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Item 1. Financial Statements

2022-11-07 compared with 2021-11-04 · 1042 added, 660 removed, 180 unchanged (90% of the section changed)

4 unchanged sentences

(in millions, except per share amounts)

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

2021 2020 2021 2020

Net sales $ 1,069 $ 895 $ 3,163 $ 2,260

Three Months Ended June 30,

Six Months Ended June 30,

Cost of products sold

Gross profit 591 442 1,768 1,086

Selling, general, and administrative expenses 394 315 1,177 935

Selling, general, and

administrative expenses

Research and development expenses

Goodwill impairment — — — 157

Restructuring and other costs 3 18 11 62

Operating income (loss) 159 82 468 ( 147 )

Other income and expenses:

Interest expense, net 13 14 43 32

Other expense (income), net 8 1 4 4

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

Provision (benefit) for income taxes 35 13 102 ( 1 )

Net income (loss) 103 54 319 ( 182 )

Net income attributable to noncontrolling interest — 1 — —

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

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

Basic $ 0.47 $ 0.25 $ 1.46 $ ( 0.83 )

Diluted $ 0.47 $ 0.25 $ 1.45 $ ( 0.83 )

Weighted average common shares outstanding:

Basic 218.6 218.5 218.6 219.4

Diluted 220.5 219.2 220.7 219.4

Restructuring and

Operating income

Other income and

Other expense

(income), net

Income before income

Provision for income

attributable to noncontrolling interest

attributable to Dentsply Sirona

Net income per common

share attributable to Dentsply Sirona:

Weighted average

common shares outstanding:

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

3 unchanged sentences

(in millions)

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

2021 2020 2021 2020

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

Other comprehensive (loss) income, net of tax:

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

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

Pension liability gain 2 2 8 5

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

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

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

Total comprehensive income (loss) attributable to Dentsply Sirona $ 47 $ 121 $ 216 $ ( 159 )

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive

(loss) income, net of tax:

currency translation (loss) gain

derivative financial instruments

liability gain

comprehensive (loss) income, net of tax

Total comprehensive

(loss) income

Comprehensive

income attributable to noncontrolling interests

Total comprehensive

(loss) income attributable to Dentsply Sirona

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

3 unchanged sentences

(in millions, except per share amounts)

September 30, 2021 December 31, 2020

Current Assets:

Cash and cash equivalents $ 281 $ 438

Accounts and notes receivables-trade, net 748 673

Inventories, net 532 466

Prepaid expenses and other current assets 243 214

Total Current Assets 1,804 1,791

Property, plant, and equipment 771 791

Operating lease right-of-use assets, net 183 176

Identifiable intangible assets, net 2,402 2,504

Goodwill 4,000 3,986

Other noncurrent assets 128 94

Total Assets $ 9,288 $ 9,342

June 30, 2022

December 31, 2021

Cash and cash

notes receivables-trade, net

expenses and other current assets

Total Current

plant, and equipment, net

lease right-of-use assets, net

intangible assets, net

noncurrent assets

Liabilities and Equity

Current Liabilities:

Accounts payable $ 276 $ 305

Accrued liabilities 641 653

Income taxes payable 58 60

Notes payable and current portion of long-term debt 151 299

Total Current Liabilities 1,126 1,317

Notes payable

and current portion of long-term debt

Total Current

Long-term debt

Operating lease liabilities 139 130

Deferred income taxes 413 393

Other noncurrent liabilities 560 554

lease liabilities

noncurrent liabilities

Total Liabilities

and contingencies (Note 15)

Preferred stock, $ 1.00 par value;

0.25 million shares authorized;

0.25 million shares

no shares issued

Common stock, $ 0.01 par value;

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

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

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

Retained earnings 1,481 1,233

Accumulated other comprehensive loss ( 567 ) ( 464 )

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

( 2,454 ) ( 2,409 )

Total Dentsply Sirona Equity 5,122 4,967

Noncontrolling interests 3 3

Total Equity 5,125 4,970

Total Liabilities and Equity $ 9,288 $ 9,342

400.0 million shares authorized, and 264.5 million shares issued at June 30, 2022

and December 31, 2021

million and 217.4 million shares outstanding at June 30, 2022 and December 31, 2021

excess of par value

other comprehensive loss

Treasury stock, at cost, 49.7 million and 47.1 million shares at June 30,

2022 and December 31, 2021, respectively

Dentsply Sirona Equity

Noncontrolling

Total Liabilities and

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

3 unchanged sentences

(in millions, except per share amounts)

Stock Capital in

Par Value Retained

Earnings Accumulated

Comprehensive

Loss Treasury

Stock Total Dentsply Sirona

Equity Noncontrolling

Interests Total

Total Dentsply Sirona

Noncontrolling

Balance at December 31,

Net income — — 117 — — 117 — 117

Other comprehensive loss — — — ( 90 ) — ( 90 ) — ( 90 )

Exercise of stock options — 11 — — 22 33 — 33

Stock based compensation expense — 13 — — — 13 — 13

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

Treasury shares purchased — — — — ( 90 ) ( 90 ) — ( 90 )

Restricted stock unit distributions — ( 11 ) — — 7 ( 4 ) — ( 4 )

Cash dividends ($ 0.10 per share)

— — ( 22 ) — — ( 22 ) — ( 22 )

Other comprehensive

Exercise of stock

compensation expense

Funding of employee

stock purchase plan

Accelerated share

Restricted stock unit

distributions

Cash dividends declared ($ 0.125

Balance at March 31,

Net income — — 99 — — 99 — 99

Other comprehensive income — — — 43 — 43 — 43

Exercise of stock options — 3 — — 9 12 — 12

Stock based compensation expense — 19 — — — 19 — 19

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

Cash dividends ($ 0.11 per share)

— — ( 25 ) — — ( 25 ) — ( 25 )

Other comprehensive

Exercise of stock

compensation expense

Funding of employee

stock purchase plan

Accelerated share

Restricted stock unit

distributions

Restricted stock unit

Cash dividends declared ($ 0.125

Balance at June 30,

Net income — — 103 — — 103 — 103

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

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

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

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

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

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

Cash dividends ($ 0.11 per share)

— — ( 23 ) — — ( 23 ) — ( 23 )

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

DENTSPLY SIRONA INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (cont.)

(in millions, except per share amounts)

Stock Capital in

Par Value Retained

Earnings Accumulated

Comprehensive

Loss Treasury

Stock Total Dentsply Sirona

Equity Noncontrolling

Interests Total

Total Dentsply Sirona

Noncontrolling

Balance at December 31,

Net loss — — ( 140 ) — — ( 140 ) — ( 140 )

Other comprehensive loss — — — ( 112 ) — ( 112 ) — ( 112 )

Exercise of stock options — — — — 4 4 — 4

Stock based compensation expense — 9 — — — 9 — 9

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

Treasury shares purchased — ( 28 ) — — ( 112 ) ( 140 ) — ( 140 )

Restricted stock unit distributions — ( 15 ) — — 9 ( 6 ) — ( 6 )

Cash dividends ($ 0.10 per share)

— — ( 22 ) — — ( 22 ) — ( 22 )

Other comprehensive

Exercise of stock

compensation expense

Funding of employee

stock purchase plan

Treasury shares

Restricted stock unit

distributions

Cash dividends declared ($ 0.10

Balance at March 31,

Net loss — — ( 95 ) — — ( 95 ) ( 1 ) ( 96 )

Other comprehensive income — — — 68 — 68 — 68

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

Stock based compensation expense — 10 — — — 10 — 10

Treasury shares purchased — 28 — — ( 28 ) — — —

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

Cash dividends ($ 0.10 per share)

— — ( 22 ) — — ( 22 ) — ( 22 )

Other comprehensive

Exercise of stock

compensation expense

Restricted stock unit

distributions

Cash dividends declared ($ 0.11

Balance at June 30,

Net income — — 53 — — 53 1 54

Other comprehensive income — — — 67 — 67 — 67

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

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

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

Cash dividends ($ 0.10 per share)

— — ( 22 ) — — ( 22 ) — ( 22 )

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

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

3 unchanged sentences

(in millions)

Nine Months Ended September 30,

Cash flows from operating activities:

Net income (loss) $ 319 $ ( 182 )

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

Depreciation 94 104

Amortization of intangible assets 167 143

Goodwill impairment — 157

Indefinite-lived intangible asset impairment — 39

Deferred income taxes ( 11 ) ( 53 )

