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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
Commission File Number 0-16211
DENTSPLY SIRONA Inc.
(Exact name of registrant as specified in its charter)
Delaware
39-1434669
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
13320 Ballantyne Corporate Place, Charlotte, North Carolina
28277-3607
(Address of principal executive offices)
(Zip Code)
(844) 848-0137
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $.01 per share XRAY The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   x No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x
Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Yes    No   x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  At August 3, 2021, DENTSPLY SIRONA Inc. had 218,550,601 shares of common stock outstanding.



DENTSPLY SIRONA Inc.

TABLE OF CONTENTS

2


PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Net sales $ 1,067  $ 491  $ 2,094  $ 1,365 
Cost of products sold 469  315  917  721 
Gross profit 598  176  1,177  644 
Selling, general, and administrative expenses 398  261  783  620 
Research and development expenses
40  18  77  52 
Goodwill impairment —  —  —  157 
Restructuring and other costs 44 
Operating income (loss) 155  (104) 309  (229)
Other income and expenses:
Interest expense, net 16  11  30  18 
Other expense (income), net (4)
Income (loss) before income taxes 134  (120) 283  (250)
Provision (benefit) for income taxes 35  (24) 67  (14)
Net income (loss) 99  (96) 216  (236)
Less: Net income (loss) attributable to noncontrolling interest —  (1) —  (1)
Net income (loss) attributable to Dentsply Sirona $ 99  $ (95) $ 216  $ (235)
Net income (loss) per common share attributable to Dentsply Sirona:
Basic $ 0.45  $ (0.44) $ 0.99  $ (1.07)
Diluted $ 0.45  $ (0.44) $ 0.98  $ (1.07)
Weighted average common shares outstanding:
Basic 218.4  218.7  218.6  219.8 
Diluted 220.7  218.7  220.8  219.8 

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
3


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Net income (loss) $ 99  $ (96) $ 216  $ (236)
Other comprehensive income (loss), net of tax:
 Foreign currency translation gain (loss) 37  75  (62) (44)
 Net gain (loss) on derivative financial instruments (8) (3)
 Pension liability gain
Total other comprehensive income (loss), net of tax 43  68  (47) (44)
Total comprehensive income (loss) 142  (28) 169  (280)
Less: Comprehensive income (loss) attributable to noncontrolling interests —  —  —  — 
Total comprehensive income (loss) attributable to Dentsply Sirona $ 142  $ (28) $ 169  $ (280)

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
4


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)
June 30, 2021 December 31, 2020
Assets
Current Assets:
Cash and cash equivalents $ 332  $ 438 
Accounts and notes receivables-trade, net 678  673 
Inventories, net 539  466 
Prepaid expenses and other current assets 236  214 
Total Current Assets 1,785  1,791 
Property, plant, and equipment 769  791 
Operating lease right-of-use assets, net 184  176 
Identifiable intangible assets, net 2,488  2,504 
Goodwill 4,033  3,986 
Other noncurrent assets 119  94 
Total Assets $ 9,378  $ 9,342 
Liabilities and Equity
Current Liabilities:
Accounts payable $ 281  $ 305 
Accrued liabilities 621  653 
Income taxes payable 44  60 
Notes payable and current portion of long-term debt 305  299 
Total Current Liabilities 1,251  1,317 
Long-term debt 1,946  1,978 
Operating lease liabilities 139  130 
Deferred income taxes 415  393 
Other noncurrent liabilities 550  554 
Total Liabilities 4,301  4,372 
Equity:
Preferred stock, $1.00 par value; 0.25 million shares authorized; no shares issued
—  — 
Common stock, $0.01 par value;
400.0 million shares authorized, and 264.5 million shares issued at June 30, 2021 and December 31, 2020
218.5 million and 218.7 million shares outstanding at June 30, 2021 and December 31, 2020
Capital in excess of par value 6,638  6,604 
Retained earnings 1,402  1,233 
Accumulated other comprehensive loss (511) (464)
Treasury stock, at cost, 46.0 million and 45.8 million shares at June 30, 2021 and December 31, 2020, respectively
(2,458) (2,409)
Total Dentsply Sirona Equity 5,074  4,967 
Noncontrolling interests
Total Equity 5,077  4,970 
Total Liabilities and Equity $ 9,378  $ 9,342 
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
5


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions, except per share amounts)
(unaudited)
Common
Stock
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total Dentsply Sirona
Equity
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2020 $ $ 6,604  $ 1,233  $ (464) $ (2,409) $ 4,967  $ $ 4,970 
Net income —  —  117  —  —  117  —  117 
Other comprehensive loss —  —  —  (90) —  (90) —  (90)
Exercise of stock options —  11  —  —  22  33  —  33 
Stock based compensation expense —  13  —  —  —  13  —  13 
Funding of employee stock purchase plan —  —  —  — 
Treasury shares purchased —  —  —  —  (90) (90) —  (90)
Restricted stock unit distributions —  (11) —  —  (4) —  (4)
Cash dividends ($0.1000 per share)
—  —  (22) —  —  (22) —  (22)
Balance at March 31, 2021 $ $ 6,618  $ 1,328  $ (554) $ (2,468) $ 4,927  $ $ 4,930 
Net income —  —  99  —  —  99  —  99 
Other comprehensive income —  —  —  43  —  43  —  43 
Exercise of stock options —  —  —  12  —  12 
Stock based compensation expense —  19  —  —  —  19  —  19 
Restricted stock unit distributions —  (2) —  —  (1) —  (1)
Cash dividends ($0.1100 per share)
—  —  (25) —  —  (25) —  (25)
Balance at June 30, 2021 $ $ 6,638  $ 1,402  $ (511) $ (2,458) $ 5,074  $ $ 5,077 

