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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following Management’s Discussion and Analysis of Financial Conditions and Results of Operations (“MD&A”) is intended to help the reader understand the Company’s operations and business environment. MD&A is provided as a supplement to, and should be read in conjunction with, the Consolidated Financial Statements and Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. The following discussion includes forward-looking statements that involve certain risks and uncertainties. See Part I, Item 1, “Business - Forward-Looking Statements and Associated Risks” in the beginning of this Form 10-K. The MD&A includes the following sections:

•Business - a general description of Dentsply Sirona’s business and how performance is measured;

•Results of Operations - an analysis of the Company’s consolidated results of operations for the years ended December 31, 2023 and 2022;

•Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates; and

•Liquidity and Capital Resources - an analysis of cash flows; debt and other obligations; off-balance sheet arrangements; and aggregate contractual obligations.

2023 Operational Highlights

For the year ended December 31, 2023,

•Net sales increased 1.1% compared to the prior year. On an organic basis (a Non-GAAP measure as defined under the heading “Key Performance Measurements” below) net sales increased 2.2% for the year ended December 31, 2023 compared to the prior year. Net sales were negatively impacted by approximately 1.1% due to the strengthening of the U.S. dollar over the prior year period.

•Net loss was $132 million as compared to net loss of $950 million for the prior year primarily due to lower goodwill and intangible asset impairment charges of $307 million compared to $1,287 million in the prior year. Diluted loss per share was $0.62 per share compared to diluted loss per share of $4.41 in the prior year.

•Cash from operations was $377 million, as compared to $517 million in the prior year.

Company Profile

DENTSPLY SIRONA Inc. (“Dentsply Sirona” or the “Company”), is the world’s largest manufacturer of professional dental products and technologies, with a 137-year history of innovation and service to the dental industry and patients worldwide. Dentsply Sirona develops, manufactures, and markets a comprehensive solutions offering including dental equipment and dental consumable products under a strong portfolio of world class brands. The Company also manufactures and markets certain healthcare consumable products for continence care. Dentsply Sirona’s products provide innovative, high-quality and effective solutions to advance patient care and deliver better, safer and faster dentistry. Dentsply Sirona’s worldwide headquarters is located in Charlotte, North Carolina. The Company’s shares of common stock are listed in the United States on Nasdaq under the symbol XRAY.

BUSINESS

Effective April 1, 2023, the Company realigned its reporting structure due to certain organizational changes. As a result, the Company’s reportable segments changed from Technology & Equipment and Consumables to (i) Connected Technology Solutions, (ii) Essential Dental Solutions, (iii) Orthodontic and Implant Solutions, and (iv) Wellspect Healthcare. All comparative segment information and disaggregated revenue information has been recast to reflect the Company’s new segment structure and current period presentation.

Segment Descriptions

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

Connected Technology Solutions

This segment includes the design, manufacture, and sales of the Company’s dental technology and equipment products. These products include the Equipment & Instruments and CAD/CAM product categories.

Essential Dental Solutions

This segment includes the development, manufacture, and sales of the Company’s value-added endodontic, restorative, and preventive consumable products and small equipment used in dental offices for the treatment of patients. Offerings in this segment also include specialized treatment products including products used in the creation of dental appliances.

Orthodontic and Implant Solutions

This segment includes the design, manufacture, and sales of the Company’s various digital implant systems and innovative dental implant products, digital dentures and dental professional directed aligner solutions. Offerings in this segment also include application of our digital services and technology, including those provided by DS Core, our cloud-based platform.

Wellspect Healthcare

This segment includes the design, manufacture, and sales of the Company’s innovative continence care solutions for both urinary and bowel management. This category consists mainly of urology catheters and other healthcare-related consumable products.

The impact of global economic conditions

Markets in several regions, particularly Europe, continue to experience varying degrees of recessionary pressures and face concerns about the systemic impacts of adverse economic conditions and geopolitical issues. Changes in economic conditions, supply chain constraints, higher energy costs, labor shortages, the conflict in Ukraine, and geopolitical tensions in the Middle East, have all contributed to a period of higher inflation across the industry and the regions in which the Company operates. As a result, the Company has experienced higher prices for certain raw materials, particularly for electronic components which have in some cases required incremental procurement costs such as brokers’ fees during the year, and consequently a negative impact on margins. Although these trends improved in most regions in the second half of 2023, we expect a continuation of inflationary pressure on the cost of both raw materials and wages into 2024, the effect of which will depend on the Company’s ability to successfully mitigate and offset the related impacts.

The deterioration in macroeconomic conditions has also negatively impacted demand for the Company’s products and may continue to do so in the future. Specifically, higher interest rates have put pressure on the ability and willingness of our customers to obtain financing for equipment purchases, which affects volumes for these products. The impact of macroeconomic declines and high interest rates has been particularly apparent in Germany, which accounts for 11% of the Company’s sales. Germany was in a recession for most of 2023, largely due to persistent high inflation and falling household spending. In Germany and in other markets, pressures on discretionary consumer spending have depressed demand for elective dental procedures including sales of implants products. Additionally, these trends lead to additional competitive pressure for lower-priced options for investments in new equipment by dental practices. The Company believes the challenging conditions in Germany are likely to persist into 2024, which may further impact the Company’s sales of products in this market.

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

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

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

•Optimizing our customer management and implementing strategic investments in our commercial sales organization in key markets, particularly the United States; and

•Refining our focus on developing a winning portfolio with global scale to maximize market share in a competitive pricing environment.

As explained further in the Results of Operations section below, the Company has partially offset elevated costs in certain areas of the business with price increases during the year. Should the higher inflationary environment continue, the Company may be unable to raise the prices of our products and services sufficiently or may engage in other cost cutting measures to keep up with the rate of inflation which could have a material adverse effect on our results of operations and financial condition.

The impact of the Israel-Hamas war

The terrorist attacks by Hamas militants crossing the border from Gaza to Israel in October 2023 and the subsequent military response by the Israeli government resulted in significant unrest and uncertainty within that region, including the possibility that escalating violence and involvement of other terrorist groups from neighboring countries may further impact our employees and operations.

The Company’s operations in Israel consist of two manufacturing facilities for implants products, with one site in northern Israel and one in southern Israel, which employ approximately 300 associates. These facilities remain open and continue to operate. We may, however, determine to discontinue production for the safety of our employees, or we could face future production slowdowns or interruptions at either location due to the impacts of the war including personnel absences as a number of our employees have been called to active military duty, or due to other resource constraints such as the inability to source materials for production.

For the year ended December 31, 2023, net sales of products produced at these sites comprise approximately 3% of our consolidated net sales and 13% of the net sales attributed to our Orthodontic and Implant Solutions segment. Net assets within Israel total $197 million as of December 31, 2023, consisting primarily of acquired technology, cash, inventory, and property, plant and equipment associated with our operations in country. While the conflict did not have a material impact on results for the year ended December 31, 2023, the Company continues to monitor developments and prepare contingency plans to limit the potential disruption to our operations for the fiscal year 2024.

Additionally, the Company sells products from across our portfolio to distributors of dental products and direct to dental practices within Israel and its neighboring countries which may face reduced patient traffic and demand for our products in the near term. Net sales for products sold to our customers in Israel comprise less than 1% of our consolidated net sales for the year ended December 31, 2023.

While Israel does not constitute a material portion of our business, a significant escalation or expansion of the conflict’s current scope and economic disruption could result in loss of sales and market position, disrupt our supply chain, broaden inflationary costs including energy prices, and have a material adverse effect on our results of operations, including impairment of the net assets in Israel or the goodwill associated our Implants & Prosthetics reporting unit.

The impact of the war in Ukraine

In February 2022, because of the invasion of Ukraine by Russia, economic sanctions were imposed by the United States, the European Union, and certain other countries on Russian financial institutions and businesses. Due to the medical nature of our products, the current sanctions have not materially restricted the Company’s ability to continue selling many of our products to customers located in Russia. The Company also sources certain raw materials and components from Russia and Ukraine, and has taken actions to minimize any adverse impacts from disrupted supply chains related to these items. The Company’s operations in Ukraine consist primarily of R&D activities, which continue uninterrupted from other locations to focus on the safety of employees. Overall, the Company’s operations in Russia and Ukraine have not been materially impacted by the conflict, and consequently, the Company has not recorded any allowance for doubtful accounts, inventory reserves, or asset impairments through the year ended December 31, 2023 as a result of the conflict.

For the year ended December 31, 2023, net sales in Russia and Ukraine were approximately 2% of our consolidated net sales, and net assets in these countries were $78 million. These net assets include $42 million of cash and cash equivalents held within Russia as of December 31, 2023. Due to currency control measures imposed by the Russian government which include restrictions on the ability of companies to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia, we may be limited in our ability to transfer this cash balance out of Russia without incurring substantial costs, if at all.

