UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 0-16211

DENTSPLY SIRONA Inc.

(Exact name of registrant as specified in its charter)

Delaware	39-1434669
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
13320 Ballantyne Corporate Place, Charlotte, North Carolina	28277-3607
(Address of principal executive offices)	(Zip Code)

(844) 848-0137

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $.01 per share	XRAY	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐    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   ☐   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  ☒	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  ☒

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, 2022, DENTSPLY SIRONA Inc. had 214,911,886 shares of common stock outstanding.

EXPLANATORY NOTE

As previously reported, we were unable to timely file our Quarterly Report on Form 10-Q for the first quarter of fiscal 2022 ended March 31, 2022 and our Quarterly Report on Form 10-Q for the second quarter of fiscal 2022 ended June 30, 2022 as a result of an Audit and Finance Committee’s investigation as described in Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 as amended and filed on November 7, 2022 (the “2021 Form 10-K/A”) and Amendment No. 1 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 filed on November 7, 2022 (the “Third Quarter 2021 Form 10-Q/A”). For the same reason, we are filing our Quarterly Report on Form 10-Q for the first quarter of fiscal 2022 simultaneously herewith.

Please refer to the Explanatory Note to our 2021 Form 10-K/A for more information on the internal investigation commenced in March 2022 by the Audit and Finance Committee of the Company’s Board of Directors (the “Audit and Finance Committee”) of Dentsply Sirona Inc. (the “Company”). The internal investigation is now complete. The Company delayed the filing of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (this “Form 10-Q”) pending the completion of the Audit and Finance Committee’s investigation. For a more detailed discussion of the correction of the accounting errors resulting from the above matters, refer to Note 1 to the consolidated financial statements of the Company included in Part II, Item 8 of the Company’s 2021 Form 10-K/A.

DENTSPLY SIRONA Inc.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	Page
Item 1	Financial Statements (unaudited)	4
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income (Loss)	5
	Consolidated Balance Sheets	6
	Consolidated Statements of Changes in Equity	7
	Consolidated Statements of Cash Flows	9
	Notes to Unaudited Interim Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4	Controls and Procedures	57
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	60
Item 1A	Risk Factors	60
Item 2	Unregistered Sales of Securities and Use of Proceeds	61
Item 6	Exhibits	62
Signatures		63

2

General

Unless otherwise stated herein or the context otherwise indicates, reference throughout this Form 10-Q to “Dentsply Sirona”, or the “Company,” “we,” “us” or “our” refers to financial information and transactions of DENTSPLY SIRONA Inc., together with its subsidiaries on a consolidated basis.

Forward-Looking Statements and Associated Risks

All statements in this Form 10-Q that do not directly and exclusively relate to historical facts constitute “forward-looking statements” and include statements related to our ability to successfully remediate the material weakness in our internal control over financial reporting disclosed in this Form 10-Q in the manner currently anticipated. These statements represent current expectations and beliefs, and no assurance can be given that the results described in such statements will be achieved. Such statements are subject to numerous assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside of our control, including those described in Part II, Item 1A “Risk Factors” of this Form 10-Q and in Part I, Item 1A, “Risk Factors” of the Company’s 2021 Form 10-K/A filed on November 7, 2022, and other factors which may be described in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). No assurance can be given that any expectation, belief, goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned not to place undue reliance on such statements which speak only as of the date they are made. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

Investors should understand it is not possible to predict or identify all such factors or risks. As such, you should not consider 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.

3

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	1,023	$	1,062	$	1,992	$	2,088
Cost of products sold	442		467		890		914
Gross profit	581		595		1,102		1,174
Selling, general, and administrative expenses	410		393		786		779
Research and development expenses	45		43		90		83
Restructuring and other costs	7		5		10		8
Operating income	119		154		216		304
Other income and expenses:
Interest expense, net	15		15		27		29
Other expense (income), net	13		8		11		(1)
Income before income taxes	91		131		178		276
Provision for income taxes	18		35		36		68
Net income	73		96		142		208
Less: Net income attributable to noncontrolling interest	—		—		—		—
Net income attributable to Dentsply Sirona	$	73	$	96	$	142	$	208
Net income per common share attributable to Dentsply Sirona:
Basic	$	0.34	$	0.44	$	0.66	$	0.95
Diluted	$	0.34	$	0.43	$	0.66	$	0.94
Weighted average common shares outstanding:
Basic	214.9		218.4		215.9		218.6
Diluted	215.3		220.7		216.5		220.8