Common
Stock
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total Dentsply Sirona
Equity
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2019 $ $ 6,587  $ 1,404  $ (600) $ (2,301) $ 5,093  $ $ 5,095 
Net loss —  —  (140) —  —  (140) —  (140)
Other comprehensive loss —  —  —  (112) —  (112) —  (112)
Exercise of stock options —  —  —  —  — 
Stock based compensation expense —  —  —  —  — 
Funding of employee stock purchase plan —  —  —  — 
Treasury shares purchased —  (28) —  —  (112) (140) —  (140)
Restricted stock unit distributions —  (15) —  —  (6) —  (6)
Cash dividends ($0.1000 per share)
—  —  (22) —  —  (22) —  (22)
Balance at March 31, 2020 $ $ 6,554  $ 1,242  $ (712) $ (2,399) $ 4,688  $ $ 4,690 
Net loss —  —  (95) —  —  (95) (1) (96)
Other comprehensive income —  —  —  68  —  68  —  68 
Exercise of stock options —  —  —  —  — 
Stock based compensation expense —  10  —  —  —  10  —  10 
Treasury shares purchased —  28  —  —  (28) —  —  — 
Restricted stock unit distributions —  (16) —  —  10  (6) —  (6)
Cash dividends ($0.1000 per share)
—  —  (22) —  —  (22) —  (22)
Balance at June 30, 2020 $ $ 6,576  $ 1,125  $ (644) $ (2,416) $ 4,644  $ $ 4,645 
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
6



DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Six Months Ended June 30,
2021 2020
Cash flows from operating activities:
Net income (loss) $ 216  $ (236)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation 64  65 
Amortization of intangible assets 112  94 
Goodwill impairment —  157 
Indefinite-lived intangible asset impairment —  39 
Deferred income taxes (6) (32)
Stock based compensation expense 32  19 
Other non-cash expense 20 
(Gain) loss on sale of non-strategic businesses and product lines (13) — 
Changes in operating assets and liabilities, net of acquisitions:
Accounts and notes receivable-trade, net (17) 269 
Inventories, net (77) (1)
Prepaid expenses and other current assets (22) 33 
Other noncurrent assets (8)
Accounts payable (28) (89)
Accrued liabilities (10) (140)
Income taxes (8) (15)
Other noncurrent liabilities (9)
Net cash provided by operating activities 263  164 
Cash flows from investing activities:
Capital expenditures (66) (39)
Cash paid for acquisitions of businesses and equity investments, net of cash acquired (241) — 
Cash received on sale of non-strategic businesses or product lines 27  — 
Cash received on derivative contracts —  58 
Proceeds from sale of property, plant, and equipment
Net cash (used in) provided by investing activities (279) 20 
Cash flows from financing activities:
Proceeds (repayments) on short-term borrowings, net (1)
Cash paid for treasury stock (90) (140)
Cash dividends paid (44) (44)
Proceeds from long-term borrowings, net of deferred financing costs 13  1,442 
Repayments on long-term borrowings, net —  (701)
Proceeds from exercised stock options 45 
Cash paid on derivative contracts —  (31)
Other financing activities, net (8) (3)
Net cash (used in) provided by financing activities (78) 528 
Effect of exchange rate changes on cash and cash equivalents (12) (8)
Net (decrease) increase in cash and cash equivalents (106) 704 
Cash and cash equivalents at beginning of period 438  405 
Cash and cash equivalents at end of period $ 332  $ 1,109 
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
7


DENTSPLY SIRONA Inc. and Subsidiaries

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. Results for interim periods should not be considered indicative of results for a full year. These financial statements and related notes contain the accounts of DENTSPLY SIRONA Inc. and subsidiaries (“Dentsply Sirona” or the “Company”) on a consolidated basis and should be read in conjunction with the consolidated financial statements and notes included in the Company’s most recent Form 10-K for the year ended December 31, 2020.

The accounting policies of the Company, as applied in the interim consolidated financial statements presented herein, are substantially the same as presented in the Company’s Form 10-K for the year ended December 31, 2020, except as may be indicated below. Certain prior period amounts within the Consolidated Statements of Operations have been reclassified in order to conform with the current year presentation of separately reported Research and development expenses.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ materially from those estimates.

Revenue Recognition

At June 30, 2021, the Company had $47 million of deferred revenue recorded predominantly in Accrued liabilities in the Consolidated Balance Sheets, with an immaterial portion recorded in Other noncurrent liabilities. The Company expects to recognize significantly all of this deferred revenue within the next 12 months.

