( 33 ) ( 1 ) ( 6 ) ( 8 ) ( 48 )

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 )

4 unchanged sentences

(in millions) 2022 2021 2020

Loss on derivative financial instruments:

Gain (Loss) on derivative financial instruments:

Interest rate swaps $ ( 3 ) $ ( 4 ) $ ( 4 ) Interest expense, net

1 unchanged sentence

Net loss before tax $ — $ ( 7 ) $ ( 2 )

Tax impact — — — Provision for income taxes

Tax impact — — — (Benefit) provision for income taxes

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

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Net loss before tax $ ( 7 ) $ ( 11 ) $ ( 8 )

Tax impact 3 2 1 Provision for income taxes

Tax impact 2 3 2 (Benefit) provision for income taxes

Net loss after tax $ ( 5 ) $ ( 8 ) $ ( 6 )

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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.

The 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 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.

Measurement period adjustments made to the fair values of the assets acquired and liabilities assumed during the years ended December 31, 2022 and 2021 were immaterial to the financial statements, resulting in an increase to goodwill of $ 2 million.

Identifiable intangible assets acquired were as follows:

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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:

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

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

(in millions)

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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 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 $ 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:

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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.

("Datum"), 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.

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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 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)

Cash and cash equivalents $ 14

Current assets 16

Intangible assets 416

Current liabilities ( 28 )

Net assets acquired 418

Purchase consideration $ 1,045

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:

Weighted Average

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

Non-compete agreements $ 16 5

Technology know-how 210 10

Tradenames and trademarks 190 20

In the year ended December 31, 2022, certain earn-out provisions were achieved and the Company made cash payments of $ 5 million to the former shareholders of Datum with no impact to the Company's Statement of Operations for the period.

As of December 31, 2022, the remaining contingent consideration obligation was $ 4 million.

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.

These results, as well as the historical results for the above acquired businesses for the year ended December 31, 2021 are not material in relation to the Company’s net sales and earnings for that period.

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.

Acquisition-related costs incurred for the year ended December 31, 2022 and 2021 were $ 1 million and $ 8 million, respectively, consisting primarily of legal and professional fees in relation to the Propel and Byte acquisitions and are recorded in SG&A expenses in the Consolidated Statements of Operations.

Investment in Affiliates

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.

On June 4, 2021, the effective date of the transaction, the Company paid $ 16 million to acquire a minority interest in a UK 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.

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

Segment adjusted operating income is defined as operating income before income taxes and before certain corporate headquarters unallocated costs, restructuring and other costs, interest expense, interest income, other expense (income), net, amortization of intangible assets and depreciation resulting from the fair value step-up of property, plant, and equipment from acquisitions.

Segment adjusted operating income is defined as operating income before income taxes and before certain corporate headquarters unallocated costs (including certain inter-segment eliminations which are generally based on estimated external selling prices and are eliminated during consolidation), goodwill impairments, intangible asset impairments and other costs, interest expense, net, other expense (income), net, amortization of intangible assets and depreciation resulting from the fair value step-up of property, plant, and equipment from business combinations.

A description of the products and services provided within each of the Company’s two reportable segments is provided below.

1 unchanged sentence

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.

These products include dental implants, CAD/CAM systems, orthodontic 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.

14 unchanged sentences

(in millions) 2022 2021 2020

Technologies & Equipment (a)

$ 556 $ 387 $ 467

Consumables (a)

Technologies & Equipment $ 399 $ 543 $ 382

Consumables 495 539 316

Segment adjusted operating income $ 894 $ 1,082 $ 698

Reconciling items (income) expense:

All other (a) (b)

All other (a)

Goodwill impairment 1,187 — 157

Restructuring and other costs 17 77 81

Intangible asset impairment and other costs 114 17 77

Interest expense, net 60 55 46

3 unchanged sentences

plant, and equipment from business combinations

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.

(b) Includes the results of unassigned Corporate headquarters costs and inter-segment eliminations.

(Loss) income before income taxes $ ( 1,055 ) $ 545 $ ( 50 )

(a) Includes the results of unassigned corporate headquarters costs and inter-segment eliminations.

Capital Expenditures Year Ended December 31,

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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:

Customers that accounted for 10% or more of net sales or accounts receivable for the years ended December 31, 2022 and 2020 were as follows:

Year Ended December 31,

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N/A 12 % 10 % 18 %

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

were less than ten percent of consolidated net sales.

NOTE 8 - OTHER EXPENSE (INCOME), NET

2 unchanged sentences

(in millions) 2022 2021 2020

Foreign exchange transaction (gain) loss $ ( 6 ) $ ( 13 ) $ ( 27 )

Foreign exchange transaction loss (gain) $ 11 $ ( 6 ) $ ( 13 )

Other expense (income), net 47 14 14

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Operating leases 5.1 5.3

The lease cost recognized in the Consolidated Statements of Operations for the year ended December 31, 2021 and 2020 were as follows:

The lease cost recognized in the Consolidated Statements of Operations were as follows:

Year Ended December 31,

(in millions) 2022 2021

3 unchanged sentences

Total lease cost $ 81 $ 78

The contractual maturity dates of the remaining lease liabilities for the year ended December 31, 2021 were as follows:

The contractual maturity dates of the remaining lease liabilities as of December 31, 2022 were as follows:

(in millions) Finance Leases Operating Leases Total

4 unchanged sentences

Present value of lease liabilities $ 2 $ 203 $ 205

The supplemental cash flow information for the year ended December 31, 2021 and 2020 were as follows:

The supplemental cash flow information for leases were as follows:

Year Ended December 31,

(in millions) 2022 2021 2020

5 unchanged sentences

NOTE 12 - GOODWILL AND INTANGIBLE ASSETS

The Company assesses both goodwill and indefinite-lived intangible assets for impairment annually during the second quarter or more frequently if events or changes in circumstances indicate the asset might be impaired.

The Company conducted its annual goodwill and indefinite-lived intangible assets impairment tests as of April 1, 2021.

2021 Annual Goodwill Impairment Testing

The fair values of the Company's five reporting units were computed using a discounted cash flow model with inputs developed using both internal and market-based data.