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

4

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	73	$	96	$	142	$	208
Other comprehensive (loss) income, net of tax:
Foreign currency translation (loss) gain	(114)		37		(162)		(62)
Net gain on derivative financial instruments	22		4		32		9
Pension liability gain	2		2		3		6
Total other comprehensive (loss) income, net of tax	(90)		43		(127)		(47)
Total comprehensive (loss) income	(17)		139		15		161
Less: Comprehensive income attributable to noncontrolling interests	—		—		—		—
Total comprehensive (loss) income attributable to Dentsply Sirona	$	(17)	$	139	$	15	$	161

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

5

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

(unaudited)

	June 30, 2022		December 31, 2021
Assets
Current Assets:
Cash and cash equivalents	$	362	$	339
Accounts and notes receivables-trade, net	661		750
Inventories, net	581		515
Prepaid expenses and other current assets	281		248
Total Current Assets	1,885		1,852
Property, plant, and equipment, net	744		773
Operating lease right-of-use assets, net	205		198
Identifiable intangible assets, net	2,100		2,319
Goodwill	3,858		3,976
Other noncurrent assets	156		121
Total Assets	$	8,948	$	9,239
Liabilities and Equity
Current Liabilities:
Accounts payable	$	289	$	262
Accrued liabilities	688		760
Income taxes payable	44		57
Notes payable and current portion of long-term debt	220		182
Total Current Liabilities	1,241		1,261
Long-term debt	1,807		1,913
Operating lease liabilities	159		149
Deferred income taxes	409		391
Other noncurrent liabilities	494		528
Total Liabilities	4,110		4,242
Commitments and contingencies (Note 15)
Equity:
Preferred stock, $1.00 par value; 0.25 million shares authorized; no shares issued	—		—
Common stock, $0.01 par value;	3		3
400.0 million shares authorized, and 264.5 million shares issued at June 30, 2022 and December 31, 2021
214.8 million and 217.4 million shares outstanding at June 30, 2022 and December 31, 2021
Capital in excess of par value	6,617		6,606
Retained earnings	1,602		1,514
Accumulated other comprehensive loss	(719)		(592)
Treasury stock, at cost, 49.7 million and 47.1 million shares at June 30, 2022 and December 31, 2021, respectively	(2,666)		(2,535)
Total Dentsply Sirona Equity	4,837		4,996
Noncontrolling interests	1		1
Total Equity	4,838		4,997
Total Liabilities and Equity	$	8,948	$	9,239

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

6

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, 2021	$	3	$	6,606	$	1,514	$	(592)	$	(2,535)	$	4,996	$	1	$	4,997
Net income	—		—		69		—		—		69		—		69
Other comprehensive loss	—		—		—		(37)		—		(37)		—		(37)
Exercise of stock options	—		1		—		—		4		5		—		5
Stock based compensation expense	—		11		—		—		—		11		—		11
Funding of employee stock purchase plan	—		1		—		—		1		2		—		2
Accelerated share repurchase	—		(30)		—		—		(120)		(150)		—		(150)
Restricted stock unit distributions	—		(16)		—		—		10		(6)		—		(6)
Cash dividends declared ($0.125 per share)	—		—		(27)		—		—		(27)		—		(27)
Balance at March 31, 2022	$	3	$	6,573	$	1,556	$	(629)	$	(2,640)	$	4,863	$	1	$	4,864
Net income	—		—		73		—		—		73		—		73
Other comprehensive loss	—		—		—		(90)		—		(90)		—		(90)
Exercise of stock options	—		—		—		—		2		2		—		2
Stock based compensation expense	—		16		—		—		—		16		—		16
Funding of employee stock purchase plan	—		—		—		—		1		1		—		1
Accelerated share repurchase	—		30		—		—		(30)		—		—		—
Restricted stock unit distributions	—		(3)		—		—		1		(2)		—		(2)
Restricted stock unit dividends	—		1		(1)		—		—		—		—		—
Cash dividends declared ($0.125 per share)	—		—		(26)		—		—		(26)		—		(26)
Balance at June 30, 2022	$	3	$	6,617	$	1,602	$	(719)	$	(2,666)	$	4,837	$	1	$	4,838