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

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

Business Drivers

The primary drivers of organic sales (as defined below) include macroeconomic factors, global dental industry demand, innovation and new product launches by the Company, as well as continued investments in sales and marketing resources to drive demand creation, including clinical education. Management believes that the Company’s ability to execute its strategies should allow it to grow faster than the underlying dental industry over time. On a short-term basis, sudden changes in the macroeconomic environment, supply chain challenges, or changes in distributor inventory levels can and have impacted the Company’s sales. Demand can also fluctuate based on the timing of dental trade shows where promotions are offered, major new product introductions, and variability in dental patient traffic, which can be exacerbated by seasonal or severe weather patterns, or other demographic disruptions such as global pandemics.

The Company has a focus on maximizing operational excellence on a global basis. The Company has expanded the use of technology as well as process improvement initiatives to enhance global efficiency. In addition, management continues to evaluate the worldwide consolidation and simplification of operations and functions to further reduce costs. While the Company continues consolidation initiatives which can have an adverse impact on reported results in the short term, the Company expects that the continued benefits from these global efficiency efforts will optimize its cost structure. Meanwhile, the Company intends to continue pursuing opportunities to expand the Company’s product and solutions offerings, technologies, and sales and service infrastructure through partnerships. Although the professional dental market has experienced consolidation, it remains fragmented. Management believes there will continue to be opportunities to participate as a consolidator in the industry for the foreseeable future.

The Company’s business is subject to quarterly fluctuations in net sales and operating income. Annual price increases, promotional activities, as well as changes in inventory levels at distributors contribute to this fluctuation. Distributor inventory levels tend to increase in the period leading up to a price increase and decline in the period following the implementation of a price increase, although these fluctuations are mitigated by limits on purchases ahead of these increases. Changes in distributors’ inventory levels have impacted the Company’s consolidated net sales in the past and may continue to do so in the future. In addition, the Company may from time to time engage in new distributor relationships that could cause fluctuations in consolidated net sales and operating income. Distributor inventory levels may fluctuate and differ from the Company’s projections and market demand, resulting in the Company’s forecast of future results being different than expected. There can be no assurance that the Company’s distributors and customers will maintain levels of inventory or patterns of build and liquidation timing in accordance with the Company’s predictions or history. Any of these fluctuations could be material to the Company’s consolidated financial statements. For more information about the drivers of our business and related risks, see Part I, Item 1, “Business” and Part I, Item 1A, “Risk Factors.”

Restructuring Programs

On February 14, 2023, the Board of Directors of the Company approved a plan to restructure the Company’s business to improve operational performance and drive shareholder value creation, which is expected to result in the Company incurring between $115 to $135 million in one-time charges and achieving approximately $200 million in annual cost savings. For details on this plan including the nature of the non-recurring charges incurred during the year, refer to Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K, and to the discussion under the heading “Material Trends in Capital Resources” within MD&A.

Impact of Foreign Currencies

Due to the Company’s global footprint, movements in foreign currency exchange rates may have a material impact on its reported net sales and pre-tax income. With approximately two-thirds of the Company’s net sales originating from regions outside the U.S, the Company’s net sales and results of operations are negatively impacted by the strengthening, or positively impacted by the weakening, of the U.S. dollar compared to the primary currencies in which the Company operates.

While the Company employs financial instruments to hedge some of its transactional foreign exchange exposure, these activities do not insulate it completely from those exposures, particularly from the currency exposure arising from translation of non-U.S. dollar functional currency subsidiaries. During fiscal year 2023, both net sales and gross profit were adversely impacted due to the significant strengthening of the U.S. dollar against foreign currencies. The continued strength of the U.S. dollar could continue to adversely impact the Company’s results.

RESULTS OF OPERATIONS

2023 Compared to 2022

Net Sales and Key Performance Measurements

The Company presents net sales comparing the current year periods to the prior year periods. In addition, the Company also presents the changes in net sales on an organic sales basis, which is a Non-GAAP measure. The Company defines “organic sales” as the reported net sales adjusted for: (1) net sales from acquired and divested businesses recorded prior to the first anniversary of the acquisition or divestiture; (2) net sales attributable to discontinued product lines in both the current and prior year periods; and (3) the impact of foreign currency changes, which is calculated by translating current period net sales using the comparable prior period’s currency exchange rates.

Our measure of organic sales may differ from those used by other companies and should not be considered in isolation from, or as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP. Organic sales is an important internal measure for the Company, and its senior management receives a monthly analysis of operating results that includes organic sales. The performance of the Company is measured on this metric along with other performance metrics.

The Company discloses changes in organic sales to allow investors to evaluate the performance of the Company’s operations exclusive of the items listed above that may impact the comparability of results from period to period and may not be indicative of past or future performance of the normal operations of the Company. The Company believes that this supplemental information is helpful in understanding underlying net sales trends.

A reconciliation of net sales to organic sales for the year ended December 31, 2023 is as follows:

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Unfavorable foreign exchange impact (1.1 %)

Organic sales 2.2 %

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

The increase in organic sales was led by positive performance in the Essential Dental Solutions segment, primarily driven by price increases, and positive performance in the Orthodontic and Implant Solutions segment, primarily driven by price increases and higher volumes of orthodontic aligners. These increases were partially offset by lower volumes in the Connected Technology Solutions segment.

Net Sales by Segment

Connected Technology Solutions

A reconciliation of net sales to organic sales for the year ended December 31, 2023 is as follows:

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Unfavorable foreign exchange impact (1.3 %)

Organic sales (2.8 %)

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

The decrease in organic sales was primarily due to lower volumes of imaging and instrument products, particularly in the United States and Europe, due to the unfavorable macroeconomic environment and competitive pressure for imaging products. This trend of lower volumes for these products is expected to continue into 2024. These decreases were partially offset by sales of new CAD/CAM products. Sales of CAD/CAM products in the United States were also positively impacted by the timing of sales to distributors relative to the year ended December 31, 2022, as explained below in our discussion of net sales within the United States.

Essential Dental Solutions

A reconciliation of net sales to organic sales for the year ended December 31, 2023 is as follows:

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Unfavorable foreign exchange impact (0.8 %)

Organic sales 3.6 %

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

The increase in organic sales was due to price increases across the segment and higher volumes of preventive consumable products, particularly in the United States, as well as the favorable impact of new product launches. These increases were partially offset by lower volumes of restorative and endodontic consumables products.

Orthodontic and Implant Solutions

A reconciliation of net sales to organic sales for the year ended December 31, 2023 is as follows:

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Unfavorable foreign exchange impact (1.7 %)

Organic sales 5.1 %

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

The increase in organic sales was primarily driven by higher volumes of both our in-office and direct-to-consumer orthodontic aligner solutions, particularly in the United States, coupled with an increase in the volume of implants and prosthetics products in the Rest of World, particularly in China. Organic sales also benefited from price increases for orthodontic aligners during the year. These increases were partially offset by lower volumes of implants and prosthetics products in the United States and Europe.

Wellspect Healthcare

A reconciliation of net sales to organic sales for the year ended December 31, 2023 is as follows:

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Unfavorable foreign exchange impact (0.7 %)

Organic sales 7.3 %

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

The increase in organic sales was primarily driven by higher volumes across all regions, particularly in Europe, the favorable impact of new product launches and price increases.

Net Sales by Region

United States

A reconciliation of net sales to organic sales for the year ended December 31, 2023 is as follows:

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Favorable foreign exchange impact 0.2 %

Organic sales 3.0 %

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

The increase in organic sales was driven primarily by price increases and higher demand for Essential Dental Solutions products and orthodontics aligners. This was partially offset by lower volumes of imaging, instruments and implants products. Organic sales were also positively affected by wholesale volumes for CAD/CAM products relative to the year ended December 31, 2022 due in part to timing of sales to distributors in prior year. The level of inventory for CAD/CAM units held by distributors at year end 2023 remained consistent with the beginning of 2023, compared to a reduction in distributor inventory levels of approximately $60 million in 2022. Distributor inventory levels for CAD/CAM products remained low as of December 31, 2023 relative to historical averages.

Europe

A reconciliation of net sales to organic sales for the year ended December 31, 2023 is as follows:

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Unfavorable foreign exchange impact (0.4 %)

Organic sales (0.2 %)

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

The decrease in organic sales was primarily driven by lower volumes of CAD/CAM, imaging, and instruments products because of unfavorable market and macroeconomic trends, particularly in Germany, partially offset by positive performance in the Wellspect Healthcare segment, price increases and higher volumes of orthodontic aligners.

Rest of World

A reconciliation of net sales to organic sales for the year ended December 31, 2023 is as follows:

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Unfavorable foreign exchange impact (4.4 %)

Organic sales 5.1 %

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

The increase in organic sales was primarily driven by higher volumes of implant products, price increases and improved demand for Essential Dental Solutions products. Organic sales also benefited from higher volumes of certain Connected Technology Solutions products, including treatment centers and imaging. Additionally, local volume-based procurement policies in China, which were implemented in 2023 resulted in increased volumes of implants products, partially offset by price reductions.

Gross Profit

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Gross profit as a percentage of net sales 52.6 % 54.2 % (160) bps

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

Gross profit declined due to higher manufacturing and input costs, an increase in warranty costs, and inventory obsolescence charges driven by the Company’s product rationalization initiatives. Margins were also negatively affected by foreign currency translation headwinds of $16 million.

