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What changed in DENTSPLY SIRONA Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DENTSPLY SIRONA Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+537 added−511 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in DENTSPLY SIRONA Inc.'s 2023 10-K

537 paragraphs added · 511 removed · 372 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

82 edited+24 added−21 removed31 unchanged
Biggest changeNet sales for each product category as a percentage of the Company's total net sales for the year ended December 31, 2022, were as follows: % of Net Sales Equipment & Instruments 17.3 % Implants 14.5 % CAD/CAM 12.8 % Orthodontics 7.6 % Healthcare 6.9 % Technology & Equipment segment revenue 59.1 % Endodontic & Restorative 29.8 % Other consumables 11.1 % Consumables segment revenue 40.9 % Total net sales 100.0 % Dental Industry, Sales and Distribution The Company believes that the dental industry is attractive and will grow over the long-term based on the following factors: • Increasing worldwide population, including a shift towards aging demographics, which will require greater dental care. • Natural teeth are being retained longer - individuals with natural teeth are much more likely to visit a dentist than those without any natural teeth. • Increasing demand for aesthetic dentistry and the use of aligners as an orthodontic treatment. • Continued opportunities in emerging markets related to the rise in discretionary incomes making dental services an increasing priority. • Increasing demand for single visit dentistry versus historical multi-visit procedure requirements, and for higher quality of patient care in terms of comfort and ease of product use and handling. • Increasing demand for earlier preventive care - dentistry has evolved from a profession primarily dealing with pain, infections, and tooth decay to one with increased emphasis on earlier diagnosis, preventive care, and the role oral health plays in overall health. 5 • Increasing opportunity for digital collaboration between General Practitioners (“GPs”), specialists, labs, and patients is creating widening demand for fully integrated solutions such as cloud-based platforms and services facilitated by GPs. • Increasing demand for more efficiency and better workflow in the dental office, including digital tools such as the enhanced power of diagnostic equipment through 3D imaging.
Biggest changeIndustry Growth Drivers The Company believes that the dental industry is attractive and will grow over the long-term based on the following factors: • Increasing worldwide population, including a shift towards aging demographics, which will require greater dental care. • Natural teeth are being retained longer - individuals with natural teeth are much more likely to visit a dentist than those without any natural teeth. • Increasing demand for aesthetic dentistry and the use of aligners as an orthodontic treatment. • Continued opportunities in emerging markets related to the rise in discretionary incomes making dental services an increasing priority. • Growing preference for single visit dentistry versus historical multi-visit procedure requirements, and for higher quality of patient care in terms of comfort and ease of product use and handling. • Increasing demand for earlier preventive care - dentistry has evolved from a profession primarily dealing with pain, infections, and tooth decay to one with increased emphasis on earlier diagnosis, preventive care, and the role oral health plays in overall health. • Increasing opportunity for digital collaboration between General Practitioners (“GPs”), specialists, labs, and patients is creating widening demand for fully integrated solutions such as cloud-based platforms and services facilitated by GPs. • Increasing demand for more efficiency and better workflow in the dental office, including digital tools such as diagnostic equipment enhanced through the power of 3D imaging.
These regulations also applied to all medical device manufacturers who market their medical devices in the EU and all such manufacturers had to perform significant upgrades to quality systems and processes including technical documentation and subject them to new certification under EU MDR in order to continue to sell those products in the EU.
These regulations also applied to all medical device manufacturers who market their medical devices in the EU and all such manufacturers had to perform significant upgrades to quality systems and processes including technical documentation and subject them to new certification under the EU MDR in order to continue to sell those products in the EU.
The Company is subject to domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders governing data privacy and transparency, including, but not limited to, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (the “HITECH Act”), the California Consumer Privacy Act, the European General Data Protection Regulation (the “GDPR”), China’s Personal Information Protection Law, the Physician Payments Sunshine Provisions of the Patient Protection and Affordable Care Act, the EU Directive 2002/58/EC (and implementing and local measures adopted thereunder), France’s Data Protection Act of 1978 (rev. 2004) and France’s Loi Bertrand, certain rules issued by Denmark’s Health and Medicines Authority, and similar international laws and regulations.
The Company is subject to domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders governing data privacy and transparency, including, but not limited to, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (the “HITECH Act”), the California Consumer Privacy Act, the European General Data Protection Regulation (the “GDPR”), China’s Personal Information Protection Law, the Physician Payments Sunshine Provisions of the Patient Protection and Affordable Care Act, EU Directive 2002/58/EC (and implementing and local measures adopted thereunder), France’s Data Protection Act of 1978 (rev. 2004) and France’s Loi Bertrand, certain rules issued by Denmark’s Health and Medicines Authority, and similar international laws and regulations.
Training and Awareness We offer a catalog of on-demand diversity, equity & inclusion training options aimed at strengthening awareness. A standout offering is our ongoing “Conversations of Understanding” sessions. Employees are invited to register for these small group discussions where internal volunteers share experiences on varying diversity, equity, & inclusion topics to generate healthy discussion and awareness.
Training and Awareness We offer a catalog of on-demand diversity, equity & inclusion training options aimed at strengthening awareness. A standout offering is our ongoing “Conversations of Understanding” sessions. Employees are invited to register for these small group discussions where internal volunteers share experiences on varying diversity, equity, and inclusion topics to generate healthy discussion and awareness.
R&D investments include activities to accelerate product and clinical innovation and discipline, and develop potential improvements to the manufacturing process. These investments also support engineering efforts that incorporate customer feedback into continuous improvement for current and next-generation products, with an objective to achieve more frequent development and release cycles.
R&D investments include activities to accelerate product and clinical innovation and discipline and develop potential improvements to the manufacturing process. These investments also support engineering efforts that incorporate customer feedback into continuous improvement for current and next-generation products, with the objective to achieve more frequent development and release cycles.
Additional information regarding certain risks related to our intellectual property is included in Item 1A “Risk Factors” of this Form 10-K and is incorporated herein by reference. 10 Human Capital Our employees are core to our Company, and their contributions enable the success of our business.
Additional information regarding certain risks related to our intellectual property is included in Item 1A “Risk Factors” of this Form 10-K and is incorporated herein by reference. 11 Human Capital Our employees are core to our Company, and their contributions enable the success of our business.
Our actions are in line with EHS frameworks and certifications such as OHSAS 18001 and ISO 45001. We also have a Corporate Crisis Management Team, prepared to respond to crisis situations we may be confronted on a global scale with in a prompt and efficient manner.
Our actions are in line with EHS frameworks and certifications such as OHSAS 18001 and ISO 45001. We also have a Corporate Crisis Management Team, prepared to respond to crisis situations with which we may be confronted on a global scale in a prompt and efficient manner.
Diversity, Equity & Inclusion Council Our Diversity, Equity & Inclusion Council is a group of demographically and functionally diverse employees from across the world dedicated to enabling our diversity, equity & inclusion efforts and championing initiatives that support the organization internally and externally.
Diversity, Equity & Inclusion Council Our Diversity, Equity & Inclusion Council is a group of demographically and functionally diverse employees from across the world dedicated to enabling our diversity, equity & inclusion efforts by championing initiatives that support the organization internally and externally.
The Company products in Europe bear the CE mark showing that such products comply with European regulations. The Company’s products classified by EU MDD were mandated to be certified under the new MDR.
The Company’s products in Europe bear the CE mark showing that such products comply with European regulations. The Company’s products classified by the EU MDD were mandated to be certified under the new MDR.
Treatment centers comprise a broad range of products from basic dental chairs to sophisticated chair-based units with integrated diagnostic, hygiene and ergonomic functionalities, as well as specialist centers used in preventive treatment and for training purposes. This product group also includes other lab equipment such as amalgamators, mixing machines and porcelain furnaces.
Treatment centers comprise a broad range of products from basic dental chairs to sophisticated chair-based units with integrated diagnostic, hygienic and ergonomic functionalities, as well as specialist centers used in preventive treatment and for training purposes. This product group also includes other lab equipment, such as amalgamators, mixing machines and porcelain furnaces.
The FDCA requires these products, when sold in the U.S., to be safe and effective for their intended use and to comply with the regulations administered by the U.S. Food and Drug Administration (“FDA”). Certain medical device products are also regulated by comparable agencies in non-U.S. countries in which they are produced or sold.
The FDCA requires these products, when sold in the United States, to be safe and effective for their intended use and to comply with the regulations administered by the U.S. Food and Drug Administration (“FDA”). Certain medical device products are also regulated by comparable agencies in non-U.S. countries in which they are produced or sold.
All executive leaders create annual action plans and progress is reviewed quarterly. Employee Health & Safety Matters The health and safety of our employees are of utmost importance to us. We have a dedicated Employee Health & Safety ("EHS") program that provides global processes and trainings and monitors our progress against set goals.
All executive leaders create annual action plans and progress is reviewed quarterly. Employee Health & Safety Matters The health and safety of our employees are of utmost importance to us. We have a dedicated Employee Health & Safety (“EHS”) program that provides global processes and trainings and monitors our progress against set goals.
Investors should understand it is impossible to predict or identify all such factors or risks. As such, you should not consider either the foregoing lists, or the risks identified in the Company’s SEC filings, to be a complete discussion of all potential risks or uncertainties associated with an investment in the Company. 13
Investors should understand it is impossible to predict or identify all such factors or risks. As such, you should not consider either the foregoing lists, or the risks identified in the Company’s SEC filings, to be a complete discussion of all potential risks or uncertainties associated with an investment in the Company. 14
Compensation and Benefits As part of the our total rewards philosophy, we offer competitive compensation and benefit programs designed to attract and retain top talent. We are committed to providing and administering these programs in a way that treats our employees at all levels fairly and equitably.
Compensation and Benefits As part of our total rewards philosophy, we offer competitive compensation and benefit programs designed to attract, retain, and motivate top talent. We are committed to providing and administering these programs in a way that treats our employees at all levels fairly and equitably.
Under the program, the government will award contracts to the lowest bidders who are able to satisfy the quality and quantity requirements. The successful bidders will be guaranteed a sale volume for at least a year, giving the winner an opportunity to gain or increase market share.
Under the program, the government will award contracts to the lowest bidders who are able to satisfy the quality and quantity requirements. The successful bidders will be guaranteed a sales volume for at least a year, giving the winner an opportunity to gain or increase market share.
Our talent strategy prioritizes attracting, engaging, developing, and retaining talent to support our business strategy. We strive to foster a diverse and inclusive environment where every employee can grow and perform at their best. Attract, Engage, Develop & Retain In 2022, we continued to evolve our talent strategy to support business priorities.
Our talent strategy prioritizes attracting, engaging, developing, and retaining talent to support our business strategy. We strive to foster a diverse and inclusive environment where every employee can grow and perform at their best. Attract, Engage, Develop & Retain In 2023, we continued to evolve our talent strategy to support business priorities.
The AKS and similar fraud and abuse laws applicable in non-U.S. jurisdictions prohibit persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a health care program, such as, in the U.S., Medicare or Medicaid. 9 The Company’s production and sale of products is further subject to regulations concerning the supply of conflict minerals, various environmental regulations such as the Federal Water Pollution Control Act (the “Clean Water Act”) and others enforced by the Environmental Protection Agency (“EPA”) or equivalent state agencies, and the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (the “Health Care Reform Law”).
The AKS and similar fraud and abuse laws applicable in non-U.S. jurisdictions prohibit persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a health care program, such as, in the United States, Medicare or Medicaid. 10 The Company’s production and sales of products is further subject to regulations concerning the supply of conflict minerals, various environmental regulations such as the Federal Water Pollution Control Act (the “Clean Water Act”) and others enforced by the Environmental Protection Agency (“EPA”) or equivalent state agencies, and the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (the “Health Care Reform Law”).
Dentsply Sirona believes that its principal strengths include its well-established brand names, its reputation for high quality and innovative products, its leadership in product development and manufacturing, its global sales force, the breadth of its product line and distribution network, its commitment to customer satisfaction and support of the Company’s products by dental and medical professionals.
Dentsply Sirona believes that its principal strengths include its well-established brand names, its end-to-end dental portfolio, its reputation for high quality and innovative products, its leadership in product development and manufacturing, its global sales force, the breadth of its distribution network, its commitment to customer satisfaction and support of the Company’s products by dental and medical professionals.
Innovations include the Company’s Primeprint Solution to provide medical-grade 3D printing, Primescan Connect which offers a laptop-based version of Primescan, the SmartLite Pro EndoActivator which serves as a new irrigation solution for root canal procedures, and the Axano treatment center combining smart design with efficient workflows.
Innovations include: the Company’s Primeprint Solution, which provides medical-grade 3D printing; Primescan Connect, which offers a laptop-based version of Primescan; the SmartLite Pro EndoActivator which serves as a new irrigation solution for root canal procedures; and the Axano treatment center combining smart design with efficient workflows.
The Company also undertakes pre-commercialization trials and testing of technological improvements prior to inception of the manufacturing process. As is true across its other functions, the Company is continually transforming how R&D is conducted by identifying best practices, driving efficiencies, and optimizing cost structure to enable a more effective development process with a strategic focus on innovation process discipline.
The Company also undertakes pre-commercialization trials and testing of technological improvements prior to inception of the manufacturing process. As is true across its other functions, the Company regularly enhances how R&D is conducted by identifying best practices, driving efficiencies, and optimizing cost structure to enable a more effective development process with a strategic focus on innovation process discipline.
The Company is able to navigate macroeconomic challenges and is well positioned to execute on its strategy of enabling dentists to have superior integrated workflows through its robust market offerings in all key areas of dental procedures (implants, endodontic, restorative and aligners) as well as digital infrastructure (CAD/CAM and imaging) utilized in dental practices around the globe.
The Company is well positioned to navigate macroeconomic challenges and execute on its strategy of enabling dentists to utilize superior integrated workflows through our robust market offerings in all key areas of dental procedures (implants, endodontic, restorative and aligners) as well as digital infrastructure (CAD/CAM and imaging) utilized in dental practices around the globe.
The business is conducted in the United States of America (“U.S.” or "United States"), as well as in over 150 foreign countries, principally through its foreign subsidiaries. Dentsply Sirona has a long-established presence in the European market, particularly in Germany, Sweden, France, the United Kingdom ("UK"), Switzerland and Italy.
The business is conducted in the United States of America (“U.S.” or “United States”), as well as in over 150 foreign countries, principally through its foreign subsidiaries. Dentsply Sirona has a long-established presence in the European market, particularly in Germany, Sweden, France, the United Kingdom (“UK”), Switzerland and Italy.
Financing Information about Dentsply Sirona’s working capital, liquidity and capital resources is provided in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K. Competition The Company conducts its operations, both domestic and foreign, under highly competitive market conditions.
Financing Information about Dentsply Sirona’s working capital, liquidity and capital resources is provided in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K. Competition The Company conducts its global operations, under highly competitive market conditions.