The Company assesses both goodwill and indefinite-lived intangible assets for impairment annually as of April 1 or more frequently if events or changes in circumstances indicate the asset might be impaired.

The Company conducted its annual goodwill and indefinite-lived intangible assets impairment tests as of April 1, 2022, noting no impairment.

Third Quarter 2022 Impairment

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 within the Technologies & Equipment segment and certain indefinite-lived intangible assets, including within the above mentioned reporting units as well as the Consumables reporting unit within the Consumables segment.

As such, a third quarter impairment test was performed (the "third quarter test").

During the third quarter test, the fair values of the two reporting units above were computed using a discounted cash flow model with inputs developed using both internal and market-based data.

The discounted cash flow model uses five- to ten- year forecasted cash flows plus a terminal value based on capitalizing the last period's cash flows using a perpetual growth rate.

The Company's significant assumptions in the discounted cash flow models include, but are not limited to, the discount rates, revenue growth rates (including perpetual growth rates), and operating margin percentages of the reporting unit's business.

These assumptions were developed in consideration of current market conditions.

The total forecasted cash flows for each of the reporting units were discounted using rates ranging between 8.0 % to 9.5 %.

Further, 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 revenue growth rate assumptions were developed in consideration of future expectations which include, but were not limited to, distribution channel changes, impact from competition, and new product developments for these reporting units.

The Company also considered the current and projected market and economic conditions amid the ongoing COVID-19 pandemic for the dental industry both in the U.S.

and globally, when determining its assumptions.

As a result of the annual tests of goodwill performed as of April 1, 2021, no impairment was identified.

The use of estimates and the development of assumptions results in uncertainties around forecasted cash flows.

For this reason, in conjunction with the annual test, the Company applied a hypothetical sensitivity analysis to its reporting units.

In conjunction with its annual goodwill impairment test, the Company applied a hypothetical sensitivity analysis to each of its reporting units by increasing the discount rate of these reporting units by 100 basis points and, in a separate test, reducing by 10% the fair value of those reporting units.

All of the Company's reporting units passed the hypothetical tests without the fair value being reduced below carrying value, and therefore it was noted that there were currently no reporting units deemed at risk of being impaired based on the sensitivity analysis.

During the time subsequent to the annual evaluation, and at December 31, 2021, the Company considered whether any events or changes in circumstances had resulted in the likelihood that the goodwill of any of its reporting units may have been impaired.

It is management's assessment that no such events have occurred.

A change in any of the estimates and assumptions used in the annual test, as well as further unfavorable changes in the ongoing COVID-19 pandemic, a decline 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 could result in a future impairment charge.

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

2021 Annual Indefinite-Lived Intangibles Impairment Testing

The Company also assessed the annual impairment of indefinite-lived intangible assets at April 1, 2021, which largely consists of acquired tradenames and trademarks, in conjunction with the annual impairment tests of goodwill.

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 ownership of an asset.

Management judgment is necessary to determine key assumptions, including revenue growth rates, perpetual revenue growth rates, royalty rates, and discount rates.

The Company utilized discount rates ranging from 8.5 % to 10.0 %.

As a result of the annual impairment test of indefinite-lived intangible assets, no impairment was identified.

The Company applied a hypothetical sensitivity analysis.

It was noted that if the fair value of each of these indefinite-lived intangibles assets had been hypothetically reduced by 10% or the discount rate had been hypothetically increased by 100 basis points at April 1, 2021, the fair value of these assets would still exceed their book value.

Should the Company’s analysis in the future indicate additional unfavorable impacts related to the ongoing COVID-19 pandemic, an increase in discount rates, or a decline in the use of the tradenames and trademarks, any of which could have a negative material impact to the implied fair values and could result in a future impairment to the carrying value of the indefinite-lived intangible assets.

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

The Company's significant assumptions in the discounted cash flow models include, but are not limited to, the discount rate of 11.0 %, revenue growth rates (including perpetual growth rates), operating margin percentages, and net working capital changes of the reporting unit's business.

These assumptions were developed in consideration of current market conditions and future expectations which include, but were not limited to, distribution channel changes, impact from competition, and new product developments.

The Company also considered current and projected market and economic conditions.

As a result, 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, for the three months ended September 30, 2022.

This charge was recorded in Goodwill impairment in the Consolidated Statements of Operations.

During the third quarter test, the fair values of intangible assets were computed using either an income approach, specifically a relief from royalty method, or a qualitative assessment.

The Company's significant assumptions in the relief from royalty method include, but were not limited to, discount rates ranging from 11.0 % to 12.5 %, revenue growth rates (including perpetual growth rates) and royalty rates.

As a result, the Company recorded an 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 charge for the Consumables reporting unit within the Consumables segment, for its indefinite-lived intangible assets for the three months ended September 30, 2022.

This charge was recorded in Intangible asset impairment and other costs in the Consolidated Statements of Operations.

Fourth Quarter 2022 Impairment

During the fourth quarter of 2022, the Company considered whether any events or changes in circumstances indicated that goodwill or indefinite-lived intangible assets may have been impaired.

Based on a quantitative analysis performed, the Company believes there is no indication that the carrying value of any of its reporting units "more likely than not" exceeds fair value at December 31, 2022.

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

As such, an impairment test was performed in the fourth quarter.

The fair values of these intangible assets were computed using an income approach, specifically a relief from royalty method.

The Company's other significant inputs in the relief from royalty method in the fourth quarter were consistent to those described within the third quarter test above, with royalty rates remaining consistent with the third quarter test and discount rates ranging from 11.5 % to 12.0 %.

As a result of the fourth quarter test, the Company recorded 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.

These charges were recorded in Intangible asset impairment and other costs in the Consolidated Statements of Operations.

At December 31, 2022, the remaining goodwill related to the Digital Dental Group and Equipment & Instruments reporting units was $ 235 million and $ 193 million, respectively, and the carrying value of indefinite-lived intangible assets with impairments in the third or fourth quarter was $ 156 million, $ 15 million, and $ 39 million for the Digital Dental Group, Equipment & Instruments, and Consumables reporting units, respectively.