Operating Expenses

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Selling, general, and administrative expenses $ 1,613 $ 1,589 $ 24 1.5 %

Goodwill and intangible asset impairments 307 1,287 (980) NM

Restructuring and other costs 67 14 53 NM

SG&A as a percentage of net sales 40.7 % 40.5 % 20 bps

R&D as a percentage of net sales 4.6 % 4.4 % 20 bps

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

NM - Not meaningful

SG&A Expenses

SG&A expenses as a percentage of net sales increased in part due to higher headcount costs which were primarily due to incremental investments in the Company’s customer-facing roles, inflationary increases, and incentive compensation, partially offset by savings from the restructuring initiatives. Expenses were also negatively impacted by an increase in clinical education, travel, and trade event costs as more customer-related interactions have returned to in-person format. The overall increase in expenses was partially offset by a benefit from lower than expected severance costs due to a settlement, lower professional service costs, and lower advertising costs.

R&D Expenses

R&D expenses increased compared to the year ended December 31, 2022. The Company continues to prioritize ongoing investments in digital workflow solutions, product development initiatives, software development for improved collaboration, cloud connectivity of devices, and a clinical application suite. The Company expects to maintain a level of investment in R&D that is approximately 4% of annual net sales.

Goodwill and Intangible Asset Impairments

Goodwill and intangible asset impairments decreased compared to the year ended December 31, 2022, due to a lower level of impairment charges. For further details see Item 8, Note 11, Goodwill and Intangible Assets, in the Notes to the Consolidated Financial Statements of this Form 10-K.

Restructuring and Other Costs

During the year ended December 31, 2023, we recorded net expense of $67 million of Restructuring and other costs which consist primarily of charges associated with the restructuring plan announced in February 2023. For further details see Item 8, Note 18, Restructuring and Other Costs, in the Notes to the Consolidated Financial Statements of this Form 10-K.

Segment Adjusted Operating Income

Year Ended December 31,

(in millions, except percentages) (a) 2023 2022 $ Change % Change

Connected Technology Solutions $ 101 $ 161 $ (60) (37.5 %)

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

(a) See Note 6, Segment and Geographic Information, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for a reconciliation from segment adjusted operating income to consolidated U.S. GAAP income.

Connected Technology Solutions

The decrease in segment adjusted operating income is due to the organic sales decrease noted above, increased warranty costs, unfavorable impact from product mix, manufacturing and input cost inflation, and increased headcount primarily for key customer-facing roles. These increases were partially offset by reductions in professional services costs.

Essential Dental Solutions

The increase in segment adjusted operating income is due to the organic sales increase noted above, the favorable impact of foreign currency exchange partially offset by manufacturing and input cost inflation and an increase in SG&A expenses including an increase in headcount for customer-facing roles and trade event related expenses.

Orthodontic and Implant Solutions

The decrease in segment adjusted operating income is due to an increase in SG&A costs including increased headcount for key customer-facing roles particularly personnel supporting implants sales in the United States, the unfavorable impact of foreign currency exchange, and manufacturing and input cost inflation, partially offset by the organic sales increase.

Wellspect Healthcare

The increase in segment adjusted operating income resulted from the increase in organic sales noted above, as well as margin improvements due to favorable manufacturing leverage from higher volumes, partially offset by unfavorable foreign currency translation.

Other Income and Expenses

Year Ended December 31,

(in millions, except percentages) 2023 2022 $ Change % Change

Other expense (income), net 9 53 (44) NM

Net interest and other expense $ 90 $ 118 $ (28)

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

NM - Not meaningful

Interest expense, net

Net interest expense for the year ended December 31, 2023 increased as compared to the year ended December 31, 2022, driven primarily by higher interest rates on short-term and other borrowings.

Other expense (income), net

Other expense (income), net for the year ended December 31, 2023 compared to the year ended December 31, 2022 was as follows:

Year Ended December 31,

Loss on sales or disposal of non-core businesses $ — $ 3 $ (3)

Foreign exchange (gains) losses (a) (3) 6 (9)

Loss from equity method investments 4 36 (32)

Defined benefit pension plan expenses 7 7 —

Other non-operating loss 1 1 —

Other expense (income), net $ 9 $ 53 $ (44)

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

Loss from equity method investments decreased compared to the year ended December 31, 2022 due to the write-off in 2022 of the Company’s ownership position in a privately-held dental investment company following impairment of underlying investments held by the investment company and the Company’s determination that the remaining investment was not recoverable.

Income Taxes and Net Loss

Year Ended December 31,

(in millions, except per share data and percentages) 2023 2022 $ Change

Benefit for income taxes $ (43) $ (105) $ 62

Effective income tax rate 24.8 % 9.9 %

Net loss attributable to Dentsply Sirona $ (132) $ (950) $ 818

Net loss per common share - diluted $ (0.62) $ (4.41)

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

Benefit for income taxes

We recorded an income tax benefit of $43 million and $105 million for the years ended December 31, 2023 and December 31, 2022, respectively. The decrease in tax benefit is primarily due to the impairment of goodwill recorded in 2022.

Further information regarding the details of income taxes is presented in Note 16, Income Taxes, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

2022 Compared to 2021

Discussion of the results of operations for the year ended December 31, 2022 as compared to December 31, 2021 was included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 1, 2023. Effective April 1, 2023 the Company realigned its reporting structure due to certain organizational changes. As a result, the reportable segments changed from Technology & Equipment and Consumables to (i) Connected Technology Solutions, (ii) Essential Dental Solutions, (iii) Orthodontic and Implant Solutions, and (iv) Wellspect Healthcare. A discussion of the results of operations for the year ended December 31, 2022 as compared to December 31, 2021 for net sales and segment adjusted operating income based on the realigned segments is presented below.

Net Sales by Segment

Connected Technology Solutions

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

Year Ended December 31,

(in millions, except percentages) 2022 2021 $ Change % Change

Unfavorable foreign exchange impact (8.8 %)

Organic sales (0.8 %)

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

The decrease in organic sales was primarily due to the impact of ongoing global supply chain constraints and lower volumes due to product availability, particularly for certain products which rely on electronic components, as well as the impact of COVID-19 reducing demand in certain markets, particularly China. These decreases were partially offset by sales of new CAD/CAM products and higher volumes of treatment center and imaging products. Sales of CAD/CAM products in the United States were also negatively impacted by high distributor inventory levels at the start of fiscal year 2022 which were subsequently reduced throughout the year. The level of inventory for CAD/CAM units held by distributors was reduced by approximately $60 million during 2022, compared to a build in inventory levels of approximately $50 million in 2021, partly as a result of incremental incentives offered during the latter half of that period which did not recur in 2022.

Essential Dental Solutions

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

Year Ended December 31,

(in millions, except percentages) 2022 2021 $ Change % Change

Unfavorable foreign exchange impact (5.2 %)

Organic sales (0.6 %)

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

The decrease in organic sales was due to lower volumes for endodontic and restorative products, particularly in the United States and China, with sales volumes in the latter having been negatively impacted by government regulations stemming from the COVID-19 pandemic. This decrease was partially offset by higher volumes of preventive consumable products, as well as price increases across the segment.

Orthodontic and Implant Solutions

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

Year Ended December 31,

(in millions, except percentages) 2022 2021 $ Change % Change

Unfavorable foreign exchange impact (5.4 %)

Acquisitions 0.3 %

Divestitures and discontinued products (0.3 %)

Organic sales (0.1 %)

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

The decrease in organic sales was primarily driven by lower volumes of implants products, particularly in China during the second half of 2022, due to reduced demand in advance of the local volume based procurement program taking effect in 2023, as well as from the impact of the COVID-19 pandemic. This decrease was partially offset by higher volumes of orthodontic aligners, particularly in the United States and Europe, as well as price increases across the segment.

Wellspect Healthcare

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

Year Ended December 31,

(in millions, except percentages) 2022 2021 $ Change % Change

Unfavorable foreign exchange impact (11.3 %)

Organic sales 0.3 %

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

The increase in organic sales was primarily driven by higher volumes, primarily in Europe and Rest of World, mostly offset by the impact of a one-time price adjustment matter with the Italian government.

Segment Adjusted Operating Income

Year Ended December 31,

(in millions, except percentages) (a) 2022 2021 $ Change % Change

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

Connected Technology Solutions

The decrease in segment adjusted operating income was due to the organic sales decrease noted above, higher costs for raw materials, labor, and distribution costs in 2022 as a result of supply chain constraints, and higher headcount and professional services costs. These increases were partially offset by favorable product sales mix.

Essential Dental Solutions

Orthodontic and Implant Solutions

The decrease in segment adjusted operating income was due to the organic sales decrease noted above, the unfavorable impact of foreign currency translation, higher manufacturing and distribution costs, and higher advertising costs, partially offset by the improved profitability of orthodontics products from higher volumes and price increases.