Dentsply Sirona also owns and maintains more than 5,000 patents throughout the world and has also licensed a number of patents owned by others. Our policy is to protect its products and technology through patents and trademark registrations both in the U.S. and in significant international markets.
Dentsply Sirona also owns and maintains more than 5,000 patents throughout the world and has also licensed a number of patents owned by others. Our policy is to protect its products and technology through patents and trademark registrations both in the United States and in significant international markets.
Food, Drug, and Cosmetic Act (the “FDCA”), Council Directive 93/42/EEC on Medical Devices (“MDD”) (1993) in the European Union ("EU"), which will be updated to the EU Medical Device Regulation (“MDR”) in 2021 (and implementing and local measures adopted thereunder) and similar international laws and regulations.
Food, Drug, and Cosmetic Act (the “FDCA”), Council Directive 93/42/EEC on Medical Devices (“MDD”) (1993) in the European Union (“EU”), which was updated to the EU Medical Device Regulation (“MDR”) in 2021 (and implementing and local measures adopted thereunder) and similar international laws and regulations.
Dental and medical devices sold by the Company in the U.S. are generally classified by the FDA into a category that renders them subject to the same controls that apply to all medical devices, including regulations regarding alteration, misbranding, notification, record-keeping and good manufacturing practices.
Dental and medical devices sold by the Company in the United States are generally classified by the FDA into a category that renders them subject to the same controls that apply to all medical devices, including regulations regarding alteration, misbranding, notification, record-keeping and good manufacturing practices.
Recently, the Chinese government launched a national program for volume-based, centralized medical device and consumables procurement with minimum quantity commitments in an attempt to negotiate lower prices from drug manufacturers and reduce the price of medical devices and other products.
Beginning in late 2022, the Chinese government launched a national program for volume-based, centralized medical device and consumables procurement with minimum quantity commitments in an attempt to negotiate lower prices from drug manufacturers and reduce the price of medical devices and other products.
There are, however, significant uncertainties involving the application of various legal requirements, the violation of which could result in, among other things, sanctions. See Item 1A, "Risk Factors” of this Form 10-K for additional detail. Sources and Supply of Raw Materials and Finished Goods The Company manufactures the majority of the products that it sells.
There are, however, significant uncertainties involving the application of various legal requirements, the violation of which could result in, among other things, sanctions. See Item 1A, “Risk Factors,” of this Form 10-K for additional detail. Sources and Supply of Raw Materials and Finished Goods The Company manufactures the majority of the products that it sells.
During the year, the Company also introduced its premium EV Implants System for providing implants that are harmonized, simplified and digitally enabled, as well as its enhanced orthodontic offering SureSmile Solutions that includes the addition of a whitening kit, retainers, and the VPro orthodontic device which uses high-frequency vibration to reduce discomfort in aligner treatment.
During 2022, the Company also introduced its premium EV Implants System for providing implants that are harmonized, simplified and digitally enabled, as well as its enhanced orthodontic offering SureSmile Solutions, inclusive of a whitening kit, retainers, and the VPro orthodontic device, which uses high-frequency vibration to reduce discomfort in aligner treatment.
We strive to foster an environment in which our teams feel inspired and empowered to do their best work and bring new ideas to the table. We have a Diversity, Equity & Inclusion strategy focused on embedding diversity, equity & inclusion into our culture.
We strive to foster an environment in which our teams feel inspired and empowered to bring their “whole selves” to work and bring new ideas to the table. We have a Diversity, Equity & Inclusion strategy focused on embedding diversity, equity & inclusion into our culture.
Customers that accounted for 10% or more of net sales and accounts receivable for the years ended December 31, 2022 and 2020 were as follows: 2022 2020 % of net sales % of accounts receivable % of net sales % of accounts receivable Henry Schein, Inc. 11 % 15 % 14 % N/A Patterson Companies, Inc.
Customers that accounted for 10% or more of net sales or accounts receivable for the years ended December 31, 2023 and 2022 were as follows: 2023 2022 % of net sales % of accounts receivable % of net sales % of accounts receivable Henry Schein, Inc. 14 % 11 % 11 % 15 % Patterson Companies, Inc.
The Company introduced the first dental electric drill over 131 years ago, the first dental X-ray unit approximately 100 years ago, the first dental computer-aided design/computer-aided manufacturing (“CAD/CAM”) system approximately 30 years ago, and numerous other significant innovations including pioneering ultrasonic scaling to increase the speed, effectiveness and comfort of cleaning and revolutionizing both file and apex locater technology to make root canal procedures easier and safer.
The Company introduced the first dental electric drill approximately 132 years ago, the first dental X-ray unit approximately 100 years ago, the first hydrophilic catheter approximately 40 year ago, the first dental computer-aided design/computer-aided manufacturing (“CAD/CAM”) system approximately 30 years ago, and numerous other significant innovations including pioneering ultrasonic scaling to increase the speed, effectiveness and comfort of cleaning and revolutionizing both file and apex locater technology to make root canal procedures easier and safer.
Due in part to its direct-to-consumer model, the Company’s Byte aligner business in the U.S. is subject to various state laws, rules and policies which govern the practice of dentistry within such state.
Due in part to its direct-to-consumer model, the Company’s Byte aligner business in the United States is subject to various state laws, rules and policies which govern the practice of dentistry within such state.
N/A 12 % 10 % 18 % Although a significant portion of the Company's sales are made to distributors, dealers and importers, Dentsply Sirona focuses much of its marketing efforts on the dentists, dental hygienists, dental assistants, dental laboratories and dental schools which are the end-users of its products.
Although a significant portion of the Company’s sales are made to distributors and importers, Dentsply Sirona focuses much of its marketing efforts on the dentists, dental hygienists, dental assistants, dental laboratories and dental schools which are the end-users of its products.
Talent Acquisition Our organization has talent sourcing guidelines requiring diverse and internal candidate interview slates for Director-level and above roles. To increase internal mobility, we offer career development options and utilize our talent review processes to highlight diverse talent. We educate our hiring managers on inclusive hiring practices.
Talent Acquisition Our organization has talent sourcing guidelines requiring diverse and internal candidate interview slates. To increase internal mobility, we offer career development options and utilize our talent review processes to highlight diverse talent. We educate our hiring managers on inclusive hiring practices.
The following sections describe certain, but not all, of the significant regulations that apply to the Company. For a description of the risks related to the regulations that the Company is subject to, please refer to Item 1A. “Risk Factors” of this Form 10-K.
The following sections describe some, but not all, of the significant regulations that apply to the Company. For a description of the risks related to the regulations that the Company is subject to, please refer to Item 1A, “Risk Factors,” of this Form 10-K.
Diversity, Equity & Inclusion Diversity in our organization is a source of great strength. We provide opportunities for all employees to bring their perspective, experience, and lens to the workplace. Our commitment to a diverse workforce helps us create robust solutions to our customers’ challenges and drive innovation.
Diversity, Equity & Inclusion Diversity in our organization is a source of great strength. We provide opportunities for all employees to bring their perspectives, experiences, and lenses to the workplace. Our commitment to a diverse workforce helps us create robust solutions to our customers’ challenges and drive innovation.
Dentsply Sirona develops, manufactures, and markets comprehensive solutions including technologically-advanced dental equipment as well as dental and healthcare consumable products under a strong portfolio of world class brands. Dentsply Sirona’s products provide innovative, high-quality and effective solutions to advance patient care and deliver better, safer and faster dentistry.
Dentsply Sirona develops, manufactures, and markets comprehensive solutions, including technologically advanced dental equipment supported by cloud software solutions as well as dental products and healthcare consumable products in urology and enterology under a strong portfolio of world class brands. Dentsply Sirona’s products provide innovative, high-quality, and effective solutions to advance patient care and deliver better, safer and faster dentistry.
Federal Anti-Kickback Statute (“AKS”), the UK’s Bribery Act 2010 (c.23), Brazil’s Clean Company Act 2014 (Law No. 12,846) China’s National Health and Family Planning Commission (“NHFPC”) circulars No. 40 and No. 50, and similar international laws and regulations.
Foreign Corrupt Practices Act (“FCPA”), the U.S. Federal Anti-Kickback Statute (“AKS”), the UK’s Bribery Act 2010 (c.23), Brazil’s Clean Company Act 2014 (Law No. 12,846) China’s National Health and Family Planning Commission (“NHFPC”) circulars No. 40 and No. 50, and similar international laws and regulations.
As of December 31, 2022, Dentsply Sirona employed approximately 5,000 highly-trained, sales and technical staff specialized in each of our various products and solutions to provide comprehensive marketing, sales, and technical support services to meet the needs of our distributors, dealers and end-users.
Sales and Distribution As of December 31, 2023, Dentsply Sirona employed approximately 5,100 highly trained, sales and technical staff specialized in each of our various products and solutions to provide comprehensive marketing, sales, and technical support services to meet the needs of our distributors and end-users.
These products and solutions are produced by the Company globally and are distributed throughout the world under some of the most well-established brand names and trademarks in these industries, including but not limited to: AH PLUS, ANKYLOS, AQUASIL ULTRA, ARTICADENT, ASTRA TECH, ATLANTIS, AXANO, AXEOS, BYTE, CALIBRA CEMENTS, CAULK, CAVITRON, CELTRA, CERAMCO, CERCON, CEREC, CEREC MCX, CITANEST, CONFORM FIT, DAC, DELTON, DENTSPLY, DETREY, DS CORE, DYRACT, ESTHET.X, FRIOS, IMPLANT EV, INLAB, INTEGO, IPN, LOFRIC, LUCITONE, MAILLEFER, MIDWEST, MIS, MTM, NAVINA, NUPRO, OMNICAM, OMNITAPER EV, ORAQIX, ORIGO, ORTHOPHOS, OSSEOSPEED, OSSIX, PALODENT, PRIME & BOND, PROFILE, PRIMEMILL, PRIMEPRINT, PRIMESCAN, PRIMETAPER EV, PROGLIDER, PROTAPER ULTIMATE, RECIPROC, PUREVAC, SANI-TIP, SCHICK, SIDEXIS, SIMPLANT, SINIUS, SIROLASER, SIRONA, SLIMLINE, SMARTLITE PRO, SPECTRA ST, STYLUS, SULTAN, SUREFIL, SURESMILE, SYMBIOS, T1, T2, T3, T4, TENEO, THERMAFIL, TRIODENT, TRUBYTE, TRUNATOMY, VDW, VIPI, WAVEONE, WELLSPECT, XENO, XIVE, XYLOCAINE and ZHERMACK.
These products and solutions are produced by the Company globally and are distributed throughout the world under some of the most well-established brand names and trademarks in these industries, including but not limited to: AH PLUS, ANKYLOS, AQUASIL ULTRA, ARTICADENT, ASTRA TECH, ATLANTIS, AXANO, AXEOS, BYTE, CALIBRA CEMENTS, CAULK, CAVITRON, CELTRA, CERAMCO, CERCON, CEREC, CEREC TESSERA, CEREC MCX, CITANEST, CONFORM FIT, DAC, DELTON, DENTSPLY, DETREY, DS CORE, DYRACT, ENERGO, ESTHET.X, FRIOS, IMPLANT EV, INLAB, INTEGO, IPN, LOFRIC, LUCITONE, MAILLEFER, MIDWEST, MIS, MTM, NAVINA, NUPRO, OMNICAM, OMNITAPER EV, ORAQIX, ORIGO, ORTHOPHOS, OSSEOSPEED, OSSIX, OSSIX AGILE, PALODENT, PRIME & BOND, PROFILE, PRIMEMILL, PRIMEPRINT, PRIMESCAN, PRIMESCAN CONNECT, PRIMETAPER EV, PROGLIDER, PROTAPER ULTIMATE, RECIPROC, PUREVAC, SANI-TIP, SCHICK, SDR FLOW+, SIDEXIS, SIMPLANT, SINIUS, SIROLASER, SIRONA, SLIMLINE, SMARTLITE PRO, SPECTRA ST, STYLUS, SULTAN, SURESMILE, SYMBIOS, T1, T2, T3, T4, TENEO, THERMAFIL, TRIODENT, TRUBYTE, TRUNATOMY, VDW, VIPI, WAVEONE, WELLSPECT, XENO, XIVE, X SMART PRO, XYLOCAINE and ZHERMACK. 4 The Company conducts business through four reportable segments: (1) Connected Technology Solutions, (2) Essential Dental Solutions, (3) Orthodontic and Implant Solutions, and (4) Wellspect Healthcare.
We are also looking to increasingly utilize an enterprise approach to funding that employs a returns-based mindset and allocates R&D spend towards those areas with the highest return. In addition to internal product development, the Company also pursues external R&D opportunities, including acquisitions, licensing, or other arrangements with third parties.
We are also looking to increasingly utilize an enterprise approach to funding that employs a returns-based mindset with the goal of allocating R&D spending to those areas with the highest return. In addition to internal product development, the Company also pursues external R&D opportunities, including acquisitions, licensing, or other arrangements with third parties.
Competition in the dental and healthcare consumable products and dental technology and equipment products industries is based primarily upon product performance, quality, safety and ease of use, as well as price, customer service, innovation and acceptance by clinicians, technicians and patients.
Competition in the industries for dental technology and equipment, dental consumables, and continence care products is based primarily upon product performance, quality, safety and ease of use, as well as price, customer service, innovation and acceptance by clinicians, technicians and patients.
For the year ended December 31, 2021, no customer accounted for 10% or more of consolidated net sales or consolidated accounts receivable balance.
N/A 10 % N/A 12 % For the year ended December 31, 2021, no customer accounted for 10% or more of consolidated net sales or consolidated accounts receivable.
A top priority of the Diversity, Equity & Inclusion Council is to equip leaders to discuss and be accountable for driving sustained diversity, equity, and inclusion progress. 11 Employee Resource Groups The purpose of our employee resource groups is to foster a diverse, equitable, and inclusive environment enabling employees to bring their best to work as they participate in successfully executing our strategy.
A top priority of the Diversity, Equity & Inclusion Council is to equip leaders to discuss and be accountable for driving sustained diversity, equity, and inclusion progress. 12 Employee Resource Groups The purpose of our Employee Resource Groups (“ERGs”) is to foster a diverse, equitable and inclusive environment as they participate in successfully executing our strategy.
We are members of the Paradigm for Parity cross-sector diversity commitment – a coalition of more than 130 CEOs, executives, board members, founders and experts dedicated to providing women and men equal opportunity and power and achieving gender parity by 2030.
We are members of the Paradigm for Parity cross-sector diversity commitment – a coalition of more than 150 CEOs, executives, board members, founders and experts dedicated to providing women equal opportunity and power.
The Company files annual reports, quarterly reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”). 12 Dentsply Sirona also makes available free of charge through the investor section of its website at www.dentsplysirona.com its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such materials are filed with or furnished to the SEC.
Dentsply Sirona also makes available free of charge through the investor section of its website at www.dentsplysirona.com its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such materials are filed with or furnished to the SEC.