Stock based compensation expense 54 36

Other non-cash expense 12 9

(Gain) loss on sale of non-strategic businesses and product lines ( 14 ) —

Changes in operating assets and liabilities, net of acquisitions:

Accounts and notes receivable-trade, net ( 98 ) 149

Inventories, net ( 82 ) 74

Prepaid expenses and other current assets ( 27 ) 50

Other noncurrent assets ( 12 ) 8

Accounts payable ( 39 ) ( 65 )

Accrued liabilities 41 ( 73 )

Income taxes 11 ( 10 )

Other noncurrent liabilities 20 ( 14 )

Net cash provided by operating activities 435 372

Cash flows from investing activities:

Six Months Ended June 30,

Cash flows from

operating activities:

Adjustments to

reconcile net income to net cash provided by operating activities:

Amortization of

intangible assets

Deferred income

compensation expense

Other non-cash

Gain on sale of

non-strategic businesses and product lines

operating assets and liabilities, net of acquisitions:

notes receivable-trade, net

expenses and other current assets, net

noncurrent assets

noncurrent liabilities

Net cash provided by

operating activities

Cash flows from

investing activities:

Capital expenditures

Cash paid for acquisitions of businesses and equity investments, net of cash acquired ( 248 ) ( 2 )

Cash received on sale of non-strategic businesses or product lines 27 —

Cash received on derivative contracts 1 58

Cash paid on derivative contracts — ( 1 )

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

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

Cash flows from financing activities:

Proceeds (repayments) on short-term borrowings, net 147 ( 1 )

Cash paid for treasury stock ( 90 ) ( 140 )

Cash paid for

acquisitions of businesses and equity investments, net of cash acquired

Cash received on sale

of non-strategic businesses or product lines

Cash received on

derivative contracts

Proceeds from sale of

property, plant, and equipment

Other investing

Net cash used in

investing activities

Cash flows from

financing activities:

Cash paid for

accelerated share repurchase

Proceeds on short-term

Cash paid for treasury

Cash dividends paid

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

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

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

Deferred financing costs — ( 6 )

Proceeds from exercised stock options 47 6

Cash paid on derivative contracts — ( 31 )

Other financing activities, net ( 11 ) ( 4 )

Net cash (used in) provided by financing activities ( 257 ) 504

Effect of exchange rate changes on cash and cash equivalents ( 16 ) ( 4 )

Net (decrease) increase in cash and cash equivalents ( 157 ) 867

Cash and cash equivalents at beginning of period 438 405

Cash and cash equivalents at end of period $ 281 $ 1,272

Proceeds from long-term

borrowings, net of deferred financing costs

Repayments on long-term

Proceeds from exercised

stock options

Other financing

activities, net

Net cash used in

financing activities

Effect of exchange rate

changes on cash and cash equivalents

Net increase (decrease)

in cash and cash equivalents

Cash and cash

equivalents at beginning of period

Cash and cash

equivalents at end of period

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

1 unchanged sentence

and Subsidiaries

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

NOTES TO UNAUDITED

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SIGNIFICANT

ACCOUNTING POLICIES AND REVISION

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the U.S.

The accompanying unaudited interim consolidated financial statements have been

prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the U.S.

Securities and Exchange Commission (“SEC”).

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.

In the opinion of management, all adjustments (consisting only

of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.

Results for interim periods should not be considered indicative of results for a full year.

These financial statements and related notes contain the accounts of DENTSPLY SIRONA Inc.

and subsidiaries (“Dentsply Sirona” or the “Company”) on a consolidated basis and should be read in conjunction with the consolidated financial statements and notes included in the Company’s most recent Form 10-K for the year ended December 31, 2020.

The accounting policies of the Company, as applied in the interim consolidated financial statements presented herein, are substantially the same as presented in the Company’s Form 10-K for the year ended December 31, 2020, except as may be indicated below.

Certain prior period amounts within the Consolidated Statements of Operations have been reclassified in order to conform with the current year presentation of separately reported Research and development expenses.

These financial

statements and related notes contain the accounts of DENTSPLY SIRONA Inc.

and subsidiaries (“Dentsply Sirona” or the “Company”) on a consolidated basis and should be read in conjunction with the consolidated financial statements and notes

included in the Company’s most recent Form 10-K for the year ended December 31, 2021, as amended and filed on November 7, 2022.

Recently Concluded Investigation

As previously disclosed, the Audit and Finance Committee of the Company’s Board of

Directors (the “Audit and Finance Committee”), assisted by independent legal counsel and forensic accountants, commenced an internal investigation in March 2022 of allegations regarding certain financial reporting matters submitted by current and

former employees of the Company.

In the North America Investigation, the Audit and Finance Committee concluded that there was no evidence of intentional wrongdoing or fraud.

The Audit and Finance Committee found that certain former members of

senior management, including the Company’s former Chief Executive Officer and former Chief Financial Officer, violated provisions of the Company’s Code of Ethics and Business Conduct.

In addition, these former members of senior management did not

maintain and promote an appropriate control environment focused on compliance in areas of the Company’s business, nor did they sufficiently promote, monitor or enforce adherence to the Code of Ethics and Business Conduct.

The North America

Investigation found that certain former members of senior management, including the former Chief Executive Officer and the former Chief Financial Officer created a culture where employees did not feel comfortable raising concerns without fear of

In addition, the North America Investigation substantiated certain allegations regarding inappropriate tone at the top by the former Chief Executive Officer and the former Chief Financial Officer.

Based on the China Investigation, the Audit and Finance Committee concluded that members of the Company’s local commercial team in

China, as well as the head of the Company’s Asia-Pacific commercial organization, committed intentional wrongdoing by failing to provide requested information to the Company’s local accounting team, by obstructing the work of the accounting team

and by lacking truthfulness in providing information to the Company and to the Audit and Finance Committee as part of the China Investigation.

The China Investigation also determined that these actions by the certain members of the Company’s

local commercial team in China, as well as the former Chief Financial Officer and the head of the Company’s Asia-Pacific commercial organization, violated the Company’s Code of Ethics and Business Conduct.

On October 29, 2022, the Audit and Finance Committee determined that its

investigation was complete, and authorized the filing of these interim consolidated financial statements for the three-month and six-month periods ended June 30, 2022.

Correction of Previously Reported Interim Consolidated Quarterly Financial Statements

The interim consolidated financial statements include immaterial corrections to the

three-month and six-month periods ended June 30, 2021 which were presented in Note 23 to the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 in the Company’s 2021 Form 10-K/A filed on November 7,

This revision, which corrects for errors related to certain customer incentive programs as well as the accounting and assumptions in the determination of estimates related to the Company’s sales returns provisions, warranty reserve

provisions and variable consideration, as well as other immaterial adjustments, results in a decrease to Net sales by $ 5 million, a

decrease to Gross Profit by $ 3 million, a decrease to Operating Income of $ 1 million and a decrease to Diluted EPS by $ 0.02 per share from

amounts previously reported for the three-month period ended June 30, 2021.

This revision results in a decrease to Net sales by $ 6

million, a decrease to Gross Profit by $ 3 million, a decrease to Operating Income of $ 5 million and a decrease to Diluted EPS by $ 0.04 per share from

amounts previously reported for the six-month period ended June 30, 2021.

Previously reported cash flows from operating, investing and financing activities for the six-month period ended June 30, 2021 were not impacted.

Use of Estimates

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

The preparation of financial statements in conformity with US GAAP requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of net sales and

expense during the reporting period.

Actual results could differ materially from those estimates.

Revenue Recognition

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

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

Accounts and Notes Receivable

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

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

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

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

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

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

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

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

Therefore, prior period amounts have not been retrospectively adjusted.

Goodwill & Intangible Assets

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

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

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

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

Specifically, for the three months ended June 30, 2022, some of these estimates and

assumptions continue to be based on an ongoing evaluation of expected future impacts from the COVID-19 pandemic.

The full extent to which the COVID-19 pandemic will directly or indirectly have a negative material impact on the Company’s financial

condition, liquidity, or results of operations in future periods is highly uncertain and difficult to predict.

More specifically, although demand for the Company’s products has largely recovered from the impact of rigorous preventive measures

implemented at the outset of the pandemic, it continues to be affected by social distancing guidelines, dental practice safety protocols which reduce patient traffic, and some lingering patient reluctance to seek dental care.

Also, impacts from

the pandemic continue to be experienced in the form of more recent shortages and higher prices of raw materials such as electronic components, higher related transportation costs, and labor shortages.