Wellspect Healthcare

The decrease in segment adjusted operating income was due to the unfavorable impact of foreign currency translation and higher manufacturing costs, partially offset by the organic sales increase noted above.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements. The process of determining significant estimates is fact specific and considers factors such as historical experience, current and expected economic conditions, product mix and in some cases, actuarial techniques. The Company evaluates these significant factors as facts and circumstances dictate. Some events as described below could cause results to differ significantly from those determined using estimates. The Company has identified the following accounting estimates as those which are critical to its business and results of operations.

Goodwill and Indefinite-Lived Intangible Assets

Assessment of the potential impairment of goodwill and indefinite-lived intangible assets is an integral part of the Company’s normal ongoing review of operations. Testing for potential impairment of these assets is dependent on significant assumptions and reflects management’s best estimates at a particular point in time. The dynamic economic environments in which the Company’s businesses operate and key economic and business assumptions with respect to projected selling prices, increased competition and introductions of new technologies can significantly affect the outcome of impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time at which such impairments are recognized. If there are unfavorable changes in these assumptions, particularly changes in the Company’s discount rates, revenue growth rates, and operating margins, the Company may be required to recognize impairment charges.

In particular, the determination of fair value involves uncertainties around the forecasted cash flows as it requires management to make assumptions and apply judgment to estimate future business expectations. Those future expectations include, but are not limited to, distribution channel changes, impact from competition, and new product developments for these reporting units. The Company also considers the current and projected market and economic conditions for dental and medical device industries, both in the United States and globally, when determining its assumptions. Operating cash flow assumptions may also be impacted by assumptions regarding costs and benefits from restructuring initiatives, tax rates, foreign exchange rates, capital spending and working capital changes.

A change in any of these estimates and assumptions used in the annual test, as well as unfavorable changes in the overall markets served by these reporting units, among other factors, could have a negative material impact to the fair value of the reporting units and indefinite-lived intangible assets and could result in a future impairment charge. There can be no assurance that the Company’s future goodwill and indefinite-lived impairment testing will not result in a material adverse impact to the Company’s results of operations.

Information with respect to the Company’s significant accounting policies on goodwill and indefinite-lived intangible assets are included in Note 1, Significant Accounting Policies, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Goodwill

Goodwill represents the excess cost over the fair value of the identifiable net assets of business acquired. Goodwill is not amortized; instead, it is tested for impairment annually or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired, or if a decision is made to sell a business. Judgment is involved in determining if an indicator of impairment has occurred during the year. Such indicators may include a decline in expected cash flows, unanticipated competition, increased interest rates, or slower growth rates, among others. When testing goodwill for impairment, the Company may assess qualitative factors for its reporting units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount including goodwill. Alternatively, the Company may bypass this qualitative assessment and perform the quantitative goodwill impairment test. It is important to note that fair values which could be realized in an actual transaction may differ from those used to evaluate the impairment of goodwill.

Goodwill is allocated among reporting units and evaluated for impairment at that level. The Company’s reporting units are either an operating segment or one level below its operating segments, as determined in accordance with U.S. GAAP.

The quantitative evaluation of impairment involves comparing the current fair value of each reporting unit to its net book value, including goodwill. The Company uses a discounted cash flow model (“DCF model”) as its valuation technique to measure the fair value for its reporting units when testing for impairment, as management believes forecasted operating cash flows are the best indicator of such fair value. The discounted cash flow model uses five- to ten- year forecasted cash flows plus a terminal value based on capitalizing the last period’s cash flows using a perpetual growth rate. The significant assumptions and estimates involved in the application of the DCF model to forecast operating cash flows include, but are not limited to the discount rates, revenue growth rates (including perpetual growth rates), and future operating margin percentages of the reporting unit’s business. These assumptions may vary significantly among the reporting units. Operating cash flow forecasts are based on approved business-unit operating plans for the early years and historical relationships and projections in later years. In the development of the forecasted cash flows, the Company applies revenue, gross profit, and operating expense assumptions taking into consideration historical trends as well as future expectations. The revenue growth rate assumptions were developed in consideration of future expectations which included, but were not limited to, distribution channel changes, impact from competition, and new product developments for these reporting units. Discount rates are estimated for geographic regions and applied to the reporting units located within the regions. These rates are developed based on market participant data, which included assumptions regarding the Company’s weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit’s ability to execute on the projected cash flows. As part of the annual test, the Company reconciled the aggregate fair values of its reporting units to its market capitalization, which included a reasonable control premium based on market conditions. The Company has not materially changed its methodology for goodwill impairment testing for the years presented.

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets consist of tradenames, trademarks and in-process R&D and are not subject to amortization; instead, they are tested for impairment annually or more frequently if events or circumstances indicate that the carrying value of indefinite-lived intangible assets may be impaired or if a decision is made to sell a business. A significant amount of judgment is involved in determining if an indicator of impairment has occurred during the year. Such indicators may include a decline in expected cash flow, unanticipated competition, increased interest rates, or slower growth rates, among others. It is important to note that fair values that could be realized in an actual transaction may differ from those used to evaluate the impairment of indefinite-lived assets.

The fair value of acquired tradenames and trademarks is estimated using a relief from royalty method, which values an indefinite-lived intangible asset by estimating the royalties saved through the ownership of an asset. Under this method, an owner of an indefinite-lived intangible asset determines the arm’s length royalty that likely would have been charged if the owner had to license the asset from a third party. The royalty rate, which is based on the estimated rate applied against forecasted sales, is tax-affected and discounted at present value using a discount rate commensurate with the relative risk of achieving the cash flow attributable to the asset. Management judgment is necessary to determine key assumptions, including revenue growth rates, perpetual revenue growth rates, royalty rates, and discount rates. Other assumptions are consistent with those applied to goodwill impairment testing.

Goodwill and Indefinite-Lived Intangible Asset Impairment Results

On April 1, 2023, the Company realigned its reporting structure due to certain organizational changes. Reporting units under the former structure were tested for impairment prior to the realignment, and no impairment was identified.

As a result of the realignment, the Company reallocated its goodwill to align its new reporting units which resulted from the change in its operating segments. Goodwill was reassigned to each of the new reporting units using a relative fair value approach. The Company assessed the goodwill of the new reporting units and its indefinite-lived intangible assets for impairment as of April 1, 2023. Based on this test, it was determined that the fair values of its reporting units and indefinite-lived intangible assets more likely than not exceeded their carrying values, resulting in no impairment.

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

In the quarter ended September 30, 2023, the Company identified indicators of a more likely than not impairment related to its Connected Technology Solutions reporting unit, which comprises all the Connected Technology Solutions segment. The decline in fair value for this reporting unit was driven by adverse macroeconomic factors because of weakened demand, particularly in European markets, and increased discount rates. Core underlying market interest rates, which serve as the basis for the discount rate assumptions in our impairment models, rose by approximately 110 bps between the annual impairment test and the interim test during the third quarter of 2023. These factors contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows in the near term, particularly demand for products which are commonly financed by end customers which are adversely impacted by an environment of higher interest rates. The higher inflationary environment also impacted the discretionary spending behavior of our customers more generally, further reducing global demand for certain products in favor of lower cost options. As such, an impairment test was performed in the third quarter of 2023 (the “third quarter test”). As a result, the Company recorded a pre-tax goodwill impairment charge for the three months ended September 30, 2023 related to the Connected Technology Solutions reporting unit of $291 million, resulting in a full write-off of the remaining goodwill balance for the Connected Technology Solutions segment. This charge was recorded in Goodwill and intangible asset impairment in the Consolidated Statement of Operations.

Additionally, in conjunction with the third quarter test, the Company tested the long-lived intangible assets related to the businesses within the Connected Technology Solutions reporting unit within the Connected Technology Solutions segment for impairment. The Company also identified an indicator of impairment for the indefinite-lived intangible assets within the Implants & Prosthetics reporting unit within the Orthodontic and Implant Solutions segment, and determined certain tradenames and trademarks were impaired. As a result, the Company recorded indefinite-lived intangible asset impairment charges of $14 million and $2 million for the Connected Technology Solutions and Orthodontic and Implant Solutions segments, respectively, for the three months ended September 30, 2023. The impairment charges were primarily driven by macroeconomic factors such as weakened demand, higher cost of capital, and cost inflation, which are contributing to reduced forecasted revenues. These charges were recorded in Goodwill and intangible asset impairment in the Consolidated Statements of Operations. As the fair value of these indefinite-lived intangible assets approximate carrying value as of December 31, 2023, any further decline in key assumptions could result in additional impairment in future periods.

For further information on our annual and interim tests, see Note 11, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Income Taxes

Income taxes are determined using the liability method of accounting for income taxes. The Company’s tax expense includes U.S. and international income taxes plus the provision for U.S. taxes on undistributed earnings of international subsidiaries not considered to be permanently invested.

The Company applies a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes in the consolidated financial statements the impact of a tax position if that position is more likely than not of being sustained upon examination by the taxing authorities based on the technical merits of the position.

Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes. Deferred tax assets are recognized if it is more likely than not that the assets will be realized in future years. The Company establishes a valuation allowance for deferred tax assets for which realization is not likely. At December 31, 2023, the Company has a valuation allowance of $863 million against the benefit of certain deferred tax assets of foreign and domestic subsidiaries.