As of December 31, 2022, our organization and its subsidiaries employed over 15,000 employees across the globe. Of these employees, approximately 3,600 were employed in the U.S. Some employees outside of the U.S. and particularly in Europe are covered by collective bargaining, union contracts, worker councils or other similar programs.
As of December 31, 2023, our organization and its subsidiaries employed approximately 15,000 employees across the globe. Of these employees, approximately 3,500 were employed in the United States. Some employees outside of the United States, particularly in Europe, are covered by collective bargaining agreements, union contracts, worker councils or other similar programs.
In particular, the Company has continued to prioritize investments supporting digitally enhanced workflows through each stage of patient care, including imaging and scanning technologies used in diagnosis, treatment planning software, and customized products to deliver treatment.
In particular, the Company has continued to prioritize investments supporting digitally connected solutions and enhanced workflows through each stage of patient care, including imaging and scanning technologies used in diagnosis, treatment planning software, and products which are customizable and scalable.
Demand can also fluctuate based on the timing of dental tradeshows 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 the recent COVID-19 pandemic.
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 disruptions such as global pandemics.
As of December 31, 2022, our employees have led the successful establishment of seven employee resource groups consisting of approximately 2,000 members from across the globe. Our employee resource groups focus on developing talent, increasing employee engagement, and creating awareness through allyship. We consistently recognize high participation in employee resource group-led events.
As of December 31, 2023, our employees have led establishment of nine ERGs consisting of approximately 3,800 members from across the globe. Our ERGs focus on developing talent, increasing employee engagement, and creating awareness through allyship. We consistently recognize high participation in employee resource group-led events.
The Company is also committed to participation in clinical research demonstrating the efficacy of our products prior to market introduction, and in supporting the clinical education and technical training of dental professionals.
As part of this objective, the Company remains committed to participation in clinical research demonstrating the efficacy of our products prior to market introduction, and in supporting the clinical education and technical training of dental professionals.
There are many companies that produce some, but no competitor produces all of the same types of products as those produced by the Company. 8 Regulation The development, manufacture, sale and distribution of the Company’s products are subject to comprehensive governmental regulation both within and outside the U.S.
There are many companies that produce some of the same types of products as those produced by the Company, but no single competitor produces the breadth of products that are produced by the Company. 9 Regulation The development, manufacture, sales and distribution of the Company’s products are subject to comprehensive governmental regulation both within and outside the United States.
Technologies & Equipment Segment Equipment & Instruments The Equipment & Instruments product category consists of basic and high-tech dental equipment such as treatment centers, imaging equipment, motorized dental handpieces, and other instruments for dental practitioners and specialists.
These products include the Equipment & Instruments and CAD/CAM product categories. Equipment & Instruments The Equipment & Instruments product category consists of basic and high-tech dental equipment such as imaging equipment, motorized dental handpieces, treatment centers, and other instruments for dental practitioners and specialists.
Item 1. Business Overview DENTSPLY SIRONA Inc. (“Dentsply Sirona” or the “Company”) is the world’s largest manufacturer of professional dental products and technologies, with a 136-year history of innovation and service to the dental industry and patients worldwide.
Item 1. Business Overview 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 a vision of improving oral health and continence care globally.
The Company remains focused on ensuring that all its products that are considered to be medical devices will be fully certified as required by the EU MDR dates and timelines.
This also includes completion of certified quality management systems by May 26, 2024. The Company remains focused on ensuring that all its products that are considered to be medical devices will be fully certified as required by the EU MDR dates and timelines.
The Company has an integrated approach to customer service, direct and indirect selling, and clinical education to strengthen the relationship with the customer and better serve the customers' needs. • Create innovative solutions that customers love to use: A comprehensive R&D program that prioritizes strategic spending building the next generation of digital workflow technologies and service offerings, resulting in more impactful innovations each year. • Think and act with positive intent and the highest integrity: Execute the business in a way that empowers our people, respects the communities in which we do business, and establishes trust with our partners and stakeholders. 6 • Operate sustainably in everything we do: Take a thoughtful, proactive approach to creating a sustainable company through investments in our employees, customers, and the environment. • Use size and global breadth to our advantage: The Company is focused on integrating its dental product portfolios to unlock operational efficiencies, including performance improvements in procurement, logistics, manufacturing, sales force and marketing programs; and at the same time simplifying the business on a worldwide scale.
We conduct our business in accordance with that goal using the following core operating principles: • Approach customers as one: The Company has an integrated approach to customer service, direct and indirect selling, and clinical education to strengthen relationships with customers and better serve customers’ needs. 3 • Create innovative solutions that customers love to use: A comprehensive R&D program that prioritizes strategic spending, builds the next generation of digital workflow technologies and service offerings, and results in impactful innovations that grow our business. • Think and act with positive intent and the highest integrity: Execute the business in a way that empowers our people, respects the communities in which we do business, and establishes trust with our partners and stakeholders. • Use size and global breadth to our advantage: We are focused on integrating our dental product portfolios to unlock operational efficiencies, and on enhancing our healthcare consumables product portfolio, with an emphasis on performance improvements in procurement, logistics, manufacturing, sales force and marketing programs, while at the same time simplifying our business on a worldwide scale.
The Company’s long-term plans for investment in product development include an objective to maintain a level of R&D spend that is at least 4% of annual net sales with a focus on innovation and expansion of digital, software, services, and other platform offerings.
The Company’s plans for investment in product development include maintaining a level of R&D spending that is at approximately 4% of annual net sales with a focus on innovation in and expansion of digital workflow solutions and other platform offerings.
Although the backlog on products is generally not material to the financial statements due in part to the Company's efforts to maintain short lead times within its manufacturing, levels can fluctuate and affect sales in certain periods due to supply chain disruption and unavailability of required inputs.
Although the backlog on products is generally not material to the financial statements due in part to the Company’s efforts to maintain short lead times within its manufacturing, levels can fluctuate and affect sales in certain periods due to supply chain disruption and unavailability of required inputs. 13 Securities Exchange Act Reports The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC.
Imaging equipment serves as the starting point for the Company’s digital workflow offerings and consists of a broad range of diagnostic imaging systems for 2D or 3D, panoramic, and intra-oral applications.
Imaging equipment serves as a key point of entry to the Company’s digital workflow offerings and consists of a broad range of diagnostic imaging systems for 2D or 3D, panoramic, and intraoral applications, as well as cone-beam computed tomography systems (“CBCT”).
Certain highly technical products such as dental technology equipment, dental ceramics, crown and bridge porcelain products, endodontic instruments and materials, orthodontic aligners and appliances, and dental implants are often sold directly to the dental laboratory or dental professionals in some markets. Additionally, the Company’s Byte business produces aligners which are sold direct to consumers under doctor-directed, personalized treatment plans.
Certain products such as endodontic instruments and materials, orthodontic aligners and appliances, and dental implants are often sold directly to dental laboratories or dental professionals in some markets. Additionally, the Company’s Byte business produces aligners which are sold directly to patients based on personalized treatment plans prescribed by dental professionals.
The volume guarantee is intended to make manufacturers more willing to cut their prices in order to win a bid and may also enable successful bidders to lower their distribution and commercial costs. Many types of drugs are covered under the program, including drugs made by international pharmaceutical companies and generics made by domestic Chinese manufacturers.
The volume guarantee is intended to make manufacturers more willing to cut their prices in order to win a bid and may also enable successful bidders to lower their distribution and commercial costs.
Other Consumables The remaining consumables products include small equipment products such as intraoral curing light systems, dental diagnostic systems and ultrasonic scalers and polishers, as well as other dental supplies including dental anesthetics, prophylaxis paste, dental sealants, impression materials, teeth whiteners and topical fluoride.
The restorative products include dental ceramics and other materials used in prosthetic restorations including crowns and veneers. 5 The preventive products include small equipment products such as curing light systems, dental diagnostic systems and ultrasonic scalers and polishers, as well as other dental supplies including dental anesthetics, prophylaxis paste, dental sealants and impression materials.
Many of Dentsply Sirona’s existing products are undergoing brand extensions, and the Company also continues to focus efforts on successfully launching innovative products that have a more significant impact on how dental and clinical professionals treat their patients.
We continue to focus efforts on successfully launching innovative products that have a significant impact on how dental and clinical professionals treat their patients.
During 2022, the Company unveiled its cloud solution DS Core, an open platform developed in collaboration with Google Cloud that integrates digital dentistry workflows across its devices, services, and technologies. The DS Core digital platform is designed to enable more precise and simplified cloud storage, optimize diagnostic capabilities, and streamline existing workflows and collaboration with laboratory partners and specialists.
The DS Core digital platform is designed to enable more precise and simplified cloud storage, optimize diagnostic capabilities, and streamline existing workflows and collaborations with laboratory partners and specialists.
The Company offers a broad suite of products which together provide digital workflows for dental practitioners to make the highest use of technological advancements throughout each stage of patient care. Dentsply Sirona’s principal product categories are dental technology and equipment products and dental consumable products. Additionally, the Company manufactures and sells healthcare consumable products for urological applications.
Principal Products and Product Categories The worldwide professional dental industry encompasses the diagnosis, treatment and prevention of disease and ailments of the teeth, gums and supporting bone. The Company offers a broad suite of products which together provide digital workflows for dental practitioners to make the highest use of technological advancements throughout each stage of patient care.
Securities Exchange Act Reports The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that the Company files with the SEC at http://www.sec.gov.
The public can obtain any documents that the Company files with the SEC at http://www.sec.gov. The Company files annual reports, quarterly reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”).
Implants The Implants product offering includes technology to support signature digital workflows for implant systems, a portfolio of innovative dental implant products, bone regenerative and restorative solutions, and educational programs, all of which provide dental professionals with a completely new way of practicing implantology.
Implants & Prosthetics The Implants & Prosthetics product category includes technology to support the Company’s digital workflows for implant systems, a portfolio of innovative dental implant products, digital dentures, crown and bridge porcelain products, bone regenerative and restorative solutions, treatment planning software and educational programs.
Initiatives to support technological development also include collaborations with research institutions and dental and medical schools. The Company annually supports the achievements of dental students conducting innovative research through its Student Competition for Advancing Dental Research and its Application Awards program.
These investments in clinical education allow us to reinforce and develop relationships with dental professionals. We also annually support the achievements of dental students conducting innovative research through its Student Competition for Advancing Dental Research and its Application Awards program.
As part of its technology and equipment solutions, the Company also offers an open, cloud-based platform for digital services.
Dentsply Sirona’s principal product categories are dental technology and equipment products, clear aligners, and dental consumable products. Additionally, the Company manufactures and sells healthcare consumable products for urological and enterological applications. As part of its technology and equipment solutions, the Company also offers an open, cloud-based platform for digital services, DS Core.
The Company is also subject to domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders regarding anti-bribery and anti-corruption, including, but not limited to, the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.S.
Future expansion of the program by the Chinese government could result in reduced margins on covered devices and products, required renegotiation of distributor arrangements, and incurrence of inventory-related charges. The Company is also subject to domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders regarding anti-bribery and anti-corruption, including, but not limited to, the U.S.
As part of this end-user “pull through” marketing approach, the Company conducts extensive distributor, dealer and end-user marketing programs. Additionally, the Company trains laboratory technicians, dental hygienists, dental assistants and dentists in the proper use of its products and introduces them to the latest technological developments at its educational courses conducted throughout the world.
As part of these courses, the Company trains laboratory technicians, dental hygienists, dental assistants and dentists in the proper use of its products and introduces them to the latest technological developments. Additionally, we maintain ongoing consulting and educational relationships with various dental associations and recognized worldwide opinion leaders in the dental field.
Dentsply Sirona has 55 academies and education centers that are home to state-of-the-art training facilities for dental professionals who seek a comprehensive variety of clinical and technical continuing education curriculum. The academies offering hands-on teaching, live lectures, and on-demand webinars and courses which are taught by a diverse range of internationally known experts in all fields of dentistry.
The academies offer hands-on teaching, live lectures, and on-demand webinars and courses which are taught by a diverse range of internationally known experts in all fields of dentistry. In 2023, we delivered more than 9,200 training courses to dental professionals through in-person, online, and hybrid formats.
Complex materials technology and processes are necessary to manufacture the Company’s products. Where the Company can improve quality and customer service and lower costs, we endeavor to automate our global manufacturing operations.
The manufacturing processes of the Company’s products require substantial and varied technical expertise. Complex materials technology and processes are necessary to manufacture the Company’s products. The Company endeavors to automate its global manufacturing operations in the interest of improving product quality and lowering costs.
The Company provides over 7,000 training courses through our DS Academy annually, with approximately 300,000 dental professionals participating. 7 Through our internal research centers as well as through our collaborations with external research institutions, dental and medical schools, the Company directly invests in the development of new products, improvement of existing products and advances in technology.
Through our internal research centers as well as through our collaborations with external research institutions, dental and medical schools, the Company directly invests in the development of new products, the improvement of existing products and advancements in technology. These investments include an emphasis on research in digital data sharing technology, including the incorporation of long-term artificial intelligence and machine learning.
The Implants business is supported by key technologies including custom abutments, advanced tapered immediate load screws and regenerative bone growth factor. CAD/CAM Dental CAD/CAM technologies are products designed for dental offices to support numerous digital dental procedures including dental restorations.
The Implants & Prosthetics product category is supported by key technologies including custom abutments, advanced tapered immediate load screws and regenerative bone growth factor. Offerings in this category also include dental prosthetics such as artificial teeth and precious metal dental alloys.
The Orthodontics product category also includes a High Frequency Vibration ("HFV") technology device known as VPro or as HyperByte within Byte's product offering. The aligner offerings include software technology that enables aligner treatment planning and for SureSmile seamless connectivity of a digital workflow from diagnostics through treatment delivery.
Byte aligner solutions include Byte Plus, with in-office intraoral scanning for treatment planning. The aligner offerings also include software technology that enables aligner treatment planning and seamless connectivity of digital workflows from diagnostics through treatment delivery.
In combination, these initiatives will improve organizational efficiency and better leverage the Company’s selling, general and administrative infrastructure. Product Development While the Company enjoys market leadership in several of its product categories, continuous innovation and product development are critical for it to continue to grow its share in markets it serves.
As part of this end-user “pull through” marketing strategy, the Company conducts extensive marketing programs with a combined approach that also engages DSOs and distributors. 7 Product Development While the Company enjoys market leadership in several of its product categories, continuous innovation and product development are critical for it to continue to grow its share in markets it serves.
Sales and Distribution Dentsply Sirona distributes approximately two-thirds of its dental consumable and technology and equipment products through third-party distributors.
The program launched with an initial focus on endodontic and restorative consumable products with potential to expand in 2024 and future years, including a goal of achieving additional efficiency from optimizing our geographic footprint. Dentsply Sirona distributes approximately two-thirds of its dental consumable and technology and equipment products through third-party distributors.