Accounts and Notes Receivable

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

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

8


Inventory

As of June 30, 2021, all of the Company's inventories were determined by the first-in, first-out (“FIFO”) or average cost methods. As of the end of the first quarter of 2021, the Company had $1 million of inventories accounted for under the Last in first out (“LIFO”) method of inventory costing. Effective as of the beginning of the second quarter, the method of accounting for these inventories was changed from LIFO to FIFO. This change in accounting is preferable as the value of inventory for which cost was previously determined using a LIFO cost flow assumption has declined from prior years due to changes in the business, and it also allows for a more consistent methodology being utilized across the Company, and provides improved comparability with industry peers. The change in accounting principle was recognized during the second quarter of 2021 by adjusting these inventories to cost as determined using the FIFO method, resulting in an increase in inventories of $4 million and a corresponding reduction to Cost of products sold in the Company's Consolidated Statements of Operations. The impact of this change is not material to the Company’s financial position as of December 31, 2020, the Company’s results of operations for any previously reported prior periods nor is the cumulative effect of the change material to the results of operations for the second quarter of 2021. Therefore, prior period amounts have not been retrospectively adjusted.

Goodwill & Intangible Assets

Effective 2021 and prospectively, the Company will perform its required annual goodwill impairment test as of April 1 rather than on April 30 which was the Company’s previous practice. The Company believes this change is preferable as it more closely aligns with the timing of the Company’s strategic business planning process. The Company does not believe this change resulted in any delay, acceleration or avoidance of impairment. Furthermore, a retrospective application to prior periods is impracticable as the Company is unable to objectively determine, without the use of hindsight, the assumptions which would be used in earlier periods.

Additional information related to the annual impairment test is provided in Note 13, Goodwill and Intangible Assets.

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04 "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting", which was subsequently amended by ASU No. 2021-01 "Reference Rate Reform (Topic 848): Scope" in January 2021. The new standard provides optional expedients and exceptions to contracts, hedging relationships, and other transactions that reference the London Interbank Offer Rate ("LIBOR") or another rate expected to be discontinued due to the reference rate reform. This standard is permitted to be adopted any time through December 31, 2022, and does not apply to contract modifications made or hedging relationships entered into or evaluated after December 31, 2022. The Company is currently assessing the impact that this standard will have on its financial position, results of operations, cash flows, and disclosures.


NOTE 2 – STOCK COMPENSATION

Total stock based compensation expense for non-qualified stock options, restricted stock units ("RSU"), and the tax related benefit for the three and six months ended June 30, 2021 and 2020 were as follows:
Three Months Ended Six Months Ended
(in millions) 2021 2020 2021 2020
Stock option expense $ $ $ $
RSU expense 18  29  16 
Total stock based compensation expense $ 19  $ 10  $ 32  $ 19 
Related deferred income tax benefit $ $ $ $

9


The amount of stock compensation expense recorded in Cost of products sold, Selling, general, and administrative expense, and Research and development expense in the Company's Consolidated Statement of Operations for the three and six months ended June 30, 2021 and 2020, were as follows:
Three Months Ended Six Months Ended
(in millions) 2021 2020 2021 2020
Cost of products sold
$ $ $ $
Selling, general, and administrative expense 16  29  18 
Research and development expense —  — 
Total stock based compensation expense $ 19  $ 10  $ 32  $ 19 


NOTE 3 – COMPREHENSIVE INCOME (LOSS)

Changes in Accumulated other comprehensive income (loss) ("AOCI"), net of tax, by component for the six months ended June 30, 2021 and 2020 were as follows:
(in millions) Foreign Currency Translation Gain (Loss) Gain (Loss) on Cash Flow Hedges Gain (Loss) on Net Investment Hedges Pension Liability Gain (Loss) Total
Balance, net of tax, at December 31, 2020 $ (187) $ (25) $ (119) $ (133) $ (464)
Other comprehensive (loss) income before reclassifications and tax impact (74) (6) (68)
Tax (expense) benefit (25) (2) (1) (26)
Other comprehensive (loss) income, net of tax, before reclassifications (99) (4) (94)
Amounts reclassified from accumulated other comprehensive income, net of tax —  — 
Net (decrease) increase in other comprehensive loss (99) (2) (90)
Balance, net of tax, at March 31, 2021 $ (286) $ (27) $ (112) $ (129) $ (554)
Other comprehensive income before reclassifications and tax impact 31  —  35 
Tax benefit (expense) (2) (1) — 
Other comprehensive income, net of tax, before reclassifications 37  —  —  38 
Amounts reclassified from accumulated other comprehensive income, net of tax —  — 
Net increase in other comprehensive income 37  —  43 
Balance, net of tax, at June 30, 2021 $ (249) $ (23) $ (112) $ (127) $ (511)
10