As the fair value of these reporting units and 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 the Company's reporting units and indefinite-lived intangible assets that were not impaired in the third or fourth quarter, the Company performed hypothetical sensitivity analyses by increasing the discount rate by 100 basis points and, in a separate test, reducing by 10 % the fair value of the reporting units and indefinite-lived intangible assets.

If discount rates were hypothetically increased by 100 basis points one reporting unit within the Technologies & Equipment segment and certain indefinite-lived intangibles within the Technologies & Equipment segment would have a fair value less than 10% in excess of book value.

Goodwill associated with this reporting unit was $ 1,128 million at December 31, 2022, and the carrying value of these indefinite-lived intangible assets was $ 47 million at December 31, 2022.

Any deviation in actual financial results compared to the forecasted financial results or valuation assumptions used in the annual or interim tests, a decline in equity valuations, increases in interest rates, or changes in the use of intangible assets, among other factors, could have a material adverse effect to the fair value of either the reporting units or indefinite-lived intangibles assets and could results in a future impairment charge.

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

2021 Annual Goodwill and Indefinite-Lived Intangibles Impairment and Testing

The Company performed the required annual impairment tests of goodwill and indefinite-lived intangibles as of April 1, 2021 consistent with the valuation approaches described above, which did not result in any impairment for the year ended December 31, 2021.

2020 Annual Goodwill and Indefinite-Lived Intangibles Impairment and Testing

During the three months ended March 31, 2020, the Company recorded an impairment charge of $ 157 million related to the goodwill associated with the Equipment & Instruments reporting unit.

The impairment was a result of changes in forecasted revenues, operating margins, and discount rates due to the negative impacts of the COVID-19 pandemic on customer demand for the Company's products, which caused a decline in revenue and profitability in the first quarter of 2020.

To determine the fair value of each of the reporting units for which a triggering event was concluded to exist as of March 31, 2020, the Company utilized a discounted cash flow model consistent with the valuation approach described above for the annual impairment test, and utilized discount rates for each of the reporting units which ranged between 9.5 % to 11.5 %.

The impairment was a result of changes in forecasted revenues, operating margins, and discount rates due to negative impacts of the COVID-19 pandemic on customer demand for the Company's products, which caused a decline in revenue and profitability in the first quarter of 2020.

To determine the fair value of each of the reporting units for which a triggering event was concluded to exist as of March 31, 2020, the Company utilized a discounted cash flow model, and utilized discount rates for each of the reporting units which ranged between 9.5 % to 11.5 %.

As a result of these models which included updates to the estimates and assumptions resulting from the ongoing COVID-19 pandemic, the Company determined the goodwill associated with the Equipment & Instruments reporting unit was impaired.

The impairment charge was recorded as a separate line in the Consolidated Statements of Operations.

The impairment charge was recorded in Goodwill impairment in the Consolidated Statements of Operations.

The Company also concluded in the first quarter of 2020 that due to the negative effects of the COVID-19 pandemic on revenue and profitability, a triggering event also existed for all but two of the Company's indefinite-lived intangible assets as of March 31, 2020.

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In the development of the forecasted cash flows, the Company applied significant judgment to determine key assumptions, including royalty rates, and discount rates (which ranged from 10.0 % to 17.5 %).

The impairment test resulted in an impairment charge of $ 39 million related to certain tradenames and trademarks related to the Equipment & Instruments reporting unit during the three months ended March 31, 2020.

The impairment test resulted in an impairment charge of $ 39 million related to certain tradenames and trademarks within the Equipment & Instruments reporting unit during the three months ended March 31, 2020.

The impairment charge was driven by a decline in forecasted sales as a result of the COVID-19 pandemic as discussed above, as well as an unfavorable change in the discount rates.

The 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 intangibles at April 30, 2020 consistent with the valuation approaches described above, which did not result in any additional impairment in 2020.

2019 Annual Goodwill and Indefinite-Lived Intangibles Impairment and Testing

Effective January 1, 2019, the Company realigned certain businesses between segments resulting in a change from eleven reporting units to five .

As a result, the Company transferred goodwill between segments due to these changes.

Affected reporting units, including the CAD/CAM and Treatment Center reporting units in the Technologies & Equipment segment, were tested for potential impairment of goodwill before the transfers.

No goodwill impairment was identified due to the realignment.

The Company further performed the required annual impairment tests of goodwill at April 30, 2019 on all five reporting units.

The performance of the Company’s annual impairment test did no t result in any impairment of the Company’s goodwill.

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

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

The Company further assessed the annual impairment of the remaining indefinite-lived intangible assets at April 30, 2019, which largely consists of acquired tradenames and trademarks, in conjunction with the annual impairment tests of goodwill.

The performance of the Company’s annual impairment test did no t result in any impairment of the Company’s indefinite-lived intangible assets.

The impairment charge was recorded in Intangible asset impairment and other costs in the Consolidated Statement of Operations.

The Company further performed the required annual impairment tests of goodwill and indefinite-lived intangibles as of April 30, 2020 consistent with the valuation approaches described above, which did not result in any additional impairment for the year ended December 31, 2020.

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

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Acquisition related additions (a)

Impairment ( 157 ) — ( 157 )

Translation and other ( 105 ) ( 14 ) ( 119 )

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Goodwill, net $ 3,096 $ 880 $ 3,976

Acquisition related additions (a)

Impairment ( 1,187 ) — ( 1,187 )

Translation and other ( 87 ) ( 14 ) ( 101 )

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Total identifiable intangible assets $ 3,473 $ ( 1,570 ) $ 1,903 $ 3,737 $ ( 1,418 ) $ 2,319

(a) Intangible assets acquired in a business combination that are in-process and used in research and development ("R&D") activities are considered indefinite-lived until the completion or abandonment of the R&D efforts.

(a) Intangible assets acquired in a business combination that are in-process and used in R&D activities are considered indefinite-lived until the completion or abandonment of the R&D efforts.

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

During the third quarter of 2022, the completion of certain R&D activities occurred, resulting in the reclassification of $ 5 million of in-process R&D to in-service assets with a definite life.