In the second quarter of 2022, the Company

has continued to experience supply chain constraints, which has impacted its ability to timely produce and deliver certain products, and has also resulted in increases in shipping rates.

To address these issues, the Company has taken steps to

mitigate the impact of these trends, including continued emphasis on cost reduction and supply chain efficiencies.

However, uncertainties remain regarding how long these impacts will continue, whether customer demand will fully return to

pre-COVID-19 levels upon lifting of remaining government restrictions, or whether future variants of the virus may have an adverse impact on demand in affected markets.

Accounting Pronouncements Not Yet Adopted

4 unchanged sentences

Scope” in January 2021.

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

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

The Company is currently assessing the impact that this standard will have on its financial position, results of operations, cash flows, and disclosures.

NOTE 2 – STOCK COMPENSATION

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

Three Months Ended Nine Months Ended

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.

The amendments in this standard were

effective upon issuance and generally can be applied to contract modifications made or evaluated through December 31, 2022.

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

In October 2021, the FASB issued ASU No.

2021-08, “Business Combinations:

for Contract Assets and Contract Liabilities from Contracts with Customers” (Topic 805), which requires contract assets and liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in

accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts.

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

current approach.

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

The Company is currently assessing the impact of this standard

on its consolidated financial statements and related disclosures.

NOTE 2 - REVENUE

Revenues are derived primarily from the sale of dental equipment and dental and

healthcare consumable products.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring

goods or providing services.

Net sales disaggregated by product category for the three and six

months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

Six Months Ended

(in millions)

Equipment segment net sales

Other Consumables

Consumables segment sales

Total net sales

Net sales disaggregated by geographic region for the three and six

months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

Six Months Ended

(in millions)

United States

Rest of World

Total net sales

Contract Assets and Liabilities

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

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

The Company had $ 72 million and $ 68 million of deferred

revenue recorded in Accrued liabilities in the Consolidated Balance Sheets at June 30, 2022 and December 31, 2021, respectively.

Prior year deferred revenue of approximately $ 42 million was recognized in the current year.

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

Allowance for Doubtful Accounts

Accounts and notes receivables-trade, net are stated net of allowances for doubtful

accounts and trade discounts, which were $ 12 million at June 30, 2022 and $ 13 million at December 31, 2021.

For the three months and six months ended June 30, 2022 and 2021, changes to the provision for doubtful accounts including write-offs of

accounts receivable that were previously reserved were insignificant.

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

NOTE 3 – STOCK

The amounts of stock compensation expense recorded in the Company’s Consolidated

Statements of Operations for the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

Six Months Ended

(in millions)

Cost of products sold

$ 2 $ — $ 4 $ 1

Selling, general, and administrative expense 19 15 48 33

Research and development expense 1 1 2 1

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

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

NOTE 3 – COMPREHENSIVE INCOME (LOSS)

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

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

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

Other comprehensive (loss) income before reclassifications and tax impact ( 74 ) ( 6 ) 9 3 ( 68 )

Tax (expense) benefit ( 25 ) 2 ( 2 ) ( 1 ) ( 26 )

Other comprehensive (loss) income, net of tax, before reclassifications ( 99 ) ( 4 ) 7 2 ( 94 )

Amounts reclassified from accumulated other comprehensive income, net of tax — 2 — 2 4

Net (decrease) increase in other comprehensive loss ( 99 ) ( 2 ) 7 4 ( 90 )

Balance, net of tax, at March 31, 2021 $ ( 286 ) $ ( 27 ) $ ( 112 ) $ ( 129 ) $ ( 554 )

Other comprehensive income before reclassifications and tax impact 31 3 1 — 35

Tax benefit (expense) 6 ( 2 ) ( 1 ) — 3

Other comprehensive income, net of tax, before reclassifications 37 1 — — 38

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

Net increase in other comprehensive income 37 4 — 2 43

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

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

general, and administrative expense

development expense

Total stock based

compensation expense

Related deferred

income tax benefit

NOTE 4 – COMPREHENSIVE

INCOME (LOSS)

Changes in Accumulated other comprehensive income (loss) (“AOCI”),

net of tax, by component for the six months ended June 30, 2022 and 2021 were as follows:

(in millions)

Foreign Currency Translation Gain (Loss)

Gain (Loss) on Cash Flow Hedges

Gain (Loss) on Net Investment and Fair Value

Pension Liability Gain (Loss)

Balance, net of tax,

at December 31, 2021

comprehensive (loss) income before reclassifications and tax impact

comprehensive (loss) income, net of tax, before reclassifications

reclassified from accumulated other comprehensive income, net of tax

Net (decrease)

increase in other comprehensive loss

Balance, net of tax,

at March 31, 2022

comprehensive (loss) income before reclassifications and tax impact

comprehensive (loss) income, net of tax, before reclassifications

reclassified from accumulated other comprehensive income, net of tax

Net (decrease)

increase in other comprehensive income

Balance, net of tax,

at June 30, 2022

(in millions)

Foreign Currency Translation Gain (Loss)

Gain (Loss) on Cash Flow Hedges

Gain (Loss) on Net Investment and Fair Value

Pension Liability Gain (Loss)

Balance, net of tax,

at December 31, 2020

comprehensive (loss) income before reclassifications and tax impact

Tax (expense)

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

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

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

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

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

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

Other comprehensive (loss) income before reclassifications and tax impact ( 117 ) ( 16 ) 25 — ( 108 )

Tax (expense) benefit ( 2 ) 4 ( 8 ) — ( 6 )

Other comprehensive (loss) income, net of tax, before reclassifications ( 119 ) ( 12 ) 17 — ( 114 )

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

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

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

Other comprehensive income (loss) before reclassifications and tax impact 77 — ( 15 ) — 62

Tax (expense) benefit ( 2 ) — 7 — 5

Other comprehensive income (loss)\, net of tax, before reclassifications 75 — ( 8 ) — 67

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

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

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

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

Tax benefit (expense) 17 ( 2 ) 2 — 17

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

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

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

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

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

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

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

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

NOTE 4 – EARNINGS PER COMMON SHARE

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

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

comprehensive (loss) income, net of tax, before reclassifications

reclassified from accumulated other comprehensive income, net of tax

Net (decrease)

increase in other comprehensive income

Balance, net of tax,

at March 31, 2021

comprehensive income before reclassifications and tax impact

comprehensive income, net of tax, before reclassifications

reclassified from accumulated other comprehensive income, net of tax

in other comprehensive income

Balance, net of tax,

at June 30, 2021

At June 30, 2022 and December 31, 2021, the cumulative tax

adjustments were $ 120 million and $ 168

million, respectively, primarily related to foreign currency translation adjustments.

The cumulative foreign currency translation adjustments included translation losses

of $ 460 million and $ 250

million at June 30, 2022 and December 31, 2021, respectively, and cumulative losses on loans designated as hedges of net investments of $ 68

million and $ 116 million, respectively.

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

financial instruments.

Reclassifications out of AOCI to the Consolidated Statements of Operations for the

three and six months ended June 30, 2022 and 2021 were insignificant.

NOTE 5 – EARNINGS PER

The computation of basic and diluted earnings per common share for

the three and six months ended June 30, 2022 and 2021 were as follows:

Basic Earnings Per Common Share

Three Months Ended

Six Months Ended

(in millions, except per share amounts)

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

Weighted average common shares outstanding 218.6 218.5 218.6 219.4

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

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

attributable to Dentsply Sirona

Weighted average

common shares outstanding

Earnings per common

share - basic

Diluted Earnings Per Common Share

Three Months Ended

Six Months Ended

(in millions, except per share amounts)

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

Weighted average common shares outstanding 218.6 218.5 218.6 219.4

Incremental weighted average shares from assumed exercise of dilutive options from stock-based compensation awards 1.9 0.7 2.1 —

Total weighted average diluted shares outstanding 220.5 219.2 220.7 219.4

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

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

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

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

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

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

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

NOTE 5 – BUSINESS COMBINATIONS

attributable to Dentsply Sirona

Weighted average

common shares outstanding

Incremental weighted

average shares from assumed exercise of dilutive options from stock-based compensation awards

Total weighted average

diluted shares outstanding

Earnings per common

share - diluted

For the three and six months ended June 30, 2022, the Company excluded from the

computation of weighted average diluted shares outstanding 4.0 million and 3.6 million of equivalent shares of common stock from stock options and RSUs because their effect would be antidilutive.