(in millions) Foreign Currency Translation Gain (Loss) Gain (Loss) on Cash Flow Hedges Gain (Loss) on Net Investment Hedges Pension Liability Gain (Loss) Total
Balance, net of tax, at December 31, 2019 $ (368) $ (11) $ (101) $ (120) $ (600)
Other comprehensive (loss) income before reclassifications and tax impact (117) (16) 25  —  (108)
Tax (expense) benefit (2) (8) —  (6)
Other comprehensive (loss) income, net of tax, before reclassifications (119) (12) 17  —  (114)
Amounts reclassified from accumulated other comprehensive income, net of tax —  —  — 
Net (decrease) increase in other comprehensive loss (119) (12) 17  (112)
Balance, net of tax, at March 31, 2020 $ (487) $ (23) $ (84) $ (118) $ (712)
Other comprehensive income (loss) before reclassifications and tax impact 77  —  (15) —  62 
Tax (expense) benefit (2) —  — 
Other comprehensive income (loss), net of tax, before reclassifications 75  —  (8) —  67 
Amounts reclassified from accumulated other comprehensive income, net of tax —  —  — 
Net increase (decrease) in other comprehensive loss 75  —  (8) 68 
Balance, net of tax, at June 30, 2020 $ (412) $ (23) $ (92) $ (117) $ (644)

These amounts are recorded in AOCI, net of any related tax adjustments. At June 30, 2021 and December 31, 2020, the cumulative tax adjustments were $193 million and $216 million, respectively, primarily related to foreign currency translation gains and losses.

The cumulative foreign currency translation adjustments included translation losses of $113 million and $25 million at June 30, 2021 and December 31, 2020, respectively, and cumulative losses on loans designated as hedges of net investments of $135 million and $162 million, respectively. These foreign currency translation losses were partially offset by movements on derivative financial instruments.

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


11


NOTE 4 – EARNINGS PER COMMON SHARE

The computation of basic and diluted earnings per common share for the three and six months ended June 30, 2021 and 2020 were as follows:
Basic Earnings (Loss) Per Common Share Three Months Ended Six Months Ended
(in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) attributable to Dentsply Sirona $ 99  $ (95) $ 216  $ (235)
Weighted average common shares outstanding 218.4  218.7  218.6  219.8 
Earnings (loss) per common share - basic $ 0.45  $ (0.44) $ 0.99  $ (1.07)
Diluted Earnings (Loss) Per Common Share Three Months Ended Six Months Ended
(in millions, except per share amounts) 2021 2020 2021 2020
Net income (loss) attributable to Dentsply Sirona $ 99  $ (95) $ 216  $ (235)
Weighted average common shares outstanding 218.4  218.7  218.6  219.8 
Incremental weighted average shares from assumed exercise of dilutive options from stock-based compensation awards 2.3  —  2.2  — 
Total weighted average diluted shares outstanding 220.7  218.7  220.8  219.8 
Earnings (loss) per common share - diluted $ 0.45  $ (0.44) $ 0.98  $ (1.07)

The calculation of weighted average diluted common shares outstanding excluded 0.7 million and 1.0 million of potentially diluted common shares because the Company reported a net loss for the three and six months ended June 30, 2020, respectively.

For the three and six months ended June 30, 2021, the Company excluded from the computation of weighted average diluted shares outstanding 0.5 million and 0.7 million of equivalent shares of common stock from stock options and RSUs because their effect would be antidilutive. For the three and six months ended June 30, 2020, the company excluded 4.2 million and 3.1 million equivalent shares of common stock outstanding from stock options and RSUs because their effect would be antidilutive.

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


NOTE 5 – BUSINESS COMBINATIONS

Acquisitions

2021 Transactions

On June 1, 2021, the effective date of the transaction, the Company paid $132 million to acquire substantially all of the assets of Propel Orthodontics LLC, a privately-held company based in New York and California. Propel Orthodontics manufactures and sells orthodontic devices and provides in-office and at-home orthodontic accessory devices to orthodontists and their patients primarily within the clear aligner market. The acquisition is expected to further accelerate the growth and profitability of the Company's combined clear aligners business.

12


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

(in millions)
Other current assets $
Intangible assets 64 
Current liabilities (1)
Net assets acquired 67 
Goodwill 65 
Purchase consideration $ 132 

The purchase price has been allocated on the basis of the preliminary estimates of fair values of assets acquired and liabilities assumed, resulting in the recording of $65 million in goodwill, which is considered to represent the value associated with the acquired workforce and synergies the two companies anticipate realizing as a combined company. The goodwill is expected to be deductible for tax purposes. Management is continuing to finalize its valuation of certain assets including other intangible assets and will conclude its valuation no later than one year from the acquisition date.

Identifiable intangible assets acquired were as follows:
Weighted Average
Useful Life
(in millions, except for useful life) Amount (in years)
Developed technology $ 64  10
Total $ 64 

On January 21, 2021, the effective date of the transaction, the Company paid $94 million with the potential for additional earn-out provision payments of up to $10 million, to acquire 100% of the outstanding shares of Datum Dental, Ltd., a privately-held producer and distributor of specialized regenerative dental material based in Israel. The fair value of the earn-out provision has been valued at $9 million as of the transaction date, resulting in a total purchase price of $103 million.

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

(in millions)
Cash and cash equivalents $
Other current assets
Intangible assets 76 
Current liabilities (2)
Other long-term assets (liabilities), net (14)
Net assets acquired 64 
Goodwill 39 
Purchase consideration $ 103 

The purchase price has been allocated on the basis of the preliminary estimates of fair values of assets acquired and liabilities assumed, resulting in the recording of $39 million in goodwill, which is considered to represent the value associated with the acquired workforce and synergies the two companies anticipate realizing as a combined company. The goodwill is not deductible for tax purposes. Measurement period adjustments made to the fair values of the assets acquired and liabilities assumed during the first six months of 2021 were immaterial to the financial statements, resulting in an increase to goodwill of $6 million. Management is continuing to finalize its valuation of certain assets including other intangible assets and will conclude its valuation no later than one year from the acquisition date.