In the fourth quarter of 2022, the Company made the determination to abandon certain in-process R&D efforts, and recorded a $ 3 million impairment charge of in-process R&D assets.

Amortization expense for identifiable definite-lived intangible assets for the years ended December 31, 2022, 2021 and 2020 was $ 209 million, $ 222 million and $ 192 million, respectively.

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During the second quarter of 2021, the Company purchased certain developed technology rights for an initial payment of $ 3 million.

The purchase consideration also includes contingent payments of $ 17 million to be made upon reaching certain regulatory and commercial milestones, which were not yet deemed probable at December 31, 2021.

The purchase consideration also includes contingent payments of $ 17 million to be made upon reaching certain regulatory and commercial milestones, which were not yet considered probable at December 31, 2022.

NOTE 13 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

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The average balance outstanding for the commercial paper facility during the year ended December 31, 2022 was $ 269 million.

At December 31, 2020, the Company had no outstanding borrowings under this commercial paper facility.

At December 31, 2021, the Company had $ 170 million outstanding borrowings under this commercial paper facility.

The Company also has access to $ 50 million in uncommitted short-term financing under lines of credit from various financial institutions, the availability of which is reduced by other short-term borrowings of $ 22 million.

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

Long-Term Debt

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(in millions except percentages) Balance Rate Balance Rate

Fixed rate senior notes $ 450 million due August 2021

$ — — % $ 296 4.1 %

Private placement notes 70 million euros due October 2024

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Other borrowings, various currencies and rates 21 17

Hedge accounting fair value adjustment (a)

$ 1,836 $ 1,922

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Long-term portion $ 1,826 $ 1,913

(a) Represents the fair value of interest rate swap agreements entered into on a portion of the outstanding senior notes.

At December 31, 2022, the Company had $ 632 million borrowings available under unused lines of credit, including lines available under its short-term arrangements and revolving credit agreement.

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

The table below reflects the contractual maturity dates of the various long-term borrowings as follows:

(in millions) December 31, 2021

The contractual maturity dates of the Company's long-term borrowings as of December 31, 2022 were as follows:

(in millions)

2028 and beyond 1,340

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

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

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

On March 8, 2022, the Company entered into an Accelerated Share Repurchase Agreement ("ASR Agreement") with a financial institution to purchase the Company's common stock based on the volume-weighted average price of the Company's common stock during the term of the agreement, less a discount.

(in millions, except per share amounts) Initial Delivery Final Settlement

Agreement Date Amount Paid Shares Received Price per share Value of Shares as a % of Contract Value Settlement Date Total Shares Received Average Price per Share

March 8, 2022 $ 150 2.4 $ 50.44 80 % April 19, 2022 3.1 $ 48.22

The ASR agreement was accounted for as an initial delivery of common shares in a treasury stock transaction on March 9, 2022 of $ 120 million and a forward contract indexed to the Company's common stock for an amount of common shares to be determined on the final settlement date.

The forward contract met all applicable criteria for equity classification and was not accounted for as a derivative instrument.

Therefore, the forward contract was recorded as Capital in excess of par value and upon final settlement was recorded as Treasury Stock in the Consolidated Balance Sheets at December 31, 2022.

The initial delivery and final settlement of common stock reduced the weighted average common shares outstanding for both basic and diluted EPS.

The forward contract did not impact the weighted average common shares outstanding for diluted EPS.

For the years ended December 31, 2022, 2021 and 2020, the Company repurchased outstanding shares of common stock at a cost of $ 150 million, $ 200 million and $ 140 million, respectively.

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NOTE 17 - INCOME TAXES

The components of income (loss) before income taxes were as follows:

The components of (loss) income before income taxes were as follows:

Year Ended December 31,

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Foreign ( 524 ) 494 41

Total (loss) income before income taxes

$ ( 1,055 ) $ 545 $ ( 50 )

The components of the provision (benefit) for income taxes from operations were as follows:

The components of the (benefit) provision for income taxes from operations were as follows:

Year Ended December 31,

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Total $ ( 228 ) $ ( 25 ) $ ( 62 )

$ 138 $ 23 $ 82

Total (benefit) provision for income taxes $ ( 105 ) $ 134 $ 23

The reconciliation of the U.S.

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Year Ended December 31,

2021 2020 2019

(in millions) 2022 2021 2020

Statutory U.S.

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Year Ended December 31,

(in millions) Deferred Tax Asset

Deferred Tax Asset

(in millions) 2022 2021

Deferred tax assets

Commission and bonus accrual $ 9 $ 6

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Inventory 9 16

Identifiable intangible assets — 569 — 613

Insurance premium accruals 3 3

Miscellaneous accruals 37 27

Other 17 — 11 —

Unrealized losses included in AOCI 46 — 98 —

Property, plant and equipment — 48 — 50

Lease right-of-use asset — 47 — 42

Net unrealized gains/losses included in AOCI — 47

Lease right-of-use liability 48 47

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Sales and marketing accrual 9 14

Taxes on unremitted earnings of foreign subsidiaries — 5 — 6

Tax loss carryforwards and other tax attributes 654 275

Subtotal $ 542 $ 669 $ 613 $ 711

Total deferred tax assets $ 891 $ 558

Valuation allowances ( 645 ) ( 267 )

Total $ 275 $ 669 $ 326 $ 711

Total deferred tax assets, net $ 246 $ 291

Deferred tax liabilities

Identifiable intangible assets $ ( 325 ) $ ( 569 )

Property, plant and equipment ( 41 ) ( 47 )

Lease right-of-use asset ( 47 ) ( 47 )

Net unrealized gains/losses included in AOCI ( 13 ) —

Taxes on unremitted earnings of foreign subsidiaries ( 6 ) ( 5 )

Total deferred tax liabilities ( 432 ) ( 668 )

Net deferred tax liabilities $ ( 186 ) $ ( 377 )

Deferred tax assets and liabilities are included in the following Consolidated Balance Sheets line items at December 31 were as follows:

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The Company has tax loss carryforwards related to certain foreign and domestic subsidiaries of approximately $ 2,790 million at December 31, 2022, of which $ 2,525 million expires at various times through 2042 and $ 265 million may be carried forward indefinitely.