For the three and six months ended June 30, 2021, the

Company excluded 0.5 million and 0.7

million of equivalent shares of common stock outstanding from stock options and RSUs because their effect would be antidilutive.

The Board of Directors has approved a share repurchase program, up to $ 1.0 billion.

Share repurchases may be made through open market purchases, Rule 10b5-1 plans, accelerated share repurchases, privately negotiated

transactions or other transactions in such amounts and at such times as the Company deems appropriate based upon prevailing market and business conditions and other factors.

At June 30, 2022, the Company had authorization to repurchase $ 740 million in shares of common stock remaining under the share repurchase program.

On March 8, 2022, the Company entered into an Accelerated Share Repurchase Agreement

(“ASR Agreement”) with a financial institution to purchase the Company’s common stock based on the volume-weighted average price of the Company’s common stock during the term of the agreement, less a discount.

(in millions, except per share amounts)

Initial Delivery

Final Settlement

Agreement Date

Shares Received

Price per share

Value of Shares as

a % of Contract Value

Settlement Date

Average Price per

March 8, 2022

April 19, 2022

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 June 30, 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.

NOTE 6 – BUSINESS

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.

specialized software with a focus on CAD/CAM systems.

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

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

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

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

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

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 Company anticipates realizing from integrating the acquired assets into the Company’s existing business operations, and 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 and the six months ended June 30, 2022 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 manufactures and sells orthodontic devices and provides in-office and at-home orthodontic accessory devices to orthodontists and their patients primarily within the clear aligner market.

(in millions, except for useful life)

In-process R&D

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 and certain of its affiliated entities, a privately-held business

based in California (“Propel Orthodontics”).

The acquired business manufactures and sells orthodontic devices and provides in-office and at-home orthodontic accessory devices to orthodontists and their patients primarily within the clear aligner

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

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

The fair values of the assets acquired and liabilities assumed in connection with

the Propel Orthodontics acquisition were as follows:

(in millions)

2 unchanged sentences

Current liabilities

Net assets acquired 69

Purchase consideration $ 132

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

assets acquired

consideration

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 Company anticipates realizing from integrating the acquired assets into the Company’s existing business operations.

The goodwill is expected to be deductible for tax purposes.

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

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

Measurement period adjustments made to the fair values of the assets acquired and liabilities assumed during the year ended December 31, 2021 and the six months ended June 30, 2022 were immaterial to the financial statements, resulting in a

reduction to goodwill of $ 2 million.

Identifiable intangible assets acquired were as follows:

Weighted Average

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

(in millions, except for useful life)

Developed technology

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

Dental, Ltd., a privately-held producer and distributor of specialized regenerative dental material based in Israel.

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

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

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

Cash and cash

Other current assets

1 unchanged sentence

Current liabilities

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 preliminary 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.

Other long-term assets

(liabilities), net

assets acquired

consideration

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 Company anticipates realizing from integrating the acquired assets into the Company’s existing business operations.

The goodwill is not deductible for tax purposes.

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

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

Measurement period

adjustments made to the fair values of the assets acquired and liabilities assumed during the year ended December 31, 2021 and the six months ended June 30, 2022 were immaterial to the financial statements, resulting in an increase to goodwill of

Identifiable intangible assets acquired were as follows:

Weighted Average

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

(in millions, except for useful life)

Developed technology

In-process R&D 10 Indefinite

2020 Transactions

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

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

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

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

(in millions)

Cash and cash equivalents $ 14

Current assets 17

Intangible assets 416

Current liabilities ( 28 )

Net assets acquired 419

Purchase consideration $ 1,045

The purchase price has been allocated on the basis of the preliminary estimates of fair values of assets acquired and liabilities assumed, which resulted in the recording of $ 626 million in goodwill.

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

Intangible assets acquired were as follows:

Weighted Average

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

Non-compete agreements $ 16 5

Technology know-how 210 10

Tradenames and trademarks 190 20

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

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

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

Investments in Affiliates

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

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

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

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

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

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

NOTE 6 – SEGMENT INFORMATION

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

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

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

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

In-process R&D

The results of operations for each of the acquired businesses above upon the

effective date of each transaction have been included in the accompanying financial statements.

These results, as well as the historical results for the above acquired businesses for the periods ended June 30, 2022 and June 30, 2021, are not

material in relation to the Company’s net sales and earnings for those periods.

The Company therefore does not believe these acquisitions represent material transactions either individually or in the aggregate requiring the supplemental pro-forma

information prescribed by ASC 805 and accordingly, this information is not presented.

Investment in Affiliates

On June 4, 2021, the effective date of the transaction, the

Company paid $ 16 million to acquire a minority interest in a U.K.-based, privately-held provider of healthcare consumables.

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.

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 six months

ended June 30, 2021.

NOTE 7 – SEGMENT

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

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

and allocate resources.

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

operating income.

amortization of intangible assets and depreciation resulting from the fair value step-up of property, plant, and equipment from acquisitions.

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 Consumable Products.

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

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

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

Three Months Ended Nine Months Ended

This segment is responsible for the design, manufacture, and sales of the Company’s

dental technology and equipment products and healthcare products.

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

This segment is responsible for the design, manufacture, and sales of the Company’s

consumable products which include various preventive, restorative, endodontic, and dental laboratory products.

The Company’s segment information for the three and six months ended June 30, 2022

and 2021 was as follows:

Three Months Ended

Six Months Ended

(in millions)

Technologies & Equipment $ 629 $ 504 $ 1,848 $ 1,328

Consumables 440 391 1,315 932

Total net sales $ 1,069 $ 895 $ 3,163 $ 2,260

Technologies &

Segment Adjusted Operating Income

Three Months Ended Nine Months Ended

Three Months Ended

Six Months Ended

(in millions)

Technologies & Equipment (a)

$ 148 $ 127 $ 409 $ 234

Consumables (a)

135 115 439 160

Segment adjusted operating income (loss) 283 242 848 394

Reconciling items expense (income):

All other (b)

66 91 198 175

Goodwill impairment — — — 157

Restructuring and other costs 3 18 11 62

Interest expense, net 13 14 43 32

Other expense (income), net 8 1 4 4

Amortization of intangible assets 56 49 167 143

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

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

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

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

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

Technologies &

adjusted operating income

Reconciling items

expense (income):

All other (a)

Restructuring

and other costs

Other expense

(income), net

of intangible assets

resulting from the fair value step-up of property, plant, and equipment from business combinations

Income before income

(a) Includes the results of unassigned Corporate headquarters costs and inter-segment

eliminations.

NOTE 8 – INVENTORIES

Inventories, net were as follows:

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

Finished goods $ 327 $ 264

(in millions)

June 30, 2022

December 31, 2021

Raw materials and

Work-in-process

Raw materials and supplies 132 134

Inventories, net $ 532 $ 466

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

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

NOTE 8 – RESTRUCTURING AND OTHER COSTS

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

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

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

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

Finished goods

Company’s inventory reserve was $ 79 million and $ 86 million at June 30, 2022 and December 31, 2021, respectively.

Inventories are stated at the lower of cost

and net realizable value.

NOTE 9 – RESTRUCTURING

AND OTHER COSTS

Restructuring and other costs for the three and six months ended

June 30, 2022 and 2021 were as follows:

Affected Line Item in the Consolidated

Statements of Operations

Three Months Ended

Six Months Ended

(in millions)

Cost of products sold

Selling, general, and administrative expenses 3 1 6 1

Selling, general, and

administrative expenses

Restructuring and

restructuring and other costs

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

Restructuring Programs and Accruals

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

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

The Company is exiting several of its facilities and reducing its workforce by approximately 4 % to 5 %.

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

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

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

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

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

(in millions) 2019 and

Prior Plans 2020 Plans 2021 Plans Total

The Company’s restructuring accruals at June 30, 2022 were as

(in millions)

Balance at December

Provisions 2 4 7 13

Amounts applied ( 8 ) ( 11 ) ( 3 ) ( 22 )

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

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

Balance at June 30,

Other Restructuring Costs

(in millions) 2019 and

Prior Plans 2020 Plans 2021 Plans Total

(in millions)

Balance at December

Provisions 2 3 3 8

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

Change in estimate — ( 1 ) — ( 1 )

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

Balance at June 30,

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

(in millions) December 31, 2020 Provisions Amounts

Applied Change in Estimates September 30, 2021

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

Consumables 17 12 ( 14 ) ( 2 ) 13

All Other 1 3 ( 3 ) — 1

Total $ 34 $ 21 $ ( 30 ) $ ( 7 ) $ 18

The associated restructuring liabilities are recorded in Accrued liabilities and Other noncurrent liabilities in the Consolidated Balance Sheets.