13


Identifiable intangible assets acquired were as follows:
Weighted Average
Useful Life
(in millions, except for useful life) Amount (in years)
Developed technology $ 66 
15
In-process R&D 10  Indefinite
Total $ 76 

2020 Transactions

On December 31, 2020, the effective date of the transaction, the Company acquired 100% of the outstanding interests of Straight Smile, LLC ("Byte"), a privately-held company, for approximately $1.0 billion using cash on hand. Byte is a doctor-directed, direct-to-consumer, clear aligner business. The acquisition is expected to enhance scale and accelerate the growth and profitability of the Company's combined clear aligners business.

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

(in millions)
Cash and cash equivalents $ 14 
Current assets 17 
Intangible assets 416 
Current liabilities (28)
Net assets acquired 419 
Goodwill 626 
Purchase consideration $ 1,045 

The purchase price has been allocated on the basis of the preliminary estimates of fair values of assets acquired and liabilities assumed, which resulted in the recording of $626 million in goodwill. The amount of goodwill is considered to represent the value associated with the acquired workforce and synergies the two companies anticipate realizing as a combined company, including alignment with the Company’s existing clear aligner business, and is deductible for tax purposes. Measurement period adjustments made to the fair values of the assets acquired and liabilities assumed during the first six months of 2021 were immaterial to the financial statements, resulting in a reduction to goodwill of $5 million.

Intangible assets acquired were as follows:
Weighted Average
Useful Life
(in millions, except for useful life) Amount (in years)
Non-compete agreements $ 16  5
Technology know-how 210  10
Tradenames and trademarks 190  20
Total $ 416 

The results of operations for the Byte, Datum, and Propel businesses upon the effective date of each transaction have been included in the accompanying financial statements. These results, as well as the historical results for the above acquired businesses for the periods ended June 30, 2021 and 2020, are not material in relation to the Company’s net sales and earnings for those periods. The Company therefore does not believe these acquisitions represent material transactions either individually or in the aggregate requiring the supplemental pro-forma information prescribed by ASC 805 and accordingly, this information is not presented.

14


Investments in Affiliates

On June 4, 2021, the effective date of the transaction, the Company paid $16 million to acquire a minority interest in a privately-held provider of healthcare consumables. The Company records this investment and subsequent profit or losses under equity method accounting within Other noncurrent assets.

Divestitures

On April 1, 2021, the Company disposed of certain orthodontics businesses based in Japan previously included as part of the Technologies and Equipment segment in exchange for a cash receipt of $8 million. The divestiture resulted in an immaterial loss recorded in Other expense (income), net in the Consolidated Statements of Operations for the three and six months ended June 30, 2021.

On February 1, 2021, the Company disposed of an investment casting business previously included as part of the Consumables segment in exchange for a cash receipt of $19 million. The divestiture resulted in a pre-tax gain of $13 million recorded in Other expense (income), net in the Consolidated Statements of Operations for the six months ended June 30, 2021.


NOTE 6 – SEGMENT INFORMATION

The Company’s two operating segments are organized primarily by product and generally have overlapping geographical presence, customer bases, distribution channels, and regulatory oversight. These operating segments also comprise the Company’s reportable segments in accordance with how the Company’s chief operating decision-maker regularly reviews financial results and uses this information to evaluate the Company’s performance and allocate resources.

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

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

Technologies & Equipment

This segment is responsible for the design, manufacture, and sales of the Company’s Dental Technology and Equipment Products and Healthcare Consumable Products. These products include dental implants, CAD/CAM systems, orthodontic clear aligner products, imaging systems, treatment centers, instruments, as well as consumable medical device products.

Consumables

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

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

Net Sales
Three Months Ended Six Months Ended
(in millions) 2021 2020 2021 2020
Technologies & Equipment $ 622  $ 304  $ 1,219  $ 824 
Consumables 445  187  875  541 
Total net sales $ 1,067  $ 491  $ 2,094  $ 1,365 

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Segment Adjusted Operating Income
Three Months Ended Six Months Ended
(in millions) 2021 2020 2021 2020
Technologies & Equipment (a)
$ 135  $ (4) $ 261  $ 107 
Consumables (a)
154  (17) 304  45 
Segment adjusted operating income (loss) 289  (21) 565  152 
Reconciling items expense (income):
All other (b)
70  35  132  84 
Goodwill impairment —  —  —  157 
Restructuring and other costs 44 
Interest expense, net 16  11  30  18 
Other expense (income), net (4)
Amortization of intangible assets 56  47  111  94 
Depreciation resulting from the fair value step-up of property, plant, and equipment from business combinations — 
Income (loss) before income taxes $ 134  $ (120) $ 283  $ (250)
(a) Certain charges related to discontinuance of product lines which were previously reported in adjusted operating income for the reportable segments, $7 million for the three and six months June 30, 2020, respectively, have been reclassified to the "All other" category to conform to current year presentation and the Company's internal reporting in the Chief Operating Decision Maker package. These amounts are not material to the measure of segment results for the years presented.
(b) Includes the results of unassigned Corporate headquarters costs and inter-segment eliminations.