Included in deferred income tax assets at December 31, 2021 are tax benefits totaling $ 228 million, before valuation allowances, for the tax loss carryforwards.

In addition the Company has recorded a deferred tax asset of $ 48 million, related to tax attributes.

Included in deferred income tax assets at December 31, 2022 are tax benefits of $ 601 million and $ 53 million, before valuation allowances, related to tax loss carryforwards and disallowed interest carryforwards, respectively.

As of December 31, 2021 the Company's deferred tax assets included $ 229 million of tax loss carryforwards and $ 46 million of disallowed interest carryforwards.

The increase from the prior year is primarily attributable to the re-establishment of Luxembourg net operating loss carryforwards of $ 1.5 billion.

The realizability of such net operating losses was previously determined to be remote and therefore a related deferred tax asset was not recorded.

As of December 31, 2022, the Company believes that these Luxembourg net operating losses are no longer remote such that it is appropriate to recognize an increase in the deferred tax asset of $ 382 million, with a corresponding increase to the valuation allowance.

The Company has recorded $ 591 million of valuation allowance to offset the tax benefit of net operating losses, $ 36 million to offset the tax benefit of foreign tax credits, and $ 18 million of valuation allowance for other deferred tax assets.

The increase in the valuation allowance is primarily driven by the aforementioned Luxembourg net operating loss.

The Company has recorded these valuation allowances due to the uncertainty that these assets can be realized in the future.

The Company has provided $ 6 million of withholding taxes on certain undistributed earnings of its foreign subsidiaries that the Company anticipates will be repatriated.

Undistributed earnings of foreign subsidiaries and related companies that are considered to be permanently invested amounted to $ 2,492 million a t December 31, 2022 and $ 1,771 million at December 31, 2021 .

The Tax Cuts and Jobs Act imposed U.S.

tax on all post-1986 foreign unrepatriated earnings accumulated through December 31, 2017.

Unrepatriated earnings generated after December 31, 2017, are now subject to tax in the current year.

All undistributed earnings are still subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply.

It is not practicable to calculate the unrecognized deferred tax liability on undistributed earnings.

Tax Contingencies

The total amount of gross unrecognized tax benefits at December 31, 2021 is approximately $ 42 million, of this total, approximately $ 41 million represents the amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate.

The total amount of gross unrecognized tax benefits at December 31, 2022 is approximately $ 55 million, including interest of which, approximately $ 55 million represents the amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate.

It is reasonably possible that certain amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date of the Company’s consolidated financial statements.

Expiration of statutes of limitation in various jurisdictions during the next twelve months could include unrecognized tax benefits of approximately $ 1 million.

Of this approximately $ 1 million represents the amount of unrecognized tax benefits that, if recognized would affect the effective income tax rate.

Expiration of statutes of limitations in various jurisdictions during the next twelve months could include unrecognized tax benefits of approximately $ 11 million, if recognized, would affect the effective income tax rate.

The total amount of accrued interest and penalties were $ 6 million and $ 8 million at December 31, 2022 and 2021, respectively.

The Company has consistently classified interest and penalties recognized in its consolidated financial statements as income taxes based on the accounting policy election of the Company.

During the years ended December 31, 2021 and 2020, the Company recognized income tax expense of $ 2 million each year, related to interest and penalties.

During the year ended December 31, 2019, the Company recognized income tax benefit of $ 2 million, related to interest and penalties.

The Company recognized a tax benefit of $ 2 million and tax expense of $ 2 million for the years ended December 31, 2022 and 2021, respectively, related to interest and penalties.

The Company is subject to U.S.

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The tax years 2014 through 2021 are subject to future potential tax audit adjustments.

The Company has concluded audits in Germany through the tax year 2013 and is currently under audit for the years 2014 through 2017.

The Company concluded audits in Germany through the tax year 2013 and is currently under audit for the years 2014 through 2017.

The tax years 2018 through 2021 are subject to future potential audit adjustments in Germany.

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Gross change for current year positions 4 2 1

Decrease due to settlements and payments — — ( 4 )

Decrease due to statute expirations — — —

Increase due to effect of foreign currency translation — — 1

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Unrecognized tax benefits at end of period $ 49 $ 34 $ 27

Federal Legislative Changes

Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to $ 1,771 million a t December 31, 2021 and $ 1,807 million at December 31, 2020 .

The Tax Cuts and Jobs Act (the "act" or "U.S.

tax reform") imposed U.S.

tax on all post-1986 foreign unrepatriated earnings accumulated through December 31, 2017.

Unrepatriated earnings generated after December 31, 2017, are now subject to tax in the current year.

All undistributed earnings are still subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply.

It is not practicable to calculate the unrecognized deferred tax liability on undistributed earnings.

For the Global Intangible Low Taxed Income (GILTI) provision of the Act, the Company has made the policy election to record any liability associated with GILTI in the period in which it is incurred.

In March 2020, in response to the impact of the COVID-19 pandemic in the U.S.

and across the globe, the U.S.

Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act.

In December 2020, the U.S.

Congress passed a second relief package, Consolidated Appropriations Act, 2021.

The enactment period impacts to the Company were immaterial to income tax expense.

NOTE 18 - BENEFIT PLANS

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Defined Benefit Plans

The Company maintains defined benefit pension plans for certain employees in Austria, France, Germany, Italy, Japan, the Netherlands, Norway, Sweden, Switzerland, Taiwan, and the United States.

The Company maintains defined benefit pension plans for certain employees in Austria, France, Germany, Indonesia, Italy, Japan, the Netherlands, Norway, Sweden, Switzerland, Taiwan, and the U.S.

These plans provide benefits based upon age, years of service and remuneration.

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The changes also include a $ 1 million actuarial gain due to demographic assumption changes and a $ 14 million actuarial loss due to plan experience different than anticipated.

Significant changes in the retirement plan benefit obligations for the year ended December 31, 2020 include a $ 31 million actuarial loss primarily attributable to the change in discount rates, the effect of which is slightly offset by the change in inflation and salary increase assumptions in some plans.

