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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
Commission File Number 0-16211
DENTSPLY SIRONA Inc.
(Exact name of registrant as specified in its charter)
Delaware
39-1434669
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
13320 Ballantyne Corporate Place, Charlotte, North Carolina
28277-3607
(Address of principal executive offices)
(Zip Code)
(844) 848-0137
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $.01 per shareXRAYThe Nasdaq Stock Market LLC

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

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

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

Large accelerated filer  x
Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  At November 3, 2020, DENTSPLY SIRONA Inc. had 218,555,259 shares of common stock outstanding.



DENTSPLY SIRONA Inc.

TABLE OF CONTENTS
 
Page

2


PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net sales$894.8 $962.1 $2,259.7 $2,917.7 
Cost of products sold452.5 448.1 1,173.5 1,363.2 
Gross profit442.3 514.0 1,086.2 1,554.5 
Selling, general, and administrative expenses341.9 399.3 1,014.5 1,262.1 
Goodwill impairment  156.6  
Restructuring and other costs18.7 5.2 62.5 68.1 
Operating income (loss)81.7 109.5 (147.4)224.3 
Other income and expenses:
Interest expense14.5 6.6 33.5 23.0 
Interest income(0.4)(0.7)(1.8)(2.0)
Other expense (income), net0.9 (2.9)3.8 (4.6)
Income (loss) before income taxes66.7 106.5 (182.9)207.9 
Provision (benefit) for income taxes12.5 21.5 (1.3)47.3 
Net income (loss)54.2 85.0 (181.6)160.6 
Less: Net income (loss) attributable to noncontrolling interest0.4  (0.1) 
Net income (loss) attributable to Dentsply Sirona$53.8 $85.0 $(181.5)$160.6 
Net income (loss) per common share attributable to Dentsply Sirona:
Basic$0.25 $0.38 $(0.83)$0.72 
Diluted$0.25 $0.38 $(0.83)$0.71 
Weighted average common shares outstanding:
Basic218.5 223.1 219.4 223.5 
Diluted219.2 224.9 219.4 225.2 

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
3


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net income (loss)$54.2 $85.0 $(181.6)$160.6 
Other comprehensive income (loss), net of tax:
 Foreign currency translation gain (loss)84.8 (127.5)40.0 (144.8)
 Net (loss) gain on derivative financial instruments(19.3)20.1 (22.2)12.0 
 Pension liability gain1.6 0.9 4.7 2.7 
Total other comprehensive income (loss), net of tax67.1 (106.5)22.5 (130.1)
Total comprehensive income (loss)121.3 (21.5)(159.1)30.5 
Less: Comprehensive income attributable to noncontrolling interests  0.4 0.3 
Total comprehensive income (loss) attributable to Dentsply Sirona$121.3 $(21.5)$(159.5)$30.2 

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
4


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)
September 30, 2020December 31, 2019
Assets
Current Assets:
Cash and cash equivalents$1,272.0 $404.9 
Accounts and notes receivables-trade, net628.1 782.0 
Inventories, net489.1 561.7 
Prepaid expenses and other current assets190.4 251.3 
Total Current Assets2,579.6 1,999.9 
Property, plant and equipment, net772.4 802.4 
Operating lease right-of-use assets, net144.1 159.3 
Identifiable intangible assets, net2,058.1 2,176.3 
Goodwill3,282.7 3,396.5 
Other noncurrent assets59.0 68.5 
Total Assets$8,895.9 $8,602.9 
Liabilities and Equity
Current Liabilities:
Accounts payable$242.8 $307.9 
Accrued liabilities564.1 629.2 
Income taxes payable75.2 56.1 
Notes payable and current portion of long-term debt296.1 2.3 
Total Current Liabilities1,178.2 995.5 
Long-term debt1,930.0 1,433.1 
Operating lease liabilities105.4 119.5 
Deferred income taxes423.1 479.6 
Other noncurrent liabilities496.9 480.3 
Total Liabilities4,133.6 3,508.0 
Commitments and contingencies  
Equity:
Preferred stock, $1.00 par value; 0.25 million shares authorized; no shares issued
  