The Company’s tax positions are subject to ongoing examinations by the tax authorities. The Company operates within multiple taxing jurisdictions throughout the world and in the normal course of business is examined by taxing authorities in those jurisdictions. Adjustments to the uncertain tax positions are recorded when taxing authority examinations are completed, statutes of limitation are closed, changes in tax laws occur or as new information comes to light regarding the technical merits of the tax position.

LIQUIDITY AND CAPITAL RESOURCES

Year Ended December 31,

Cash provided by (used in):

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

Net (decrease) increase in cash and cash equivalents $ (31) $ 26 $ (57)

Cash provided by operating activities decreased primarily because of changes in working capital including lower collections from sales during the current period, higher cost of sales and operating expenses, and timing of payments to vendors. These decreases in operating cash were offset by other changes in working capital including the impact of inventory levels remaining flat during the current period as compared to build in inventory in the prior year. For the year ended December 31, 2023, the number of days for sales outstanding in accounts receivable increased by 4 days to 59 days at December 31, 2023 as compared to 55 days at December 31, 2022, and the number of days of sales in inventory decreased by 11 days to 126 days at December 31, 2023 as compared to 137 days at December 31, 2022.

The decrease in cash used in investing activities was primarily due to higher cash received on derivative contract settlements of $26 million and proceeds of $13 million from the sale of the Company’s minority investment in a provider of healthcare consumables. Capital expenditures were $149 million in both 2023 and 2022. The Company estimates capital expenditures to be in the range of approximately $170 million to $200 million for the twelve months ending December 31, 2024 and expects these investments to include implementation expenses for a new global Enterprise Resource Planning (“ERP”) system, equipment upgrades, and capacity expansion to support product innovation and consolidate operations for enhanced efficiencies.

The decrease in cash used in financing activities was primarily driven by higher net borrowings on short-term debt during 2023 of $190 million compared to prior year, partially offset by higher capital returned to shareholders through increased share repurchases of $150 million and increased dividends paid of $12 million. Primarily because of this activity, combined with an increase of $46 million due to exchange rate fluctuations on debt denominated in foreign currencies, the Company’s total borrowings increased by a net $174 million during the year ended December 31, 2023.

During the year ended December 31, 2023, the Company repurchased approximately 8.8 million shares under its open market share repurchase plan for a cost of $300 million at a volume-weighted average price of $34.20. On November 7, 2023, the Board of Directors approved an increase to the authorized share repurchase program of $1.0 billion. At December 31, 2023, $1,440 million of authorization remains available for future share repurchases. Additional share repurchases, if any, may be made through open market purchases, Rule 10b5-1 plans, accelerated share repurchases, privately negotiated transactions, or other transactions in such amounts and at such times as the Company considers appropriate based upon prevailing market and business conditions and other factors. At December 31, 2023, the Company held 57.3 million shares of treasury stock.

The Company’s ratio of total net debt to total capitalization was as follows:

Year Ended December 31,

(in millions, except percentages) 2023 2022

Current portion of debt $ 322 $ 118

Less: Cash and cash equivalents 334 365

Total net debt to total capitalization ratio 35.1 % 29.3 %

At December 31, 2023, the Company had a total remaining borrowing capacity of $499 million under lines of credit, including lines available under its short-term arrangements and revolving credit facility. The Company’s borrowing capacity includes a $700 million multi-currency revolving credit facility that expires on May 12, 2028. The Company also has available an aggregate $500 million U.S. dollar commercial paper facility. The $700 million revolver serves as a back-up to the commercial paper facility, thus the total available credit under the commercial paper facility and the multi-currency revolving credit facility in the aggregate is $700 million. The Company had $225 million outstanding borrowings under the commercial paper facility at December 31, 2023 resulting in $475 million remaining available under the revolving credit and commercial paper facilities. The Company also has access to $44 million in uncommitted short-term financing under lines of credit from various financial institutions. The lines of credit have no major restrictions and are provided under demand notes between the Company and the lending institutions. At December 31, 2023, the Company has $20 million outstanding under these short-term borrowing arrangements.

The Company’s multi-currency revolving credit facility, term loans and senior notes contain certain covenants relating to the Company’s operations and financial condition. The most restrictive of these covenants are: a ratio of total debt outstanding to total capital not to exceed 0.6, and a ratio of operating income excluding depreciation and amortization to interest expense of not less than 3.0 times, in each case, as such terms are defined in the relevant agreement. Any breach of any such covenants would result in a default under the existing debt agreements that would permit the lenders to declare all borrowings under such debt agreements to be immediately due and payable and, through cross default provisions, would entitle the Company’s other lenders to accelerate their loans. At December 31, 2023, the Company was in compliance with these covenants.

The Company expects on an ongoing basis to be able to finance operating cash requirements, capital expenditures, and debt service from the current cash, cash equivalents, cash flows from operations and amounts available under its existing borrowing facilities. The Company’s credit facilities are further discussed in Note 14, Financing Arrangements, in the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries’ operating activities and future foreign investments. The Company can repatriate cash to the United States, which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S. state income taxes, and the impact of foreign currency movements. At December 31, 2023, management believed that sufficient liquidity was available in the United States and expects this to remain for the next twelve months. The Company has repatriated and expects to continue repatriating certain funds from its non-U.S. subsidiaries that are not needed to finance local operations, however, these repatriation activities have not and are not expected to result in a significant incremental tax liability to the Company.

The Company continues to review its debt portfolio and may refinance additional debt or add debt in the near-term based on strategic capital management. The Company believes there is sufficient liquidity available for the next twelve months.

Off Balance Sheet Arrangements

At December 31, 2023, the Company held $30 million of precious metals on consignment from several financial institutions. Under these consignment arrangements, the financial institutions own the precious metal, and, accordingly, the Company does not report this consigned inventory as part of its inventory on the Consolidated Balance Sheets. These consignment agreements allow the Company to acquire the precious metal at market rates at a point in time, which is approximately the same time, and for the same price as alloys are sold to the Company’s customers. If the financial institutions would discontinue offering these consignment arrangements, and if the Company could not obtain other comparable arrangements, the Company may be required to obtain third party financing to fund an ownership position to maintain precious metal inventory at operational levels. For additional details, see Item 7A “Quantitative and Qualitative Disclosure About Market Risk - Consignment Arrangements.”

Contractual Obligations

The Company’s scheduled contractual cash obligations at December 31, 2023 were as follows:

Within1 Year Years 2-3 Years 4-5 GreaterThan5 Years Total

(in millions)

Precious metal consignment agreements 30 — — — 30

Due to the uncertainty with respect to the timing of future cash flows associated with the Company’s unrecognized tax benefits at December 31, 2023, the Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority; therefore, $40 million of unrecognized tax benefits has been excluded from the contractual obligations table above. See Note 16, Income Taxes, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Material Trends in Capital Resources

On February 14, 2023, the Board of Directors of the Company approved a plan to restructure the Company’s business to improve operational performance and drive shareholder value creation. The plan includes a restructuring of the business through a new operating model with five global business units, optimization of central functions and overall management infrastructure, and other efforts aimed at cost savings. The restructuring plan anticipates a reduction in the Company’s global workforce of approximately 8% to 10%, subject to co-determination processes with employee representative groups in countries where required. The plan is expected to be substantially completed in 2024 and result in approximately $200 million in annual cost savings. The reduction in headcount and cost savings related to this plan is expected to be offset as the Company makes additional investments in sales personnel, our new global ERP system, and other transformation initiatives.

As of December 31, 2023, in conjunction with this plan the Company has incurred $66 million in restructuring charges primarily related to employee transition, severance payments, employee benefits, and facility closure costs and $20 million in other non-recurring costs related to restructuring activities which mostly consist of consulting, legal and other professional service fees. The Company expects to incur between $115 to $135 million in one-time charges, comprising $80 to $100 million in restructuring expenditures and charges and $35 million in other non-recurring charges. The estimates of these charges and their timing are subject to several assumptions, including local law requirements in various jurisdictions and co-determination aspects in countries where required. Actual amounts may differ materially from estimates. In addition, the Company may incur other charges or cash expenditures in connection with this plan which are not currently contemplated. For further details refer to Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Beginning in the second quarter of 2022, the Company’s financial results have also been impacted by the costs associated with the internal investigation conducted and completed by the Audit and Finance Committee and subsequently, the external investigation by the SEC which is currently in progress. These costs have included legal expenses as well as third party accounting and other professional service fees in conjunction with the investigations and subsequent remediation activities. Additionally, the Company has incurred severance costs associated with its remedial personnel actions, as well as special one-time costs in connection with retention of key personnel. These costs totaled approximately $61 million for the year ended December 31, 2022, with additional costs of $19 million incurred for the year ended December 31, 2023. The costs in 2023 were offset by a $17 million gain from release of employee compensation accruals resulting from a settlement in the three months ended September 30, 2023. The Company expects that it will continue to incur legal defense costs into 2024 pertaining to the matters described in Note 21, Commitments and Contingencies, in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 1, Significant Accounting Policies, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for a discussion of recent accounting guidance and pronouncements.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company’s major market risk exposures include changing interest rates, movements in foreign currency exchange rates and potential price volatility of commodities used by the Company in its manufacturing processes. The Company’s policy is to manage risk of exposure to interest rates using a combination of fixed and floating rate debt as well as interest rate swaps. The Company employs foreign currency denominated debt and currency swaps which serve to partially offset the Company’s exposure on its net investments in subsidiaries denominated in foreign currencies. The Company’s policy generally is to hedge major foreign currency transaction exposures through foreign exchange forward contracts. These contracts are entered into with major financial institutions thereby minimizing the risk of credit loss. The Company does not hold or issue derivative financial instruments for speculative or trading purposes. The Company is subject to other foreign exchange market risk exposure in addition to the risks on its financial instruments, such as possible impacts on its pricing and production costs, which are difficult to reasonably predict, and have therefore not been included below.