Although all medical device manufacturers were required to certify their Class I (as defined in the EU MDR regulations) products by May 2021, the EU MDR regulations for additional Classes of medical devices is mandated to be fully enforceable by May 2024. This also includes completion of certified quality management systems to manufacturers quality management systems.
Although all medical device manufacturers were required to certify their Class I products by May 2021, on March 15, 2023, the EU extended the MDR transition periods to December 31, 2027 for Class III and implantable Class IIb devices and December 31, 2028 for non-implantable Class IIb and lower risk devices and for Class I devices (each such Class as defined in the EU MDR regulations) that are a higher class under the MDR.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we fail to remediate these material weaknesses or experiences additional material weaknesses in the future, we may be unable to accurately and timely report financial results or comply with the requirements of being a public company, which could cause the price of our common stock to decline and harm our business. • We restated certain of our previously issued consolidated financial statements, which resulted in unanticipated costs and may affect investor confidence and raise reputational issues. • We may be subject to litigation and regulatory examinations, investigations, proceedings or court orders as a result of or relating to our internal investigation and if any of these items are resolved adversely against us, it could harm our business, financial condition and results of operations. • Our failure to timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equity capital, and restricts our ability to issue equity securities. • Lack of global standardized processes, centralization of transaction management and/or execution could result in control deficiencies and impact management’s assertions and financial reporting. • We rely heavily on information and technology to operate both our businesses and our technology dependent product solutions portfolios, and any continued cyber incidents with respect to our supporting information and technology infrastructure, whether by deliberate attacks or unintentional events, could harm our operations. • Privacy concerns and laws, evolving regulation of cross-border data transfer restrictions and other regulations may adversely affect our business. • We may be unable to develop innovative products and solutions or stimulate customer demand. • Our ongoing business operations may be disrupted for a significant period of time, resulting in material operating costs and financial losses. • We may be unable to execute key strategic initiatives due to competing priorities and strategies of our distribution partners and other factors, which may result in financial losses and operational inefficiencies. • The success of our business depends in part on achieving our strategic objectives, including through acquisitions, dispositions, and strategic investments and initiatives. • We may fail to realize the expected benefits of our strategic initiatives, including announced or potential future restructuring and transformation efforts. • We have recognized substantial goodwill and indefinite-lived intangible asset impairment charges, most recently in Q3 and Q4 2022, and may be required to recognize additional goodwill and indefinite-lived intangible asset impairment charges in the future. • Our failure to obtain patents and, consequently, to protect our proprietary technology could have an adverse impact on our competitive position. • Our profitability could suffer if third parties infringe upon our intellectual property rights or if our products are found to infringe upon the intellectual property rights of others. • Changes in our credit ratings or macroeconomic impacts on credit markets may increase our cost of capital and limit financing options. • A breach of the covenants under our debt instruments outstanding from time to time could result in an event of default under the applicable agreement. • We may not be able to repay our outstanding debt in the event that we do not generate sufficient cash flow to service our debts and cross default provisions may be triggered due to a breach of covenants under our existing indebtedness. • Our foreign currency hedging and cash management transactions may be ineffective or only partially mitigate the impact, exposing us to unexpected interest rate volatility. • Due to the international nature of our business, including increasing exposure to markets outside of the U.S., political or economic changes or other factors could harm our business and financial performance. • Due to our international operations, we are exposed to the risk of changes in foreign exchange rates. • Changes in or interpretations of tax rules, operating structures, transfer pricing regulations, country profitability mix and regulations may adversely affect our effective tax rate. • We may be unable to obtain necessary product approvals and marketing clearances. • Inadequate levels of reimbursement from governmental or other third-party payers for procedures using our products may cause our revenue to decline. 14 • Challenges may be asserted against our products due to real or perceived quality, health or environmental issues. • If we fail to comply with laws and regulations relating to health care fraud, we could suffer penalties or be required to make significant changes to our operations, which could adversely affect our business. • Our business is subject to extensive, complex and changing domestic and foreign laws, rules, regulations, self-regulatory codes, directives, circulars and orders that failure to comply with which, if not complied with, could subject us to civil or criminal penalties or other liabilities. • Our quarterly operating results and market price for our common stock may continue to be volatile. • Certain provisions in our governing documents, and of Delaware law, may make it more difficult for a third party to acquire us. • Our revenue, results of operations, cash flow, and liquidity may be materially adversely impacted by the ongoing COVID-19 outbreak. • Our business may be adversely affected by changes in global economic conditions, including inflation, rising interest rates, and supply chain shortages. • The loss of members of our senior management and the resulting management transition might have an adverse impact on our future operating results. • Talent gaps and failure to manage and retain top talent may impact our ability to grow the business. • We face the inherent risk of litigation and claims. • Climate change and related natural disasters could negatively impact our business and financial results. • Expectations relating to environmental, social and governance considerations may expose us to potential liabilities, increased costs, reputational harm, and other adverse effects on our business.
Biggest changeAlthough these material weaknesses have all been remediated as of December 31, 2023, should they recur, or if we experience additional material weaknesses in the future, we may be unable to accurately and timely report financial results or comply with the requirements for public companies, which could cause the price of our common stock to decline or limit our access to the capital markets. • We may be subject to additional litigation and regulatory examinations, investigations, proceedings or court orders as a result of or relating to the 2022 internal investigation which included certain financial reporting matters, which is now complete, and if any of these items are resolved adversely against us, it could harm our business, financial condition and results of operations. • Lack of global standardized processes, centralization of transaction management and/or failures to execute could result in control deficiencies and adversely impact management’s assertions and financial reporting. • We rely heavily on information and technology to operate both our businesses and our technology dependent product solutions portfolios, and any cyber incidents with respect to our information and technology infrastructure, whether by deliberate attacks or unintentional events, could harm our operations and have a material impact on our business and financial results. • Evolving governmental oversight of the use of personal information, cross-border data transfer restrictions and the use of AI, as well as other technology regulations, may adversely affect our business. • We may be unable to develop innovative products and solutions to stimulate customer demand. • Damage to our reputation or brand could negatively impact our business, financial condition or results of operations. • Our ongoing business operations may be disrupted for a significant period of time, resulting in material operating costs and financial losses. • We may be unable to execute key strategic initiatives due to competing priorities and strategies of our distribution partners and other factors, which may result in financial losses and operational inefficiencies. • The success of our business depends in part on achieving our strategic objectives, including through acquisitions, dispositions, and strategic investments and initiatives. • We may fail to realize the expected benefits of our strategic initiatives, including recently executed or potential future restructuring and other business transformation efforts. • We have recognized substantial goodwill and indefinite-lived intangible asset impairment charges and may be required to recognize additional goodwill and indefinite-lived intangible asset impairment charges in the future. • Our failure to protect our proprietary technology could have an adverse impact on our competitive position. • Our financial results may be adversely impacted if our products are found to infringe upon the intellectual property rights of others. • Changes in our credit ratings or macroeconomic impacts on credit markets may increase our cost of capital and limit financing options. • A breach of the covenants under our debt instruments outstanding from time to time could result in an event of default under the applicable agreement. • We may not be able to repay our outstanding debt if we do not generate sufficient cash flow to service our debts and cross default provisions may be triggered due to a breach of covenants under our existing indebtedness. • Our foreign currency hedging and cash management transactions may be ineffective or only partially mitigate the impact of exchange rate fluctuations, exposing us to unexpected volatility. • Due to the global nature of our business, including increasing exposure to markets outside of the United States, political or economic changes or other factors could harm our business and financial performance. • Changes in or interpretations of tax rules, operating structures, transfer pricing regulations, country profitability mix and regulations may adversely affect our effective tax rate. • We may be unable to obtain necessary product approvals and marketing clearances. • Our doctor-directed, direct to customer clear aligner business could be adversely affected by challenges to our business model or by new state actions restricting our ability to provide our products and services in certain states. • Inadequate levels of reimbursement from governmental or other third-party payors for procedures using our products may cause our revenue to decline. • Challenges may be asserted against our products due to real or perceived quality, health or environmental issues. 15 • If we fail to comply with laws and regulations relating to health care fraud, we could suffer penalties or be required to make significant changes to our operations, which could adversely affect our business. • Our business is subject to extensive, complex and changing domestic and foreign laws, rules, regulations, self-regulatory codes, directives, circulars and orders which, if not complied with, subjects us to civil or criminal penalties or other liabilities. • The market price for our common stock may continue to be volatile as a result of a number of factors, including quarterly operating results. • Certain provisions in our governing documents, and of Delaware law, may make it more difficult for a third party to acquire us. • Our business may be adversely affected by changes in global economic conditions, including inflation, rising interest rates, and supply chain shortages. • Talent gaps and failure to manage and retain top talent may impact our ability to manage our operations, execute strategic initiatives and grow the business. • We face the inherent risk of legal actions, including litigation, product liability claims, and other regulatory or compliance matters. • Climate change and related natural disasters could negatively impact our business and financial results. • Expectations relating to environmental, social and governance considerations may expose us to potential liabilities, increased costs, reputational harm, and other adverse effects on our business.
We continue to focus on standardizing our processes, improving our financial systems, maintaining effective internal controls and centralizing transaction management and/or execution so as to provide continued assurance with respect to our financial reports, support the continued growth of the business, and prevent financial misstatement or fraud.
We continue to focus on standardizing our processes, improving our financial systems, maintaining effective internal controls and centralizing transaction management and execution so as to provide continued assurance with respect to our financial reports, support the continued growth of the business, and prevent financial misstatement or fraud.
As a result, we will increasingly be exposed to risks inherent in the development, integration and operation of our evolving information and technology supporting our product platforms, as well as our own internal infrastructure, including: • security breaches, viruses, cyberattacks, ransomware or other malware or other failures or malfunctions; • disruption, impairment or failure of data centers or hardware, telecommunications facilities or other infrastructure platforms; 17 • failures during the process of upgrading or replacing software, databases or components contained in the information and technology infrastructure; • the compromise or unauthorized disclosure of sensitive or proprietary information related to our business and customers; • excessive costs, excessive delays or other deficiencies in systems development and deployment; and • an unintentional event that involves a third-party gaining unauthorized access to our systems or proprietary information.
As a result, we will increasingly be exposed to risks inherent in the development, integration and operation of the evolving information and technology supporting our product platforms, as well as our own internal infrastructure, including: 17 • security breaches, viruses, cyberattacks, ransomware or other malware or other failures or malfunctions; • disruption, impairment or failure of data centers or hardware, telecommunications facilities or other infrastructure platforms; • failures during the process of upgrading or replacing software, databases or components contained in the information and technology infrastructure; • the compromise or unauthorized disclosure of sensitive or proprietary information related to our business and customers; • excessive costs, excessive delays or other deficiencies in systems development and deployment; and • an unintentional event that involves a third-party gaining unauthorized access to our systems or proprietary information.
For example, non-compliance with applicable laws or regulations a third-party partner that is processing personal data on our behalf may be deemed non-compliance by us or a failure by us to conduct proper due diligence on the third party.
For example, non-compliance with applicable laws or regulations by a third-party partner that is processing personal data on our behalf may be deemed non-compliance by us or a failure by us to conduct proper due diligence on the third party.
Our products that fall into the category of Class I as classified by EU MDD were mandated to be certified under the new EU MDR.
Our products that fall into the category of Class I as classified by the EU MDD were mandated to be certified under the new EU MDR.
In addition, many of these laws are vague or indefinite and have not been interpreted by the courts, and have been subject to frequent modification and varied interpretation by prosecutorial, regulatory authorities, increasing compliance risks.
In addition, many of these laws are vague or indefinite and have not been interpreted by the courts and have been subject to frequent modification and varied interpretation by prosecutorial or regulatory authorities, increasing compliance risks.
Despite our training and compliance programs, we cannot provide assurance that our internal policies and procedures will always protect us from violation of such anti-corruption laws committed by our affiliated entities or their respective officers, directors, employees and agents.
Despite our training and compliance programs, we cannot provide assurance that our internal policies and procedures will always protect us from violation of such anti-corruption laws committed by our employees or affiliated entities or their respective officers, directors, employees and agents.
Any ongoing investigation of any potential violations of the FCPA or other anti-corruption laws by the U.S. or foreign authorities could harm our reputation and have an adverse impact on our business, financial condition and results of operations. On December 31, 2020, we acquired Byte, a leading provider in the direct-to-consumer, doctor-directed aligner market.
Any ongoing investigation of any potential violations of the FCPA or other anti-corruption laws by the U.S. or foreign authorities could harm our reputation and have an adverse impact on our business, financial condition and results of operations. 31 On December 31, 2020, we acquired Byte, a leading provider in the direct-to-consumer, doctor-directed aligner market.
While we seek to mitigate our business risks associated with climate events, we recognize that there are inherent climate-related risks regardless of where we conduct our businesses. Global climate change is expected to result in certain types of natural disasters occurring more frequently or with more intense effects.
While we seek to mitigate our risks associated with climate events, we recognize that there are inherent climate-related risks regardless of where we conduct our businesses. Global climate change is expected to result in certain types of natural disasters occurring more frequently or with more intense effects.
Effective patent, trademark and trade secret protection may not be available in every country in which we will offer, or intend to offer, our products. Any failure to adequately protect our intellectual property could devalue our proprietary content and impair our ability to compete effectively.
Effective patent, trademark and trade secret protection may not be available in every country in which we will offer, or intend to offer, our products. Any failure to adequately protect our intellectual property rights could devalue our proprietary content and impair our ability to compete effectively.
Our management has devoted and may be required to devote significant time and attention to these matters. If any of these matters are resolved adversely against us, it could harm our reputation, business, financial condition and results of operations.
Our management has devoted and may be required to further devote significant time and attention to these matters. If any of these matters are resolved adversely against us, it could harm our reputation, business, financial condition and results of operations.
Additionally, while we cannot estimate our potential exposure to these matters at this time, we have already expended a significant amount of time and resources investigating the claims underlying and defending these matters and expect to continue to need to expend our resources to conclude these matters.
Additionally, while we cannot estimate our potential exposure to these matters at this time, we have already expended a significant amount of time and resources investigating the claims underlying and defending these matters and expect to continue to expend our resources to conclude these matters.
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion.
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations (“ESG”) relating to businesses, including climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion.
For instance, the GDPR, applicable as of 2018 and still one of the strictest and most comprehensive privacy laws in the world, is being continuously enforced, and increasingly heavy fines are now being levied on businesses.
For instance, the GDPR, applicable as of 2018 and still one of the strictest and most comprehensive privacy laws in the world, is being continuously enforced, and fines are now increasingly being levied on businesses.
Changes in our credit ratings or macroeconomic impacts on credit markets may increase our cost of capital and limit financing options. We utilize the short and long-term debt markets to obtain capital from time to time.
Changes in our credit ratings or macroeconomic impacts on credit markets may increase our cost of capital and limit financing options. We utilize short and long-term debt markets to obtain capital from time to time.