Significant changes in the retirement plan benefit obligations for the year ended December 31, 2021 include a $ 26 million actuarial gain primarily attributable to the increase in discount rates, the effect of which is slightly offset by the change in inflation and salary increase assumptions in some plans.

The changes also include a $ 6 million actuarial gain due to demographic assumption changes and a $ 16 million actuarial loss due to plan experience different than anticipated.

Defined Benefit Pension Plan Assets

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Participant contributions 4 4

Actuarial losses (gains) ( 16 ) 31

Actuarial gains ( 149 ) ( 16 )

Plan amendments — ( 1 )

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Acquisitions/Divestitures — 1 — Other expense (income), net

Curtailment and settlement (gains) loss ( 1 ) — 6 Other expense (income), net

Curtailment and settlement gains ( 1 ) ( 1 ) — Other expense (income), net

Net periodic benefit cost $ 19 $ 27 $ 25

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(in millions) 2022 2021 2020

Net actuarial loss (gain) $ ( 36 ) $ 43 $ 53

Net actuarial (gains) loss $ ( 125 ) $ ( 36 ) $ 43

Amortization ( 7 ) ( 11 ) ( 9 )

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Fair Value Measurements of Plan Assets

The fair value of the Company’s pension plan assets at December 31, 2021 and 2020 is presented in the table below by asset category.

The fair value of the Company’s pension plan assets at December 31, 2022 and 2021 are presented in the table below by asset category.

Approximately 81 % of the total plan assets are categorized as Level 1, and therefore, the values assigned to these pension assets are based on quoted prices available in active markets.

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Mutual funds (b)

Common trusts (c)

Insurance contracts 34 — — 34

Hedge funds 11 — — 11

Real estate 1 — — 1

Total $ 212 $ 166 $ — $ 46

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(b) This category includes mutual funds balanced between moderate-income generation and moderate capital appreciation with investment allocations of approximately 50 % equities and 50 % fixed income investments.

(c) This category includes common/collective funds with investments in approximately 65 % equities and 35 % in fixed income investments.

A reconciliation from December 31, 2020 to December 31, 2022 for the plan assets categorized as Level 3 were as follows:

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Purchases, sales and settlements, net ( 2 ) ( 1 ) — ( 3 )

Transfers in and/or (out) 2 — — 2

Effect of exchange rate changes ( 3 ) — — ( 3 )

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Purchases, sales and settlements, net ( 1 ) ( 2 ) — ( 3 )

Transfers in and/or out 2 — — 2

Effect of exchange rate changes ( 2 ) — — ( 2 )

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2027-2031 128

NOTE 19 - RESTRUCTURING AND OTHER COSTS

During the year ended December 31, 2021, the Company recorded net restructuring and other costs of $ 20 million, which consists primarily of severance and other restructuring costs of $ 23 million, offset by adjustments to inventory reserve of $ 3 million.

During the year ended December 31, 2020, the Company recorded restructuring and other costs of $ 123 million which consists primarily of inventory write-downs of $ 31 million, accelerated depreciation of $ 14 million, severance costs of $ 23 million, indefinite-lived intangible asset impairment of $ 39 million, and other impairments of $ 8 million.

During the year ended December 31, 2019, the Company recorded restructuring and other costs of $ 128 million, which consists primarily of inventory write-downs of $ 20 million, accelerated depreciation of $ 3 million, severance costs of $ 37 million, fixed asset impairments of $ 33 million, and $ 9 million related to impairments of both definite-lived and indefinite-lived intangible assets.

The details of total restructuring and other costs for the years ended 2021, 2020 and 2019 were as follows:

NOTE 19 - INTANGIBLE ASSET IMPAIRMENT AND OTHER COSTS

During the year ended December 31, 2022, the Company recorded net intangible asset impairment and other costs of $ 114 million, which consists primarily of indefinite-lived asset impairment of $ 100 million and severance and other costs of $ 14 million.

During the year ended December 31, 2021, the Company recorded net intangible asset impairment and other costs of $ 20 million, which consists primarily of severance and other restructuring costs of $ 23 million, offset by adjustments to inventory reserve of $ 3 million.

During the year ended December 31, 2020, the Company recorded intangible asset impairment and other costs of $ 123 million which consists primarily of inventory write-downs of $ 31 million, accelerated depreciation of $ 14 million, severance costs of $ 23 million, indefinite-lived intangible asset impairment of $ 39 million, and other impairments of $ 8 million.

Intangible asset impairment and other costs for the years ended December 31, 2022, 2021 and 2020 were as follows:

Affected Line Item in the Consolidated Statements of Operations Year Ended December 31,

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Selling, general, and administrative expenses — 6 2

Restructuring and other costs 17 77 81

Other income and expenses — — ( 1 )

Total restructuring and other costs $ 20 $ 123 $ 128

Restructuring Programs and Accruals

In 2018, the Board of Directors of the Company 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.

These plans are nearing completion as of the end of 2021 and are expected to result in total charges of approximately $ 345 million, of which $ 321 million has been incurred as of December 31, 2021.

For the year ended December 31, 2021, the Company made a $ 3 million adjustment related to inventory reserves and recorded severance costs of $ 2 million related to these plans.

Remaining expenses in 2021 pertain to minor restructuring actions taken during the year.

These expenses are included in the above table.

Intangible asset impairment and other costs 114 17 77

Total intangible asset impairment and other costs $ 114 $ 20 $ 123

The Company's restructuring accruals at December 31, 2022 were as follows:

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Amounts applied ( 4 ) ( 2 ) ( 1 ) ( 7 )

Change in estimates ( 1 ) — — ( 1 )

Balance at December 31, 2022 $ — $ — $ 1 $ 1

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Amounts applied ( 2 ) ( 5 ) ( 3 ) ( 10 )

Change in estimates — ( 1 ) — ( 1 )

Balance at December 31, 2021 $ 3 $ 1 $ — $ 4

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Any cash flows associated with these instruments are included in investing activities in the Consolidated Statements of Cash Flows except for derivative instruments that include an other-than-insignificant financing element, for which all cash flows are classified as financing activities in the Consolidated Statements of Cash Flows.