NOTE 7 – INVENTORIES

Inventories, net were as follows:
(in millions) June 30, 2021 December 31, 2020
Finished goods $ 336  $ 264 
Work-in-process 76  68 
Raw materials and supplies 127  134 
Inventories, net $ 539  $ 466 

The Company's inventory reserve was $93 million and $117 million at June 30, 2021 and December 31, 2020, respectively. Inventories are stated at the lower of cost and net realizable value.


NOTE 8 – RESTRUCTURING AND OTHER COSTS

During the three and six months ended June 30, 2021, the Company recorded net restructuring and other costs of $7 million and $8 million, respectively, which consists of severance and other restructuring costs of $8 million and $11 million offset by adjustments to inventory reserves of $1 million and $3 million, respectively.

During the three and six months ended June 30, 2020, the Company recorded restructuring and other costs of $1 million and $44 million, respectively, which consists of asset impairments of $39 million for the six months ended, and severance costs of $1 million and $5 million for the periods respectively.

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The details of total restructuring and other costs for the three and six months ended June 30, 2021 and 2020 were as follows:
Affected Line Item in the Consolidated Statements of Operations Three Months Ended Six Months Ended
(in millions) 2021 2020 2021 2020
Cost of products sold $ (1) $ —  $ (3) $ — 
Selling, general, and administrative expenses —  — 
Restructuring and other costs 44 
Total restructuring and other costs $ $ $ $ 44 

The Company announced on August 6, 2020 that it will exit its traditional orthodontics business as well as both exit and restructure certain portions of its laboratory business. The traditional orthodontics business is part of the Technologies & Equipment segment and the laboratory business is part of the Consumables segment. The Company is exiting several of its facilities and reducing its workforce by approximately 4% to 5%. The Company expects to record restructuring charges in a range of $60 million to $70 million for inventory write-downs, severance costs, fixed asset write-offs, and other facility closure costs. The Company recorded total expenses of approximately $57 million related to these actions which consists primarily of inventory write-downs of approximately $28 million, accelerated depreciation of approximately $14 million, and severance costs of approximately $10 million. For the six months ended June 30, 2021, the Company made a $3 million adjustment related to inventory reserves and recorded severance costs of $1 million. The Company expects nearly all of the remaining restructuring charges to be completed by the first quarter of 2022.

The Company’s restructuring accruals at June 30, 2021 were as follows:
Severance
(in millions) 2019 and
Prior Plans
2020 Plans 2021 Plans Total
Balance at December 31, 2020 $ 12  $ 17  $ —  $ 29 
Provisions 11 
Amounts applied (8) (5) (1) (14)
Change in estimates (1) (1) —  (2)
Balance at June 30, 2021 $ $ 15  $ $ 24 
Other Restructuring Costs
(in millions) 2019 and
Prior Plans
2020 Plans 2021 Plans Total
Balance at December 31, 2020 $ $ $ —  $
Provisions — 
Amounts applied (1) (1) (1) (3)
Balance at June 30, 2021 $ $ $ $
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The cumulative amounts for the provisions and adjustments and amounts applied for all the plans by segment were as follows:
(in millions) December 31, 2020 Provisions Amounts
Applied
Change in Estimates June 30, 2021
Technologies & Equipment $ 16  $ $ (6) $ —  $ 15 
Consumables 17  (9) (2) 12 
All Other (2) — 
Total $ 34  $ 14  $ (17) $ (2) $ 29 
The associated restructuring liabilities are recorded in Accrued liabilities and Other noncurrent liabilities in the Consolidated Balance Sheets.

NOTE 9 – FINANCIAL INSTRUMENTS AND DERIVATIVES

Derivative Instruments and Hedging Activities

The Company’s activities expose it to a variety of market risks, which primarily include the risks related to the effects of changes in foreign currency exchange rates and interest rates. These financial exposures are monitored and managed by the Company as part of its overall risk management program. The objective of this risk management program is to reduce the volatility that these market risks may have on the Company’s operating results and equity. The Company employs derivative financial instruments to hedge certain anticipated transactions, firm commitments, or assets and liabilities denominated in foreign currencies. Additionally, the Company utilizes interest rate swaps to convert fixed rate debt into variable rate debt or variable rate debt to fixed rate debt. The Company does not hold derivative instruments for trading or speculative purposes.

Derivative Instruments

The following summarizes the notional amounts of cash flow hedges, hedges of net investments, fair value hedges, and derivative instruments not designated as hedges for accounting purposes by derivative instrument type at June 30, 2021 and the notional amounts expected to mature during the next 12 months.
(in millions) Aggregate Notional Amount Aggregate Notional Amount Maturing within 12 Months
Cash Flow Hedges
Foreign exchange forward contracts $ 350  $ 272 
Total derivative instruments designated as cash flow hedges $ 350  $ 272 
Hedges of Net Investments
  Foreign exchange forward contracts $ 95  $ 47 
Cross currency basis swaps 312  312 
Total derivative instruments designated as hedges of net investments $ 407  $ 359 
Fair Value Hedges
Foreign exchange forward contracts $ 243  $ 125 
Total derivative instruments designated as fair value hedges $ 243  $ 125 
Derivative Instruments not Designated as Hedges
Foreign exchange forward contracts $ 258  $ 258 
Total derivative instruments not designated as hedges $ 258  $ 258 
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Cash Flow Hedges
Foreign Exchange Risk Management