The Company will continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate. 27 We may be unable to obtain necessary product approvals and marketing clearances.
The Company will continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate. We may be unable to obtain necessary product approvals and marketing clearances.
Accordingly, the ongoing SEC investigation and any potential related litigation could result in distraction to management and entail risks and uncertainties, the outcome of which could adversely affect our results of operations and our reputation.
Accordingly, the ongoing SEC investigation and any related litigation could result in distraction to management and entail risks and uncertainties, the outcome of which could adversely affect our results of operations and our reputation.
Increasing natural disasters in connection with climate change could also impact our third-party vendors, service providers or other stakeholders, including disruptions in supply chains, or information technology or other necessary services for our Company. 33 Expectations relating to environmental, social and governance considerations may expose us to potential liabilities, increased costs, reputational harm, and other adverse effects on our business.
Increasing natural disasters in connection with climate change could also impact our third-party vendors, service providers or other stakeholders, including disruptions in supply chains, information technology or other necessary services for our Company. 34 Expectations relating to environmental, social and governance considerations may expose us to potential liabilities, increased costs, reputational harm, and other adverse effects on our business.
Any inability, or perceived inability, to adequately address privacy and data protection concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations (including at newly acquired companies) could result in additional cost and liability to us or our officials, damage our reputation, inhibit sales, and otherwise adversely affect our business.
Any inability, or perceived inability, to adequately address privacy and data protection concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations (including at newly acquired companies) could result in additional cost and liability to us or our officers, damage our reputation, inhibit sales, and otherwise adversely affect our business.
The length, impact, and outcome of this ongoing military conflict is highly unpredictable and could lead to significant market and other disruptions, which, along with the spillover effect of ongoing civil, political and economic disturbances on surrounding areas, may significantly devalue currencies utilized by us or have other adverse impacts including increased costs of raw materials and inputs, manufacturing or shipping delays or increases in inflation rate, cyber attacks and supply chain challenges.
The length, impact, and outcome of this ongoing military conflict is highly unpredictable and could lead to significant market and other disruptions, which, along with the spillover effect of ongoing civil, political and economic disturbances on surrounding areas, may significantly devalue currencies utilized by us or have other adverse impacts including increased costs of raw materials and inputs, manufacturing or shipping delays or increases in inflation rate, cyberattacks and supply chain challenges.
Many of our subsequent private outstanding debt agreements have been amended to reflect these covenants. We may need to reduce the amount of our indebtedness outstanding from time to time in order to comply with such ratios, though no assurance can be given that we will be able to do so.
Many of our subsequent private outstanding debt agreements have been amended to reflect these covenants. We may need to reduce the amount of our indebtedness outstanding from time to time to comply with such ratios, though no assurance can be given that we will be able to do so.
Fines for noncompliance with the GDPR can amount to up to €20 million or 4% of the total worldwide annual turnover from the preceding financial year (whichever is higher) and may be imposed in conjunction with the exercise of the authority's investigatory and corrective powers.
Fines for noncompliance with the GDPR can amount to up to €20 million or 4% of the total worldwide annual sales from the preceding financial year (whichever is higher) and may be imposed in conjunction with the exercise of the authority’s investigatory and corrective powers.
Accordingly, a natural disaster has the potential to disrupt our and our clients’ businesses and may cause us to experience work stoppages, project delays, financial losses and additional costs to resume operations, including increased insurance costs or loss of cover, legal liability and reputational losses.
Accordingly, a natural disaster has the potential to disrupt our and our customers’ businesses and may cause us to experience work stoppages, project delays, financial losses and additional costs to resume operations, including increased insurance costs or loss of cover, legal liability and reputational losses.
Byte contracts with an expansive nationwide network of independent licensed dentists and orthodontists for the provision of clinical services, including the oversight and control of each customer’s clinical treatment; however, there can be no assurance that such business model will not be challenged as the corporate practice of dentistry by state governmental authorities, trade associations, or others.
Byte contracts with an expansive nationwide network of independent licensed dentists and orthodontists for the provision of clinical services, which includes the oversight and control of each customer’s clinical treatment; however, there can be no assurance that such business model will not be challenged as the corporate practice of dentistry by state governmental authorities, trade associations, or others.
We cannot provide assurances that, although past cybersecurity incidents have not had a material effect on our business or operations to date and despite our efforts to ensure the integrity of our systems and the measures that we or our service providers take to anticipate, detect, avoid or mitigate such threats, a future cyber-attack would not result in material harm to us or our business and results of operations.
We cannot provide assurances that, although past cybersecurity incidents have not had a material effect on our business or operations to date and despite our efforts to ensure the integrity of our systems and the measures that we or our service providers take to anticipate, detect, avoid or mitigate such threats, a future cyberattack would not result in material harm to us or our business and results of operations.
Most of our cash deposited with banks is not insured and would be subject to the risk of bank failure. Our total liquidity also depends in part on the availability of funds under our 2018 Credit Facility.
Most of our cash deposited with banks is not insured and would be subject to the risk of bank failure. Our total liquidity also depends in part on the availability of funds under our 2023 Credit Facility.
Alternatively, we may dispose of a business at a price or on terms that are less than we had anticipated, or with the exclusion of select assets. Dispositions may also involve continued financial involvement in a divested business, such as through continuing equity ownership, transition service agreements, guarantees, indemnities or other current or contingent financial obligations.
Alternatively, we may dispose of a business at a valuation or on terms that are less favorable than we had anticipated, or with the exclusion of select assets. Dispositions may also involve continued involvement in a divested business, such as through continuing equity ownership, transition service agreements, guarantees, indemnities or other current or contingent financial obligations.
These include restrictions on the ability of companies to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. Russia may further respond in kind, and the continuation of the conflict may result in additional sanctions being enacted by the U.S., other North Atlantic Treaty Organization member states, the EU or other countries.
These include restrictions on the ability of companies to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. Russia may further respond in kind, and the continuation of the conflict may result in additional sanctions being enacted by the United States, other North Atlantic Treaty Organization member states, the EU or other countries.
We may incur additional costs or be required to make changes to our operations in order to comply with any new regulations or customer requirements. Legislation or regulations that potentially impose restrictions, caps, taxes, or other controls on emissions of greenhouse gases such as carbon dioxide, could adversely affect our operations and financial results. 34
We may incur additional costs or be required to make changes to our operations to comply with any new regulations or customer requirements. Legislation or regulations that potentially impose restrictions, caps, taxes, or other controls on emissions of greenhouse gases such as carbon dioxide, could adversely affect our operations and financial results.
We rely in part on our dealer and customer relationships and predictions of dealer and customer inventory levels in projecting future demand levels and financial results. These inventory levels may fluctuate, and may differ from our predictions, resulting in our projections of future results being different than expected.
We rely in part on our distributor and customer relationships and predictions of distributor and customer inventory levels in projecting future demand levels and financial results. These inventory levels may fluctuate, and may differ from our predictions, resulting in our projections of future results being different than expected.
With approximately two-thirds of our sales located outside the U.S., our consolidated net sales are impacted negatively by the strengthening or positively by the weakening of the U.S. dollar as compared to certain foreign currencies.
With approximately two-thirds of our sales located outside the United States, our consolidated net sales are impacted negatively by the strengthening or positively by the weakening of the U.S. dollar as compared to certain foreign currencies.
We experience significant fluctuations in quarterly sales and earnings due to a number of factors, some of which are substantially outside of our control, including but not limited to: • general economic conditions, as well as those specific to the healthcare industry and related industries; • changes in income tax laws and incentives that could create adverse tax consequences; • the execution of restructuring plans; • the complexity of our organization; • our ability to supply products to meet customer demand; • the timing of new product introductions by us and our competitors; • the timing of industry trade shows; • changes in customer inventory levels; • developments in government or third party payor reimbursement policies; • changes in customer preferences and product mix; • fluctuations in manufacturing costs; • competitors’ sales promotions; • fluctuations in currency exchange rates; and • the impact of COVID-19.
We experience significant fluctuations in quarterly sales and earnings due to several factors, some of which are substantially outside of our control, including but not limited to: • general economic conditions, as well as those specific to the healthcare industry and related industries; • changes in income tax laws and incentives that could create adverse tax consequences; • the execution of restructuring plans; • the complexity of our organization; • our ability to supply products to meet customer demand; • the timing of new product introductions by us and our competitors; • the timing of industry trade shows; • changes in customer inventory levels; • developments in government or third party payor reimbursement policies; • changes in customer preferences and product mix; • fluctuations in manufacturing costs; • competitors’ sales promotions; and • fluctuations in currency exchange rates.
Under these arrangements, performance by the acquired or divested business, or other conditions outside our control, could affect our future financial results. Additionally, if we make acquisitions, it may incur debt, assume contingent liabilities and/or additional risks, or create additional expenses, any of which might adversely affect our financial results.
Under these arrangements, the performance of the acquired or divested business, or other conditions outside our control, could affect our future financial results. Additionally, if we make acquisitions, they may incur debt, assume contingent liabilities and/or additional risks, or create additional expenses, any of which might adversely affect our financial results.
For example, certain techniques used to obtain unauthorized access, introduce malicious software, disable or degrade service, or sabotage systems may be designed to remain dormant until a triggering event and we may be unable to anticipate these techniques or implement adequate preventive measures since techniques change frequently or are not recognized until launched, and because cyber attacks can originate from a wide variety of sources.
For example, certain techniques used to obtain unauthorized access, introduce malicious software, disable or degrade service, or sabotage systems may be designed to remain dormant until a triggering event occurs and we may be unable to anticipate these techniques or implement adequate preventive measures since techniques change frequently or are not recognized until launched, and because cyberattacks can originate from a wide variety of sources.
Although we currently use and may in the future use certain financial instruments to attempt to mitigate market fluctuations in foreign exchange rates, there can be no assurance that such measures will be effective or that they will not create additional financial obligations for us.
Although we currently use and may in the future use certain financial instruments to attempt to mitigate market fluctuations in foreign exchange rates, there can be no assurance that such measures will be effective, available through financial markets or that they will not create additional financial obligations for us.
Risk Factors Summary The following is a summary of the significant risk factors that could materially impact our business, financial condition or future results, including risks related to our businesses, our international operations, our regulatory environments, ownership of our common stock, COVID-19, and other general risks: • Management identified material weaknesses in our internal control over financial reporting that resulted in errors in previously issued financial statements.
Risk Factors Summary The following is a summary of the significant risk factors that could materially impact our business, financial condition or future results, including risks related to our businesses, our international operations, our regulatory environments, ownership of our common stock, and other general risks: • Management previously identified material weaknesses in our internal control over financial reporting, some of which resulted in errors in previously issued financial statements.
Any failure, or perceived failure, by us to achieve our goals, further or initiatives, adhere to our public statements, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price.
Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price.
Anyone who circumvents our security measures could misappropriate proprietary information, including information regarding us, our employees, our service providers and/or our clients, or cause interruptions in our operations.
Anyone who circumvents our security measures could misappropriate proprietary information, including information regarding us, our employees, our service providers and/or our customers, or cause interruptions in our operations.
Certain of these risks may be heightened as a result of changing political climates which may lead to changes in areas such as trade restrictions and tariffs, regulatory requirements and exchange rate fluctuations, which may adversely affect our business and financial performance.
Certain of these risks may be heightened because of changing political climates which may lead to changes in areas such as trade restrictions and tariffs, regulatory requirements and exchange rate fluctuations, which may adversely affect our business and financial performance.
We must obtain certain approvals by, and marketing clearances from, governmental authorities, including the FDA and similar health authorities in foreign countries to market and sell our select products in those countries. These agencies regulate the marketing, manufacturing, labeling, packaging, advertising, sale and distribution of medical devices. The FDA enforces additional regulations regarding the safety of X-ray emitting devices.
We must obtain certain approvals and marketing clearances from, governmental authorities, including the FDA and similar health authorities in foreign countries to market and sell select products in those countries. These agencies regulate the marketing, manufacturing, labeling, packaging, advertising, sales and distribution of medical devices. The FDA enforces additional regulations regarding the safety of X-ray emitting devices.
The goodwill and indefinite-lived intangible asset impairment analyses are sensitive to changes in key assumptions used, such as discount rates, revenue growth rates, perpetual revenue growth rates, royalty rates, and operating margin percentages of the business as well as current market conditions affecting the dental and medical device industries in both the U.S. and globally.
The goodwill and indefinite-lived intangible asset impairment analyses are sensitive to changes in key assumptions used, such as discount rates, revenue growth rates, perpetual revenue growth rates, royalty rates, and operating margin percentages of the business as well as current market conditions affecting the dental and medical device industries in both the United States and globally.
Potential events such as extreme weather, natural disasters, worker strikes and social and political actions, such as trade wars, or other events beyond our control, could impact our ongoing business operations, including potential critical third-party vendor disruptions or failure to adhere to contractual obligations affecting our supply chain and manufacturing needs or the loss of critical information technology and telecommunications systems.
Potential events such as extreme weather, natural disasters, regional epidemics or global pandemics, worker strikes and social and political actions, such as trade wars, regional wars or conflicts or other events beyond our control, could impact our ongoing business operations, including potential critical third-party vendor disruptions or failure to adhere to contractual obligations affecting our supply chain and manufacturing needs or the loss of critical information technology and telecommunications systems.
Additionally, privacy laws, rules and regulations are also rapidly developing in other regions, including China, Brazil, South Korea, and is expanding through the U.S., state by state (e.g., California, Virginia, Colorado, Connecticut, and Utah), in parallel with federal privacy laws protecting sensitive health information.
Additionally, privacy laws, rules and regulations are also rapidly developing in other regions, including China, Brazil and South Korea, and is expanding through the United States, state by state (e.g., California, Virginia, Colorado, Connecticut, and Utah), in parallel with federal privacy laws protecting sensitive health information.
Although all medical device manufacturers were required to certify their Class I products by May 2021, the EU MDR regulations for additional Classes of medical devices is mandated to be fully enforceable by May 2024. This also includes completion of certified quality management systems to manufacturers quality management systems.
Although all medical device manufacturers were required to certify their Class I products by May 2021, the EU MDR regulations for additional Classes of medical devices are mandated to be fully enforced by May 2024. This also includes completion of certified quality management systems to manufacturers quality management systems.
If Patterson or Henry Schein ceases to purchase a significant volume of products from us, or if changes in our promotional strategies and investments result in changes in our distributor relationships or short-term uneven growth, it could have a material adverse effect on our results of operations and financial condition.
If Patterson or Henry Schein ceases to purchase a significant volume of products from us, or if changes in our promotional strategies and investments result in changes in our distributor relationships, it could have a material adverse effect on our results of operations and financial condition.
Successful product warranty claims brought against us could reduce our profits and/or impair our financial condition, and damage our reputation. Climate change and related natural disasters could negatively impact our business and financial results. We operate in more than 150 countries and our suppliers’ manufacturing facilities are located in multiple locations around the world.