NOTE 9 – FINANCIAL INSTRUMENTS AND DERIVATIVES

(in millions)

December 31, 2021

Change in Estimates

June 30, 2022

Technologies &

The associated restructuring liabilities are recorded in Accrued

liabilities and Other noncurrent liabilities in the Consolidated Balance Sheets.

NOTE 10 – FINANCIAL

INSTRUMENTS AND DERIVATIVES

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 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.

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

The objective of this risk management program is to reduce the volatility that these market risks may have on the Company’s operating results and equity.

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

Additionally, the Company utilizes interest rate swaps to convert fixed rate debt into variable rate debt or variable rate debt to fixed rate debt.

The Company does not hold derivative instruments for trading or speculative purposes.

Derivative Instruments

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

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

The objective of this

risk management program is to reduce the volatility that these market risks may have on the Company’s operating results and cash flows.

The Company employs derivative financial instruments to hedge certain anticipated transactions, firm

commitments, or assets and liabilities denominated in foreign currencies.

Additionally, the Company utilizes interest rate swaps to convert fixed rate debt into variable rate debt or vice versa.

The Company does not hold derivative instruments

for trading or speculative purposes.

The following summarizes the notional amounts of cash flow hedges,

hedges of net investments, fair value hedges, and derivative instruments not designated as hedges for accounting purposes by derivative instrument type at June 30, 2022 and the notional amounts expected to mature during the next 12 months.

(in millions)

Aggregate Notional Amount

Aggregate Notional Amount Maturing within 12

Cash Flow Hedges

Foreign exchange forward contracts $ 323 $ 246

Total derivative instruments designated as cash flow hedges $ 323 $ 246

Hedges of Net Investments

Foreign exchange forward contracts $ 185 $ 93

Cross currency basis swaps 309 —

Total derivative instruments designated as hedges of net investments $ 494 $ 93

exchange forward contracts

Total derivative

instruments designated as cash flow hedges

Hedges of Net

Foreign exchange

forward contracts

Cross currency

Total derivative

instruments designated as hedges of net investments

Fair Value Hedges

Interest Rate Swaps $ 250 $ —

Foreign exchange forward contracts 217 134

Total derivative instruments designated as fair value hedges $ 467 $ 134

Derivative Instruments not Designated as Hedges

Foreign exchange forward contracts $ 342 $ 342

Total derivative instruments not designated as hedges $ 342 $ 342

Interest rate

exchange forward contracts

Total derivative

instruments designated as fair value hedges

Derivative Instruments

not Designated as Hedges

exchange forward contracts

Total derivative

instruments not designated as hedges

Cash Flow Hedges

Foreign Exchange Risk Management

The Company uses a program to hedge select anticipated foreign currency cash flows to reduce volatility in both cash flows and reported earnings.

The Company accounts for the designated 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.

The Company hedges select anticipated foreign currency cash flows to reduce

volatility in both cash flows and reported earnings.

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.

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.

Accordingly, the spot-to-spot change in the derivative fair value will be deferred in AOCI and released and recorded in the Consolidated Statements of Operations in the same period that the hedged transaction is recorded.

The time-value component of the fair value of the derivative is reported on a straight-line basis in Cost of products sold in the Consolidated Statements of Operations in the period which it is applicable.

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

These foreign exchange forward contracts generally have maturities up to 18 months, which is the period over which the Company is hedging exposures to variability of cash flows and the counterparties to the transactions are typically large international financial institutions.

Accordingly, the

spot-to-spot change in the derivative fair value will be deferred in AOCI and released and recorded in the Consolidated Statements of Operations in the same period that the hedged transaction is recorded.

The time-value component of the fair

value of the derivative is reported on a straight-line basis in Cost of products sold in the Consolidated Statements of Operations in the period which it is applicable.

Any cash flows associated with these instruments are included in operating

activities in the Consolidated Statements of Cash Flows.

typically large international financial institutions.

Interest Rate Risk Management

The Company enters into interest rate swap contracts infrequently as they are only used to manage interest rate risk on long-term debt instruments and not for speculative purposes.

The Company enters into interest rate swap contracts infrequently as they are only

used to manage interest rate risk on long-term debt instruments and not for speculative purposes.

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

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

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

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

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.

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

As of June 30, 2022 and December 31, 2021, $ 23 million and $ 25 million, respectively, 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.

At June 30, 2022, the Company expects to reclassify an immaterial amount of deferred net losses on cash flow hedges recorded in AOCI in the Consolidated Statements of Operations during the next 12 months.

the rollforward of derivative instruments designated as cash flow hedges in AOCI see Note 4, Comprehensive Income (Loss).

Hedges of Net Investments in Foreign Operations

The Company has significant investments in foreign subsidiaries.

The net assets of these subsidiaries are exposed to volatility in currency exchange rates.

The net assets of

these subsidiaries are exposed to volatility in currency exchange rates.

The Company employs both derivative and non-derivative financial instruments to hedge a portion of this exposure.

The derivative instruments consist of foreign exchange forward contracts and cross currency basis swaps.

The derivative instruments consist of foreign exchange

forward contracts and cross-currency basis swaps.

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 derivative and non-derivative financial 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.

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

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

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

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

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

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

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

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

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.

Any cash flows associated with these instruments are included in investing activities in the Consolidated Statements of Cash Flows except for derivative

instruments that include an other-than-insignificant financing element, for which all cash flows are classified as financing activities in the Consolidated Statements of Cash Flows.

The fair value of the foreign exchange forward contracts and cross-currency basis

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

The effective portion of the change in the value

of these derivatives is recorded in AOCI, net of tax effects.

On July 2, 2021, the Company entered into a cross currency basis swap totaling a

notional amount of $ 300 million which matures on June 3, 2030.

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

This contract effectively converts a portion of the $ 750 million bond coupon from 3.3 % to 1.7 %.

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.

As of June 30, 2022 the euro net investment hedge portfolio has an aggregate notional value of 160

million euro with maturity dates through June 2024.

Fair Value Hedges

Foreign Exchange Risk Management

The Company has intercompany loans denominated in Swedish kronor that are exposed to volatility in currency exchange rates.

The Company has intercompany loans denominated in Swedish kronor that are exposed to

volatility in currency exchange rates.

The Company employs derivative financial instruments to hedge these exposures.

The Company accounts for these designated foreign exchange forward contracts as fair value hedges.

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

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

The Company measures the

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

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

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

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

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

The foreign exchange forwards are designated as fair value hedges.

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

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

Any cash flows associated with

these instruments are included in operating activities in the Consolidated Statements of Cash Flows.

On January 6, 2021 the Company entered into foreign exchange forward contracts with

a notional value of SEK 1.3 billion as a result of an increase in intercompany loans denominated in Swedish kronor.

exchange forwards are designated as fair value hedges.

Interest Rate Risk Management

On July 1, 2021, the Company entered into variable interest rate swaps with a

notional amount of $ 250 million, which effectively converts a portion of the underlying fixed rate of 3.3 % on the $ 750 million Senior Notes

due June 2030 to a variable interest rate.

Of the $ 250 million notional amount, $ 100 million has a term of five-years maturing on June 1, 2026

and $ 150 million has a term of nine years

maturing on March 1, 2030.

Derivative Instruments Not Designated as Hedges

The Company enters into derivative instruments with the intent to partially mitigate the foreign exchange revaluation risk associated with recorded assets and liabilities that are denominated in a non-functional currency.

The Company enters into derivative instruments with the intent to partially mitigate

the foreign exchange revaluation risk associated with recorded assets and liabilities that are denominated in a non-functional currency.

The Company primarily uses foreign exchange forward contracts to hedge these risks.

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

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

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

The gains and losses on

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

Any cash flows

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

Gains and (losses) recorded in the Company’s Consolidated Statements of Operations

related to the economic hedges not designated as hedges for the three and six months ended June 30, 2022 and 2021 were insignificant.