The fair value of the foreign exchange forward contracts and cross-currency basis swaps is the estimated amount the Company would receive or pay at the reporting date, taking into account the effective interest rates, cross-currency swap basis rates and foreign exchange rates.

The effective portion of the change in the value of these derivatives is recorded in AOCI, net of tax effects.

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

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

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

On May 25, 2021, the Company re-established its euro net investment hedge portfolio by entering into eight foreign exchange forward contracts, each with a notional amount of 10 million euro.

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

On April 7, 2020, the Company terminated its entire foreign exchange forward contracts net investment hedge portfolio early which resulted in a $ 48 million cash receipt.

The Company elected to enter into this transaction to convert the favorable gain position into additional liquidity.

The original contracts have quarterly maturity dates through March 2023.

The Company enters into additional foreign exchange contracts as individual contracts within the portfolio mature.

As of December 31, 2022, the euro net investment hedge portfolio has an aggregate notional value of 160 million euro with maturity dates through December 2024.

Fair Value Hedges

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The Company measures the effectiveness of fair value hedges of anticipated transactions on a spot-to-spot basis rather than on a forward-to-forward basis.

Accordingly, the spot-to-spot change in the derivative fair value will be recorded in the Consolidated Statements of Operations.

Accordingly, the spot-to-spot change in the derivative fair value will be recorded in Other expense (income), net in the Consolidated Statements of Operations.

The time-value component of the fair value of the derivative is reported on a straight-line basis in Other expense (income), net in the Consolidated Statements of Operations in the applicable period.

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

On January 6, 2021 the Company entered into foreign exchange forward contracts with a notional value of SEK 1.3 billion as a result of an increase in intercompany loans denominated in Swedish kronor.

The foreign exchange forwards are designated as fair value hedges.

Interest Rate Risk Management

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The gains and losses on these derivative transactions offset the gains and losses generated by the revaluation of the underlying non-functional currency balances and are recorded in Other expense (income), net in the Consolidated Statements of Operations.

Any cash flows associated with the foreign exchange forward contracts and interest rate swaps not designated as hedges are included in operating activities in the Consolidated Statements of Cash Flows.

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

Derivative Instrument Activity

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Year Ended December 31, 2022

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

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

Cash Flow Hedges

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Year Ended December 31, 2021

Cash Flow Hedges

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Fair Value Hedges

Foreign exchange forward contracts $ ( 3 ) Interest expense, net $ — $ 3 $ —

Foreign exchange forward contracts $ ( 1 ) Other expense (income), net $ — $ 1 $ 23

Interest rate swap — Interest expense, net — — 1

Total for fair value hedging $ ( 1 ) $ — $ 1 $ 24

Year Ended December 31, 2020

Cash Flow Hedges

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Foreign exchange forward contracts $ 18 $ 11 $ 2 $ 1

Interest rate swaps 5 — — 9

Cross currency basis swaps 4 — — 7

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Foreign exchange forward contracts $ 38 $ — $ 38 $ ( 7 ) $ — $ 31

Cross currency basis swaps 26 — 26 ( 12 ) — 14

Total assets $ 64 $ — $ 64 $ ( 19 ) $ — $ 45

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Interest rate swaps 34 — 34 ( 9 ) — 25

Cross currency basis swaps 4 — 4 ( 3 ) — 1

Total liabilities $ 46 $ — $ 46 $ ( 19 ) $ — $ 27

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Foreign exchange forward contracts $ 31 $ — $ 31 $ ( 9 ) $ — $ 22

Cross currency basis swaps — — — — — —

Total assets $ 31 $ — $ 31 $ ( 9 ) $ — $ 22

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

Interest rate swaps 4 — 4 ( 2 ) — 2

Cross currency basis swaps 4 — 4 ( 3 ) — 1

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NOTE 21 - FAIR VALUE MEASUREMENT

The estimated fair value and carrying value of the Company's total long-term debt, including current portion, was $ 2,239 million and $ 2,095 million, respectively, at December 31, 2021.

The estimated fair value and carrying value of the Company's total debt was $ 1,769 million and $ 1,944 million, respectively, at December 31, 2022.

At December 31, 2021, the estimated the fair value and carrying value was $ 2,239 million and $ 2,095 million, respectively.

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It is considered a Level 2 fair value measurement for disclosure purposes.

The interest rate on the outstanding principal of the $ 750 million Senior Notes is a fixed rate of 3.3 %.

The fair value of the Senior Notes is based on interest rates at December 31, 2021.

For additional details on interest rates of long-term debt, please see Note 15, Financing Arrangements.

Assets and liabilities measured at fair value on a recurring basis

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(in millions) Total Level 1 Level 2 Level 3

Interest rate swaps $ 5 $ — $ 5 $ —

Long-term debt 4 — 4 —

Cross currency interest rate swaps $ 26 $ — $ 26 $ —

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Interest rate swaps $ 34 $ — $ 34 $ —

Cross currency basis swaps 7 — 7 —

Foreign exchange forward contracts 12 — 12 —

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(in millions) Total Level 1 Level 2 Level 3

Interest rate swaps $ 5 $ — $ 5 $ —

Cross currency interest rate swaps 4 — 4 —

Foreign exchange forward contracts 30 — 30 —

Total assets $ 39 $ — $ 39 $ —

Interest rate swaps $ 9 $ — $ 9 $ —

Cross currency interest rate swaps 7 — 7 —

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The Company utilizes interest rates swaps and foreign exchange forward contracts that are considered cash flow hedges.

In addition, the Company at times employs certain cross currency interest rate swaps and forward exchange contracts that are considered hedges of net investment in foreign operations.

In addition, the Company at times employs certain cross currency interest rate swaps and foreign exchange forward contracts that are considered hedges of net investment in foreign operations.

Both types of designated derivative instruments are further discussed in Note 20, Financial Instruments and Derivatives.