Successful product warranty claims brought against us could reduce our profits and/or impair our financial condition and damage our reputation. Climate change and related natural disasters could negatively impact our business and financial results. We have sales or operations in more than 150 countries and our suppliers’ manufacturing facilities are in multiple locations around the world.
Together, our two largest distributors, Patterson and Henry Schein, accounted for approximately 17% of our annual revenue for the year ended December 31, 2022, and it is anticipated that they will continue to be the largest distribution contributors to our revenue through 2023.
Together, our two largest distributors, Patterson and Henry Schein, accounted for approximately 21% of our annual revenue for the year ended December 31, 2023, and it is anticipated that they will continue to be the largest distribution contributors to our revenue through 2024.
Any financing that we might need for acquisitions may only be available on terms that restrict our business or that impose additional costs that reduce our operating results. We may fail to realize the expected benefits of our strategic initiatives, including announced or potential future restructuring and transformation efforts.
Any financing that we might need for acquisitions may only be available on terms that restrict our business or that impose additional costs that reduce our operating results. 22 We may fail to realize the expected benefits of our strategic initiatives, including recently executed or potential future restructuring and other business transformation efforts.
There can be no assurance that dealers and customers will maintain levels of inventory in accordance with our predictions or past history, or that the timing of customers’ inventory build-up or liquidation will be in accordance with our predictions or past history. Additionally, we periodically upgrade or replace our various software systems, including our customer relationship management systems.
There can be no assurance that distributors and customers will maintain levels of inventory in accordance with our predictions or past history, or that the timing of customers’ inventory build-up or liquidation will be in accordance with our expectations or historical experience. Additionally, we periodically upgrade or replace our various software systems, including our customer relationship management systems.
Accordingly, there is a reasonable possibility that the material weaknesses identified, or other material weaknesses or deficiencies identified in the future, could result in a misstatement of accounts or disclosures that would result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis or cause us to fail to meet our obligations under securities laws, stock exchange listing rules, or debt instrument covenants to file periodic financial reports on a timely basis.
Accordingly, there is a reasonable possibility that a reoccurrence of the material weaknesses identified under Item 8 on this Form 10-K, or other material weaknesses or deficiencies identified in the future, could result in a misstatement of accounts or disclosures that would result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis or cause us to fail to meet our obligations under securities laws, stock exchange listing rules, or debt instrument covenants to file periodic financial reports on a timely basis.
RISKS RELATED TO OUR REGULATORY ENVIRONMENTS Changes in or interpretations of tax rules, operating structures, transfer pricing regulations, country profitability mix and regulations may adversely affect our effective tax rate. As a company with international operations, we are subject to income taxes, as well as non-income-based taxes, in the U.S. and various foreign jurisdictions.
RISKS RELATED TO OUR REGULATORY ENVIRONMENTS Changes in or interpretations of tax rules, operating structures, transfer pricing regulations, country profitability mix and regulations may adversely affect our effective tax rate. As a company with global operations, we are subject to income taxes, as well as non-income-based taxes, in the United States and various foreign jurisdictions.
In addition, we may have to participate in one or more interference proceedings declared by the U.S. Patent and Trademark Office, the European Patent Office or other foreign patent governing authorities, to determine the priority of inventions, which could result in substantial costs.
In addition, it may be necessary to participate in one or more interference proceedings declared by the U.S. Patent and Trademark Office, the European Patent Office or other foreign patent governing authorities, to determine the priority of inventions, which could result in substantial costs.
Below is a full description of each of such significant risk factors. RISKS RELATED TO OUR RESTATEMENT AND INTERNAL CONTROLS Management identified material weaknesses in our internal control over financial reporting that resulted in errors in previously issued financial statements.
Below is a full description of each of such significant risk factors. RISKS RELATED TO OUR INTERNAL CONTROLS Management previously identified material weaknesses in our internal control over financial reporting, some of which resulted in errors in previously issued financial statements.
These changes may be influenced by changing relationships with the dealers and customers, economic conditions and customer preference for particular products.
These changes may be influenced by changing relationships with distributors and customers, economic conditions and customer preference for particular products.
We may not be able to repay our outstanding debt in the event that we do not generate sufficient cash flow to service our debts and cross default provisions may be triggered due to a breach of covenants under our existing indebtedness.
We may not be able to repay our outstanding debt if we do not generate sufficient cash flow to service our debts and cross default provisions may be triggered due to a breach of covenants under our existing indebtedness.
Due to the complexities inherent in implementing these types of cost reduction and restructuring activities, and the quarterly phasing of related investments, we may fail to realize expected efficiencies and benefits, such as the goals for net sales growth, or may experience a delay in realizing such efficiencies and benefits, and our operations and business could be disrupted.
Due to the complexities inherent in implementing these types of cost reduction and restructuring activities, and the timing of strategic investments, we may fail to realize expected efficiencies and benefits, such as the goals for net sales growth or operating margins, or may experience a delay in realizing such efficiencies and benefits, and our operations and business could be disrupted.
As previously disclosed, we voluntarily contacted the SEC to advise that the Audit and Finance Committee was conducting an independent investigation regarding certain financial reporting matters, and we are continuing to cooperate with the SEC.
As previously disclosed in 2022, we voluntarily contacted the SEC to advise that the Audit and Finance Committee was conducting an independent investigation regarding certain financial reporting matters, and we are continuing to cooperate with the SEC. The SEC’s investigation is ongoing.
Acquisitions by us of products or businesses that are found to infringe upon the intellectual property rights of others and the resulting changes to the competitive landscape of the industry could further increase this risk.
Acquisitions by us of products, technologies or processes, either through acquisitions of businesses or assets, that are found to infringe upon the intellectual property rights of others and the resulting changes to the competitive landscape of the industry could further increase this risk.
We also have the ability to incur up to $700 million of indebtedness under the revolving credit facility (“2018 Credit Facility”), as discussed below, and may incur significantly more indebtedness in the future. Our current debt agreements contain a number of covenants and financial ratios, which we are required to satisfy.
We also can incur up to $700 million of indebtedness under the multi-currency revolving credit facility (“2023 Credit Facility”), as discussed below, and may incur significantly more indebtedness in the future. Our current debt agreements contain a number of covenants and financial ratios, which we are required to satisfy.
For example, as a result of escalating tensions and the subsequent invasion of Ukraine by Russia, the U.S., other North Atlantic Treaty Organization member states, the EU and other countries have imposed sanctions on Russia, including its major financial institutions and certain other businesses and individuals, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic.
For example, due to escalating tensions and the subsequent invasion of Ukraine by Russia, the United States, other North Atlantic Treaty Organization member states, the EU and other countries have imposed sanctions on Russia, including its major financial institutions and certain other businesses and individuals, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic.
Approximately two-thirds of our sales are located in regions outside the U.S. In addition, we anticipate that sales outside of the U.S. will continue to expand and account for a significant portion of our revenue.
Approximately two-thirds of our sales are in regions outside the United States. In addition, we anticipate that sales outside of the United States will continue to expand and account for a significant portion of our revenue.
Export controls implemented as part of sanctions could also restrict the sale of equipment or products containing U.S. developed software and technology into Russia. 26 For the year ended December 31, 2022, net sales in Russia and Ukraine were approximately 3% of our consolidated net sales, and net assets in these countries were $83 million as of December 31, 2022.
Export controls implemented as part of sanctions could also restrict the sale of equipment or products containing U.S. developed software and technology into Russia. 27 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.
Byte’s business in the U.S. is subject to various state laws, rules and policies which govern the practice of dentistry within such state.
Byte’s business in the United States is subject to various state laws, rules and policies which govern the practice of dentistry within such state.
Additionally, we generally warrant each of our products against defects in materials and workmanship for a period of one year from the date of shipment or installation plus any extended warranty period purchased by the customer. The future costs associated with providing product warranties could be material.
Additionally, we include warranties on select products against defects in materials and workmanship, which are generally for a period of one year from the date of shipment or installation plus any extended warranty period purchased by the customer. The future costs associated with providing product warranties could be material.
The failure of any bank in which we deposit our funds or that is part of our 2018 Credit Facility could reduce the amount of cash we have available for operations and additional investments in our business. 25 RISKS RELATED TO OUR INTERNATIONAL OPERATIONS Due to the international nature of our business, including increasing exposure to markets outside of the U.S., political or economic changes or other factors could harm our business and financial performance.
The failure of any bank in which we deposit our funds or that is part of our 2023 Credit Facility could reduce the amount of cash we have available for operations and additional investments in our business. 26 RISKS RELATED TO OUR GLOBAL OPERATIONS Due to the global nature of our business, including increasing exposure to markets outside of the United States, political or economic changes or other factors could harm our business and financial performance.
A breach of the covenants under our debt instruments outstanding from time to time could result in an event of default under the applicable agreement. We have debt securities outstanding of approximately $1.8 billion.
A breach of the covenants under our debt instruments outstanding from time to time could result in an event of default under the applicable agreement. We have debt securities outstanding of approximately $1.9 billion as of December 31, 2023.
Cyber attacks could also cause us to incur significant remediation costs, disrupt key business operations and divert attention of management and key information technology resources. We also face the ongoing challenge of managing access controls to our information and technology infrastructure.
Cyberattacks could also cause us to incur significant costs to recover from breaches, disrupt key business operations and divert attention of management and key information technology resources. We also face the ongoing challenge of managing access controls to our information and technology infrastructure.
We remain focused on ensuring that all our products that are considered to be medical device will be fully certified as required by the EU MDR dates and timelines.
We remain focused on ensuring that all our products that are considered to be medical devices will be fully certified as required by the EU MDR deadlines.
These regulations as well applied to all medical device manufacturers who market their medical devices in EU and all had to perform significant upgrades to quality systems and processes including technical documentation and subject them to new certification under EU MDR in order to continue to sell those products in the EU.
These regulations applied to all medical device manufacturers who market their medical devices in the EU and manufacturers were required to perform significant upgrades to quality systems and processes including technical documentation and obtain new certification under the EU MDR to continue to sell those products in the EU.
Risks and uncertainties that we face with respect to our patents and patent applications include the following: • the pending patent applications that we have filed, or to which we have exclusive rights, may not result in issued patents or may take longer than we expect to result in issued patents; • the allowed claims of any patents that are issued may not provide meaningful protection; • we may be unable to develop additional proprietary technologies that are patentable; • the patents licensed or issued to us may not provide a competitive advantage; • other companies may challenge patents licensed or issued to us; • disputes may arise regarding inventions and corresponding ownership rights in inventions and know-how resulting from the joint creation or use of intellectual property by us and our respective licensors; and • other companies may design around the technologies patented by us.
Risks and uncertainties that we face with respect to our patents and patent applications include the following: • the pending patent applications that we have filed, or to which we have exclusive rights, may not result in issued patents or may take longer than we expect to result in issued patents; • the allowed claims of any patents that are issued may not provide meaningful protection; • other companies may challenge patents licensed or issued to us; • disputes may arise regarding inventions and corresponding ownership rights in inventions and know-how resulting from the joint creation or use of intellectual property by us and our respective licensors; and • other companies may design around the technologies patented by us. 24 Our financial results may be adversely impacted if our products are found to infringe upon the intellectual property rights of others.
In addition, we make statements about our environmental, social and governance goals and initiatives through our Sustainability Report, our other non-financial reports, information provided on our website, press statements and other communications.
We make statements about our ESG goals and initiatives through our Sustainability Report, our other non-financial reports, information provided on our website, press statements and other communications.
Further, we currently do not have excess or standby computer processing or network capacity everywhere in the world to avoid disruption in the receipt, processing and delivery of data in the event of a system failure.
Disaster recovery plans, where in place, might not adequately protect us in the event of a system failure. Further, we currently do not have excess or standby computer processing or network capacity everywhere in the world to avoid disruption in the receipt, processing and delivery of data in the event of a system failure.
Our failure to maintain such ratios or a breach of the other covenants under our debt agreements outstanding from time to time could result in an event of default under the applicable agreement.
Our failure to maintain such ratios or a breach of the other covenants under our debt agreements outstanding from time to time could result in an event of default under the applicable agreement. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness.
Other laws, referred to as “anti-kickback laws,” prohibit soliciting, offering, receiving or paying remuneration in order to induce the referral of a patient or ordering, purchasing, leasing or arranging for or recommending ordering, purchasing or leasing, of items or services that are paid for by federal, state and other health care payors and programs.
Other laws, referred to as “anti-kickback laws,” prohibit soliciting, offering, receiving or paying remuneration in order to induce the referral of a patient or ordering, purchasing, leasing or arranging for or recommending ordering, purchasing or leasing, of items or services that are paid for by federal, state and other health care payors and programs. 30 The U.S. government has expressed concerns about financial relationships between suppliers and physicians and dentists.
If we are not in compliance with the FCPA and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could have a material adverse impact on our business, financial condition, results of operations and liquidity.
Failure to comply with the FCPA and other laws governing the conduct of business with government entities (including local laws), will subject us to criminal and civil penalties and other remedial measures, which could have a material adverse impact on our business, financial condition, results of operations and liquidity.
Additionally, movements in certain foreign exchange rates may unfavorably or favorably impact our results of operations, financial condition and liquidity as a number of our manufacturing and distribution operations are located outside of the U.S.
Additionally, movements in certain foreign exchange rates may impact our results of operations, financial condition and liquidity since a number of our manufacturing and distribution operations are located outside of the United States.
We have identified new products as an important part of our growth opportunities. There is no assurance that entirely new technology or approaches to dental treatment or competitors’ new products will not be introduced that could render our products obsolete.
We have identified the development of new technologies and products as an important part of our growth strategy. There is no assurance that entirely new technology or approaches to dental treatment or competitors’ new products will not be introduced that could render our products obsolete, and there is no assurance that capital allocated to R&D will yield expected benefits.
Failure to comply with these rules, regulations, self-regulatory codes, circulars and orders could result in significant civil and criminal penalties and costs, including the loss of licenses and the ability to participate in federal and state health care programs, and could have a material adverse impact on our business.
After which, the UK may impose its own differing regulatory requirements for products being imported from the EU into the UK. 29 Failure to comply with these rules, regulations, self-regulatory codes, circulars and orders could result in significant civil and criminal penalties and costs, including the loss of licenses and the ability to participate in federal and state health care programs, and could have a material adverse impact on our business.
These plans include implementation of a new operating model with five global business units designed to drive enterprise integration and align the product portfolio with our growth strategy, commencement of our central functions and infrastructure optimization to support efficiency of the overall organization, creation of a Senior Vice President of Quality and Regulatory role, designed to elevate the quality and regulatory affairs function within the management team, simplification of the management structure to bring the Company in-line with the industry best practices, and other initiatives aimed at delivering cost savings to fund critical investments in 2023 and to position the Company for sustainable future growth.