The Company uses a program to hedge select anticipated foreign currency cash flows to reduce volatility in both cash flows and reported earnings. The Company accounts for the designated foreign exchange forward contracts as cash flow hedges. As a result, the Company records the fair value of the contracts primarily through AOCI based on the assessed effectiveness of the foreign exchange forward contracts. The Company measures the effectiveness of cash flow hedges of anticipated transactions on a spot-to-spot basis rather than on a forward-to-forward basis. Accordingly, the spot-to-spot change in the derivative fair value will be deferred in AOCI and released and recorded in the Consolidated Statements of Operations in the same period that the hedged transaction is recorded. The time-value component of the fair value of the derivative is reported on a straight-line basis in Cost of products sold in the Consolidated Statements of Operations in the period which it is applicable. Any cash flows associated with these instruments are included in operating activities in the Consolidated Statements of Cash Flows.

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

Interest Rate Risk Management

The Company enters into interest rate swap contracts infrequently as they are only used to manage interest rate risk on long-term debt instruments and not for speculative purposes. Any cash flows associated with these instruments are included in operating activities in the Consolidated Statements of Cash Flows.

AOCI Release

Overall, the derivatives designated as cash flow hedges are considered to be highly effective for accounting purposes. At June 30, 2021, the Company expects to reclassify $6 million of deferred net losses on cash flow hedges recorded in AOCI in the Consolidated Statements of Operations during the next 12 months. For the rollforward of derivative instruments designated as cash flow hedges in AOCI see Note 3, Comprehensive (Loss) Income.

Hedges of Net Investments in Foreign Operations     

The Company has significant investments in foreign subsidiaries. The net assets of these subsidiaries are exposed to volatility in currency exchange rates. The Company employs both derivative and non-derivative financial instruments to hedge a portion of this exposure. The derivative instruments consist of foreign exchange forward contracts and cross currency basis swaps. The non-derivative instruments consist of foreign currency denominated debt held at the parent company level. Translation gains and losses related to the net assets of the foreign subsidiaries are offset by gains and losses in derivative and non-derivative financial instruments; which are designated as hedges of net investments and are included in AOCI. The time-value component of the fair value of the derivative is reported on a straight-line basis in Other expense (income), net in the Consolidated Statements of Operations in the applicable period. Any cash flows associated with these instruments are included in investing activities in the Consolidated Statements of Cash Flows except for derivative instruments that include an other-than-insignificant financing element, for which all cash flows are classified as financing activities in the Consolidated Statements of Cash Flows.
The fair value of the foreign exchange forward contracts and cross currency basis swaps is the estimated amount the Company would receive or pay at the reporting date, taking into account the effective interest rates, cross currency swap basis rates, and foreign exchange rates. The effective portion of the change in the value of these derivatives is recorded in AOCI, net of tax effects.

On May 25, 2021, the Company re-established its euro net investment hedge portfolio by entering into eight foreign exchange forward contracts, each with a notional amount of 10 million euro. The contracts have quarterly maturity dates through March 31, 2023.

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Fair Value Hedges

Foreign Exchange Risk Management

The Company has intercompany loans denominated in Swedish kronor that are exposed to volatility in currency exchange rates. The Company employs derivative financial instruments to hedge these exposures. The Company accounts for these designated foreign exchange forward contracts as fair value hedges. The Company measures the effectiveness of fair value hedges of anticipated transactions on a spot-to-spot basis rather than on a forward-to-forward basis. Accordingly, the spot-to-spot change in the derivative fair value will be recorded in the Consolidated Statements of Operations. The time-value component of the fair value of the derivative is reported on a straight-line basis in Other expense (income), net in the Consolidated Statements of Operations in the applicable period. Any cash flows associated with these instruments are included in operating activities in the Consolidated Statements of Cash Flows.

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

Derivative Instruments Not Designated as Hedges

The Company enters into derivative instruments with the intent to partially mitigate the foreign exchange revaluation risk associated with recorded assets and liabilities that are denominated in a non-functional currency. The Company primarily uses foreign exchange forward contracts to hedge these risks. The gains and losses on these derivative transactions offset the gains and losses generated by the revaluation of the underlying non-functional currency balances and are recorded in Other expense (income), net in the Consolidated Statements of Operations. Any cash flows associated with these instruments are included in cash from operating activities in the Consolidated Statements of Cash Flows.