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Balance, December 31, 2020 $ 5

Issuance of new contingent consideration —

Loss (gain) in Other expense (income), net —

Issuance of contingent consideration from business acquisition (a)

Payments ( 4 )

Balance, December 31, 2021 $ 10

Issuance of contingent consideration from business acquisition (a)

Loss (gain) in Other expense (income), net —

Payments ( 6 )

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

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

The expected settlement amount, which is immaterial to the financial statements, has been recorded as an accrued liability within the Company's consolidated balance sheet as of December 31, 2021.

The parties have also reached a settlement in the Olivares and Holt class action, and the court has approved the settlement.

The settlement amount, which is immaterial to the financial statements, has been recorded as an accrued liability within the Company's consolidated balance sheet as of December 31, 2022.

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

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Briefing on the motion to dismiss was fully submitted on May 21, 2021, and that motion is currently pending before the Court.

The Company intends to defend itself vigorously in these actions.

On June 2, 2022, the Company was named as a defendant in a putative class action filed in the U.S.

District Court for the Southern District of Ohio captioned City of Miami General Employees’ & Sanitation Employees’ Retirement Trust v.

2:22-cv-02371 (S.D.

Ohio), and on July 28, 2022, the Company was named as a defendant in a putative class action filed in the U.S.

District Court for the Southern District of New York captioned San Antonio Fire and Police Pension Fund v.

Dentsply Sirona Inc.

1:22-cv-06339 (together, the “Securities Litigation”).

The complaints in the Securities Litigation are substantially similar and both allege that, during the period from June 9, 2021 through May 9, 2022, the Company, Mr.

Casey Jr., the Company’s former Chief Executive Officer, and Mr.

Jorge Gomez, the Company’s former Chief Financial Officer, violated U.S.

securities laws by, among other things, making materially false and misleading statements or omissions, including regarding the manner in which the Company recognizes revenue tied to distributor rebate and incentive programs.

No specific amounts of damages have been alleged in these lawsuits.

The Company will continue to incur legal fees in connection with these pending cases, including expenses for the reimbursement of legal fees of present and former officers and directors under indemnification obligations.

The expense of continuing to defend such litigation may be significant.

The Company intends to defend these lawsuits vigorously, but there can be no assurance that the Company will be successful in any defense.

If any of the lawsuits are decided adversely, the Company may be liable for significant damages directly or under our indemnification obligations, which could adversely affect our business, results of operations and cash flows.

At this stage, the Company is are unable to assess whether any material loss or adverse effect is reasonably possible as a result of these lawsuits or estimate the range of any potential loss.

As a result of an audit by the IRS for fiscal years 2012 through 2013, on February 11, 2019, the IRS issued to the Company a “30-day letter” and a Revenue Agent’s Report (“RAR”), relating to the Company’s worthless stock deduction in 2013 in the amount of $ 546 million.

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The Company and its advisors discussed its position with the IRS Appeals Office Team on October 28, 2020 and, on November 13, 2020, submitted a supplemental response to questions raised by the Appeals Team.

The Company’s position continues to be reviewed by the IRS Appeals Office team.

believes the IRS' position is without merit and believes that it is more likely-than-not the Company’s position will be sustained upon further review by the IRS Appeals Office Team.

After an extended review by the IRS Appeals Office team, no resolution was reached in the appeals process.

It is anticipated that a statutory notice of deficiency for 2014 will soon be issued and, subsequently, the Company will file a petition in U.S.

Tax Court contesting the 2014 deficiency.

If the Company is not successful in defending its position, the potential additional income tax and interest attributable to 2015 and possibly later years is likely to be material due to the resulting loss of net operating loss carryforwards.

The Company believes the IRS' position is without merit and believes that it is more likely-than-not the Company’s position will be sustained in litigation.

The Company has not accrued a liability relating to the proposed tax adjustments.

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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 an additional $ 44 million in tax expense.

The Company has appealed the disallowance to the Swedish Administrative Court.

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On August 7, 2017, the Company appealed the unfavorable decision of the Swedish Administrative Court.

On November 5, 2018, the Company delivered its final argument to the Administrative Court of Appeals at a hearing.

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

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

Subsequently, the Swedish Tax Authority has conceded in pending court proceedings that the Company should be granted further interest expense deductions, but still claims that interest expense deductions incurring a maximum additional tax expense of $ 11 million should be disallowed on grounds not relating to European Union law.

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

On December 22, 2022, the Administrative Court of Appeal granted the Company a large part of the disputed interest deductions for tax years 2013 to 2014.

If the same assessment were to be applied also in the pending cases regarding tax years 2015 to 2018, the Company would incur a total tax expense of $ 7 million in the aggregate.

In order to pursue further judicial relief, The Supreme Administrative Court of Sweden would have to attract the case.

In consultation with its advisors the Company believes that the likelihood of the Supreme Administrative Court of Sweden attraction of the case is remote.

While the Company continues to maintain the position that the deductions are appropriate under local tax law, our ability to pursue further remedies is limited.

As a result, the Company recorded tax expense of $ 7 million related to this matter in its financial statements in the fourth quarter of 2022.

In addition to the matters disclosed above, the Company is, from time to time, subject to a variety of litigation and similar proceedings incidental to its business.

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Other Commitments

At December 31, 2021, we were obligated under various operating lease agreements.

At December 31, 2022, we were obligated under various lease agreements.

Please refer to Note 11, Leases, for additional details.

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Please refer to Note 18, Benefit Plans, for additional details.

NOTE 23 - SUBSEQUENT EVENTS

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.

The plan includes a restructuring of the business through a new operating model with five business units, optimization of central functions and overall management infrastructure, and other efforts aimed at cost savings.

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 estimates of these charges and their timing are subject to several assumptions, including local law requirements in various jurisdictions and co-determination aspects in countries where required.

Actual amounts may differ materially from estimates.

In addition, the Company may incur other charges or cash expenditures in connection with this plan which are not currently contemplated.

DENTSPLY SIRONA INC.

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267 3 382 ( 1 ) ( 6 ) 645

(a) The increase charged to other accounts represents an increase in deferred tax assets related to the re-establishment of Luxembourg net operating loss carryforwards for which a corresponding increase to the valuation allowance was also recorded, with no net impact to tax expense.

For details, refer to Note 17 Income Taxes in the preceding financial statements.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data