What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-01 · 457 added, 548 removed, 1414 unchanged (42% of the section changed)

5 unchanged sentences

Consolidated Statements of Operations - Years ended December 31, 2023, 2022, and 2021

Consolidated Statements of Comprehensive Income - Years ended December 31, 2022 , 2021 , and 2020

Consolidated Statements of Comprehensive Income or Loss - Years ended December 31, 2023, 2022, and 2021

Consolidated Balance Sheets - December 31, 2023 and 2022

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Note 5 - Comprehensive (Loss) Income

Note 6 - Business Combinations

Note 6 - Segment and Geographic Information

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Note 10 - Leases

Note 12 - Goodwill and Intangibles Assets

Note 11 - Goodwill and Intangible Assets

Note 12 - Prepaid Expenses and Other Current Assets

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Note 17 - Benefit Plans

Note 19 - Intangible Asset Impairment and Other Costs

Note 18 - Restructuring and Other Costs

Note 19 - Financial Instruments and Derivatives

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Note 21 - Commitments and Contingencies

Note 23 - Subsequent Event

Financial Statement Schedule for the Years Ended December 31, 2023, 2022, and 2021.

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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.

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;

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.

The 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;

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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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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

Also, 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, 2023.

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”).

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.

Based on its assessment, management concluded that, as of December 31, 2023, 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.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears herein.

Campion /s/ Glenn G.

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Chief Financial Officer

March 1, 2023 March 1, 2023

February 29, 2024 February 29, 2024

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

of DENTSPLY SIRONA Inc.

To the Board of Directors and Stockholders of Dentsply Sirona Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Dentsply Sirona Inc.

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”).

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income or loss, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 8 (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

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.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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 management's report referred to above.

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.

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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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

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.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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.

As described in Notes 1 and 11 to the consolidated financial statements, the Company’s consolidated net goodwill balance was $2,438 million as of December 31, 2023, of which a 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.

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.

On April 1, 2023, management realigned its reporting units due to a change in organizational structure.

Reporting units under the former structure were tested for impairment prior to the realignment, and no impairment was identified.

As a result of the realignment, the Company reallocated its goodwill to align its new reporting units which resulted from the change in its operating segments.

Goodwill was reassigned to each of the new reporting units using a relative fair value approach.

Management assessed the goodwill of the new reporting units and its indefinite-lived intangible assets for impairment as of April 1, 2023.

Based on this test, it was determined that the fair values of its reporting units and indefinite-lived intangible assets more likely than not exceeded their carrying values, resulting in no impairment.

In the third quarter of 2023, management identified indicators of a "more likely than not" impairment related to its Connected Technology Solutions reporting unit, which comprises all of the Connected Technology Solutions segment.

The decline in fair value for this reporting unit was driven by adverse macroeconomic factors as a result of weakened demand, particularly in European markets, and increased discount rates.

As a result of the interim test, management recorded a pre-tax goodwill impairment charge related to the Connected Technology Solutions reporting unit within the Connected Technology Solutions segment of $291 million.

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.

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.

The significant assumptions used by management 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, and future operating margin percentages 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 future operating margin percentages for both the annual and interim assessments, 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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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, 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;

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

Evaluating management’s assumptions related to revenue growth rates, perpetual revenue growth rates, and future operating margin percentages involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units;

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

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

Professionals with specialized skill and knowledge were used to assist in 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

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

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

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

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

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

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

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.

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

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

evaluating the tax documentation provided by management;

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

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

/s/ PricewaterhouseCoopers LLP

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Charlotte, North Carolina

March 1, 2023

February 29, 2024

We have served as the Company’s auditor since 2000.

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Research and development expenses 184 174 171

Goodwill impairment 1,187 — 157

Intangible asset impairment and other costs 114 17 77

Goodwill and intangible asset impairments 307 1,287 —

Restructuring and other costs 67 14 17

Operating (loss) income ( 85 ) ( 937 ) 608

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS

(in millions)

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Foreign currency translation adjustments 49 ( 156 ) ( 181 )

Net gain (loss) on derivative financial instruments 29 25 ( 32 )

Net (loss) gain on derivative financial instruments ( 30 ) 29 25

Pension liability adjustments ( 27 ) 91 26

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

Total other comprehensive loss ( 8 ) ( 36 ) ( 130 )

Total comprehensive (loss) income ( 140 ) ( 986 ) 281

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

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

Other comprehensive income — — — 138 — 138 1 139

— — 411 — — 411 — 411

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

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

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

Net income — — 411 — — 411 — 411

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

Other comprehensive loss

— — — ( 36 ) — ( 36 ) — ( 36 )

Exercise of stock options — 1 — — 6 7 — 7

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

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

Cash dividends declared ($ 0.50 per share)

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Restricted stock unit distributions — ( 32 ) — — 23 ( 9 ) — ( 9 )

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

Cash dividends declared ($ 0.56 per share)

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Amortization of intangible assets 211 209 222

Fixed asset impairment — — 3

Goodwill impairment 291 1,187 —

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Stock based compensation expense 46 59 48

Restructuring and other costs 33 ( 10 ) ( 17 )

Equity in earnings from unconsolidated affiliates 4 36 10

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Inventories, net 6 ( 141 ) ( 64 )

Prepaid expenses and other current assets, net ( 33 ) ( 32 ) 39

Prepaid expenses and other current assets ( 58 ) ( 33 ) ( 32 )

Other noncurrent assets 4 1 ( 10 )

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Cash received on derivative contracts 39 13 2

Proceeds from sale of property, plant and equipment

Other investing activities, net 1 ( 2 ) 2

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Cash flows from financing activities:

Proceeds from long-term borrowings, net of deferred financing costs 6 16 1,448

Proceeds from long-term borrowings — 6 16

Repayments on long-term borrowings ( 7 ) ( 2 ) ( 297 )

Net borrowings (repayments) on short-term borrowings 126 ( 64 ) 179

Payments on terminated derivative instruments — — ( 30 )

Proceeds from exercised stock options — 6 51

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Other financing activities, net ( 10 ) ( 21 ) ( 36 )

Net cash (used in) provided by financing activities ( 329 ) ( 379 ) 476

Net cash used in financing activities ( 307 ) ( 329 ) ( 379 )

Effect of exchange rate changes on cash and cash equivalents ( 12 ) ( 24 ) ( 19 )

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

Net (decrease) increase in cash and cash equivalents

( 31 ) 26 ( 99 )

Cash and cash equivalents at beginning of period 365 339 438

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(“Dentsply Sirona” or the “Company”), is the world’s largest manufacturer of dental products and technologies, with a 137 -year history of innovation and service to the dental industry and patients worldwide.

The Company’s principal product categories include dental consumable products, dental equipment, dental technologies and certain healthcare consumable products.

The Company’s principal product categories include dental consumable products, dental equipment, dental technologies and continence care consumable products.

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

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All significant intercompany accounts and transactions are eliminated in consolidation.

Certain prior period amounts have been reclassified to conform to current year presentation.

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.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.

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.

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

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

but may be longer in international markets.

Payment terms are typically 30 days in the United States but may be longer in markets outside the U.S.

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

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The allowance is determined based on a combination of factors, including the length of time that the receivable is past due, history of write-offs, and the Company’s knowledge of circumstances relating to specific customers’ ability to meet their financial obligations.

Provision for doubtful accounts are included in Selling, general and administrative expenses in the Consolidated Statements of Operations.

The provision for doubtful accounts is included in Selling, general and administrative expenses (“SG&A”) in the Consolidated Statements of Operations.

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

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

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

The cost of inventories is based upon the first-in, first-out method ( “ FIFO ” ) or average cost methods.

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.

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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 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.

Goodwill is not subject to amortization but is tested for impairment at the reporting unit level annually in accordance with U.S.

GAAP 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.

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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.

The Company conducts an impairment test in accordance with U.S.

GAAP 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.

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.

Additional information related to the testing for indefinite-lived intangible asset impairment, including results of the annual test performed as of April 1, 2023 and the interim impairment assessment performed in the third quarter of 2023, is provided in Note 11, Goodwill and Intangible Assets.

Definite-Lived Intangible Assets

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

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

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

Identifiable definite-lived intangible assets are amortized on a basis that best reflects how their economic benefits are utilized over the life of the asset or on a straight-line basis if not materially different from actual utilization.

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The Company uses the following useful lives for its definite-lived intangible assets:

Definite-lived Intangible Asset Type Useful Life

Patents Up to date patent expires

Definite-Lived Intangible Asset Type

Patents Up to the date the patent expires

Tradenames and trademarks Up to 20 years

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Assets acquired through acquisitions are recorded at fair value .

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

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

The Company capitalizes costs incurred in the development or acquisition of software, whether for internal or external use, and expenses costs incurred in the preliminary project planning stage.

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

Property, Plant, and Equipment Assets Type Useful Life

Property, Plant and Equipment Assets Type

Buildings 40 years

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

The benefit or loss from interest rate swaps is recorded in Interest expense, net in the Company’s Consolidated Statements of Operations consistent with the classification of interest expense attributable to the underlying debt.

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

The Company classifies derivative assets and liabilities as current when the remaining term of the derivative contract is one year or less.

The Company has elected to classify the cash flow from derivative instruments in the same category as the cash flows from the items being hedged.

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

The Company has elected to classify the cash flows from derivative instruments in the same category as the cash flows from the items being hedged.