Common stock, $0.01 par value;
2.6 2.6 
400.0 million shares authorized, and 264.5 million shares issued at September 30, 2020 and December 31, 2019
218.5 million and 221.3 million shares outstanding at September 30, 2020 and December 31, 2019, respectively
Capital in excess of par value6,592.4 6,586.7 
Retained earnings1,156.2 1,404.2 
Accumulated other comprehensive loss(577.6)(599.7)
Treasury stock, at cost, 46.0 million and 43.2 million shares at September 30, 2020 and December 31, 2019, respectively
(2,413.1)(2,301.3)
Total Dentsply Sirona Equity4,760.5 5,092.5 
Noncontrolling interests1.8 2.4 
Total Equity4,762.3 5,094.9 
Total Liabilities and Equity$8,895.9 $8,602.9 
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
5


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions, except per share amounts)
(unaudited)

Common
Stock
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total Dentsply Sirona
Equity
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2019$2.6 $6,586.7 $1,404.2 $(599.7)$(2,301.3)$5,092.5 $2.4 $5,094.9 
Net loss— — (139.9)— — (139.9)— (139.9)
Other comprehensive (loss) income— — — (112.5)— (112.5)0.3 (112.2)
Exercise of stock options— (0.5)— — 4.3 3.8 — 3.8 
Stock based compensation expense— 9.4 — — — 9.4 — 9.4 
Funding of employee stock purchase plan— 0.8 — — 1.3 2.1 — 2.1 
Treasury shares purchased— (28.0)— — (112.0)(140.0)— (140.0)
Restricted stock unit distributions— (14.8)— — 8.7 (6.1)— (6.1)
Restricted stock unit dividends— 0.3 (0.3)— — — —  
Cash dividends ($0.1000 per share)
— — (21.8)— — (21.8)— (21.8)
Balance at March 31, 2020$2.6 $6,553.9 $1,242.2 $(712.2)$(2,399.0)$4,687.5 $2.7 $4,690.2 
Net loss— — (95.4)— — (95.4)(0.5)(95.9)
Other comprehensive income— — — 67.5 — 67.5 0.1 67.6 
Exercise of stock options— 0.3 — — 1.3 1.6 — 1.6 
Stock based compensation expense— 10.3 — — — 10.3 — 10.3 
Treasury shares purchased— 28.0 — — (28.0) —  
Restricted stock unit distributions— (16.0)— — 9.5 (6.5)— (6.5)
Restricted stock unit dividends— 0.2 (0.2)— — — — — 
Cash dividends ($0.1000 per share)
— — (21.9)— — (21.9)— (21.9)
Balance at June 30, 2020$2.6 $6,576.7 $1,124.7 $(644.7)$(2,416.2)$4,643.1 $2.3 $4,645.4 
Net income— — 53.8 — — 53.8 0.4 54.2 
Other comprehensive income— — — 67.1 — 67.1 — 67.1 
Acquisition of noncontrolling interest— 0.2 — — — 0.2 (0.9)(0.7)
Exercise of stock options— (0.5)— — 0.6 0.1 — 0.1 
Stock based compensation expense— 16.5 — — — 16.5 — 16.5 
Funding of employee stock purchase plan— 0.9 — — 1.7 2.6 — 2.6 
Restricted stock unit distributions— (1.6)— — 0.8 (0.8)— (0.8)
Restricted stock unit dividends— 0.2 (0.2)— — — — — 
Cash dividends ($0.1000 per share)
— — (22.1)— — (22.1)— (22.1)
Balance at September 30, 2020$2.6 $6,592.4 $1,156.2 $(577.6)$(2,413.1)$4,760.5 $1.8 $4,762.3 