Foreign Exchange Risk Management

The Company enters into derivative financial instruments to hedge the foreign exchange revaluation risk associated with recorded assets and liabilities that are denominated in a non-functional currency. The Company hedges various currencies, primarily in euros, Swedish kronor and Swiss francs. The gains and losses on these derivative transactions offset the gains and losses generated by the revaluation of the underlying non-functional currency balances.

The Company primarily uses forward foreign exchange contracts and cross currency basis swaps to hedge these risks. The Company uses a layered hedging program to hedge select anticipated foreign currency cash flows to reduce volatility in both cash flows and reported earnings of the consolidated Company. These cash flow hedges have maturities of six to 18 months and do not change the underlying long-term foreign currency exchange risk. The Company has numerous investments in foreign subsidiaries the most significant of which are denominated in euros, Swiss francs, Japanese yen and Swedish kronor. The net assets of these subsidiaries are exposed to volatility in currency exchange rates.

Currently, the Company uses both derivative and non-derivative financial instruments, including foreign currency denominated debt held at the parent company level and foreign exchange forward contracts to hedge some of this exposure. Translation gains and losses related to the net assets of the foreign subsidiaries are offset by gains and losses in the non-derivative and derivative financial instruments designated as hedges of net investment. At December 31, 2023, a 10% weakening of the U.S. dollar against all other currencies would decrease the net fair value associated with the forward foreign exchange contracts by approximately $107 million.

Interest Rate Risk Management

The Company enters into financial instruments, including derivatives, that expose the Company to market risk related to changes in interest rates. The Company uses a combination of financial instruments, including long-term and short-term financing, variable-rate commercial paper and derivative interest rate swaps to manage the interest rate mix of our total debt portfolio and related overall cost of borrowing.

At December 31, 2023, an increase of 1% in the interest rates on the variable interest rate instruments would decrease the Company’s fair value associated with the derivative interest rate swaps by approximately $10 million.

Consignment Arrangements

The Company holds on a consignment basis, from various financials institutions, the precious metals used in the production of precious metal dental alloy products. Under these consignment arrangements, the financial institutions own the precious metal, and, accordingly, the Company does not report this inventory on consignment as part of its inventory on the Consolidated Balance Sheet. The consignment agreements allow the Company to take ownership of the metal at approximately the same time customer orders are received and to closely match the price of the metal acquired to the price charged to the customer (i.e., the price charged to the customer is largely a pass through). These agreements are cancellable by either party at the end of each consignment period, which typically run for a period of one to nine months; however, because the Company typically has access to numerous financial institutions with excess capacity, consignment needs created by cancellations can be shifted among the other institutions.

As precious metal prices fluctuate, the Company evaluates the impact of the precious metal price fluctuation on its target gross margins for precious metal dental alloy products and may revise the prices customers are charged for precious metal dental alloy products accordingly. While the Company does not separately invoice customers for the precious metal content of precious metal dental alloy products, the underlying precious metal content is the primary component of the cost and sales price of the precious metal dental alloy products. For practical purposes, if the precious metal prices go up or down by a small amount, the Company will not immediately modify prices, as long as the cost of precious metals embedded in the Company’s precious metal dental alloy price closely approximates the market price of the precious metal. If there is a significant change in the price of precious metals, the Company adjusts the price for the precious metal dental alloys, maintaining its margin on the products.

At December 31, 2023, the Company had approximately 22,000 troy ounces of precious metal, primarily gold, platinum, palladium and silver on consignment for periods of less than one year with a market value of $30 million. Under the terms of the consignment agreements, the Company also makes compensatory payments to the consignor banks based on a percentage of the value of the consigned precious metals inventory. At December 31, 2023, the average annual rate charged by the consignor banks was 1.3%. These compensatory payments are considered to be a cost of the metals purchased and are recorded as part of the cost of products sold.

Item 8. Financial Statements and Supplementary Data

1.Financial Statements

The following consolidated financial statements of the Company are filed as part of this Form 10-K:

Page

Management’s Report on Internal Control Over Financial Reporting 63

Report of Independent Registered Public Accounting Firm 64

Note 1 - Significant Accounting Policies 73

Note 2 - Revenue 83

Note 3 - Stock Compensation 85

Note 4 - Earnings Per Common Share 87

Note 5 - Comprehensive (Loss) Income 88

Note 6 - Segment and Geographic Information 90

Note 7 - Other Expense (Income), Net 94

Note 8 - Inventories, Net 95

Note 9 - Property, Plant and Equipment, Net 96

Note 11 - Goodwill and Intangible Assets 99

Note 12 - Prepaid Expenses and Other Current Assets 103

Note 13 - Accrued Liabilities 104

Note 14 - Financing Arrangements 105

Note 16 - Income Taxes 109

Note 17 - Benefit Plans 112

Note 18 - Restructuring and Other Costs 118

Note 19 - Financial Instruments and Derivatives 120

Note 20 - Fair Value Measurement 126

Note 21 - Commitments and Contingencies 128

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

The following financial statement schedule is filed as part of this Form 10-K and is covered by the Report of Independent Registered Public Accounting Firm

Page

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making its assessment, management used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on its assessment, management concluded that, as of December 31, 2023, the Company’s internal control over financial reporting was effective based on the criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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

/s/ Simon D. Campion /s/ Glenn G. Coleman

Simon D. Campion Glenn G. Coleman

President and Chief Executive Officer Executive Vice President and

Chief Financial Officer

Report of Independent Registered Public Accounting Firm

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

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Dentsply Sirona Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income or loss, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 8 (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Annual and Interim Goodwill Impairment Assessments – Certain Reporting Units

As described inNotes 1 and 11 to the consolidated financial statements, the Company’s consolidated net goodwill balance was $2,438millionas of December 31, 2023, of which a portion relates to certain reporting units. Goodwill is tested for impairment at the reporting unit level annually as of April 1 of each year, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired. Management performs impairment tests by comparing the fair value of each reporting unit to its carrying amount to determine if there is a potential impairment. On April 1, 2023, management realigned its reporting units due to a change in organizational structure. Reporting units under the former structure were tested for impairment prior to the realignment, and no impairment was identified. As a result of the realignment, the Company reallocated its goodwill to align its new reporting units which resulted from the change in its operating segments. Goodwill was reassigned to each of the new reporting units using a relative fair value approach. Management assessed the goodwill of the new reporting units and its indefinite-lived intangible assets for impairment as of April 1, 2023. Based on this test, it was determined that the fair values of its reporting units and indefinite-lived intangible assets more likely than not exceeded their carrying values, resulting in no impairment. In the third quarter of 2023, management identified indicators of a "more likely than not" impairment related to its Connected Technology Solutions reporting unit, which comprises all of the Connected Technology Solutions segment. The decline in fair value for this reporting unit was driven by adverse macroeconomic factors as a result of weakened demand, particularly in European markets, and increased discount rates. As a result of the interim test, management recorded a pre-tax goodwill impairment charge related to the Connected Technology Solutions reporting unit within the Connected Technology Solutions segment of $291 million. As disclosed by management, the Company uses a discounted cash flow model as its valuation technique to measure the fair value for its reporting units. The discounted cash flow model uses five- to ten-year forecasted cash flows plus a terminal value based on capitalizing the last period’s cash flows using a perpetual growth rate. The significant assumptions used by management in the application of the discounted cash flow model include, but are not limited to, the discount rates, revenue growth rates, perpetual revenue growth rates, and future operating margin percentages of the reporting unit’s business.