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

See Note 19, Financial Instruments for additional information on derivative instruments.

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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 U.S.

are covered by postemployment healthcare plans.

Additionally, certain salaried employee groups in the United States 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.

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Foreign Currency Translation

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

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

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

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

During the year ended December 31, 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.

The local currency of foreign operations is generally considered to be their functional currency.

In the case of operations within highly inflationary economies, which for the Company include Argentina and Turkey, the Company remeasures the financial statements of entities in those countries with the U.S.

dollar as the functional currency.

Adjustments resulting from the process of translating the financial statements of entities with foreign functional currencies into U.S.

dollars are included in AOCI in the Consolidated Balance Sheets.

During the year ended December 31, 2023, the Company had a translation gain of $ 78 million and a loss on its loans designated as hedges of net investments of $ 29 million.

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

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

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, 2022, 2021, and 2020, net foreign currency loss of $ 11 million, gain of $ 6 million and gain of $ 13 million, respectively.

During the years ended December 31, 2023, 2022, and 2021, the Company had a net foreign currency gain of $ 3 million, loss of $ 6 million and gain of $ 12 million, respectively.

Revenue Recognition

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Selling, General and Administrative Expenses

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

SG&A represents indirect costs associated with generating revenues and in managing the business of the Company.

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

Advertising cost are expensed as incurred.

Advertising costs are expensed as incurred.

Research and Development Costs

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The Company operates within multiple taxing jurisdictions throughout the world and in the normal course of business is examined by taxing authorities in those jurisdictions.

Adjustments to the uncertain tax positions are recorded when taxing authority examinations are completed, statutes of limitation are closed, changes in tax laws occur or as new information comes to light with regard to the technical merits of the tax position.

Adjustments to the uncertain tax positions are recorded when taxing authority examinations are completed, statutes of limitation are closed, changes in tax laws occur or as new information comes to light regarding to the technical merits of the tax position.

Earnings Per Share

Basic earnings per share are calculated by dividing net earnings attributable to Company’s shareholders by the weighted average number of shares outstanding for the period.

Diluted earnings per share is calculated by dividing net earnings attributable to Company’s shareholders by the weighted average number of shares outstanding for the period, adjusted for the effect of an assumed exercise of all dilutive options outstanding at the end of the period, unless the impact of including these options is anti-dilutive.

Basic earnings per share are calculated by dividing net earnings attributable to the Company’s shareholders by the weighted average number of shares outstanding for the period.

Diluted earnings per share is calculated by dividing net earnings attributable to the Company’s shareholders by the weighted average number of shares outstanding for the period, adjusted for the effect of an assumed exercise of all dilutive options outstanding at the end of the period, unless the impact of including these options is anti-dilutive.

Business Acquisitions

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

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

For the year ended December 31, 2021, the Company incurred acquisition-related costs of $ 8 million, consisting primarily of legal and professional fees, which were recorded in SG&A expenses in the Consolidated Statements of Operations.

These costs were not material for the years ended December 31, 2023 and 2022.

Investments in Unconsolidated Affiliates

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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.

On December 7, 2023, the Company sold its minority interest in a UK-based, privately-held provider of healthcare consumables for $ 13 million.

Prior to the sale, the Company recorded a loss of $ 4 million in Other expense (income), net due to a forfeiture of accumulated earnings on the investment for declining its option to purchase the remaining ownership interest.

The Company's equity-method net losses were $ 4 million, $ 36 million, and $ 10 million for the years ended December 31, 2023, 2022, and 2021 respectively.

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The Company has numerous operating businesses covering a wide range of products and geographic regions, primarily serving the professional dental market and to a lesser extent the consumable medical device market.

The Company has two reportable segments and a description of the activities within these segments is included in Note 7, Segment and Geographic Information.

The Company has four reportable segments and a description of the activities within these segments is included in Note 6, Segment and Geographic Information.

Fair Value Measurement

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Non-Recurring Basis

When events or circumstances require an asset or liability to be measured at fair valued that otherwise is generally recorded based on another valuation method, such as, net realizable value, the Company will utilize the valuation techniques described above.

When events or circumstances require an asset or liability to be measured at fair value that otherwise is generally recorded based on another valuation method, such as, net realizable value, the Company will utilize the valuation techniques described above.

The Company records its business combinations and impairments on a non-recurring basis.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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

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.

In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2021-08, “Business Combinations (Topic 805):

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

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

The amendments in this update were effective for the fiscal years and interim periods ending after December 31, 2022.

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, 2023.

The adoption of this standard did not materially impact the Company’s consolidated financial statements or related disclosures.

In August 2018, the FASB issued ASU No.

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

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.

The adoption of this standard did not materially impact the Company’s disclosures.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”, which requires public entities to disclose information about significant expenses in their reportable segment results on both an interim and annual basis.

Public entities are required to disclose significant expense categories and amounts for each reportable segment.

Significant expense categories are derived from expenses that are regularly reported to an entity’s chief operating decision-maker (“CODM”) and included in a segment’s reported measures of profit or loss.

Public entities are also required to disclose the title and position of the CODM and explain how the CODM uses the reported measures of profit or loss to assess segment performance.

This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, early adoption is permitted and should be applied retrospectively for all prior periods presented in the consolidated financial statements.

The Company is currently evaluating the impact on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No.

2023-09, “Income Taxes (Topic 740):

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.

The adoption of this standard did not materially impact the Company’s consolidated financial statements or related disclosures.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No.

2020-04 “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which was subsequently amended by ASU No.

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

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.

This standard is permitted to be adopted any time through December 31, 2024, and does not apply to contract modifications made or hedging relationships entered into or evaluated after December 31, 2024.

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

In October 2021, the FASB issued ASU No.

2021-08, “Business Combinations:

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

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

This standard is effective for 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.

Improvements to Income Tax Disclosures”, which requires public entities to disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid on an annual basis.

The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this update are effective for annual periods beginning after December 15, 2024, early adoption is permitted and should be applied prospectively.

The Company is currently evaluating the impact on its consolidated financial statements and related disclosures.

NOTE 2 - REVENUE

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

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

For a description of the products and services provided within each of the Company’s four reportable segments see Note 6, Segment and Geographic Information.

Net sales disaggregated by product category were as follows:

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Equipment & Instruments $ 628 $ 678 $ 728

Implants 570 626 475

CAD/CAM 541 541 620

Connected Technology Solutions $ 1,169 $ 1,219 $ 1,348

Essential Dental Solutions $ 1,468 $ 1,427 $ 1,516

Orthodontics $ 339 $ 297 $ 273

Healthcare 270 303 287

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

Implants & Prosthetics 701 709 791

Orthodontic and Implant Solutions $ 1,040 $ 1,006 $ 1,064

Wellspect Healthcare $ 288 $ 270 $ 303

Total net sales $ 3,965 $ 3,922 $ 4,231

Technologies & Equipment Segment

Equipment & Instruments

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

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

Treatment centers comprise a broad range of products from basic 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 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 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 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.

Consumables Segment

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

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

Endodontic & Restorative Products

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

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

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

Other Consumables

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

Net sales disaggregated by geographic region were as follows:

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Contract Assets and Liabilities

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

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

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

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 had deferred revenue of $ 91 million and $ 57 million recorded in Accrued liabilities and Other noncurrent liabilities, respectively, in the Consolidated Balance Sheets at December 31, 2023.

The Company had deferred revenue of $ 91 million and $ 27 million recorded in Accrued liabilities and Other noncurrent liabilities, respectively, in the Consolidated Balance Sheets at December 31, 2022.

The Company recognized $ 68 million of revenue during the twelve months ended December 31, 2023 which was previously deferred as of December 31, 2022.

The Company recognized $ 59 million of revenue during the the twelve months ended December 31, 2022 which was previously deferred as of December 31, 2021.

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

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Research and development expense 4 3 2

Restructuring and other costs 2 — —

Total stock based compensation expense $ 46 $ 59 $ 49

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Expected life (years) 4.76 5.20 5.08

The total intrinsic value of options exercised for the years ended December 31, 2022, 2021 and 2020 was $ 1 million, $ 16 million and $ 3 million, respectively.

The total fair value of shares vested for the years ended December 31, 2022, 2021 and 2020 was $ 49 million, $ 76 million and $ 54 million, respectively.

The total intrinsic value of options exercised for the year ended December 31, 2023 was insignificant.

The total intrinsic value of options exercised for the years ended December 31, 2022 and 2021 was $ 1 million and $ 16 million, respectively.

The NQSO transactions for the year ended December 31, 2023 were as follows:

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There were 1 million NQSOs unvested at December 31, 2023.

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 remaining unamortized compensation cost related to NQSOs is $ 9 million, which will be expensed over the weighted average remaining vesting period of the options, which is 2.0 years.

The weighted average remaining contractual term of all outstanding options, exercisable options and options expected to vest are 5.7 years, 3.6 years and 8.8 years, respectively.

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Unvested at December 31, 2023

The unamortized compensation cost related to RSUs is $ 67 million, which will be expensed over the remaining weighted average restricted period of the RSUs, or 1.9 years.

The weighted average grant date fair value of RSUs granted for the years ended December 31, 2022 and 2021 were $ 39.73 and $ 63.61 , respectively.

The unamortized compensation cost related to RSUs is $ 57 million, which will be expensed over the remaining weighted average restricted period of the RSUs, which is 1.9 years.