6


Common
Stock
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total Dentsply Sirona
Equity
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2018$2.6 $6,522.3 $1,225.9 $(478.7)$(2,151.0)$5,121.1 $11.9 $5,133.0 
Net income— — 39.2 — — 39.2  39.2 
Other comprehensive (loss) income— — — (58.7)— (58.7)0.3 (58.4)
Divestiture of noncontrolling interest— — — — — — (10.4)(10.4)
Exercise of stock options— 1.5 — — 18.2 19.7 — 19.7 
Stock based compensation expense— 9.1 — — — 9.1 — 9.1 
Funding of employee stock purchase plan — 0.1 — — 1.9 2.0 — 2.0 
Restricted stock unit distributions— (12.8)8.0 (4.8)— (4.8)
Restricted stock unit dividends— 0.2 (0.2)— — — —  
Cash dividends ($0.0875 per share)
— — (19.9)— — (19.9)— (19.9)
Balance at March 31, 2019$2.6 $6,520.4 $1,245.0 $(537.4)$(2,122.9)$5,107.7 $1.8 $5,109.5 
Net income— — 36.4 — — 36.4  36.4 
Other comprehensive income— — — 34.8 — 34.8  34.8 
Exercise of stock options— 6.3 — — 50.2 56.5 — 56.5 
Stock based compensation expense— 25.2 — — — 25.2 — 25.2 
Treasury shares purchased— — — — (60.0)(60.0)— (60.0)
Restricted stock unit distributions— (0.8)— — 0.7 (0.1)— (0.1)
Restricted stock unit dividends— 0.2 (0.2)— — — —  
Cash dividends ($0.0875 per share)
— — (19.4)— — (19.4)— (19.4)
Balance at June 30, 2019$2.6 $6,551.3 $1,261.8 $(502.6)$(2,132.0)$5,181.1 $1.8 $5,182.9 
Net income— — 85.0 — — 85.0  85.0 
Other comprehensive loss— — — (106.5)— (106.5) (106.5)
Exercise of stock options— 0.4 — — 2.0 2.4 — 2.4 
Stock based compensation expense— 15.4 — — — 15.4 — 15.4 
Funding of employee stock purchase plan— 0.2 — — 2.0 2.2 — 2.2 
Treasury shares purchased— — — — (100.0)(100.0)— (100.0)
Restricted stock unit distributions— (0.4)— — 0.3 (0.1)— (0.1)
Restricted stock unit dividends— 0.3 (0.3)— — — —  
Cash dividends ($0.1000 per share)
— — (22.2)— — (22.2)— (22.2)
Balance at September 30, 2019$2.6 $6,567.2 $1,324.3 $(609.1)$(2,227.7)$5,057.3 $1.8 $5,059.1 
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
7



DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Nine Months Ended September 30,
20202019
Cash flows from operating activities:
Net (loss) income$(181.6)$160.6 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation103.8 101.6 
Amortization of intangible assets142.6 142.9 
Amortization of deferred financing costs3.4 2.1 
Fixed asset impairment2.4 33.4 
Goodwill impairment156.6  
Indefinite-lived intangible asset impairment38.7 5.3 
Definite-lived intangible asset impairment 3.8 
Deferred income taxes(52.7)(39.9)
Stock based compensation expense36.2 49.8 
Restructuring and other costs - non-cash5.8 15.2 
Other non-cash income(4.7)(12.4)
Loss on disposal of property, plant and equipment0.7 2.9 
Gain on divestiture of noncontrolling interest (8.7)
Loss on sale of non-strategic businesses and product lines 14.0 
Changes in operating assets and liabilities, net of acquisitions:
Accounts and notes receivable-trade, net149.1 (20.7)
Inventories, net73.8 (48.4)
Prepaid expenses and other current assets50.2 (3.6)
Other noncurrent assets8.0 (14.4)
Accounts payable(64.7)(30.5)
Accrued liabilities(72.6)(35.5)
Income taxes(9.9)11.4 
Other noncurrent liabilities(13.6)4.6 
Net cash provided by operating activities371.5 333.5 
Cash flows from investing activities:
Capital expenditures(60.0)(86.9)
Cash paid for acquisitions of businesses and equity investments, net of cash acquired(2.0)(3.3)
Cash received on sale of non-strategic businesses or product lines 11.6 
Cash received on derivative contracts57.8 34.5 
Cash paid on derivative contracts(0.9) 
Liquidation of short term investments 0.1 
Proceeds from sale of property, plant and equipment, net0.7 4.3 
Net cash used in investing activities(4.4)(39.7)
Cash flows from financing activities:
Repayments on short-term borrowings(1.2)(67.4)
Cash paid for treasury stock(140.0)(160.0)
Cash dividends paid(65.9)(58.7)
Cash paid for acquisition of noncontrolling interest of consolidated subsidiary(2.3) 
Proceeds from long-term borrowings1,448.5 119.6 
Repayments of long-term borrowings(701.0)(251.2)
Deferred financing costs(6.3)(0.7)
Proceeds from exercised stock options6.0 78.8 
Cash paid for contingent consideration on prior acquisitions(3.0)(30.7)
Cash paid on derivative contracts(30.5) 
Net cash provided by (used in) financing activities504.3 (370.3)
Effect of exchange rate changes on cash and cash equivalents(4.3)(7.0)
Net increase (decrease) in cash and cash equivalents867.1 (83.5)
Cash and cash equivalents at beginning of period404.9 309.6 
Cash and cash equivalents at end of period$1,272.0 $226.1 
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
8