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

Derivative Instrument Activity

The amount of gains and losses recorded in AOCI in the Consolidated Balance Sheets, Costs of products sold, Interest expense, net, and Other expense (income), net in the Company's Consolidated Statement of Operations related to all derivative instruments for the three months ended June 30, 2021 and 2020 were as follows:
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Three Months Ended June 30, 2021
(in millions) Gain (Loss) in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)
Cash Flow Hedges
Foreign exchange forward contracts $ Cost of products sold $ (1) $
Interest rate swaps (27) Interest expense, net (2) — 
Total for cash flow hedging $ (24) $ (3) $
Hedges of Net Investments
Cross currency basis swaps $ (2) Interest expense, net $ —  $
Foreign exchange forward contracts Other expense (income), net —  — 
Total for net investment hedging $ $ —  $
Fair Value Hedges
Foreign exchange forward contracts $ —  Other expense (income), net $ —  $ (4)
Total for fair value hedging $ —  $ —  $ (4)

Three Months Ended June 30, 2020
(in millions) Gain (Loss) in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)
Cash Flow Hedges
Foreign exchange forward contracts $ Cost of products sold $ —  $
Interest rate swaps (2) Interest expense, net —  — 
Total for cash flow hedging $ —  $ —  $
Hedges of Net Investments
Cross currency basis swaps $ (5) Interest expense, net $ —  $
Foreign exchange forward contracts (10) Other expense (income), net — 
Total for net investment hedging $ (15) $ —  $

The amount of gains and losses recorded in AOCI in the Consolidated Balance Sheets, Costs of products sold, Interest expense, net, and Other expense (income), net in the Company's Consolidated Statement of Operations related to all derivative instruments for the six months ended June 30, 2021 and 2020 were as follows:
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Six Months Ended June 30, 2021
(in millions) Gain (Loss) in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)
Cash Flow Hedges
Foreign exchange forward contracts $ (3) Cost of products sold $ (2) $
Interest rate swaps (27) Interest expense, net (3) — 
Total for cash flow hedging $ (30) $ (5) $
Hedges of Net Investments
Cross currency basis swaps $ Interest expense, net $ —  $
Foreign exchange forward contracts Other expense (income), net —  — 
Total for net investment hedging $ 10  $ —  $
Fair Value Hedges
Foreign exchange forward contracts $ —  Other expense (income), net $ —  12 
Total for fair value hedging $ —  $ —  $ 12 
Six Months Ended June 30, 2020
(in millions) Gain (Loss) in AOCI Consolidated Statements of Operations Location Effective Portion Reclassified from AOCI into Income (Expense) Recognized in Income (Expense)
Cash Flow Hedges
Foreign exchange forward contracts $ Cost of products sold $ (1) $
Interest rate swaps (20) Interest expense, net — 
Total for cash flow hedging $ (16) $ —  $
Hedges of Net Investments
Cross currency basis swaps $ Interest expense, net $ —  $
Foreign exchange forward contracts Other expense (income), net — 
Total for net investment hedging $ 10  $ —  $ 11 

For the rollforward of derivative instruments designated as cash flow hedges in AOCI see Note 3, Comprehensive Income (Loss).
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Consolidated Balance Sheets Location of Derivative Fair Values

The fair value and the location of the Company's derivatives in the Consolidated Balance Sheets were as follows:
June 30, 2021
(in millions) Prepaid Expenses and Other Current Assets Other Noncurrent Assets Accrued Liabilities Other Noncurrent Liabilities
Designated as Hedges:
Foreign exchange forward contracts $ $ $ $
Cross currency basis swaps —  —  12  — 
Total $ $ $ 17  $
Not Designated as Hedges:
Foreign exchange forward contracts $ $ —  $ $ — 
Total $ $ —  $ $ — 
December 31, 2020
(in millions) Prepaid Expenses and Other Current Assets Other Noncurrent Assets Accrued Liabilities Other Noncurrent Liabilities
Designated as Hedges:
Foreign exchange forward contracts $ $ $ 10  $
Cross currency basis swaps —  —  20  — 
Total $ $ $ 30  $
Not Designated as Hedges:
Foreign exchange forward contracts $ $ —  $ $ — 
Total $ $ —  $ $ — 

Balance Sheet Offsetting

Substantially all of the Company’s derivative contracts are subject to netting arrangements; whereby the right to offset occurs in the event of default or termination in accordance with the terms of the arrangements with the counterparty. While these contracts contain the enforceable right to offset through netting arrangements with the same counterparty, the Company elects to present them on a gross basis in the Consolidated Balance Sheets.

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Offsetting of financial assets and liabilities under netting arrangements at June 30, 2021 were as follows:
Gross Amounts Not Offset in the Consolidated Balance Sheets
(in millions) Gross Amounts Recognized Gross Amount Offset in the Consolidated Balance Sheets Net Amounts Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received/Pledged Net Amount
Assets
Foreign exchange forward contracts $ 16  $ —  $ 16  $ (10) $ —  $
Total assets $ 16  $ —  $ 16  $ (10) $ —  $
Liabilities
Foreign exchange forward contracts $ $ —  $ $ (6) $ —  $
Cross currency basis swaps 12  —  12  (3) — 
Total liabilities $ 21  $ —  $ 21  $ (9) $ —  $ 12 

Offsetting of financial assets and liabilities under netting arrangements at December 31, 2020 were as follows:
Gross Amounts Not Offset in the Consolidated Balance Sheets
(in millions) Gross Amounts Recognized Gross Amount Offset in the Consolidated Balance Sheets Net Amounts Presented in the Consolidated Balance Sheets Financial Instruments Cash Collateral Received/Pledged Net Amount
Assets
Foreign exchange forward contracts $ $ —  $ $ (9) $ —  $ — 
Total assets $ $ —  $ $ (9) $ —