The total fair value of shares vested for the years ended December 31, 2023, 2022 and 2021 was $ 42 million, $ 49 million and $ 76 million, respectively.

NOTE 4 - EARNINGS PER COMMON SHARE

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Earnings (loss) per common share - diluted $ ( 0.62 ) $ ( 4.41 ) $ 1.87

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 0.5 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.

Weighted average shares excluded from diluted common shares outstanding due to reported net loss 1.1 0.5 —

Weighted average shares excluded from diluted common shares outstanding due to antidilutive nature 3.0 3.6 1.0

NOTE 5 - COMPREHENSIVE (LOSS) INCOME

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

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

These changes are recorded in AOCI net of tax.

For the years ended December 31, 2023, 2022 and 2021, these tax adjustments were $ 166 million, $ 100 million and $ 168 million, respectively, primarily related to foreign currency translation adjustments.

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.

The cumulative foreign currency translation adjustments included translation losses of $ 360 million and $ 438 million at December 31, 2023 and 2022, respectively, and included losses of $ 113 million and $ 84 million, at December 31, 2023 and 2022, respectively, on loans designated as hedges of net investments.

Changes in AOCI, net of tax, by component for the years ended December 31, 2023 and 2022 were as follows:

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

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

Balance, net of tax, at December 31, 2022 $ ( 522 ) $ ( 17 ) $ ( 73 ) $ ( 16 ) $ ( 628 )

Other comprehensive (loss) income before reclassifications and tax impact ( 127 ) ( 1 ) 39 116 27

Tax expense ( 29 ) — ( 9 ) ( 30 ) ( 68 )

Other comprehensive (loss) income, net of tax, before reclassifications $ ( 156 ) $ ( 1 ) $ 30 $ 86 $ ( 41 )

Other comprehensive income (loss) before reclassifications and tax impact 2 — ( 45 ) ( 34 ) ( 77 )

Other comprehensive income (loss), net of tax, before reclassifications $ 49 $ — $ ( 34 ) $ ( 26 ) $ ( 11 )

Amounts reclassified from accumulated other comprehensive income, net of tax — 4 — ( 1 ) 3

Net (decrease) increase in other comprehensive income ( 156 ) ( 1 ) 30 91 ( 36 )

Net increase (decrease) in other comprehensive income 49 4 ( 34 ) ( 27 ) ( 8 )

Balance, net of tax, at December 31, 2023 $ ( 473 ) $ ( 13 ) $ ( 107 ) $ ( 43 ) $ ( 636 )

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

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

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

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Amortization of net actuarial losses — ( 8 ) ( 12 ) (a)

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

Net income (loss) before tax

$ 1 $ ( 7 ) $ ( 11 )

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

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

Net income (loss) after tax

$ 1 $ ( 5 ) $ ( 8 )

Total reclassifications for the period $ ( 3 ) $ ( 5 ) $ ( 15 )

(a) These AOCI components are included in the computation of net periodic benefit cost for the years ended December 31, 2023, 2022 and 2021, respectively.

NOTE 6 - BUSINESS COMBINATIONS

2021 Transactions

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

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

The 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 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:

Weighted Average

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

In-process R&D $ 3 Indefinite

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

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 aligner market.

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)

Other current assets $ 4

Intangible assets 66

Current liabilities ( 1 )

Net assets acquired 69

Purchase consideration $ 132

The purchase price has been allocated on the basis of the 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.

Identifiable intangible assets acquired were as follows:

Weighted Average

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

Developed technology $ 66 10

On January 21, 2021, the effective date of the transaction, the Company paid $ 94 million with the potential for additional earn-out provision payments of up to $ 10 million, to acquire 100 % of the outstanding shares of Datum Dental, Ltd.

("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.

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

(in millions)

Cash and cash equivalents $ 2

Other current assets 2

Intangible assets 76

Current liabilities ( 2 )

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

Net assets acquired 64

Purchase consideration $ 103

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

The goodwill is not deductible for tax purposes.

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 $ 6 million.

Identifiable intangible assets acquired were as follows:

Weighted Average

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

Developed technology $ 66 15

In-process R&D 10 Indefinite

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 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, 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 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.

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

The divestiture resulted in an immaterial loss recorded in Other expense (income), net in the Consolidated Statements of Operations for the year ended December 31, 2021.

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

The divestiture resulted in a pre-tax gain of $ 13 million recorded in Other expense (income), net in the Consolidated Statements of Operations for the year ended December 31, 2021.

NOTE 6 - SEGMENT AND GEOGRAPHIC INFORMATION

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

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

Effective April 1, 2023 the Company realigned its reporting structure due to certain organizational changes.

The Company realigned its reportable segments to reflect changes in how the Company manages its operations, specifically the level at which its chief operating decision maker (“CODM”) regularly reviews operating results and allocates resources.

As a result, the reportable segments changed from Technology & Equipment and Consumables to (i) Connected Technology Solutions, (ii) Essential Dental Solutions, (iii) Orthodontic and Implant Solutions, and (iv) Wellspect Healthcare.

The Company has four operating segments that are organized primarily by product.

They generally have overlapping geographical presence, customer bases, distribution channels, and regulatory oversight with the exception of Wellspect Healthcare, which has a more discrete market and regulatory environment specific to the industry for medical devices.

These operating segments which also form the Company’s reportable segments, are identified in accordance with how the Company’s CODM regularly reviews financial results and uses this information to evaluate the Company’s performance and allocate resources.

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

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.

Technologies & Equipment

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 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.

Segment adjusted operating income is defined as operating income before income taxes and before certain corporate headquarters unallocated costs, goodwill and intangible asset impairments, restructuring 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.

Asset and other balance sheet information are not reported to the CODM.

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

Connected Technology Solutions

This segment includes the design, manufacture and sales of the Company’s dental technology and equipment products.

These products include the Equipment & Instruments and CAD/CAM product categories.

Equipment & Instruments

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

Imaging equipment serves as a key point of entry to the Company’s digital workflow offerings and consists of a broad range of diagnostic imaging systems for 2D or 3D, panoramic, and intraoral applications, as well as cone-beam computed tomography systems (“CBCT”).

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

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

Dental CAD/CAM technologies are products designed for dental offices to support numerous digital workflows for procedures such as dental restorations through integrations with DS Core, our cloud-based platform.

This product category includes intraoral scanners, 3-D printers, mills, and certain software and services, as well as a full-chairside economical restoration of esthetic ceramic dentistry offering called CEREC.

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

Essential Dental Solutions

This segment includes the development, manufacture and sales of the Company’s value-added endodontic, restorative, and preventive consumable products and small equipment used in dental offices for the treatment of patients.

Offerings in this segment also include specialized treatment products including products used in the creation of dental appliances.

Essential Dental Solutions products are designed to operate in an integrated system to provide solutions for high-tech dental procedures.

The endodontic products include motorized endodontic handpieces, files, sealers, irrigation needles and other tools or single-use solutions which support root canal procedures.

The restorative products include dental ceramics and other materials used in prosthetic restorations including crowns and veneers.

The preventive products include small equipment products such as curing light systems, dental diagnostic systems and ultrasonic scalers and polishers, as well as other dental supplies including dental anesthetics, prophylaxis paste, dental sealants and impression materials.

Orthodontic and Implant Solutions

This segment includes the design, manufacture, and sales of the Company’s various digital implant systems and innovative dental implant products, digital dentures and dental professional directed aligner solutions.

Offerings in this segment also include application of our digital services and technology, including those provided by DS Core, our cloud-based platform.

The Orthodontics product category includes SureSmile, an aligner solution provided through clinician offices, and Byte, a direct-to-consumer aligner solution.

The Orthodontics product category also includes a High Frequency Vibration technology device known as VPro or as HyperByte within Byte’s product offering, as well as the new SureSmile Simulator which uses intraoral scanners and our DS Core platform to create a 3D visualization of patient outcomes.

SureSmile aligner solutions include whitening kits and retainers.

Byte aligner solutions include Byte Plus with in-office intraoral scanning for treatment planning.

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

Implants & Prosthetics

The Implants & Prosthetics product category includes technology to support the Company’s digital workflows for implant systems, a portfolio of innovative dental implant products, digital dentures, crown and bridge porcelain products, bone regenerative and restorative solutions, treatment planning software and educational programs.

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

Offerings in this category also include dental prosthetics such as artificial teeth and precious metal dental alloys.

Wellspect Healthcare

This segment includes the design, manufacture, and sales of the Company’s innovative continence care solutions for both urinary and bowel management.

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

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

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(in millions) 2023 2022 2021

Technologies & Equipment $ 2,318 $ 2,504 $ 1,954

Consumables 1,604 1,727 1,385

Connected Technology Solutions $ 1,169 $ 1,219 $ 1,348

Essential Dental Solutions 1,468 1,427 1,516

Orthodontic and Implant Solutions 1,040 1,006 1,064

Wellspect Healthcare 288 270 303

Total net sales $ 3,965 $ 3,922 $ 4,231

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(in millions) 2023 2022 2021

Technologies & Equipment $ 273 $ 280 $ 261

Consumables 41 52 61

Connected Technology Solutions $ 176 $ 172 $ 185

Essential Dental Solutions 33 31 41

Orthodontic and Implant Solutions 97 90 83

Wellspect Healthcare 18 21 24

All Other (a)

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(in millions) 2023 2022 2021

Technologies & Equipment $ 399 $ 543 $ 382

Consumables 495 539 316

Connected Technology Solutions $ 101 $ 161 $ 267

Essential Dental Solutions 478 467 511

Orthodontic and Implant Solutions 156 193 217

Wellspect Healthcare 87 73 87

Segment adjusted operating income $ 822 $ 894 $ 1,082

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All other (a)

Goodwill impairment 1,187 — 157

Intangible asset impairment and other costs 114 17 77

Goodwill and intangible asset impairments 307 1,287 —

Restructuring and other costs 67 14 17

Interest expense, net 81 65 49

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(Loss) income before income taxes $ ( 175 ) $ ( 1,055 ) $ 545

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

Capital Expenditures Year Ended December 31,

(in millions) 2022 2021 2020

Technologies & Equipment $ 101 $ 100 $ 50

Consumables 20 37 26

All Other (a)

Total $ 144 $ 159 $ 87

(a) Includes capital expenditures of corporate headquarters.