DENTSPLY SIRONA Inc. and Subsidiaries

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. Results for interim periods should not be considered indicative of results for a full year. These financial statements and related notes contain the accounts of DENTSPLY SIRONA Inc. and subsidiaries (“Dentsply Sirona” or the “Company”) on a consolidated basis and should be read in conjunction with the consolidated financial statements and notes included in the Company’s most recent Form 10-K for the year ended December 31, 2019.

The accounting policies of the Company, as applied in the interim consolidated financial statements presented herein, are substantially the same as presented in the Company’s Form 10-K for the year ended December 31, 2019, except as may be indicated below.

Use of Estimates

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

For the nine months ended September 30, 2020, the Company made certain estimates and assumptions related to the financial statements. Some of these estimates and assumptions were based on the impacts of the COVID-19 pandemic as they were known as of the date of the filing of this Form 10-Q and there may be changes to those estimates in future periods. Actual results may differ from these estimates. As of the date of issuance of these consolidated financial statements, the full extent to which the COVID-19 pandemic will directly or indirectly have a negative material impact on the Company's financial condition, liquidity, or results of operations, is highly uncertain and difficult to predict. More specifically, the demand for the Company's products has been, and continues to be, affected by social distancing guidelines, newly implemented dental practice safety protocols which reduce patient traffic, and patient reluctance to seek dental care. At this time, it is uncertain how long these impacts will continue. The impact of the stay-at-home orders and limits to essential-only dental procedures affected demand for the Company's products in March and April, but the Company began to see improvements in May and June as some of these orders were lifted. This improvement has continued into third quarter. Furthermore, economies and, to a lesser extent, capital markets worldwide have also been negatively impacted by the continuing COVID-19 pandemic, and it is possible that it could prolong or deepen the United States' and/or global economic recession. Such economic disruption has had, and could continue to have, a significant negative effect on the Company's business. Governmental authorities around the world have responded with fiscal policy actions to support economies as a whole. The magnitude and overall effectiveness of these actions remain uncertain.

9


During the first nine months of 2020, the Company's business was impacted by COVID-19. The impact began in the early part of the first quarter as the Company began to experience declines in customer demand in Asia and then further in mid-March where it was most pronounced in Europe and where the Company experienced partial or country-wide business lockdowns in various markets, including China, France, and Italy. The United States was most impacted in April and May. Most regions throughout the world continue to experience localized surges of COVID-19 cases which are being responded to by governmental authorities with partial lockdowns. While the duration and severity of this continuing pandemic is uncertain, the Company currently expects that its results of operations will have a negative material impact for the remainder of 2020 and potentially beyond. As a result of the economic uncertainties caused by the COVID-19 pandemic, the Company implemented several measures to improve liquidity and operating results, including reduction of hours and salaries, furloughs, suspended hiring, travel bans, delaying some of its planned capital expenditures, and deferring other discretionary spending for 2020. Some of these measures are being lifted as demand for the Company's products begins to improve. The Company will continue to reassess the reduction in work hours and furloughs as demand for products increases. The Company continues to monitor the COVID-19 pandemic and may need to reduce capacity in the event of a resurgence of COVID-19 or in the eve