These plans included implementation of a new operating model with five global business units designed to drive enterprise integration and align the product portfolio with our growth strategy, commencement of our central functions and infrastructure optimization to support efficiency of the overall organization, and other initiatives aimed at delivering cost savings to fund critical investments in 2023 and to position the Company for sustainable future growth.
The current global supply chain and labor market challenges and inflationary pressures have negatively affected, and we expect will continue to negatively affect, our results of operations. Specifically, the Company has recently experienced higher prices and supply chain disruption for certain of our raw materials, particularly for electronic components used in our products.
The current global supply chain and labor market challenges and inflationary pressures have negatively affected, and we expect will continue to negatively affect, our results of operations. Specifically, the Company continues to experience higher prices and supply chain disruptions for certain of our raw materials, particularly for electronic components, as well as wage inflation for direct labor.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties The following is a listing of Dentsply Sirona’s principal manufacturing and distribution locations: Location Function Leased or Owned United States: Milford, Delaware (2) Manufacture of dental consumable products Owned Sarasota, Florida (1) Manufacture of orthodontic accessory products Owned Waltham, Massachusetts (1) Manufacture and distribution of dental implant products Leased Long Island City, New York (1) Manufacture of dental equipment products Leased Lancaster, Pennsylvania (3) Distribution of dental consumable and dental equipment products Leased Johnson City, Tennessee (2) Manufacture and distribution of endodontic instruments and materials Leased Richardson, Texas (1) Manufacture of orthodontic products Leased Gardena, California (1) Distribution of orthodontic products Leased Foreign: Pirassununga, Brazil (2) Manufacture and distribution of artificial teeth Owned Bensheim, Germany (1) Manufacture and distribution of dental equipment Owned Hanau, Germany (1) (2) Manufacture and distribution of precious metal dental alloys, dental ceramics and dental implant products Owned Konstanz, Germany (2) Manufacture and distribution of dental consumable products Owned Munich, Germany (2) Manufacture and distribution of endodontic instruments and materials Owned Bar Lev Industrial Park, Israel (1) Manufacture and distribution of dental implant products Owned/Leased Badia Polesine, Italy (2) Manufacture and distribution of dental consumable products Owned/Leased Otawara, Japan (1) (2) Manufacture and distribution of precious metal dental alloys, dental consumable products and orthodontic products Owned Venlo, Netherlands (3) Distribution of dental consumable products Leased Mölndal, Sweden (1) Manufacture and distribution of dental implant products and healthcare consumable products Owned Ballaigues, Switzerland (2) Manufacture and distribution of endodontic instruments, plastic components and packaging material Owned Ankara, Turkey (1) Manufacture and distribution of healthcare consumable products Owned Mexicali, Mexico (1) Manufacture of orthodontic products Leased San Jose Province, Costa Rica (1) Manufacture of orthodontic products Leased (1) These properties are included in the Technologies & Equipment segment.
Biggest changeProperties The following is a listing of Dentsply Sirona’s principal manufacturing and distribution locations: Location Function Leased or Owned United States: Milford, Delaware (2) Manufacture of dental consumable products Owned Sarasota, Florida (2) (3) Manufacture of orthodontic accessory products and dental consumable products Owned Waltham, Massachusetts (3) Manufacture and distribution of dental implant products Leased Long Island City, New York (1) Manufacture of dental equipment products Leased Lancaster, Pennsylvania (5) Distribution of dental consumable and dental equipment products Leased York, Pennsylvania (1) Distribution of dental equipment products Owned Johnson City, Tennessee (2) Manufacture and distribution of endodontic instruments and materials Leased Foreign: Pirassununga, Brazil (2) Manufacture and distribution of artificial teeth Owned Bensheim, Germany (1) Manufacture and distribution of dental equipment Owned Hanau, Germany (2) (3) Manufacture and distribution of precious metal dental alloys, dental ceramics and dental implant products Owned Konstanz, Germany (2) Manufacture and distribution of dental consumable products Owned Munich, Germany (2) Manufacture and distribution of endodontic instruments and materials Owned Bar Lev Industrial Park, Israel (3) Manufacture and distribution of dental implant products Owned/Leased Badia Polesine, Italy (2) Manufacture and distribution of dental consumable products Owned/Leased Venlo, Netherlands (5) Distribution of dental consumable products Leased Mölndal, Sweden (3) (4) Manufacture and distribution of dental implant products and healthcare consumable products Owned Ballaigues, Switzerland (2) Manufacture and distribution of endodontic instruments, plastic components and packaging material Owned Ankara, Turkey (4) Manufacture and distribution of healthcare consumable products Owned Mexicali, Mexico (3) Manufacture of orthodontic products Leased San Jose Province, Costa Rica (3) Manufacture of orthodontic products Leased (1) These properties are included in the Connected Technology Solutions segment.
Most of these sites around the world that are used exclusively for sales and distribution are leased. We believe that our properties and facilities are well maintained and are generally suitable and adequate for the purposes for which they are used. We also lease our worldwide headquarters located in Charlotte, North Carolina. 35
We conduct research and development across various locations around the world including at our Innovation Center located in Charlotte, North Carolina. We also lease our worldwide headquarters located in Charlotte, North Carolina. We believe that our properties and facilities are well maintained and are generally suitable and adequate for the purposes for which they are used. 38
(2) These properties are included in the Consumables segment. (3) These properties are distribution warehouse not managed by named segments. In addition, the Company maintain sales and distribution offices at certain of our foreign and domestic manufacturing facilities, as well as at various other U.S. and international locations.
In addition, the Company maintain sales and distribution offices at certain of our foreign and domestic manufacturing facilities, as well as at various other U.S. and international locations. Most of these sites around the world that are used exclusively for sales and distribution are leased.
Added
(2) These properties are included in the Essential Dental Solutions segment. (3) These properties are included in the Orthodontic and Implant Solutions segment. (4) These properties are included in the Wellspect Healthcare segment. (5) These properties are distribution warehouses not managed by named segments.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor additional details, see Part II, Item 8, Note 22, Commitments and Contingencies, in the Notes to Consolidated Financial Statements of this Form 10-K, which is incorporated by reference.
Biggest changeFor additional details, see Part II, Item 8, Note 21, Commitments and Contingencies, in the Notes to Consolidated Financial Statements of this Form 10-K, which is incorporated by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFor the year ended December 31, 2022, we repurchased approximately 3.1 million shares at a cost of $150 million for an average price of $48.22. 37 Performance Graph The information contained in the Performance Graph section shall not be deemed to be filed as part of this Annual Report and does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate the graph by reference.
Biggest changeDuring the three months ended December 31, 2023, the Company had the following activity with respect to the share repurchase program: (in millions, except per share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Cost of Shares Purchased Dollar Value of Shares that May be Purchased Under the Stock Repurchase Program Period October 1, 2023 to October 31, 2023 — $ — $ — $ 590 November 1, 2023 to November 30, 2023 3.1 29.91 93 1,497 December 1, 2023 to December 31, 2023 1.8 32.15 57 1,440 4.9 $ 30.73 $ 150 For the year ended December 31, 2023, we repurchased approximately 8.8 million shares at a cost of $300 million for an average price of $34.20. 40 Performance Graph The information contained in the Performance Graph section shall not be deemed to be filed as part of this Annual Report and does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate the graph by reference.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is traded on the Nasdaq National Market under the symbol “XRAY.” Approximately 93,713 holders of our common stock are in “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is traded on the Nasdaq National Market under the symbol “XRAY.” Approximately 97,108 holders of our common stock are in “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
The graph tracks the performance of a $100 investment in DENTSPLY SIRONA’s Inc.'s common stock and in each index (with the reinvestment of all dividends) from December 31, 2017 to December 31, 2022. The S&P 500 Index and the S&P Health Care Index are included for comparative purposes only.
The graph tracks the performance of a $100 investment in DENTSPLY SIRONA’s Inc.’s common stock and in each index (with the reinvestment of all dividends) from December 31, 2018 to December 31, 2023. The S&P 500 Index and the S&P Health Care Index are included for comparative purposes only.
At December 31, 2022, the Company had authorization to repurchase $740 million in shares of common stock remaining under this program.
At December 31, 2023, the Company had authorization to repurchase $1.44 billion in shares of common stock remaining under this program.
In addition, we estimate, based on information supplied by our transfer agent, that there are 220 holders of record of the our common stock. Stock Repurchase Program On July 28, 2021 the Board of Directors approved a share repurchase program, up to $1.0 billion.
In addition, we estimate, based on information supplied by our transfer agent, that there are 208 holders of record of our common stock. Stock Repurchase Program On November 7, 2023, the Board of Directors approved an increase to the authorized share repurchase program of $1.0 billion.
They do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the stock involved, and they are not intended to forecast or be indicative of possible future performance of the Company’s common stock. 12/17 12/18 12/19 12/20 12/21 12/22 DENTSPLY SIRONA Inc. 100.00 57.00 87.29 81.51 87.47 50.63 S&P 500 100.00 95.62 125.72 148.85 191.58 156.89 S&P Health Care 100.00 106.47 128.64 145.93 184.07 180.47 38
They do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of the stock involved, and they are not intended to forecast or be indicative of possible future performance of the Company’s common stock. 12/18 12/19 12/20 12/21 12/22 12/23 DENTSPLY SIRONA Inc. 100.00 152.87 142.74 153.19 88.67 100.63 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 S&P Health Care 100.00 120.82 137.07 172.89 169.51 172.99 41
Removed
During the three months ended December 31, 2022, we had no repurchases of common shares under the stock repurchase program.
Removed
On March 8, 2022, the Company entered into an Accelerated Share Repurchase Agreement ("ASR Agreement") with a financial institution to purchase the Company's common stock based on the volume-weighted average price of the Company's common stock during the term of the agreement, less a discount.
Removed
The ASR agreement was accounted for as an initial delivery of common shares in a treasury stock transaction on March 9, 2022 of $120 million and a forward contract indexed to the Company's common stock for an amount of common shares to be determined on the final settlement date.
Removed
The forward contract met all applicable criteria for equity classification and was not accounted for as a derivative instrument. Therefore, the forward contract was recorded as Capital in excess of par value and upon final settlement was recorded as Treasury Stock in the Consolidated Balance Sheets at December 31, 2022.
Removed
The initial delivery and final settlement of common stock reduced the weighted average common shares outstanding for both basic and diluted EPS. The forward contract did not impact the weighted average common shares outstanding for diluted EPS.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeLoss from equity method investments for the year ended December 31, 2022 increased by $26 million as compared to the year ended December 31, 2021 and primarily relates to a write-off of the Company's ownership position in a privately-held dental investment company following impairment of underlying investments held by the investment company and the Company's determination that the remaining investment is not recoverable. 48 Income Taxes and Net (Loss) Income Year Ended December 31, (in millions, except per share data and percentages) 2022 2021 $ Change (Benefit) provision for income taxes $ (105) $ 134 $ (239) Effective income tax rate 9.9 % 24.6 % Net (loss) income attributable to Dentsply Sirona $ (950) $ 411 $ (1,361) Net (loss) income per common share - diluted (a) $ (4.41) $ 1.87 Percentages are based on actual values and may not recalculate due to rounding.
Biggest changeIncome 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.
Indefinite-Lived Intangible Asset Impairment 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.
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.
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 Impairment Goodwill represents the excess cost over the fair value of the identifiable net assets of business acquired.
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 course of the year.
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.
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. 52 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’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.
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. 40 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.
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. 44 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.
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 particular repatriation activities have not and are not expected to result in a significant incremental tax liability to the Company.
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.
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 cost structure. Meanwhile, the Company intends to continue pursuing opportunities to expand the Company’s product offerings, technologies, and sales and service infrastructure through partnerships.
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.
The Company’s operations in Ukraine consist primarily of R&D activities, which continue uninterrupted from other locations in order to focus on the safety of employees.
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.
The royalty rate, which is based on the estimated rate applied against forecasted sales, is tax-effected 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.
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.
(“Dentsply Sirona” or the “Company”), is the world’s largest manufacturer of professional dental products and technologies, with a 136-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.
(“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's credit facilities are further discussed in Note 15, Financing Arrangements, to 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’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.
Although the professional dental market has experienced consolidation, it remains fragmented. Management believes that there will continue to be adequate 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.
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.
The level of inventory for CAD/CAM units held by dealers 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.
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.
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.
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.
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, 2022, the Company held $42 million of precious metals on consignment from several financial institutions.
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.
In the event that 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.
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.
A significant amount of judgment is involved in determining if an indicator of impairment has occurred during the course of the year. Such indicators may include a decline in expected cash flow, unanticipated competition or slower growth rates, among others.
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.
Changes in dealer 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 of consolidated net sales and operating income.
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.
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), future operating margin percentages, and net working capital changes of the reporting unit’s business. These assumptions may vary significantly among the reporting units.
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.
As a result, the Company has experienced higher prices for certain of our raw materials, particularly for electronic components which have in some cases required incremental procurement costs such as brokers' fees during the year, and a consequently negative impact to margins.
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.
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, 2022 and 2021; • 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. 2022 Operational Highlights For the year ended December 31, 2022, • Net sales decreased 7.3% compared to the prior year.
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.
The revenue growth rate assumptions were developed in consideration of future expectations which included, but were not limited to, the current and ongoing impact of the COVID-19 pandemic, 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.
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.
Distributor inventory levels may fluctuate, and may differ from the Company’s projections, resulting in the Company’s forecast of future results being different than expected. There can be no assurance that the Company’s dealers and customers will maintain levels of inventory or patterns of build and liquidation timing in accordance with the Company’s predictions or past history.
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.
As explained further in the Results of Operations section below, the Company has partly offset these elevated costs in certain areas of the business with price increases during the year.
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.
At December 31, 2022, the Company has a valuation allowance of $645 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.
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.
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 during the year ended December 31, 2022 as a result of these developments.
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.
The Company’s reporting units are either an operating segment or one level below its operating segments, as determined in accordance with ASC 350. The quantitative evaluation of impairment involves comparing the current fair value of each reporting unit to its net book value, including goodwill.
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. 54 The quantitative evaluation of impairment involves comparing the current fair value of each reporting unit to its net book value, including goodwill.
The lines of credit have no major restrictions and are provided under demand notes between the Company and the lending institutions. At December 31, 2022, the Company has $22 million outstanding under short-term borrowing arrangements. The Company’s revolving credit facility, term loans and senior notes contain certain covenants relating to the Company's operations and financial condition.
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.
Demand can also fluctuate based on the timing of dental tradeshows 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 the recent COVID-19 pandemic. The Company has a focus on maximizing operational excellence on a global basis.
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.
(a) See Note 7, 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 US GAAP income.
(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.
The Company has the ability to repatriate cash to the U.S., 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.
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.
Those future expectations include, but are not limited to, the current and ongoing impact of the COVID-19 pandemic, 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 U.S. and globally, when determining its assumptions.
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.