Assets Year Ended December 31,

(in millions) 2022 2021

Technologies & Equipment $ 5,518 $ 6,902

Consumables 1,928 2,123

All Other (a)

Total $ 7,643 $ 9,239

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

(a) Includes the results of unassigned corporate headquarters costs.

Geographic Information

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Product and Customer Information

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

For information on the Company’s net sales by product category comprising each of the reportable segments, see Note 2, Revenue.

Concentration Risk

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 or accounts receivable for the years ended December 31, 2023 and 2022 were as follows:

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Henry Schein, Inc.

11 % 15 % 14 % N/A

14 % 11 % 11 % 15 %

Patterson Companies, Inc.

N/A 12 % 10 % 18 %

N/A 10 % N/A 12 %

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

NOTE 7 - OTHER EXPENSE (INCOME), NET

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(in millions) 2023 2022 2021

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

Foreign exchange transaction (gain) loss

$ ( 3 ) $ 6 $ ( 12 )

Other expense (income), net 12 47 14

Total other expense (income), net $ 9 $ 53 $ 2

The Company’s equity-method net losses were $ 4 million, $ 36 million, and $ 10 million for the years ended December 31, 2023, 2022, and 2021, 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.

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

The divestiture resulted in a pre-tax gain of $ 13 million recorded in Other expense (income), net in the Consolidated Statements of Operations for the year ended December 31, 2021.

NOTE 8 - INVENTORIES, NET

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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.

On April 1, 2023, the Company realigned its reporting units due to a change in organizational structure.

Reporting units under the former structure were tested for impairment prior to the realignment, and no impairment was identified.

As a result of the realignment, the Company reallocated its goodwill to align its new reporting units which resulted from the change in its operating segments.

Goodwill was reassigned to each of the new reporting units using a relative fair value approach.

The Company assessed the goodwill of the new reporting units and its indefinite-lived intangible assets for impairment as of April 1, 2023.

For both the former and new structure goodwill impairment tests as of April 1, 2023, the fair values of reporting units were computed using a discounted cash flow model with inputs developed using both internal and market-based data.

Third Quarter 2023 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.

In the quarter ended September 30, 2023, the Company identified indicators of a more likely than not impairment related to its Connected Technology Solutions reporting unit, which comprises all the Connected Technology Solutions segment.

The decline in fair value for this reporting unit was driven by adverse macroeconomic factors because of weakened demand, particularly in European markets, and increased discount rates.

Core underlying market interest rates, which serve as the basis for the discount rate assumptions in our impairment models, rose by approximately 110 bps between the annual impairment test and the interim test during the third quarter of 2023.

These factors contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows in the near term, particularly in relation to demand for products which are commonly financed by end customers and are therefore adversely impacted by an environment of higher interest rates.

The higher inflationary environment has also impacted the discretionary spending behavior of our customers more generally, further reducing global demand for certain products in favor of lower cost options.

As such, an impairment test was performed in the third quarter of 2023 (the “third quarter test”).

During the third quarter test, the fair value of the Connected Technology Solutions reporting unit was computed using a discounted cash flow model with inputs developed using both internal and market-based data.

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

Significant assumptions used in the discounted cash flow model included, but were not limited to, a discount rate of 11.5 %, revenue growth rates (including perpetual growth rates), and operating margin percentages of the reporting unit’s business.

As a result, the Company recorded a pre-tax goodwill impairment charge for the three months ended September 30, 2023 related to the Connected Technology Solutions reporting unit of $ 291 million, resulting in a full write-off of the remaining goodwill balance for the Connected Technology Solutions segment.

This charge was recorded in Goodwill and intangible asset impairment in the Consolidated Statement of Operations.

Additionally, in conjunction with the third quarter test, the Company tested the long-lived intangible assets related to the businesses within the Connected Technology Solutions reporting unit within the Connected Technology Solutions segment for impairment.

The Company also identified an indicator of impairment for the indefinite-lived intangible assets within the Implants & Prosthetics reporting unit within the Orthodontic and Implant Solutions segment, and determined certain tradenames and trademarks were impaired.

These indefinite-lived intangible assets were evaluated for impairment using an income approach, specifically a relief from royalty method.

Significant assumptions used in the relief from royalty method included, but were not limited to, discount rates (ranging from 11.5 % to 16.5 %) revenue growth rates (including perpetual growth rates), and royalty rates.

As a result, the Company recorded indefinite-lived intangible asset impairment charges of $ 14 million and $ 2 million for the Connected Technology Solutions and Orthodontic and Implant Solutions segments, respectively, for the three months ended September 30, 2023.

The impairment charge was primarily driven by macroeconomic factors such as weakened demand, higher cost of capital, and cost inflation, which are contributing to reduced forecasted revenues.

These charges were recorded in Goodwill and intangible asset impairment in the Consolidated Statements of Operations.

The carrying values of indefinite-lived intangible assets impaired in the third quarter of 2023 were $ 215 million and $ 23 million for the Connected Technology Solutions and Orthodontic and Implant Solutions segments, respectively, as of December 31, 2023.

As the fair value of these indefinite-lived intangible assets continues to approximate carrying value as of December 31, 2023, any further decline in key assumptions could result in additional impairments in future periods.

As of December 31, 2023, the Company considered qualitative and quantitative factors to determine whether any events or changes in circumstances had resulted in the likelihood that the goodwill or indefinite-lived intangible assets may have become more likely than not impaired during the fourth quarter of 2023 and concluded there were no such indicators.

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.

2022 Annual Goodwill and Indefinite-Lived Intangibles Impairment and Testing

In the third and fourth quarters of 2022, the Company experienced adverse macroeconomic factors because 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 former Digital Dental Group and former Equipment & Instruments reporting units within the former Technologies & Equipment segment and certain indefinite-lived intangible assets, within these former reporting units as well as the former Consumables reporting unit within the former Consumables segment.

The fair values of the two former 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.

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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.

As a result, the Company recorded a pre-tax goodwill impairment charge related to the former Digital Dental Group and former Equipment & Instruments reporting units within the former 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 and intangible asset impairment in the Consolidated Statements of Operations.

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.

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

As a result, the Company recorded impairment charges for its indefinite-lived intangible assets of $ 66 million and $ 28 million for the former Digital Dental Group and former Equipment & Instruments reporting units, respectively, within the former Technologies & Equipment segment, and a $ 6 million charge for the former Consumables reporting unit within the former Consumables segment, for the year ended December 31, 2022.

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

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 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 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.

The Company performed impairment tests for the indefinite-lived intangible assets using an income approach, more specifically a relief from royalty method.

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 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 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:

(in millions) Technologies & Equipment Consumables Total

(in millions) Technologies & Equipment Consumables Connected Technology Solutions Essential Dental Solutions Orthodontic and Implant Solutions Wellspect Healthcare Total

Balance at December 31, 2022

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Accumulated impairment losses ( 4,080 ) — — — — — ( 4,080 )

Goodwill, net $ 3,092 $ 894 $ 3,986

Acquisition related additions (a)

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

Balance at December 31, 2021

Goodwill, net December 31, 2022 $ 1,822 $ 866 $ — $ — $ — $ — $ 2,688

Translation 9 4 — — — — 13

Balance at March 31, 2023

Goodwill $ 5,911 $ 870 $ — $ — $ — $ — $ 6,781

Accumulated impairment losses ( 4,080 ) — — — — — ( 4,080 )

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

Goodwill, net March 31, 2023 $ 1,831 $ 870 $ — $ — $ — $ — $ 2,701

Realignment of goodwill ( 1,831 ) ( 870 ) 293 835 1,303 270 $ —

Translation — — — 1 ( 5 ) 6 2

Goodwill, net June 30, 2023 $ — $ — $ 293 $ 836 $ 1,298 $ 276 $ 2,703

Impairment — — ( 291 ) — — — ( 291 )

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

Translation — — ( 2 ) 4 25 ( 1 ) 26

Balance at December 31, 2023

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Accumulated Impairment Losses — — ( 291 ) — — — ( 291 )

Goodwill, net $ 1,822 $ 866 $ 2,688

(a) Refer to Note 6, Business Combinations, for more information regarding recent acquisitions.

Balance at December 31, 2023 $ — $ — $ — $ 840 $ 1,323 $ 275 $ 2,438

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

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In-process R&D (a)

5 — 5 14 — 14

Total indefinite-lived 452 — 452 455 — 455

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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.

The annual estimated amortization expense related to these intangible assets for each of the five succeeding calendar years is $ 207 million, $ 211 million, $ 216 million, $ 142 million and $ 123 million for 2023, 2024, 2025, 2026 and 2027, respectively.