Derivative Instrument Activity

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

Three Months Ended September 30, 2021

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

The amount of gains and losses recorded in the Company’s Consolidated Balance Sheets and Consolidated Statements of Operations related to all derivative instruments for the three months ended June 30, 2022

and 2021 were as follows:

Three Months Ended June 30, 2022

(in millions)

recognized in AOCI

Statements of Operations Location

Effective Portion

Reclassified from AOCI into Income (Expense)

Recognized in

Income (Expense)

Cash Flow Hedges

Foreign exchange forward contracts $ 6 Cost of products sold $ ( 2 ) $ —

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

Total for cash flow hedging $ 6 $ ( 3 ) $ —

exchange forward contracts

Cost of products sold

Interest rate

Interest expense, net

Total for cash flow

Hedges of Net Investments

Cross currency basis swaps $ ( 1 ) Interest expense, net $ — $ 1

Foreign exchange forward contracts 4 Other expense (income), net — —

Total for net investment hedging $ 3 $ — $ 1

Cross currency

Interest expense, net

exchange forward contracts

Other expense

(income), net

Total for net

investment hedging

Fair Value Hedges

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

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

Total for fair value hedging $ — $ — $ 7

Three Months Ended September 30, 2020

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

exchange forward contracts

Other expense

(income), net

Total for fair value

Three Months Ended June 30, 2021

(in millions)

Recognized in AOCI

Statements of Operations Location

Effective Portion

Reclassified from AOCI into Income (Expense)

Recognized in

Income (Expense)

Cash Flow Hedges

Foreign exchange forward contracts $ ( 6 ) Cost of products sold $ 1 $ 1

Interest rate swaps 3 Interest expense, net ( 2 ) —

Total for cash flow hedging $ ( 3 ) $ ( 1 ) $ 1

exchange forward contracts

Cost of products sold

Interest rate

Interest expense, net

Total for cash flow

Hedges of Net Investments

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

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

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

Nine Months Ended September 30, 2021

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

Cross currency

Interest expense, net

exchange forward contracts

Other expense

(income), net

Total for net

investment hedging

Fair Value Hedges

exchange forward contracts

Interest expense, net

Total for fair value

The amount of gains and losses recorded in the Company’s Consolidated Balance Sheets

and Consolidated Statements of Operations related to all derivative instruments for the six months ended June 30, 2022 and 2021 were as follows:

Six Months Ended June 30, 2022

(in millions)

recognized in AOCI

Statements of Operations Location

Effective Portion

Reclassified from AOCI into Income (Expense)

Recognized in

Income (Expense)

Cash Flow Hedges

Foreign exchange forward contracts $ 3 Cost of products sold $ ( 4 ) $ 1

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

Total for cash flow hedging $ 3 $ ( 8 ) $ 1

exchange forward contracts

Cost of products sold

Interest rate

Interest expense, net

Total for cash flow

Hedges of Net Investments

Cross currency basis swaps $ 6 Interest expense, net $ — $ 5

Foreign exchange forward contracts 7 Other expense (income), net — —

Total for net investment hedging $ 13 $ — $ 5

Cross currency

Interest expense, net

exchange forward contracts

Other expense

(income), net

Total for net

investment hedging

Fair Value Hedges

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

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

Total for fair value hedging $ — $ — $ 19

Nine Months Ended September 30, 2020

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

Interest rate

Interest expense, net

exchange forward contracts

Other expense

(income), net

Total for fair value

Six Months Ended June 30, 2021

(in millions)

recognized in AOCI

Statements of Operations Location

Effective Portion

Reclassified from AOCI into Income (Expense)

Recognized in

Income (Expense)

Cash Flow Hedges

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

Interest rate swaps ( 17 ) Interest expense, net ( 3 ) —

Total for cash flow hedging $ ( 19 ) $ ( 1 ) $ 2

exchange forward contracts

Cost of products sold

Interest rate

Interest expense, net

Total for cash flow

Hedges of Net Investments

Cross currency basis swaps $ ( 13 ) Interest expense, net $ — $ 7

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

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

Cross currency

Interest expense, net

exchange forward contracts

Other expense

(income), net

Total for net

investment hedging

Fair Value Hedges

exchange forward contracts

Other expense

(income), net

Total for fair value

Consolidated Balance Sheets Location of Derivative Fair Values

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

September 30, 2021

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

The fair value and the location of the Company’s derivatives in the Consolidated

Balance Sheets were as follows:

June 30, 2022

(in millions)

Prepaid Expenses

and Other Current Assets

Other Noncurrent

Accrued Liabilities

Other Noncurrent

Designated as Hedges:

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

Interest rate swaps 3 — — 5

Cross currency basis swaps 3 — — 14

Total $ 19 $ 11 $ 2 $ 19

Not Designated as Hedges:

Foreign exchange forward contracts $ 1 $ — $ 2 $ —

Total $ 1 $ — $ 2 $ —

exchange forward contracts

Interest rate

Cross currency

Not Designated as

exchange forward contracts

December 31, 2021

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

(in millions)

Prepaid Expenses

and Other Current Assets

Other Noncurrent

Accrued Liabilities

Other Noncurrent

Designated as Hedges:

Foreign exchange forward contracts $ 5 $ 2 $ 10 $ 3

Cross currency basis swaps — — 20 —

Total $ 5 $ 2 $ 30 $ 3

Not Designated as Hedges:

Foreign exchange forward contracts $ 3 $ — $ 2 $ —

Total $ 3 $ — $ 2 $ —

exchange forward contracts

Interest rate

Cross currency

Not Designated as

exchange forward contracts

Balance Sheet Offsetting

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

Substantially all of 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.

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

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

Gross Amounts Not Offset in the Consolidated Balance Sheets

(in millions) Gross Amounts Recognized Gross Amount Offset in the Consolidated Balance Sheets Net Amounts Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received/Pledged Net Amount

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

Interest rate swaps 3 — 3 ( 3 ) — —

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

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

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

Interest rate swaps 5 — 5 ( 3 ) — 2

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

While these contracts contain the enforceable right to offset through netting

arrangements with the same counterparty, the Company elects to present them on a gross basis in the Consolidated Balance Sheets.

Offsetting of financial assets and liabilities under netting arrangements at June 30,

2022 were as follows:

Gross Amounts Not Offset in the Consolidated

Balance Sheets

(in millions)

Gross Amounts Recognized

Gross Amount Offset in the Consolidated

Balance Sheets

Net Amounts Presented in the Consolidated

Balance Sheets

Cash Collateral

Received/Pledged

exchange forward contracts

Cross currency

exchange forward contracts

Interest rate

Total liabilities

Offsetting of financial assets and liabilities under netting arrangements at December 31, 2020 were as follows:

Gross Amounts Not Offset in the Consolidated Balance Sheets

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

Total assets $ 9 $ — $ 9 $ ( 9 ) $ — $ —

Foreign exchange forward contracts $ 15 $ — $ 15 $ — $ — $ 15

Interest rate swaps 20 — 20 ( 7 ) — 13

Offsetting of financial assets and liabilities under netting

arrangements at December 31, 2021 were as follows:

Gross Amounts Not Offset in the Consolidated

Balance Sheets

(in millions)

Gross Amounts Recognized

Gross Amount Offset in the Consolidated

Balance Sheets

Net Amounts Presented in the Consolidated

Balance Sheets

Cash Collateral

Received/Pledged

exchange forward contracts

Interest rate

Cross currency

Total liabilities

NOTE 10 – FAIR VALUE MEASUREMENT

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

NOTE 11 – FAIR

VALUE MEASUREMENT

The estimated fair value and carrying value of the Company’s total debt, including

current portion, was $ 1,927 million and $ 2,027

million, respectively, at June 30, 2022.

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

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

It is considered a Level 2 fair value measurement.

The fair value of long-term debt is based on recent trade information in the financial markets of the Company’s public

debt or is determined by discounting future cash flows using interest rates available at June 30, 2022 and December 31, 2021 to companies with similar credit ratings for issues with similar terms and maturities.

It is considered a Level 2 fair

value measurement for disclosure purposes.