7

	Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Dentsply Sirona Equity		Noncontrolling Interests		Total Equity
Balance at December 31, 2020	$	3	$	6,604	$	1,198	$	(464)	$	(2,409)	$	4,932	$	3	$	4,935
Net income	—		—		112		—		—		112		—		112
Other comprehensive loss	—		—		—		(90)		—		(90)		—		(90)
Exercise of stock options	—		11		—		—		22		33		—		33
Stock based compensation expense	—		13		—		—		—		13		—		13
Funding of employee stock purchase plan	—		1		—		—		2		3		—		3
Treasury shares purchased	—		—		—		—		(90)		(90)		—		(90)
Restricted stock unit distributions	—		(11)		—		—		7		(4)		—		(4)
Cash dividends declared ($0.10 per share)	—		—		(22)		—		—		(22)		—		(22)
Balance at March 31, 2021	$	3	$	6,618	$	1,288	$	(554)	$	(2,468)	$	4,887	$	3	$	4,890
Net income	—		—		96		—		—		96		—		96
Other comprehensive income	—		—		—		43		—		43		—		43
Exercise of stock options	—		3		—		—		9		12		—		12
Stock based compensation expense	—		19		—		—		—		19		—		19
Restricted stock unit distributions	—		(2)		—		—		1		(1)		—		(1)
Cash dividends declared ($0.11 per share)	—		—		(25)		—		—		(25)		—		(25)
Balance at June 30, 2021	$	3	$	6,638	$	1,359	$	(511)	$	(2,458)	$	5,031	$	3	$	5,034

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

8

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	142	$	208
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	59		64
Amortization of intangible assets	108		112
Deferred income taxes	(13)		(6)
Stock based compensation expense	33		32
Other non-cash expense	29		17
Gain on sale of non-strategic businesses and product lines	—		(13)
Changes in operating assets and liabilities, net of acquisitions:
Accounts and notes receivable-trade, net	53		(15)
Inventories, net	(95)		(80)
Prepaid expenses and other current assets, net	(39)		(22)
Other noncurrent assets	(6)		(8)
Accounts payable	49		(24)
Accrued liabilities	(47)		(5)
Income taxes	2		(7)
Other noncurrent liabilities	(9)		10
Net cash provided by operating activities	266		263
Cash flows from investing activities:
Capital expenditures	(85)		(66)
Cash paid for acquisitions of businesses and equity investments, net of cash acquired	—		(241)
Cash received on sale of non-strategic businesses or product lines	—		27
Cash received on derivative contracts	5		—
Proceeds from sale of property, plant, and equipment	—		1
Other investing activities	(3)		—
Net cash used in investing activities	(83)		(279)
Cash flows from financing activities:
Cash paid for accelerated share repurchase	(150)		—
Proceeds on short-term borrowings	38		6
Cash paid for treasury stock	—		(90)
Cash dividends paid	(51)		(44)
Proceeds from long-term borrowings, net of deferred financing costs	5		13
Repayments on long-term borrowings	(2)		—
Proceeds from exercised stock options	6		45
Other financing activities, net	(8)		(8)
Net cash used in financing activities	(162)		(78)
Effect of exchange rate changes on cash and cash equivalents	2		(12)
Net increase (decrease) in cash and cash equivalents	23		(106)
Cash and cash equivalents at beginning of period	339		438
Cash and cash equivalents at end of period	$	362	$	332

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

9

DENTSPLY SIRONA Inc. and Subsidiaries

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES AND REVISION

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the U.S. 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, 2021, as amended and filed on November 7, 2022.

Recently Concluded Investigation

As previously disclosed, the Audit and Finance Committee of the Company’s Board of Directors (the “Audit and Finance Committee”), assisted by independent legal counsel and forensic accountants, commenced an internal investigation in March 2022 of allegations regarding certain financial reporting matters submitted by current and former employees of the Company. In the North America Investigation, the Audit and Finance Committee concluded that there was no evidence of intentional wrongdoing or fraud. The Audit and Finance Committee found that certain former members of senior management, including the Company’s former Chief Executive Officer and former Chief Financial Officer, violated provisions of the Company’s Code of Ethics and Business Conduct. In addition, these former members of senior management did not maintain and promote an appropriate control environment focused on compliance in areas of the Company’s business, nor did they sufficiently promote, monitor or enforce adherence to the Code of Ethics and Business Conduct. The North America Investigation found that certain former members of senior management, including the former Chief Executive Officer and the former Chief Financial Officer created a culture where employees did not feel comfortable raising concerns without fear of retaliation. In addition, the North America Investigation substantiated certain allegations regarding inappropriate tone at the top by the former Chief Executive Officer and the former Chief Financial Officer. Based on the China Investigation, the Audit and Finance Committee concluded that members of the Company’s local commercial team in China, as well as the head of the Company’s Asia-Pacific commercial organization, committed intentional wrongdoing by failing to provide requested information to the Company’s local accounting team, by obstructing the work of the accounting team and by lacking truthfulness in providing information to the Company and to the Audit and Finance Committee as part of the China Investigation. The China Investigation also determined that these actions by the certain members of the Company’s local commercial team in China, as well as the former Chief Financial Officer and the head of the Company’s Asia-Pacific commercial organization, violated the Company’s Code of Ethics and Business Conduct.