Amortization expense for definite-lived intangible assets for the years ended December 31, 2023, 2022 and 2021 was $ 211 million, $ 209 million and $ 222 million, respectively.

The estimated annual amortization expense related to these intangible assets for each of the five succeeding calendar years is $ 212 million, $ 219 million, $ 143 million, $ 124 million and $ 128 million for 2024, 2025, 2026, 2027 and 2028, respectively.

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

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Sales and marketing programs 68 65

Reserve for dealer rebates 163 209

Reserve for distributor rebates

Restructuring costs 37 7

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Short-Term Borrowings

The Company has access to a $ 700 million multi-currency revolving credit facility ("2018 Credit Facility") through July 28, 2024.

The facility is unsecured and contains certain affirmative and negative covenants relating to the operations and financial condition of the Company.

The most restrictive of these covenants pertain to asset dispositions and prescribed ratios of indebtedness to total capital and operating income, plus depreciation and amortization to interest expense.

The credit facility serves as a back-stop facility for the Company's commercial paper program.

The Company has a $ 500 million commercial paper facility.

At December 31, 2022, the Company had borrowings of $ 95 million outstanding under this facility.

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

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

On May 12, 2023, the Company entered into a five-year senior unsecured multi-currency revolving facility, for an aggregate principal amount of $ 700 million that expires on May 12, 2028.

This new facility replaced the prior $ 700 million five-year senior unsecured multi-currency revolving facility that was scheduled to expire on July 26, 2024.

The Company also has a $ 500 million commercial paper program.

The $ 700 million multi-currency revolving credit facility serves as a back-up to the commercial paper facility, thus the total available credit under the commercial paper facility and the multi-currency revolving credit facility in the aggregate is $ 700 million.

The Company had outstanding borrowings of $ 225 million and $ 95 million under the commercial paper facility at December 31, 2023 and December 31, 2022, respectively, and no outstanding borrowings under the multi-currency revolving credit facility.

The Company also has access to $ 44 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 $ 20 million.

At December 31, 2023, the Company had $ 499 million borrowings available under unused lines of credit, including lines available under its short-term arrangements and revolving credit agreement.

Long-Term Debt

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( 28 ) ( 35 )

$ 1,881 $ 1,836

Current portion

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(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.

The Company’s revolving credit facility, term loans and senior notes contain certain affirmative and negative covenants relating to the Company's operations and financial condition.

The Company’s multi-currency revolving credit facility, term loans and senior notes contain certain affirmative and negative covenants relating to the Company’s operations and financial condition.

At December 31, 2023, the Company was in compliance with all debt covenants.

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2029 and beyond 1,197

Interest expense, net includes interest income of $ 16 million, $ 11 million and $ 3 million for the years ended December 31, 2023, 2022 and 2021, respectively, primarily relating to interest-bearing cash equivalents and customer financing for our direct-to-consumer aligner solutions.

NOTE 15 - EQUITY

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.

On November 7, 2023, the Board of Directors approved an increase to the authorized share repurchase program of $ 1.0 billion.

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

At December 31, 2023, the Company had authorization to repurchase $ 1.44 billion in shares of common stock remaining under the share repurchase program.

On March 3, 2023, the Company entered into an Accelerated Share Repurchase Agreement (“ASR Agreement”) with a financial institution to repurchase the Company’s common stock.

The Company repurchased shares under the ASR Agreement as part of the share repurchase program described above.

In 2023, the Company repurchased approximately 3.1 million shares delivered during March 2023 at a volume-weighted average price of $ 38.74 representing $ 120 million of the total anticipated repurchase.

In April 2023, an additional 0.8 million shares were delivered upon the final settlement of the ASR Agreement resulting in a total of 3.9 million shares repurchased under the agreement.

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

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March 3, 2023 $ 150 3.1 $ 38.74 80 % April 28, 2023 3.9 $ 38.55

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.

The ASR Agreement was accounted for as an initial delivery of common shares in a treasury stock transaction on March 6, 2023 of $ 121 million and a forward contract indexed to the Company’s common stock for an amount of common shares that was 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 for the quarter ended March 31, 2023.

Therefore, the value of the forward contract of $ 30 million was recorded in Capital in excess of par value at March 31, 2023.

Upon final settlement in April 2023, this amount was subsequently recorded as Treasury Stock in the Consolidated Balance Sheets.

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

The forward contract did not impact the weighted average common shares outstanding for diluted earnings per share.

For the years ended December 31, 2023, 2022 and 2021, the Company repurchased outstanding shares of common stock at a cost of $ 300 million, $ 150 million and $ 200 million, respectively.

At December 31, 2022, the Company had authorization to repurchase $ 740 million in shares of common stock remaining under the share repurchase program.

For the years ended December 31, 2022, 2021 and 2020, the Company received proceeds of $ 6 million, $ 51 million and $ 11 million, respectively, primarily as a result of stock options exercised in the amount of 0.1 million, 1.1 million and 0.3 million in each of the years, respectively.

It is the Company’s practice to issue shares from treasury stock when options are exercised.

For the year ended December 31, 2023, the treasury stock transactions resulted in an excise tax accrual of $ 3 million for public company stock repurchases established by the Inflation Reduction Act of 2022.

For the year ended December 31, 2023, stock options exercised and the proceeds received at exercise were not significant.

For the years ended December, 31, 2022 and 2021, the Company received proceeds of $ 6 million and $ 51 million, respectively, primarily as a result of stock options exercised in the amount of 0.1 million and 1.1 million in each of the years, respectively.

It is the Company’s practice to issue shares from treasury stock when stock options are exercised and RSUs vest.

Total outstanding shares of common stock and treasury stock were as follows:

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Year Ended December 31,

(in millions) 2022 2021 2020

(in millions, except percentages)

2023 2022 2021

Statutory U.S.

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Deferred tax assets

Commission and bonus accrual $ 9 $ 6

Employee benefit accruals $ 55 $ 55

Inventory 15 9

Insurance premium accruals 3 3

Miscellaneous accruals 51 37

Net unrealized gains/losses included in AOCI — 47

Lease right-of-use liability 46 48

Product warranty accruals 1 1

Net unrealized gains/losses included in AOCI

Foreign tax credit and R&D carryforward 43 40

Restructuring and other cost accruals 4 5

Sales and marketing accrual 9 14

Tax loss carryforwards and other tax attributes 948 654

11 unchanged sentences

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

Year Ended December 31,

(in millions) 2023 2022

1 unchanged sentence

Deferred income taxes $ 228 $ 287

The Company has $ 36 million of foreign tax credit carryforwards at December 31, 2022, of which $ 24 million will expire in 2025, $ 3 million will expire in 2027, and $ 9 million will expire at various times from 2028 through 2031.

The Company has $ 40 million of foreign tax credit carryforwards at December 31, 2023, of which $ 33 million will expire in 2025 and $ 7 million will expire at various times from 2028 through 2031.

The Company has tax loss carryforwards related to certain foreign and domestic subsidiaries of approximately $ 3,889 million at December 31, 2023, of which $ 3,671 million expires at various times through 2043 and $ 218 million may be carried forward indefinitely.

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.

These are reflected as deferred income tax assets at December 31, 2023, comprising of tax benefits o f $ 873 million and $ 74 million, before valuation allowances, related to tax loss carryforwards and disallowed interest carryforwards, respectively.

As of December 31, 2022 the Company’s deferred tax assets included $ 601 million of tax loss carryforwards and $ 53 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 increase in tax loss carryforwards in 2023 is primarily a result of impairment losses.

At December 31, 2023, the Company has recorded $ 791 million of valuation allowance to offset the tax benefit of net operating losses, $ 40 million to offset the tax benefit of foreign tax credits, and $ 32 million of valuation allowance for other deferred tax assets.

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

The increase in the valuation allowance is attributable to the increase in the tax loss carryforwards generated in 2023 as there is uncertainty that these assets can be realized in the future.

The Company has provided $ 8 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 $ 2,303 million a t December 31, 2023 and $ 2,492 million at December 31, 2022 .

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

1 unchanged sentence

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 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.

Expiration of statutes of limitations in various jurisdictions during the next twelve months could include unrecognized tax benefits of approximately $ 1 million, which, if recognized, would affect the effective income tax rate.

The total amount of accrued interest and penalties were $ 4 million and $ 6 million at December 31, 2023 and 2022, 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.

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 recognized a tax benefit of $ 2 million for the years ended December 31, 2023 and 2022 related to interest and penalties.

The increase in unrecognized tax benefits in 2023 is primarily related to a gain generated from an internal debt structuring in 2023.

If this benefit was recognized, it would result in a reduction to deferred tax assets related to tax loss carryforwards, with an equal and offsetting reduction to the valuation allowance.

Thus, the release of this reserve would not impact the effective tax rate.

The Company is subject to U.S.

federal income tax as well as income tax of multiple state and foreign jurisdictions.

The significant jurisdictions include the U.S., Germany, Sweden and Switzerland.

The Company has substantially concluded all U.S.

federal income tax matters for years through 2011.

The significant jurisdictions include the United States, Germany, Sweden and Switzerland.

The Company has concluded all U.S.

federal income tax matters for years through 2014 with the Internal Revenue Service (“IRS”).

The Company is currently under audit for the tax years 2015 and 2016.

For further information on the Internal Revenue Service (“IRS”) audit, see Note 22, Commitments and Contingencies.