Assets and liabilities measured at fair value on a recurring basis

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

September 30, 2021

(in millions) Total Level 1 Level 2 Level 3

Interest rate swaps $ 3 $ — $ 3 $ —

Cross currency basis swaps 3 — 3 —

Foreign exchange forward contracts 25 — 25 —

The Company’s financial assets and liabilities set forth by level within the fair

value hierarchy that were accounted for at fair value on a recurring basis were as follows:

June 30, 2022

(in millions)

Cross currency

exchange forward contracts

Long-term debt

Total assets $ 33 $ — $ 33 $ —

Interest rate swaps $ 5 $ — $ 5 $ —

Cross currency basis swaps 14 — 14 —

Foreign exchange forward contracts 4 — 4 —

Contingent considerations on acquisitions 11 — — 11

Interest rate

exchange forward contracts

considerations on acquisitions

Total liabilities

December 31, 2021

(in millions) Total Level 1 Level 2 Level 3

Foreign exchange forward contracts $ 10 $ — $ 10 $ —

Total assets $ 10 $ — $ 10 $ —

Cross currency basis swaps $ 20 $ — $ 20 $ —

Foreign exchange forward contracts 15 — 15 —

Contingent considerations on acquisitions 5 — — 5

(in millions)

Interest rate

Long-term debt

Cross currency

exchange forward contracts

Interest rate

Cross currency

exchange forward contracts

considerations on acquisitions

Total liabilities

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

Derivative valuations are based on observable inputs to the valuation model

including interest rates, foreign currency exchange rates, and credit risks.

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

In addition, the Company at times employs certain

cross currency basis swaps and forward exchange contracts that are considered hedges of net investment in foreign operations.

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

NOTE 12 – INCOME TAXES

Uncertainties in Income Taxes

The Company recognizes the impact of a tax position in the interim consolidated financial statements if that position is more likely than not of being sustained on audit based on the technical merits of the position.

It is reasonably possible that certain amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date of the Company’s quarterly consolidated financial statements.

The Company recognizes the impact of a tax position in the interim consolidated

financial statements if that position is more likely than not of being sustained on audit based on the technical merits of the position.

ASC 740-10, the Company provides for uncertain tax positions and the related interest expense by adjusting unrecognized tax benefits and accrued interest accordingly.

The Company recognizes potential interest and penalties related to unrecognized

tax benefits in income tax expense.

The Company files income tax returns in multiple jurisdictions based on its

operations, some of which are under examination by taxing authorities.

Certain amounts of unrecognized tax benefits may increase or decrease within twelve months of the reporting date of the Company’s consolidated financial statements, primarily

due to the completion of ongoing income tax examinations.

Final settlement and resolution of outstanding tax matters in various jurisdictions during the next 12 months are not expected to be significant.

Expiration of statutes of limitation in

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

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

Other Tax Matters

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

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

NOTE 12 – FINANCING ARRANGEMENTS

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

The impact of discrete items is separately recognized in the quarter in which they

During the three months ended June 30, 2022, changes in tax expense for other discrete tax matters are not significant.

During the six months ended June 30, 2022, the Company recorded $ 1 million of tax expense for other discrete tax matters.

The decrease in the effective tax rate is due to the overall decrement in the Company’s performance and the

corresponding earnings mix of jurisdictions in which Company does business.

the three and six months ended June 30, 2021, the Company recorded $ 3 million and $ 2 million, respectively, of tax expense for other discrete tax matters.

NOTE 13 – FINANCING

At June 30, 2022, the Company had $ 535 million of borrowing available under lines of credit, including lines available under its short-term arrangements and revolving credit facility.

The Company has a $ 500 million commercial paper program.

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

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

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

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

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

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

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

NOTE 13 – GOODWILL AND INTANGIBLE ASSETS

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

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

Based on the Company's 2021 impairment test, it was determined that the fair values of its reporting units and indefinite-lived intangible assets more likely than not exceed their respective carrying values, resulting in no impairment.

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

The Company had $ 193

million and $ 170 million outstanding borrowings under the commercial paper facility at June 30, 2022 and December 31, 2021,

respectively.

The Company also has a $ 700 million multi-currency revolving credit facility which serves as a back-stop credit facility

for the Company’s commercial paper program.

At June 30, 2022 and December 31, 2021, there were no outstanding borrowings under the

multi-currency revolving credit facility.

The Company also has access to $ 54 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 $26 million.

At June 30, 2022, the weighted-average interest rate for short-term debt was 2.2 %.

The Company’s revolving credit facility, term loans and senior notes contain certain

affirmative and negative debt covenants relating to the Company’s operations and financial condition.

At June 30, 2022, the Company was in compliance with all debt covenants.

As a result of the Company’s failure to file its unaudited financial statements for the fiscal quarters ended March 31, 2022 and June 30, 2022 by the reporting deadlines, the

Company obtained the consents of the requisite lenders and noteholders of its outstanding indebtedness to extend the time period for delivery of such unaudited financial statements until November 14, 2022.

Therefore, the Company has not suffered

an event of default as a result of the delayed filings

NOTE 14 – GOODWILL

AND INTANGIBLE ASSETS

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.

Based on the Company’s 2022 impairment test, it was determined that the fair values of its reporting units and

indefinite-lived intangible assets more likely than not exceeded their respective carrying values, resulting in no impairment.

The fair values of reporting units were computed using a discounted cash flow model

with inputs developed using both internal and market-based data.

Intangible assets were evaluated for impairment using an income approach, specifically a relief from royalty method, or using a qualitative assessment.

A change in any of the estimates and assumptions used in the annual test, a decline in the overall markets or 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 intangible assets and could result in a future impairment charge.

A change in any of the

estimates and assumptions used in the annual test, a decline in the overall markets or 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 intangible assets

and could result 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.

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

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

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

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

(in millions) Technologies & Equipment Consumables Total

The Company’s significant assumptions in the discounted cash flow

model included, but were not limited to, the weighted average cost of capital, revenue growth rates (including perpetual growth rates), and operating margin percentages of the reporting unit’s business.

While we consider these assumptions to be

reasonable and appropriate, they are subjective, and additional adverse changes in these key assumptions, as well as unfavorable changes in the overall markets served by these reporting units, among other factors, would have a negative material

impact to the fair value of the reporting units and indefinite-lived intangible assets and would result in a future impairment charge.

As disclosed in Note 16- Subsequent Events, the company anticipates recording a pre-tax charge for the impairment of goodwill and indefinite-lived

intangible assets in the range of $ 1.0 billion - $ 1.3 billion in the third quarter 2022.

The timing of this impairment charge in the third quarter was the result of the following factors:

Current macroeconomic conditions, including the rising interest rate environment and broad declines in equity valuations.

Since the second quarter, core

underlying market interest rates, which serve as the basis for the discount rate assumptions in our impairment models, rose by approximately 200

basis points.

Reduced earnings forecasts for several reporting units as these forecasts were impacted by ongoing macroeconomic forces.

First, global demand has weakened

for certain products in the third quarter as inflationary pressures impacted the discretionary spending behavior of our customers, which has introduced new competitive challenges.

Additionally, raw materials, supply chain, and service

costs have all increased due to changes in our business model and broad inflationary trends.

For additional information on evaluations subsequent to June 30, 2022, including the

likely impairment of goodwill and indefinite-lived intangibles identified during the third quarter of 2022, refer to the Note 16- Subsequent Events.

A reconciliation of changes

in the Company’s goodwill by reportable segment were as follows:

(in millions)

Technologies & Equipment

Balance at December

Goodwill $ 5,985 $ 894 $ 6,879

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

impairment losses

Goodwill, net

Acquisition related additions (a) 107 — 107

Translation and other

Balance at September 30, 2021

Goodwill $ 5,952 $ 941 $ 6,893

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

Balance at June 30,

impairment losses

Goodwill, net

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

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

September 30, 2021 December 31, 2020

(in millions) Gross

Amount Accumulated

Amortization Net

Amount Accumulated

Amortization Net

Developed technology and patents $ 1,752 $ ( 743 ) $ 1,009 $ 1,681 $ ( 677 ) $ 1,004

Tradenames and trademarks 269 ( 76 ) 193 273 ( 70 ) 203

Licensing agreements 36 ( 31 ) 5 37 ( 30 ) 7

Customer relationships 1,105 ( 533 ) 572 1,142 ( 494 ) 648

Identifiable definite-lived and indefinite-lived intangible assets

were as follows:

June 30, 2022

December 31, 2021

(in millions)

technology and patents

Tradenames and

relationships

Total definite-lived

Indefinite-lived tradenames and trademarks $ 610 $ — $ 610 $ 642 $ — $ 642

Indefinite-lived

tradenames and trademarks

In-process R&D (a)

13 — 13 — — —

Total indefinite-lived

Total identifiable intangible assets $ 3,785 $ ( 1,383 ) $ 2,402 $ 3,775 $ ( 1,271 ) $ 2,504

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

Total identifiable

intangible assets

(a) Intangible assets acquired in a business combination that are in-process and used in research and

development (“R&D”) activities are considered indefinite-lived until the completion or abandonment of the R&D efforts.