On October 29, 2022, the Audit and Finance Committee determined that its investigation was complete, and authorized the filing of these interim consolidated financial statements for the three-month and six-month periods ended June 30, 2022.

Correction of Previously Reported Interim Consolidated Quarterly Financial Statements

The interim consolidated financial statements include immaterial corrections to the three-month and six-month periods ended June 30, 2021 which were presented in Note 23 to the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 in the Company’s 2021 Form 10-K/A filed on November 7, 2022. This revision, which corrects for errors related to certain customer incentive programs as well as the accounting and assumptions in the determination of estimates related to the Company’s sales returns provisions, warranty reserve provisions and variable consideration, as well as other immaterial adjustments, results in a decrease to Net sales by $5 million, a decrease to Gross Profit by $3 million, a decrease to Operating Income of $1 million and a decrease to Diluted EPS by $0.02 per share from amounts previously reported for the three-month period ended June 30, 2021. This revision results in a decrease to Net sales by $6 million, a decrease to Gross Profit by $3 million, a decrease to Operating Income of $5 million and a decrease to Diluted EPS by $0.04 per share from amounts previously reported for the six-month period ended June 30, 2021. Previously reported cash flows from operating, investing and financing activities for the six-month period ended June 30, 2021 were not impacted.

10

Use of Estimates

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

Specifically, for the three months ended June 30, 2022, some of these estimates and assumptions continue to be based on an ongoing evaluation of expected future impacts from the COVID-19 pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly have a negative material impact on the Company’s financial condition, liquidity, or results of operations in future periods is highly uncertain and difficult to predict. More specifically, although demand for the Company’s products has largely recovered from the impact of rigorous preventive measures implemented at the outset of the pandemic, it continues to be affected by social distancing guidelines, dental practice safety protocols which reduce patient traffic, and some lingering patient reluctance to seek dental care. Also, impacts from the pandemic continue to be experienced in the form of more recent shortages and higher prices of raw materials such as electronic components, higher related transportation costs, and labor shortages. In the second quarter of 2022, the Company has continued to experience supply chain constraints, which has impacted its ability to timely produce and deliver certain products, and has also resulted in increases in shipping rates. To address these issues, the Company has taken steps to mitigate the impact of these trends, including continued emphasis on cost reduction and supply chain efficiencies. However, uncertainties remain regarding how long these impacts will continue, whether customer demand will fully return to pre-COVID-19 levels upon lifting of remaining government restrictions, or whether future variants of the virus may have an adverse impact on demand in affected markets.

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Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which was subsequently amended by ASU No. 2021-01 “Reference Rate Reform (Topic 848): Scope” in January 2021. The new standard provides optional expedients and exceptions to contracts, hedging relationships, and other transactions that reference the London Interbank Offer Rate (“LIBOR”) or another rate expected to be discontinued due to the reference rate reform. The amendments in this standard were effective upon issuance and generally can be applied to contract modifications made or evaluated through December 31, 2022. The Company does not expect this standard to have a material impact on its consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (Topic 805), which requires contract assets and liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. The current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value differs from the current approach. This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently assessing the impact of this standard on its consolidated financial statements and related disclosures.

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NOTE 2 - REVENUE

Revenues are derived primarily from the sale of dental equipment and dental and healthcare consumable products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

Net sales disaggregated by product category for the three and six months ended June 30, 2022 and 2021 were as follows:

	Three Months Ended				Six Months Ended
(in millions)	2022		2021		2022		2021
Equipment & Instruments	$	169	$	176	$	335	$	347
CAD/CAM	129		127		235		256
Orthodontics	76		81		144		149
Implants	149		158		304		311
Healthcare	72		75		142		149
Technology & Equipment segment net sales	$	595	$	617	$	1,160	$	1,212
Endodontic & Restorative	$	312	$	328	$	605	$	640
Other Consumables	116		117		227		236
Consumables segment sales	$	428	$	445	$	832	$	876
Total net sales	$	1,023	$	1,062	$	1,992	$	2,088