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

For additional information on the IRS audit, see Note 21, Commitments and Contingencies.

The Company concluded audits in Germany through the tax year 2014 and is currently under audit for the years 2015 through 2017.

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

The taxable years that remain open for Sweden are 2013 through 2021.

For information related to Sweden, see Note 22, Commitments and Contingencies.

The taxable years that remain open for Switzerland are 2011 through 2021.

The activity recorded for unrecognized tax benefits were as follows:

Year Ended December 31,

(in millions) 2023 2022 2021

2 unchanged sentences

Gross change for current year positions 95 4 2

Increase due to effect of foreign currency translation — — 1

Decrease due to settlements and payments ( 9 ) — —

Decrease due to statute expirations ( 4 ) — —

Decrease due to effect from foreign currency translation — ( 1 ) ( 1 )

8 unchanged sentences

The Plan includes various investment funds.

The Company makes a discretionary cash contribution that is initially targeted to be 3 % of compensation.

Each eligible participant who elects to defer to the Plan will receive a matching contribution of 100 % on the first 1% contributed and 50 % on the next 5% contributed for a total maximum matching contribution of 3.5 %.

The Company may make a non-elective discretionary cash contribution of 3 % of compensation to participant accounts.

Additionally, each eligible participant who elects to contribute to the Plan will receive a matching contribution of 100 % on the first 1% contributed and 50 % on the next 5% contributed for a total maximum matching contribution of 3.5 %.

In addition to the primary U.S.

3 unchanged sentences

Defined Benefit Plans

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.

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 United States.

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

Substantially all of the German and Swedish plans are unfunded book reserve plans.

Most employees and retirees outside the U.S.

are covered by government health plans.

Substantially all the German and Swedish plans are unfunded book reserve plans.

Most employees and retirees outside the United States are covered by government health plans.

The Company predominantly derives its discount rates by applying the specific spot rates along the yield curve to the relevant projected cash flows;

1 unchanged sentence

For the large defined benefits pension plans, the Company uses a spot rate approach for the estimation of the Service cost and Interest cost components of benefit cost by applying the specific spot rates along the yield curve to the relevant projected cash flows.

Significant changes in the retirement plan benefit obligations for the year ended December 31, 2022 include a $ 162 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 $ 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, 2023 include a $ 35 million actuarial loss primarily attributable to the decrease 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 $ 3 million actuarial loss due to plan experience different than anticipated.

4 unchanged sentences

The target allocations for defined benefit plan assets are 30 % to 65 % equity securities, 30 % to 65 % fixed income securities, 0 % to 15 % real estate, and 0 % to 25 % in all other types of investments.

Equity securities include investments in companies located both in and outside the U.S.

Equity securities include investments in companies located both in and outside the United States.

Equity securities in the defined benefit pension plans do not include Company common stock contributed directly by the Company.

14 unchanged sentences

Participant contributions 4 4

Actuarial gains ( 149 ) ( 16 )

Plan amendments — ( 1 )

Acquisitions/Divestitures — ( 2 )

Actuarial losses (gains)

Effect of exchange rate changes 26 ( 35 )

6 unchanged sentences

Plan settlements — ( 1 )

Acquisitions/Divestitures — ( 3 )

Effect of exchange rate changes 17 ( 5 )

31 unchanged sentences

Components of net periodic benefit cost were as follows:

Year Ended December 31, Location in Consolidated

(in millions) 2022 2021 2020 Statements of Operations

Year Ended December 31, Location in the Consolidated Statements of Operations

(in millions) 2023 2022 2021

Service cost $ 4 $ 5 $ 7 Cost of products sold

10 unchanged sentences

(in millions) 2023 2022 2021

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

Net actuarial losses (gains)

$ 37 $ ( 125 ) $ ( 36 )

Amortization 1 ( 7 ) ( 11 )

21 unchanged sentences

The fair value of the Company’s pension plan assets at December 31, 2023 and 2022 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.

Approximately 84 % of the total plan assets are categorized as Level 1, as the values assigned to these pension assets are based on quoted prices available in active markets.

For the other category levels, a description of the valuation is provided in Note 1, Significant Accounting Policies, under the “Fair Value Measurement” heading.

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A reconciliation from December 31, 2021 to December 31, 2023 for the plan assets categorized as Level 3 were as follows:

December 31, 2022

(in millions) Insurance

5 unchanged sentences

Balance at December 31, 2022 $ 24 $ 9 $ 1 $ 34

December 31, 2021

(in millions) Insurance

Balance at December 31, 2020 $ 37 $ 12 $ — $ 49

Actual return on plan assets:

1 unchanged sentence

Purchases, sales and settlements, net ( 1 ) ( 3 ) — ( 4 )

Transfers in and/or out 2 — — 2

Effect of exchange rate changes 1 1 — 2

7 unchanged sentences

Estimated Future Benefit Payments

Total benefits expected to be paid from the plans in the future were as follows:

Total benefits expected to be paid from the plans in the future are as follows:

(in millions) Pension

2029-2033 124

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:

NOTE 18 - RESTRUCTURING AND OTHER COSTS

Restructuring and other costs for the years ended December 31, 2023, 2022 and 2021 were as follows:

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

2 unchanged sentences

Selling, general, and administrative expenses 3 — 6

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:

Restructuring and other costs 67 14 17

Total Restructuring and other costs $ 74 $ 14 $ 20

Restructuring and other costs of $ 67 million recorded in the year ended December 31, 2023 consisted primarily of employee severance benefits and other restructuring costs related to the plan approved by the Board of Directors of the Company on February 14, 2023.

This plan seeks to restructure the Company’s business to improve operational performance and drive shareholder value creation through a new operating model with four operating segments, 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 which are now substantially complete.

The Company expects to incur between $ 115 and $ 135 million in non-recurring charges, comprising $ 80 to $ 100 million in restructuring expenditures and charges, primarily related to employee transition, severance payments, employee benefits and facility closure costs, and $ 35 million in other non-recurring costs which mostly consist of consulting, legal and other professional service fees.

The plan is expected to be substantially completed by mid-2024.

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.

The liabilities associated with the Company’s restructuring plans are recorded in Accrued liabilities and Other noncurrent liabilities in the Consolidated Balance Sheets.

Activity in the Company’s restructuring accruals at December 31, 2023 was as follows:

(in millions) 2021 and Prior Plans 2022 Plans 2023 Plans Total

14 unchanged sentences

Change in Estimates December 31, 2023

Technologies & Equipment $ 7 $ 4 $ ( 7 ) $ ( 2 ) $ 2

Consumables 11 8 ( 10 ) ( 3 ) 6

Connected Technology Solutions $ 3 $ 18 $ ( 8 ) $ — $ 13

Essential Dental Solutions 4 25 ( 10 ) ( 2 ) 17

Orthodontic and Implant Solutions 1 16 ( 7 ) ( 1 ) 9

Wellspect Healthcare — 5 ( 3 ) ( 1 ) 1

All Other — 10 ( 10 ) — —

17 unchanged sentences

Change in Estimates December 31, 2022

Technologies & Equipment $ 16 $ 9 $ ( 14 ) $ ( 4 ) $ 7

Consumables 17 15 ( 16 ) ( 5 ) 11

Connected Technology Solutions $ 7 $ 5 $ ( 5 ) $ ( 4 ) $ 3

Essential Dental Solutions 5 4 ( 5 ) — 4

Orthodontic and Implant Solutions 5 2 ( 5 ) ( 1 ) 1

Wellspect Healthcare 1 1 ( 2 ) — —

All Other — 4 ( 4 ) — —

2 unchanged sentences

Derivative Instruments and Hedging Activities

The Company’s activities expose it to a variety of market risks, which primarily include the risks related to the effects of changes in foreign currency exchange rates and interest rates.

The Company’s operations expose it to a variety of market risks, which primarily include the risks related to the effects of changes in foreign currency exchange rates and interest rates.

These financial exposures are monitored and managed by the Company as part of its overall risk management program.

24 unchanged sentences

The Company designates certain foreign exchange forward contracts as cash flow hedges.

As a result, the Company records the fair value of the contracts primarily through AOCI based on the assessed effectiveness of the foreign exchange forward contracts.

As a result, the Company records the fair value of the contracts through AOCI based on the assessed effectiveness of the foreign exchange forward contracts.

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

6 unchanged sentences

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

On May 26, 2020, the Company paid $ 31 million to settle the $ 150 million notional T-Lock contract, which partially hedged the interest rate risk of the $ 750 million senior unsecured notes.

On May 26, 2020, the Company paid $ 31 million to settle the $ 150 million notional Treasury rate lock contract, which partially hedged the interest rate risk of the $ 750 million senior unsecured notes.

This loss is amortized over the ten-year life of the notes.

At December 31, 2022, $ 23 million of this loss is remaining to be amortized from AOCI in future periods.

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

As of December 31, 2023 and December 31, 2022, $ 19 million and $ 23 million, respectively, of this loss is remaining to be amortized from AOCI in future periods.

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

At December 31, 2023, the Company expects to reclassify $ 3 million of deferred net losses on cash flow hedges recorded in AOCI in the Consolidated Statements of Operations during the next 12 months.

6 unchanged sentences

The non-derivative instruments consist of foreign currency denominated debt held at the parent company level.

Translation gains and losses related to the net assets of the foreign subsidiaries are offset by gains and losses in the aforementioned instruments, which are designated as hedges of net investments and are included in AOCI.