Should the higher inflationary environment continue, the Company may be likely to continue to be unable to raise the prices of our products and services sufficiently to keep up with the rate of inflation which could have a material adverse effect on our results of operations and financial condition.
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 Company had $95 million outstanding borrowings under the commercial paper facility at December 31, 2022 resulting in $605 million remaining available under the revolving credit and commercial paper facilities. The Company also has access to $50 million in uncommitted short-term financing under lines of credit from various financial institutions.
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 deterioration in macroeconomic conditions has also negatively affected demand for the Company's products and may continue to do so into the future. Specifically, the increase in interest rates during the year has put pressure on the ability of our customers to obtain financing for equipment purchases which affects volumes for these products.
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.
For additional discussion of associated risks, refer to Part I, Item 1A, "Risk Factors" - Risks Related to Our International Operations .
For additional discussion of associated risks, refer to Part I, Item 1A, “Risk Factors” - Risks Related to Our International Operations.
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.
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.
At December 31, 2022 , management believed that sufficient liquidity was available in the U.S. and expects this to remain for the next twelve months.
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 expects on an ongoing basis to be able to finance operating cash require ments, capital expenditures, and debt service from the current cash, cash equivalents, cash flows from operations and amounts available under its existing borrowing facilities.
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 require ments, capital expenditures, and debt service from the current cash, cash equivalents, cash flows from operations and amounts available under its existing borrowing facilities.
In addition, changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, and the conflict in Ukraine have all contributed to a period of higher inflation across the industry and the regions in which the Company operates.
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.
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, 2022, the Company held 49.3 million shares of treasury stock.
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.
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.
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.
For the year ended December 31, 2022, net sales in Russia and Ukraine were approximately 3% of our consolidated net sales, and net assets in these countries were $83 million. T hese net assets include $71 million of cash and cash equivalents held within Russia as of December 31, 2022.
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.
The performance of the Company is measured on this metric along with other performance metrics. 41 The Company discloses organic sales to allow investors to evaluate the performance of the Company’s operations exclusive of the items listed above that 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 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.
During fiscal year 2022, both net sales and gross profit were adversely impacted due to the significant strengthening of the U.S. dollar against foreign currencies.
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.
The Company believes that this supplemental information is helpful in understanding underlying net sales trends. Business Drivers The primary drivers of organic sales 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.
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.
For the year ended December 31, 2022, the number of days for sales outstanding in accounts receivable decreased by 5 days to 55 days at December 31, 2022 as compared to 60 days at December 31, 2021, and the number of days of sales in inventory increased by 27 days to 137 days at December 31, 2022 as compared to 110 days at December 31, 2021.
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 "organic sales" measure is not calculated in accordance with US GAAP; therefore, this item represents a Non-GAAP measure. This Non-GAAP measure 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 US GAAP.
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.
The Company's ratio of total net debt to total capitalization was as follows: Year Ended December 31, (in millions, except percentages) 2022 2021 Current portion of debt $ 118 $ 182 Long-term debt 1,826 1,913 Less: Cash and cash equivalents 365 339 Net debt $ 1,579 $ 1,756 Total equity 3,812 4,997 Total capitalization $ 5,391 $ 6,753 Total net debt to total capitalization ratio 29.3 % 26.0 % 54 At December 31, 2022, the Company had a total remaining borrowing capacity of $632 million under lines of credit, including lines available under its short-term arrangements and revolving credit facility.
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 Long-term debt 1,796 1,826 Less: Cash and cash equivalents 334 365 Net debt $ 1,784 $ 1,579 Total equity 3,294 3,812 Total capitalization $ 5,078 $ 5,391 Total net debt to total capitalization ratio 35.1 % 29.3 % 57 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.
In anticipation of a continued inflationary trend and potentially deteriorating macroeconomic environment, the Company has attempted to mitigate these pressures through the following actions: • 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 • Optimizing our customer management and implementing strategic investments in our commercial sales organization in key markets, particularly the U.S.
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 43 • Refining our focus on developing a winning portfolio with global scale to maximize market share in a competitive pricing environment.
Rest of World 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 Net sales $ 971 $ 1,076 $ (105) (9.8 %) Foreign exchange impact (9.6 %) Divestitures and discontinued products (0.1 %) Organic sales (0.1 %) Percentages are based on actual values and may not recalculate due to rounding.
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 Net sales $ 978 $ 971 $ 7 0.7 % Unfavorable foreign exchange impact (4.4 %) Organic sales 5.1 % Percentages are based on actual values and may not recalculate due to rounding.
On an organic basis (a Non-GAAP measure as defined under the heading "Key Performance Measurements" below) net sales decreased 0.5% for the year ended December 31, 2022 compared to 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 by Segment Technologies & Equipment 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 Net sales $ 2,318 2,504 $ (186) (7.4 %) Foreign exchange impact (7.9 %) Acquisitions 0.1 % Organic sales 0.4 % Percentages are based on actual values and may not recalculate due to rounding.
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 Net sales $ 1,550 $ 1,559 $ (9) (0.6 %) Unfavorable foreign exchange impact (0.4 %) Organic sales (0.2 %) Percentages are based on actual values and may not recalculate due to rounding.
These positive drivers were offset by the impact of ongoing global supply chain constraints and lower volumes due to product availability, particularly for certain Equipment & Instruments products which rely on electronic components , as well as the impact of COVID-19 reducing demand in certain markets, particularly China.
The decrease in organic sales was primarily due to the im pact 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.
The impact of global economic conditions In addition to the residual impacts of the COVID-19 pandemic and the war in Ukraine, markets in several regions particularly in Europe have experienced varying degrees of recessionary pressures and face continued concerns about the systemic impacts of adverse economic conditions and geopolitical issues.
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.
Primarily as a result of this activity, combined with a decrease of $60 million due to exchange rate fluctuations on debt denominated in foreign currencies, the Company's total borrowings decreased by a net $151 million during the year ended December 31, 2022.
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.
Other expense (income), net Other expense (income), net for the year ended December 31, 2022 compared to the year ended December 31, 2021 was as follows: Year Ended December 31, (in millions, except percentages) 2022 2021 $ Change Loss (gain) on sales or disposal of non-core businesses $ 3 $ (7) $ 10 Foreign exchange losses (gains) (a) 11 (6) 17 Loss from equity method investments 36 10 26 Defined benefit pension plan expenses (income) 7 10 (3) Other non-operating loss 1 1 — Other expense (income), net $ 58 $ 8 $ 50 (a) Foreign exchange losses (gains) are primarily related to the revaluation of intercompany payables and loans.
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. 50 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, (in millions) 2023 2022 $ Change 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.
The Company also manufactures and markets healthcare consumable products. 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 U.S. on Nasdaq under the symbol XRAY.
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.
Net Sales by Region United States 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 Net sales $ 1,392 $ 1,480 $ (88) (5.9 %) Foreign exchange impact (1.4 %) Acquisitions 0.2 % Divestitures and discontinued products (0.1 %) Organic sales (4.6 %) Percentages are based on actual values and may not recalculate due to rounding.
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 Net sales $ 1,427 $ 1,516 $ (89) (5.8 %) Unfavorable foreign exchange impact (5.2 %) Organic sales (0.6 %) Percentages are based on actual values and may not recalculate due to rounding.
The process of determining significant estimates is fact specific and takes into account 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.
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.
Net sales were negatively impacted by approximately 6.8% due to the strengthening of the U.S. dollar over the prior year period. • Net loss was $950 million as compared to net income of $411 million for the prior year primarily due to an goodwill impairment charge of $1,187 million.
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.
Organic sales is an important internal measure for the Company, and its senior management who receive a monthly analysis of operating results that includes organic sales.
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.
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.
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.
The impact of developments in Ukraine In February 2022, as a result of the invasion of Ukraine by Russia, economic sanctions were imposed by the U.S., the EU, and certain other countries on Russian financial institutions and businesses.
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.
For additional details, see Item 7A "Quantitative and Qualitative Disclosure About Market Risk - Consignment Arrangements." 55 Contractual Obligations The Company's scheduled contractual cash obligations at December 31, 2022 were as follows: Within 1 Year Years 2-3 Years 4-5 Greater Than 5 Years Total (in millions) Long-term borrowings, including finance leases $ 1 $ 227 $ 303 $ 1,340 $ 1,871 Operating leases 61 84 41 37 223 Purchase commitments 176 193 43 — 412 Interest on long-term borrowings, net of interest rate swap agreements 47 91 73 81 292 Postemployment obligations 25 47 51 128 251 Precious metal consignment agreements 42 — — — 42 $ 352 $ 642 $ 511 $ 1,586 $ 3,091 Due to the uncertainty with respect to the timing of future cash flows associated with the Company's unrecognized tax benefits at December 31, 2022, the Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority; therefore, $55 million of unrecognized tax benefits has been excluded from the contractual obligations table above.
For additional details, see Item 7A “Quantitative and Qualitative Disclosure About Market Risk - Consignment Arrangements.” 58 Contractual Obligations The Company’s scheduled contractual cash obligations at December 31, 2023 were as follows: Within 1 Year Years 2-3 Years 4-5 Greater Than 5 Years Total (in millions) Long-term borrowings, including finance leases $ 77 $ 366 $ 269 $ 1,197 $ 1,909 Operating leases 62 77 37 23 199 Purchase commitments 193 136 6 — 335 Interest on long-term borrowings, net of interest rate swap agreements 50 90 71 50 261 Postemployment obligations 26 47 51 124 248 Precious metal consignment agreements 30 — — — 30 $ 438 $ 716 $ 434 $ 1,394 $ 2,982 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.
Other Income and Expenses Year Ended December 31, (in millions, except percentages) 2022 2021 $ Change % Change Interest expense, net $ 60 $ 55 $ 5 9.6 % Other expense (income), net 58 8 50 NM Net interest and other expense $ 118 $ 63 $ 55 Percentages are based on actual values and may not recalculate due to rounding.
Other Income and Expenses Year Ended December 31, (in millions, except percentages) 2023 2022 $ Change % Change Interest expense, net $ 81 $ 65 $ 16 24.2 % 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.
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.
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.
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. 50 A change in any of these estimates and assumptions used in the annual test, as well as unfavorable changes in the ongoing COVID-19 pandemic, or 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.
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.
Diluted loss per share was $4.41 per share compared to net income per share of $1.87 in the prior year. • Cash from operations was $517 million, as compared to $657 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.
Although the Company has experienced recent improvement in its supply chain, we expect a continuation of these trends including disruptions and inflationary pressure on the cost of both raw material and wages, the effect of which will depend on the Company’s ability to successfully mitigate and offset the related impacts.
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.
Europe 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 Net sales $ 1,559 $ 1,675 $ (116) (6.9 %) Foreign exchange impact (9.8 %) Divestitures and discontinued products (0.1 %) Organic sales 3.0 % Percentages are based on actual values and may not recalculate due to rounding. 45 The increase in organic sales was primarily due to overall higher demand for Endodontic & Restorative products.
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 Net sales $ 270 $ 303 $ (33) (11.0 %) Unfavorable foreign exchange impact (11.3 %) Organic sales 0.3 % Percentages are based on actual values and may not recalculate due to rounding.
Adjustments to the uncertain tax positions are recorded when taxing authority examinations are completed, statutes of limitation are closed, changes in tax laws occur or as new information comes to light with regard to the technical merits of the tax position. 53 LIQUIDITY AND CAPITAL RESOURCES Year Ended December 31, (in millions) 2022 2021 $ Change Cash provided by (used in): Operating activities $ 517 $ 657 $ (140) Investing activities (138) (358) 220 Financing activities (329) (379) 50 Effect of exchange rate changes on cash and cash equivalents (24) (19) (5) Net increase (decrease) in cash and cash equivalents $ 26 $ (99) $ 125 Cash provided by operating activities decreased primarily as a result of lower sales during the current period, as well as a build-up in inventory partly as a consequence of temporary COVID-19 related shutdowns in China.
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. 56 LIQUIDITY AND CAPITAL RESOURCES Year Ended December 31, (in millions) 2023 2022 $ Change Cash provided by (used in): Operating activities $ 377 $ 517 $ (140) Investing activities (89) (138) 49 Financing activities (307) (329) 22 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.
The Company anticipates that the restructuring plan will be substantially completed within the next eighteen months and result in $200 to $225 million in net annual cost savings. 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.
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.
Such indicators may include a decline in expected cash flows, unanticipated competition 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.
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.
The Company's borrowing capacity includes a $700 million credit facility from 2018 available through July 28, 2024. The Company also has available an aggregate $500 million under a U.S. dollar commercial paper 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.
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. 51 The fair value of acquired tradenames and trademarks is estimated by the use of a relief from royalty method, which values an indefinite-lived intangible asset by estimating the royalties saved through the ownership of an asset.
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.
Although the internal investigation has been completed, related costs are expected to continue as a material trend into 2023 as the Company works to complete its remediation activities described in Part II, Item 9A Controls and Procedures of this Form 10-K, and incurs legal defense costs pertaining to the matters described in Note 22 Commitments and Contingencies to the financial statements included in Part II, Item 8. 56 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.
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. 59 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.
The continued strength of the U.S. dollar could continue to adversely impact the Company's results. 43 RESULTS OF OPERATIONS Net Sales 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 Net sales $ 3,922 $ 4,231 $ (309) (7.3 %) Foreign exchange impact (6.8 %) Acquisitions 0.1 % Divestitures and discontinued products (0.1 %) Organic sales (0.5 %) Percentages are based on actual values and may not recalculate due to rounding.
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 Net sales $ 3,965 $ 3,922 $ 43 1.1 % Unfavorable foreign exchange impact (1.1 %) Organic sales 2.2 % Percentages are based on actual values and may not recalculate due to rounding.
For further details see Item 8, Note 12, Goodwill and Intangible Assets, in the Notes to the Audited Consolidated Financial Statements of this Form 10-K.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThese 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.
Biggest changeThese 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.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company’s major market risk exposures are changing interest rates, movements in foreign currency exchange rates and potential price volatility of commodities used by the Company in its manufacturing processes.
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 through the use of 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 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.
At December 31, 2022, 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 $42 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.
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.
These compensatory payments are considered to be a cost of the metals purchased and are recorded as part of the cost of products sold. 58
These compensatory payments are considered to be a cost of the metals purchased and are recorded as part of the cost of products sold. 61
At December 31, 2022, 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 $11 million. 57 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.
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. 60 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.
At December 31, 2022, the Company had approximately 31,000 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 $42 million.
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.
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, Canadian dollars, British pounds, Swiss francs and Japanese yen.
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.
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, 2022, the average annual rate charged by the consignor banks was 2.6%.
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%.
The Company accounts for the forward foreign exchange contracts as cash flow hedges. 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.
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.
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’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.
Removed
In order to limit the unanticipated earnings fluctuations from volatility in commodity prices, the Company selectively enters into commodity swaps to convert variable raw material costs to fixed costs. The Company does not hold or issue derivative financial instruments for speculative or trading purposes.
Added
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.

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