The principal considerations for our determination that performing procedures relating to the annual and interim goodwill impairment assessments of certain reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the reporting units, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the discount rates, revenue growth rates, perpetual revenue growth rates, and future operating margin percentages for both the annual and interim assessments, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Company’s reporting units. These procedures also included, among others, testing management’s process for developing the fair value estimates of certain of the Company’s reporting units; evaluating the appropriateness of the discounted cash flow models; testing the completeness and accuracy of underlying data used in the discounted cash flow models; and evaluating the reasonableness of significant assumptions used by management related to the discount rates, revenue growth rates, perpetual revenue growth rates, and future operating margin percentages. Evaluating management’s assumptions related to revenue growth rates, perpetual revenue growth rates, and future operating margin percentages involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s discounted cash flow models and (ii) the reasonableness of the assumptions related to the discount rates and perpetual revenue growth rates.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Charlotte, North Carolina

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

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

Year Ended December 31,

Selling, general, and administrative expenses 1,613 1,589 1,551

Goodwill and intangible asset impairments 307 1,287 —

Restructuring and other costs 67 14 17

Other income and expenses:

Other expense (income), net 9 53 2

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

(Benefit) provision for income taxes (43) (105) 134

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

Net (loss) income attributable to Dentsply Sirona $ (132) $ (950) $ 411

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

Weighted average common shares outstanding:

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

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS

(in millions)

Year Ended December 31,

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments 49 (156) (181)

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

Pension liability adjustments (27) 91 26

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

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

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

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

December 31,

Assets

Current Assets:

Cash and cash equivalents $ 334 $ 365

Accounts and notes receivable-trade, net 695 632

Prepaid expenses and other current assets 320 269

Property, plant and equipment, net 800 761

Operating lease right-of-use assets, net 178 200

Identifiable intangible assets, net 1,705 1,903

Other noncurrent assets 276 198

Liabilities and Equity

Current Liabilities:

Income taxes payable 49 46

Notes payable and current portion of long-term debt 322 118

Operating lease liabilities 125 149

Other noncurrent liabilities 502 399

Commitments and contingencies (Note 21)

Equity:

Common stock, $0.01 par value; 3 3

Capital in excess of par value 6,643 6,629

Accumulated other comprehensive loss (636) (628)

Noncontrolling interests 1 1

Total Liabilities and Equity $ 7,370 $ 7,643

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

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions, except per share amounts)

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

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

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

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

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

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

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

Cash dividends declared ($0.43 per share) — — (94) — — (94) — (94)

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

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

Stock based compensation expense — 59 — — — 59 — 59

Funding of employee stock purchase plan — 1 — — 5 6 — 6

Treasury shares purchased — — — — (150) (150) — (150)

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

Cash dividends declared ($0.50 per share) — — (108) — — (108) — (108)

Other comprehensive loss — — — (8) — (8) — (8)

Exercise of stock options — (1) — — 1 — — —

Stock based compensation expense — 46 — — — 46 — 46

Funding of employee stock purchase plan — — — — 6 6 — 6

Treasury shares purchased — — — — (303) (303) — (303)

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

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

Cash dividends declared ($0.56 per share) — — (118) — — (118) — (118)

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

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions) Year Ended December 31,

Cash flows from operating activities:

Indefinite-lived intangible asset impairment 16 100 —

Stock based compensation expense 46 59 48

Restructuring and other costs 33 (10) (17)

Equity in earnings from unconsolidated affiliates 4 36 10

Other non-cash (income) expense (5) 60 24

Changes in operating assets and liabilities, net of acquisitions:

Accounts and notes receivable-trade, net (58) 85 (117)

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

Other noncurrent assets 4 1 (10)

Other noncurrent liabilities 30 1 12

Net cash provided by operating activities 377 517 657

Cash flows from investing activities:

Cash received on sale of non-strategic businesses or product lines 13 — 28

Cash received on derivative contracts 39 13 2

Proceeds from sale of property, plant and equipment 7 — —

Other investing activities, net 1 (2) 2

Net cash used in investing activities (89) (138) (358)

Cash flows from financing activities:

Proceeds from long-term borrowings — 6 16

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

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

Proceeds from exercised stock options — 6 51

Cash paid for treasury stock (300) (150) (200)

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

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

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

Net (decrease) increase in cash and cash equivalents (31) 26 (99)

Cash and cash equivalents at beginning of period 365 339 438

Cash and cash equivalents at end of period $ 334 $ 365 $ 339

Supplemental disclosures of cash flow information:

Interest paid, net of amounts capitalized $ 97 $ 70 $ 64

Non-cash investing activities:

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

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

DENTSPLY SIRONA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Description of Business

DENTSPLY SIRONA Inc. (“Dentsply Sirona” or the “Company”), is the world’s largest manufacturer of dental products and technologies, with a 137-year history of innovation and service to the dental industry and patients worldwide. The Company’s principal product categories include dental consumable products, dental equipment, dental technologies and continence care consumable products. The Company sells its products in over 150 countries under some of the most well-established brand names in the industry.

Basis of Presentation

The consolidated financial statements include the results of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Certain prior period amounts have been reclassified to conform to current year presentation.

Use of Estimates

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

Cash and Cash Equivalents

Cash and cash equivalents include deposits with banks as well as highly liquid time deposits with original maturities of ninety days or less. The balance as of December 31, 2023 includes $42 million of cash and cash equivalents located in Russia which is available for use in local operations but limited in its ability to be transferred out of the country due to control measures currently in place by the Russian government.

Short-term Investments

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

Accounts Receivable

The Company recognizes a receivable when it has an unconditional right to payment, which represents the amount the Company expects to collect in a transaction. Payment terms are typically 30 days in the United States but may be longer in markets outside the U.S. In general, contracts containing significant financing components are not material to the Company’s financial statements.

The Company establishes an allowance for doubtful accounts based on an estimate of current expected credit losses resulting from the inability of its customers to make required payments. The allowance is determined based on a combination of factors, including the length of time that the receivable is past due, history of write-offs, and the Company’s knowledge of circumstances relating to specific customers’ ability to meet their financial obligations. The provision for doubtful accounts is included in Selling, general and administrative expenses (“SG&A”) in the Consolidated Statements of Operations. For customers on credit terms, the Company performs ongoing credit evaluation of those customers’ financial condition and generally does not require collateral from them. See Note 2, Revenue, for additional information on Accounts Receivable.

Inventories

Inventories are stated at the lower of cost and net realizable value. The cost of inventories is based upon the first-in, first-out method (“FIFO”) or average cost methods.

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

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

Goodwill

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired and liabilities assumed in a business combination. Goodwill is not subject to amortization but is tested for impairment at the reporting unit level annually in accordance with U.S. GAAP as of April 1 of each year, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired. The Company performs impairment tests by comparing the fair value of each reporting unit to its carrying amount to determine if there is a potential impairment. If the carrying value of a reporting unit with goodwill exceeds its respective fair value, an impairment charge is recognized for the excess amount. Additional information related to the testing for goodwill impairment, including results of the annual test performed as of April 1, 2023 and the interim impairment assessment performed in the third quarter of 2023, is provided in Note 11, Goodwill and Intangible Assets.

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets consist primarily of tradenames and trademarks and in-process research and development (“R&D”) acquired in business combinations, and these are not subject to amortization. Valuations of indefinite-lived intangibles assets acquired in business combinations are based on information and assumptions available at the time of their acquisition, using income and market approaches to determine fair value. The Company conducts an impairment test in accordance with U.S. GAAP as of April 1 of each year, or more frequently if events or circumstances indicate that the carrying value of indefinite-lived intangible assets may be impaired. Potential impairment is identified by comparing the fair value of an intangible asset to its carrying value. Additional information related to the testing for indefinite-lived intangible asset impairment, including results of the annual test performed as of April 1, 2023 and the interim impairment assessment performed in the third quarter of 2023, is provided in Note 11, Goodwill and Intangible Assets.

Definite-Lived Intangible Assets

Definite-lived intangible assets primarily consist of patents, tradenames, trademarks, licensing agreements, developed technology, and customer relationships. The valuation of definite-lived intangibles assets acquired in business combinations is based on information and assumptions available at the time of acquisition, using income and market model approaches to determine fair value.

Identifiable definite-lived intangible assets are amortized on a basis that best reflects how their economic benefits are utilized over the life of the asset or on a straight-line basis if not materially different from actual utilization. The useful life is the period over which the asset is expected to contribute to the future cash flows of the Company. The Company uses the following useful lives for its definite-lived intangible assets:

Definite-Lived Intangible Asset Type Useful Life

Patents Up to the date the patent expires

Tradenames and trademarks Up to 20 years

Licensing agreements Up to 20 years

Customer relationships Up to 15 years

Developed technology Up to 15 years

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

These assets are reviewed for impairment whenever events or circumstances suggest that the carrying amount of the asset may not be recoverable. The Company closely monitors all intangible assets, including those related to new and existing technologies, for indicators of impairment as these assets have more risk of becoming impaired. Impairment is based upon an initial evaluation of the identifiable undiscounted cash flows. If the initial evaluation identifies a potential impairment, a fair value of the asset is determined by using a discounted cash flows valuation. If impaired, the resulting charge reflects the excess of the asset’s carrying cost over its fair value.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Assets acquired through acquisitions are recorded at fair value. The Company capitalizes costs incurred in the development or acquisition of software, whether for internal or external use, and expenses costs incurred in the preliminary project planning stage. Except for leasehold improvements, depreciation and amortization is computed by the straight-line method over the assets estimated useful lives:

Property, Plant and Equipment Assets Type Useful Life

Buildings 40 years

Machinery and Equipment 4 to 15 years

Capitalized Software 2 to 10 years

Maintenance and repairs are expensed as incurred; replacements and major improvements are capitalized. If events or circumstances exist which suggest that the carrying amount of the asset group may not be recoverable, the identifiable undiscounted cash flows of the asset group are compared to the carrying value of the asset. If the carrying value is in excess of the identifiable undiscounted cash flows, the excess of the asset group’s carrying cost over its fair value is recorded as an impairment charge.