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

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

The purchase consideration also includes contingent payments of $ 17 million to be made upon reaching certain regulatory and commercial milestones, which were not yet deemed probable at September 30, 2021.

NOTE 14 – COMMITMENTS AND CONTINGENCIES

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

purchase consideration also includes minimum guaranteed contingent payments of $ 17 million to be made upon reaching certain regulatory

and commercial milestones.

The contingent payments are not yet considered probable of payment as of June 30, 2022.

NOTE 15 – COMMITMENTS

AND CONTINGENCIES

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.

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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.

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 court in Cato

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

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

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

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

securities laws (the "State Court Action") by making material misrepresentations and omitting required information in the December 4, 2015 registration statement filed with the SEC in connection with the Merger.

The amended complaint alleges that the defendants failed to disclose, among other things, that a distributor had purchased excessive inventory of legacy Sirona products and that three distributors of the Company's products had been engaging in anticompetitive conduct.

The plaintiffs seek to recover damages on behalf of a class of former Sirona shareholders who exchanged their shares for shares of the Company's stock in the Merger.

The expected settlement amount,

which is immaterial to the financial statements, has been recorded as an accrued liability within the Company’s consolidated balance sheet as of June 30, 2022.

individual defendants, violated U.S.

securities laws (the “State Court Action”) by making material misrepresentations and omitting required information in the December 4, 2015 registration statement filed with the SEC in connection with the 2016

merger of Sirona Dental Systems Inc.

(“Sirona”) with DENTSPLY International Inc.

(the “Merger”).

The amended complaint alleges that the defendants failed to disclose, among other things, that a distributor had purchased excessive inventory of

legacy Sirona products and that three distributors of the Company’s products had been engaging in anticompetitive conduct.

The plaintiffs seek to recover damages on behalf of a class of former Sirona shareholders who exchanged their shares for

shares of the Company’s stock in the Merger.

On September 26, 2019, the Court granted the Company’s motion to dismiss all claims and a judgment dismissing the case was subsequently entered.

On February 4, 2020, the Court denied plaintiffs' post-judgment motion to vacate or modify the judgment and to grant them leave to amend their complaint.

The plaintiffs appealed the dismissal and the denial of the post-judgment motion to the Supreme Court of the State of New York, Appellate Division, First Department, and the Company cross-appealed select rulings in the Court's decision dismissing the action.

On February 4, 2020, the Court denied plaintiffs’

post-judgment motion to vacate or modify the judgment and to grant them leave to amend their complaint.

The plaintiffs appealed the dismissal and the denial of the post-judgment motion to the Supreme Court of the State of New York, Appellate

Division, First Department, and the Company cross-appealed select rulings in the Court’s decision dismissing the action.

The plaintiffs’ appeals and the Company’s cross-appeal were consolidated and argued on January 12, 2021.

On February 2, 2021, the Appellate Division issued its decision upholding the dismissal of the State Court Action with prejudice on statute of limitations grounds.

On February 2, 2021,

the Appellate Division issued its decision upholding the dismissal of the State Court Action with prejudice on statute of limitations grounds.

The Plaintiffs did not appeal the Appellate Division decision.

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").

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

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

In addition, the plaintiff alleges that the defendants violated U.S.

addition, the plaintiff alleges that the defendants violated U.S.

securities laws by making false and misleading statements in quarterly and annual reports and other public statements between February 20, 2014, and August 7, 2018.

The plaintiff asserts claims on behalf of a putative class consisting of (a) all purchasers of the Company's stock during the period February 20, 2014 through August 7, 2018 and (b) former shareholders of Sirona who exchanged their shares of Sirona stock for shares of the Company's stock in the Merger.

The plaintiff

asserts claims on behalf of a putative class consisting of (a) all purchasers of the Company’s stock during the period February 20, 2014 through August 7, 2018 and (b) former shareholders of Sirona who exchanged their shares of Sirona stock for

shares of the Company’s stock in the Merger.

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.

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 Company intends to defend itself vigorously in these actions.

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.

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.

In accordance with ASC 740, the Company recorded the tax benefit associated with the worthless stock deduction in the Company’s 2012 financial statements.

On June 2, 2022, the Company was named as a defendant in a

putative class action filed in the United States District Court for the Southern District of Ohio captioned City of Miami General Employees’ & Sanitation Employees’ Retirement Trust v.

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

Ohio), and on

July 28, 2022, the Company was named as a defendant in a putative class action filed in the United States District Court for the Southern District of New York captioned San Antonio Fire and Police Pension Fund v.

Dentsply Sirona Inc.

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

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

Casey Jr., the

Company’s former Chief Executive Officer, and Mr.

Jorge Gomez, the Company’s former Chief Financial Officer, violated United States 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

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

The expense of

continuing to defend such litigation may be significant.

We intend to defend these lawsuits vigorously, but there can be no assurance that we will be successful in any defense.

If any of the lawsuits are decided adversely, we 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, we 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.

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.

In accordance with ASC 740, the Company

recorded the tax benefit associated with the worthless stock deduction in the Company’s 2012 financial statements.

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.

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

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 2021 upon further review by the IRS Appeals Office Team.

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.

The Company and its

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

The Company’s position continues to be reviewed by the IRS

Appeals Office team.

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 upon further review by the IRS Appeals Office Team.

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.

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.

If such interest expense deductions were disallowed, the Company would be subject to an additional $ 49 million in tax expense.

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.

If such interest expense deductions were disallowed, the Company would be subject to an additional $ 39 million

in tax expense.

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 August 7, 2017, the

Company appealed the unfavorable decision of the Swedish Administrative Court.

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

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

The European Union Commission has taken the view

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

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

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

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

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.

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.

However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations, or liquidity.

While the Company maintains general, product, property, workers’ compensation, automobile, cargo, aviation, crime, fiduciary and directors’ and officers’ liability insurance up to certain limits that cover certain of these claims, this insurance may be insufficient or unavailable to cover such losses.

In addition, while the Company believes it is entitled to indemnification from third parties for some of these claims, these rights may also be insufficient or unavailable to cover such losses.

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

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

Subsequently, the Swedish Tax Authority has conceded in pending court proceedings that the

Company should be granted further interest expense deductions, but still claims that interest expense deductions incurring a maximum additional tax expense of $ 7 million should be disallowed on grounds not relating to European Union law.

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

Except as otherwise noted, the Company generally cannot predict what the eventual outcome of the above-described pending matters will be, what the timing of the ultimate resolution of these matters

will be, or what the eventual loss, fines or penalties related to each pending matter may be.

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.

However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if

unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations, or liquidity.

While the Company maintains general, product, property, workers’ compensation,

automobile, cargo, aviation, crime, fiduciary and directors’ and officers’ liability insurance up to certain limits that cover certain of these claims, this insurance

may be insufficient or unavailable to cover such losses.

In addition, while the Company believes it

is entitled to indemnification from third parties for some of these claims, these rights may also be insufficient or unavailable to cover such losses.

Purchase Commitments

The Company has certain non-cancelable future commitments primarily related to

long-term supply contracts for key components and raw materials.

At June 30, 2022, non-cancelable purchase commitments are as follows:

(in millions)

The above information should be read in conjunction with Part II, Item 7 “Contractual Obligations” and Part II, Item 8, Note 22

“Commitments and Contingencies” in our 2021 Form 10-K/A for the fiscal year ended December 31, 2021.

Off-Balance Sheet Arrangements

As of June 30, 2022, we had no material off-balance sheet arrangements that have, or

are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources other than certain items disclosed in the sections above.

Indemnification

In the normal course of business to facilitate sale 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.

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.

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

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 June 30, 2022, 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.

NOTE 16 – SUBSEQUENT

to the date of these interim unaudited consolidated financial statements but prior to issuance, the Company has continued to monitor macroeconomic events after its most recent annual goodwill impairment testing which was completed during the

second quarter ended June 30, 2022.

In the three months ended September 30, 2022, the Company expects to record a pre-tax non-cash charge for the impairment of goodwill and intangible assets in the range of $ 1.0 billion - $ 1.3 billion, due

primarily to macroeconomic factors such as higher cost of capital, cost inflation, unfavorable foreign currency impacts, and increased supply chain costs, which are contributing to reduced forecasted revenues, lower operating margins, and reduced

expectations for future cash flows.

DENTSPLY SIRONA Inc.

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What changed 10-Q

Item 1. Financial Statements