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.

The time-value component of the fair value of the derivative instruments 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 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, and foreign exchange rates.

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, considering the effective interest 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.

1 unchanged sentence

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.

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 Other expense (income), net.

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 original contracts have quarterly maturity dates through March 2023.

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

The original contracts have quarterly maturity dates through March 2023 and the Company entered into additional foreign exchange contracts as individual contracts within the portfolio matured.

As of December 31, 2023, the euro net investment hedge portfolio has an aggregate notional value of 160 million euro with maturity dates through December 2025.

On July 20, 2023, the Company entered into a Swiss franc foreign exchange forward contract designated as a net investment hedge.

The foreign exchange forward contract had a notional amount of 600 million Swiss francs.

This net investment hedge was settled in September 2023 which resulted in cash receipts totaling $ 32 million.

The Company subsequently entered into Swiss franc foreign exchange contracts designated as a net investment hedge with a total notional amount of 600 million Swiss francs.

This portfolio of contracts has semi-annual maturity dates through July 2028.

Fair Value Hedges

10 unchanged sentences

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

On February 13, 2024, the Company paid $ 9 million to settle the variable interest rate swap with a notional amount of $ 100 million which was originally set to mature on June 1, 2026.

This closure of the interest rate swap will result in a loss of $ 8 million being amortized over the remaining life of the Senior Notes due June 2030.

Derivative Instruments Not Designated as Hedges

4 unchanged sentences

Derivative Instrument Activity

The amount of gains (losses) recorded in the Company's Consolidated Balance Sheets and Consolidated Statements of Operations related to all derivative instruments were as follows:

Year Ended December 31, 2022

(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

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

Interest rate swaps — Interest expense, net ( 3 ) — —

Total for cash flow hedging $ ( 1 ) $ — $ — $ —

Hedges of Net Investments

Cross currency basis swaps $ 30 Interest expense, net $ — $ — $ 5

Foreign exchange forward contracts 11 Other expense (income), net — 2 —

Total for net investment hedging $ 41 $ — $ 2 $ 5

Fair Value Hedges

Foreign exchange forward contracts $ ( 2 ) Other expense (income), net $ — $ 1 $ 26

Interest rate swap — Interest expense, net — — ( 1 )

Total for fair value hedging $ ( 2 ) $ — $ 1 $ 25

Year Ended December 31, 2021

Cash Flow Hedges

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

Interest rate swaps — Interest expense, net ( 4 ) — —

Total for cash flow hedging $ 3 $ ( 7 ) $ 2 $ —

Hedges of Net Investments

Cross currency basis swaps $ 13 Interest expense, net $ — $ — $ 6

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

Total for net investment hedging $ 23 $ — $ 1 $ 6

Fair Value Hedges

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

The effect of derivative hedging instruments on the Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income:

Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021

(in millions) Cost of products sold Interest expense, net Other (income) expense, net Cost of products sold Interest expense, net Other (income) expense, net Cost of products sold Interest expense, net Other (income) expense, net

Total amounts of line items presented in the Consolidated Statements of Operations in which the effects of cash flow, net investment or fair value hedges are recorded

$ 1,879 $ 81 $ 9 $ 1,795 $ 65 $ 53 $ 1,884 $ 61 $ 2

(Gain) loss on Cash Flow Hedges

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

Interest rate swaps — 3 — — 3 — — 4 —

(Gain) loss on Hedges of Net Investment

Cross currency basis swaps $ — $ — $ ( 5 ) $ — $ — $ ( 5 ) $ — $ — $ ( 6 )

Foreign exchange forward contracts — — ( 12 ) — — ( 2 ) — — ( 1 )

(Gain) loss on Fair Value Hedges:

Interest rate swaps $ — $ 11 $ — $ — $ 1 $ — $ — $ ( 1 ) $ —

Foreign exchange forward contracts — — — — — ( 27 ) — — ( 24 )

(Gain) loss on Derivative Instruments not Designated as Hedges

Foreign exchange forward contracts

$ — $ — $ 8 $ — $ — $ ( 4 ) $ — $ — $ 9

Amount of Gain or (Loss) Recognized in AOCI Amount of Gain or (Loss) Reclassified from AOCI into Income

Year Ended December 31, Consolidated Statements of Operations Location Year Ended December 31,

(in millions) 2023 2022 2021 2023 2022 2021

Cash Flow Hedges

1 unchanged sentence

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

Total for cash flow hedging $ ( 18 ) $ ( 2 ) $ 4 $ —

Hedges of Net Investments

Cross currency basis swaps $ ( 26 ) Interest expense, net $ — $ — $ 9

Cross currency basis swaps $ ( 18 ) $ 30 $ 13 Other expense (income), net $ — $ — $ —

Foreign exchange forward contracts ( 29 ) 11 10 Other expense (income), net — — —

Total for net investment hedging $ ( 20 ) $ — $ 6 $ 9

Fair Value Hedges

Interest rate swaps $ — $ — $ — Other expense (income), net $ — $ — $ —

Foreign exchange forward contracts 2 ( 2 ) ( 1 ) Interest expense, net — — —

Total for fair value hedging $ ( 3 ) $ — $ 3 $ —

Consolidated Statements of Operations Location Gain (Loss) Recognized

(in millions) 2022 2021 2020

Derivative Instruments not Designated as Hedges

Foreign exchange forward contracts

Other expense (income), net $ 4 $ ( 9 ) $ 7

Total for instruments not designated as hedges $ 4 $ ( 9 ) $ 7

Consolidated Balance Sheets Location of Derivative Fair Values

23 unchanged sentences

Balance Sheet Offsetting

Substantially all of the Company’s derivative contracts are subject to netting arrangements;

Substantially all the Company’s derivative contracts are subject to netting arrangements;

whereby the right to offset occurs in the event of default or termination in accordance with the terms of the arrangements with the counterparty.

13 unchanged sentences

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

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

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

1 unchanged sentence

Interest rate swaps 34 — 34 ( 9 ) — 25

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

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

17 unchanged sentences

(in millions) Total Level 1 Level 2 Level 3

Interest rate swaps $ 5 $ — $ 5 $ —

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

2 unchanged sentences

Interest rate swaps $ 34 $ — $ 34 $ —

Cross currency interest rate swaps 7 — 7 —

Foreign exchange forward contracts 12 — 12 —

10 unchanged sentences

Balance, December 31, 2021 $ 10

Issuance of contingent consideration from business acquisition (a)

Payments ( 6 )

Balance, December 31, 2022 $ 4

Payments ( 6 )

Balance, December 31, 2023 $ 4

(a) Refer to Note 6, "Business Combinations" for more information regarding recent acquisitions.

There were no additional purchases or transfers of Level 3 financial instruments in 2023 and 2022.

1 unchanged sentence

Contingencies

On January 25, 2018, Futuredontics, Inc., a former wholly-owned subsidiary of the Company, received service of a purported class action lawsuit brought by Henry Olivares and other similarly situated individuals in the Superior Court of the State of California for the County of Los Angeles.

In January 2019, an amended complaint was filed adding another named plaintiff, Rachael Clarke, and various claims.

The plaintiff class alleges several violations of the California wage and hours laws, including, but not limited to, failure to provide rest and meal breaks and the failure to pay overtime.

The parties have engaged in written and other discovery.

On February 5, 2019, Plaintiff Calethia Holt (represented by the same counsel as Mr.

Olivares and Ms.

Clarke) filed a separate representative action in Los Angeles Superior Court alleging a single violation of the Private Attorneys’ General Act that is based on the same underlying claims as the Olivares/Clarke lawsuit.

On April 5, 2019, Plaintiff Kendra Cato filed a similar action in Los Angeles Superior Court alleging a single violation of the Private Attorneys’ General Act that is based on the same underlying claims as the Olivares/Clarke lawsuit.

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

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

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.

11 unchanged sentences

On December 19, 2018, a related putative class action was filed in the U.S.

District Court for the Eastern District of New York against the Company and certain individual defendants (the "Federal Class Action").

District Court for the Eastern District of New York against the Company and certain individual defendants.

The plaintiff makes similar allegations and asserts the same claims as those asserted in the State Court Action.

3 unchanged sentences

The Company moved to dismiss the amended complaint on August 15, 2019.

The plaintiff filed its second amended complaint on January 22, 2021, and the Company filed a motion to dismiss the second amended complaint on March 8, 2021.

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

The plaintiff filed its second amended complaint on January 22, 2021, and the Company filed a motion to dismiss the second amended complaint on March 8, 2021, with briefing on the motion fully submitted on May 21, 2021.

The Company’s motion to dismiss was denied in a ruling by the Court on March 29, 2023 and the Company’s answer to the second amended complaint was filed on May 12, 2023.

On September 29, 2023, the plaintiff filed a motion for class certification.

The Company’s opposition to the plaintiff’s motion for class certification was filed on February 8, 2024, with briefing on the plaintiff’s motion to be fully completed by April 10, 2024.

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

8 unchanged sentences

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.

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

On March 27, 2023, the Court in the Southern District of Ohio ordered the transfer of the putative class action to the Southern District of New York (the “Court”).

On June 1, 2023, the Court consolidated the two separate actions under case No.

1:22-cv-06339 and appointed the City of Birmingham Retirement and Relief System, the El Paso Firemen & Policemen’s Pension Fund, and the Wayne County Employees’ Retirement System as Lead Plaintiffs for the putative class.