Leases

The Company leases real estate, automobiles and equipment under various operating and finance leases. The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the implicit rate is not readily determinable in most of the Company’s lease agreements, the Company uses its estimated secured incremental borrowing rate, based on the information available, at commencement of the lease to determine the present value of lease payments. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Any new real estate and equipment operating lease agreements with lease and non-lease components, are accounted for as a single lease component; auto leases are accounted for as separate lease components.

The Company’s leases have remaining lease terms of approximately 1 year to 9 years. Many of the Company’s real estate and equipment leases have one or more options to renew, with terms that can extend primarily from 1 year to 3 years, which are not included in the initial lease term until considered reasonably certain of renewal. The Company does not have lease agreements with residual value guarantees, sale-and-leaseback terms, or material restrictive covenants. The Company does not have any material sublease arrangements. See Note 10, Leases for additional information.

Derivative Financial Instruments

The Company employs derivative financial instruments to hedge certain anticipated transactions, firm commitments, and assets and liabilities denominated in foreign currencies. Additionally, the Company manages exposures to changes in interest rates by utilizing interest rate swaps that have the effect of converting floating rate debt to fixed rate, or vice versa. The benefit or loss from interest rate swaps is recorded in Interest expense, net in the Company’s Consolidated Statements of Operations consistent with the classification of interest expense attributable to the underlying debt.

The Company records all derivative instruments at fair value and changes in fair value are recorded each period in the consolidated statements of operations or accumulated other comprehensive income (“AOCI”). The Company classifies derivative assets and liabilities as current when the remaining term of the derivative contract is one year or less. The Company has elected to classify the cash flows from derivative instruments in the same category as the cash flows from the items being hedged. Should the Company enter into a derivative instrument that includes an other-than-insignificant financing element then all cash flows will be classified as financing activities in the Consolidated Statements of Cash Flows as required by U.S. GAAP. See Note 19, Financial Instruments for additional information on derivative instruments.

Pension and Other Postemployment Benefits

Some of the employees of the Company and its subsidiaries are covered by government or Company-sponsored defined benefit plans and defined contribution plans. Additionally, certain salaried employee groups in the United States are covered by postemployment healthcare plans. Projected benefit obligations and net periodic costs for Company-sponsored defined benefit and postemployment benefit plans are based on an annual actuarial valuation that includes assessment of key assumptions relating to expected return on plan assets, discount rates, employee compensation increase rates and health care cost trends. Expected return on plan assets, discount rates and health care cost trend assumptions are particularly important when determining the Company’s benefit obligations and net periodic benefit costs associated with postemployment benefits. Changes in these assumptions can impact the Company’s earnings. In determining the cost of postemployment benefits, certain assumptions are established annually to reflect market conditions and plan experience to appropriately reflect the expected costs as determined by actuaries. These assumptions include medical inflation trend rates, discount rates, employee turnover and mortality rates. The Company predominantly uses liability durations in establishing its discount rates, which are observed from indices of high-grade corporate bond yields in the respective economic regions of the plans. The expected return on plan assets is the weighted average long-term expected return based upon asset allocations and historic average returns for the markets where the assets are invested, principally in foreign locations. The Company reports the funded status of its defined benefit pension and other postemployment benefit plans on its consolidated balance sheets as a net liability or asset. Additional information related to the impact of changes in these assumptions is provided in Note 17, Benefit Plans.

Accruals for Self-Insured Losses

The Company maintains insurance for certain risks, including workers’ compensation, and is self-insured for employee related healthcare benefits. The Company accrues for the expected costs associated with these risks by considering historical claims experience, demographic factors, severity factors and other relevant information. Costs are recognized in the period the claim is incurred, and the financial statement accruals include an estimate of claims incurred but not yet reported. The Company has stop-loss coverage to limit its exposure to any significant exposure on a per claim basis.

Litigation

The Company and its subsidiaries, from time to time, are parties to lawsuits arising from operations. The Company records liabilities when a loss is probable and can be reasonably estimated. If these estimates are in the form of ranges, the Company records the liabilities at the most likely outcome within the range. If no point within the range represents a better estimate of the probable loss, then the low point in the range is accrued. The ranges established by management are based on analysis made by internal and external legal counsel who considers the best information known at the time. If the Company determines that a contingency is reasonably possible, it considers the same information to estimate the possible exposure and discloses any material potential liability. These loss contingencies are monitored regularly for a change in fact or circumstance that would require an accrual adjustment. Legal costs related to these lawsuits are expensed as incurred.

Foreign Currency Translation

The local currency of foreign operations is generally considered to be their functional currency. In the case of operations within highly inflationary economies, which for the Company include Argentina and Turkey, the Company remeasures the financial statements of entities in those countries with the U.S. dollar as the functional currency.

Adjustments resulting from the process of translating the financial statements of entities with foreign functional currencies into U.S. dollars are included in AOCI in the Consolidated Balance Sheets. During the year ended December 31, 2023, the Company had a translation gain of $78 million and a loss on its loans designated as hedges of net investments of $29 million. During the year ended December 31, 2022, the Company had a translation loss of $188 million and a gain on its loans designated as hedges of net investments of $32 million. During the year ended December 31, 2021, the Company had a translation loss of $225 million and a gain on its loans designated as hedges of net investments of $46 million.

Foreign currency gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included within Other expense (income), net in the Consolidated Statements of Operations. During the years ended December 31, 2023, 2022, and 2021, the Company had a net foreign currency gain of $3 million, loss of $6 million and gain of $12 million, respectively.

Revenue Recognition

Revenues are derived primarily from the sale of dental equipment and dental and healthcare consumable products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services in accordance with ASC 606-10, Revenues from Contracts with Customers. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied; this occurs with the transfer of control of products and services to its customers, which for products generally occurs when title and risk of loss transfers to the customer, and for services generally occurs as the customer receives and consumes the benefit. Sales, value-added, and other taxes collected concurrent with revenue-producing activities are excluded from revenue.

Certain contracts with our customers include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately may require significant judgment. The Company generally uses an observable price, typically average selling price, to determine the stand-alone selling price for separate performance obligations. The Company determines the stand-alone selling price, based on Company geographic sales locations’ database of pricing and discounting practices for the specific product or service when sold separately, and utilizes this data to arrive at average selling prices by product. In cases where an average selling price is not observable, the Company determines the stand-alone selling price using relevant information and applies suitable estimation methods including, but not limited to, the cost plus a margin approach. Revenue is then allocated proportionately, based on the determined stand-alone selling price, to each distinct performance obligation.

The Company exercises judgment in estimating variable consideration, which primarily includes volume discounts, sales rebates, and product returns. The Company adjusts the estimate of revenue at the earlier of when the most likely amount of consideration can be estimated, the amount expected to be received changes, or when the consideration becomes fixed. The Company estimates volume discounts by evaluating specific inputs and assumptions, including the individual customer’s historical and estimated future product purchases. Discounts are deducted from revenue at the time of sale or when the discount is offered, whichever is later. In estimating sales rebates, the Company evaluates inputs such as customer-specific trends, terms of the customers’ contracted rebate program, historical experience, and the forecasted performance of a customer and their expected level of achievement within the rebate programs. The accruals for these rebate programs are updated as actual results and updated forecasts impact the estimated achievement for customers within the rebate programs. When the Company gives customers the right to return eligible products and receive credit, returns are estimated based on an analysis of historical experience. However, returns of products, excluding warranty-related returns, are not material.

To the extent the transaction price includes variable consideration, the Company applies judgment in constraining the estimated variable consideration due to factors that may cause reversal of cumulative revenue recognized. The Company evaluates constraints based on its historical and projected experience with similar customer contracts.

For most of its products, the Company transfers control and recognizes revenue when products are shipped from the Company’s manufacturing facility or warehouse to the customer. For contracts with customers that contain destination shipping terms, revenue is not recognized until the goods are delivered to the agreed upon destination. As such, the Company’s performance obligations related to product sales are satisfied at a point in time as this is when the customer obtains the use of and substantially all of the benefit of the product.

The Company recognizes revenue from support and maintenance contracts, extended warranties, and other certain contract performance obligations over time based on the period of the contracts or as the services are performed, as the customer simultaneously receives and consumes the benefits provided by the Company’s performance of the services. In general, the total amount of revenue recognized over time is not material to the Company’s financial statements.

Depending on the terms of its contracts, the Company may defer the recognition of a portion of revenue on a relative stand-alone selling price basis when certain performance obligations are not yet satisfied. Consideration received from customers in advance of revenue recognition is classified as deferred revenue.

XRAY US Equity

XRAY · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

Item 8. Financial Statements and Supplementary Data

XRAY US Equity☆

XRAY · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

Item 8. Financial Statements and Supplementary Data

XRAY US Equity