Lead Plaintiffs filed an amended class action complaint on July 28, 2023 (the “Amended Complaint”).

In addition to asserting the same claims against the Company, Mr.

Casey, and Mr.

Gomez, the Amended Complaint added the Company’s former Chief Accounting Officer, Mr.

Chadha, as a defendant (collectively, “Defendants”).

On October 10, 2023, Defendants filed a motion to dismiss the Amended Complaint.

Lead Plaintiffs’ opposition to Defendants’ motion to dismiss was filed on December 8, 2023, and Defendants’ reply was filed on January 8, 2024.

The motion to dismiss is still pending.

In addition to the Securities Litigation, as previously disclosed, the Company voluntarily contacted the SEC following the Company’s announcement on May 10, 2022, of the Audit and Finance Committee’s internal investigation.

The Company continues to cooperate with the SEC regarding this matter.

Separately, on July 13, 2023, Dentsply Sirona stockholder George Presura filed a shareholder derivative suit in the Delaware Court of Chancery captioned George Presura, Derivatively on Behalf of Nominal Defendant Dentsply Sirona Inc.

and Dentsply Sirona, Inc., No.

2023-0708-NAC (the “Derivative Litigation”).

The complaint, filed derivatively on behalf of the Company, asserts claims against current and former members of the Company’s Board of Directors and current and former executive officers, including Messrs.

Casey and Gomez.

The derivative complaint in this case contains allegations similar to those in the Securities Litigation, and it alleges that during the period from June 9, 2021 through July 13, 2023, various of the defendants breached fiduciary duties, committed corporate waste, and misappropriated information to conduct insider trading by making materially false and misleading statements or omissions regarding the Company’s recognition of revenue tied to distributor rebate and incentive programs and distributor inventory levels.

On August 4, 2023, the Delaware Court of Chancery stayed the Derivative Litigation until the earlier of a public announcement of a settlement of the Securities Litigation or a resolution of the pending motion to dismiss in the Securities Litigation.

On March 21, 2023, Mr.

Carlo Gobbetti filed a claim in the Milan Chamber of Arbitration against Dentsply Sirona Italia S.r.l.

(“DSI”), Italy, a wholly owned subsidiary of the Company, seeking a total of € 28 million for the alleged failure to pay a portion of the purchase price pursuant to a Share Purchase Agreement, dated October 8, 2012 (the “SPA”), in which Sirona Dental Systems, S.r.l., which at the time of the SPA’s execution was a wholly-owned subsidiary of Sirona Dental Systems, Inc., acquired all of the shares of MHT S.p.A., an Italian corporation, from Mr.

Gobbetti, and various other sellers.

Sirona Dental Systems S.r.l.

merged into Dentsply Italia S.r.l.

in 2018 (the surviving entity is now Dentsply Sirona Italia S.r.l.).

In connection with the closing of that transaction, SIRONA Dental Systems GmbH paid an amount equal to € 7 million into an escrow account (the “Escrow Account”).

The proceeds of the Escrow Account were to be released to Mr.

Gobbetti and the other sellers upon the satisfaction of certain conditions, including the delivery by July 2013 of a new prototype of an MHT S.p.A.

camera which had to meet certain specifications.

Gobbetti claims that he is entitled to receive the € 7 million outstanding balance of the purchase price under the SPA, plus € 21 million for damages incurred as a consequence of the failure to make the payment.

Gobbetti claims that he has a right to receive the full purchase price under the SPA even if the conditions set out in the SPA to deliver a prototype of the MHT S.p.A.

camera by July 2013 were not met.

On May 15, 2023, DSI filed its initial statement of defense denying that Mr.

Gobbetti and the other sellers were entitled to receive the funds deposited in the Escrow Account and further disputing the allegations.

Following the constitution of the arbitral tribunal, hearings were held on September 13, 2023 and January 19, 2024, to illustrate and discuss their respective positions.

The Parties were also permitted to further develop their arguments in one additional round of defensive briefs.

On January 29, 2024, the Parties filed a statement setting out their final pleadings.

The Arbitral Court eventually decided that the procedural issues raised by DSI (jurisdiction, capacity to be sued) will be considered together with the merits and granted the Parties final deadlines to file their respective final briefs (March 29, 2024) and replies (April 15, 2024).

The final hearing has been scheduled for May 8, 2024.

Except as noted above, 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.

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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.

At this stage, the Company is 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.

The Internal Revenue Service (“IRS”) conducted an examination of the U.S.

federal income tax returns for tax years 2012 through 2014.

In February 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.

The RAR disallows the deduction and, after adjusting the Company’s net operating loss carryforward, asserts that the Company is entitled to a refund of $ 5 million for 2012, has no tax liability for 2013, and owes a deficiency of $ 17 million in tax for 2014, excluding interest.

1 unchanged sentence

In March 2019, the Company submitted a formal protest disputing on multiple grounds the proposed taxes.

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.

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 and its advisors discussed its position with the IRS Independent Office of Appeals (the “Appeals Office”) in October 2020, and in November 2020 submitted a supplemental response to questions raised by the Appeals Office.

During the first quarter of 2023, after an extended review by the Appeals Office, the Company received a notice from the IRS, allowing the Company’s worthless stock deduction for tax year 2013.

As a result, the Company received a refund of $ 5 million for tax year 2012 with no further adjustments to the 2013 or 2014 tax return.

The IRS is conducting an examination of our U.S.

federal income tax returns for the tax years 2015 through 2016.

The Company received a Notice of Proposed Adjustment in April 2023 and a Revenue Agent Report in January 2024 from the IRS examination team proposing an adjustment related to an internal reorganization completed in 2016 with respect to the integration of certain operations of Sirona Dental Systems, Inc.

following its acquisition in 2016.

Although the proposed adjustment does not result in any additional federal income tax liability for the internal reorganization, if sustained, the proposed adjustment would result in the Company owing additional federal income taxes on a distribution of $ 451 million related to a stock redemption that occurred after the internal reorganization was completed in 2016.

The amount of additional federal income taxes due for 2016 is approximately $ 2 million, excluding interest.

The proposed adjustment, if sustained, would also result in a loss of foreign tax credits carried forward to later tax years.

We believe that we accurately reported the federal income tax consequences of the internal restructuring and stock redemption in our tax returns and will submit an administrative protest with the IRS Independent Office of Appeals contesting the examination team’s proposed adjustments.

We intend to vigorously defend our reported positions and believe that it is more likely than not that our position will be sustained.

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

However, the outcome of this dispute involves a number of uncertainties, including those inherent in the valuation of various assets at the time of the worthless stock deduction, and those relating to the application of the Internal Revenue Code and other federal income tax authorities and judicial precedent.

However, the outcome of this dispute involves a number of uncertainties, including those relating to the application of the Internal Revenue Code and other federal income tax authorities and judicial precedent.

Accordingly, there can be no assurance that the dispute with the IRS will be resolved favorably.

If determined adversely, the dispute would result in a current period charge to earnings and could have a material adverse effect in the consolidated results of operations, financial position, and liquidity of the Company.

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

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

With respect to such deductions taken in the tax years from 2013 to 2014, the Court ruled against the Company on July 5, 2017.

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

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.

The Company intends to vigorously defend its positions and pursue related appeals, where appropriate, in the above-described pending matters.

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.

These legal matters primarily involve claims for damages arising out of the use of the Company’s products and services and claims relating to intellectual property matters including patent infringement, employment matters, tax matters, commercial disputes, competition and sales and trading practices, personal injury, and insurance coverage.

The Company may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or representations, warranties or indemnities provided in connection with, divested businesses.

Some of these lawsuits may include claims for punitive and consequential, as well as compensatory damages.

The Company may also become subject to lawsuits because of past or future acquisitions or as a result of liabilities retained from, or representations, warranties or indemnities provided in connection with, divested businesses.

Some of these lawsuits may include claims for punitive, consequential, and compensatory damages.

Except as otherwise noted, the Company generally cannot predict the eventual outcomes, the timing of the ultimate resolutions, or the eventual loss, fines or penalties related to these pending matters.

Based upon the Company’s experience, current information, and applicable law, it does not believe that these proceedings and claims will have a material adverse effect on its consolidated results of operations, financial position, or liquidity.

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Indemnification

In the normal course of business to facilitate sale of our products and services, we indemnify certain parties:

In the normal course of business to facilitate sales of our products and services, we indemnify certain parties:

customers, vendors, lessors, and other parties with respect to certain matters, including, but not limited to, services to be provided by us and intellectual property infringement claims made by third parties.

In addition, we have entered into indemnification agreements with our directors and our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.

In addition, we have indemnification agreements with our directors and our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.

Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim.

It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement.

Additionally, we have a limited history of prior indemnification claims and the payments we have made under such agreements have not had a material effect on our results of operations, cash flows or financial position.

As of December 31, 2022, we did not have any material indemnification claims that were probable or reasonably possible.

It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each agreement.

Additionally, we have a limited history of prior indemnification claims and the payments made under such agreements have not had a material effect on our results of operations, cash flows or financial position.

Except as noted in the “Contingencies” section herein, as of December 31, 2023, we did not have any material indemnification claims that were probable or reasonably possible.

However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period.

Other Commitments

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

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

At December 31, 2022, we were obligated under various defined benefit pension plans in the U.S.

and other countries that cover employees who meet eligibility requirements.

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 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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(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