Net sales disaggregated by geographic region for the three and six months ended June 30, 2022 and 2021 were as follows:

	Three Months Ended				Six Months Ended
(in millions)	2022		2021		2022		2021
United States	$	358	$	363	$	666	$	710
Europe	414		429		825		846
Rest of World	251		270		501		532
Total net sales	$	1,023	$	1,062	$	1,992	$	2,088

Contract Assets and Liabilities

The Company normally does not have contract assets in the course of its business. Contract liabilities, which represent billings in excess of revenue recognized, are primarily related to advanced billings for customer aligner treatment where the performance obligation has not yet been fulfilled. The Company had $72 million and $68 million of deferred revenue recorded in Accrued liabilities in the Consolidated Balance Sheets at June 30, 2022 and December 31, 2021, respectively. Prior year deferred revenue of approximately $42 million was recognized in the current year. The Company expects to recognize significantly all of the remaining deferred revenue within the next twelve months.

Allowance for Doubtful Accounts

Accounts and notes receivables-trade, net are stated net of allowances for doubtful accounts and trade discounts, which were $12 million at June 30, 2022 and $13 million at December 31, 2021. For the three months and six months ended June 30, 2022 and 2021, changes to the provision for doubtful accounts including write-offs of accounts receivable that were previously reserved were insignificant. Changes to this provision are included in Selling, general, and administrative expenses in the Consolidated Statements of Operations.

13

NOTE 3 – STOCK COMPENSATION

The amounts of stock compensation expense recorded in the Company’s Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021 were as follows:

	Three Months Ended				Six Months Ended
(in millions)	2022		2021		2022		2021
Cost of products sold	$	—	$	2	$	1	$	2
Selling, general, and administrative expense	22		16		31		29
Research and development expense	—		1		1		1
Total stock based compensation expense	$	22	$	19	$	33	$	32
Related deferred income tax benefit	$	2	$	2	$	3	$	4

14

NOTE 4 – COMPREHENSIVE INCOME (LOSS)

Changes in Accumulated other comprehensive income (loss) (“AOCI”), net of tax, by component for the six months ended June 30, 2022 and 2021 were as follows:

(in millions)	Foreign Currency Translation Gain (Loss)		Gain (Loss) on Cash Flow Hedges		Gain (Loss) on Net Investment and Fair Value Hedges		Pension Liability Gain (Loss)		Total
Balance, net of tax, at December 31, 2021	$	(366)	$	(16)	$	(103)	$	(107)	$	(592)
Other comprehensive (loss) income before reclassifications and tax impact	(37)		3		9		—		(25)
Tax expense	(11)		—		(1)		—		(12)
Other comprehensive (loss) income, net of tax, before reclassifications	(48)		3		8		—		(37)
Amounts reclassified from accumulated other comprehensive income, net of tax	—		(1)		—		1		—
Net (decrease) increase in other comprehensive loss	(48)		2		8		1		(37)
Balance, net of tax, at March 31, 2022	$	(414)	$	(14)	$	(95)	$	(106)	$	(629)
Other comprehensive (loss) income before reclassifications and tax impact	(86)		(3)		32		—		(57)
Tax expense	(28)		—		(8)		—		(36)
Other comprehensive (loss) income, net of tax, before reclassifications	(114)		(3)		24		—		(93)
Amounts reclassified from accumulated other comprehensive income, net of tax	—		1		—		2		3
Net (decrease) increase in other comprehensive income	(114)		(2)		24		2		(90)
Balance, net of tax, at June 30, 2022	$	(528)	$	(16)	$	(71)	$	(104)	$	(719)

15

(in millions)	Foreign Currency Translation Gain (Loss)		Gain (Loss) on Cash Flow Hedges		Gain (Loss) on Net Investment and Fair Value Hedges		Pension Liability Gain (Loss)		Total
Balance, net of tax, at December 31, 2020	$	(187)	$	(25)	$	(119)	$	(133)	$	(464)
Other comprehensive (loss) income before reclassifications and tax impact	(74)		(6)		9		3		(68)
Tax (expense) benefit	(25)		2		(2)		(1)		(26)
Other comprehensive (loss) income, net of tax, before reclassifications	(99)		(4)		7		2		(94)
Amounts reclassified from accumulated other comprehensive income, net of tax	—		2		—		2		4
Net (decrease) increase in other comprehensive income	(99)		(2)		7		4		(90)
Balance, net of tax, at March 31, 2021	$	(286)	$	(27)	$	(112)	$	(129)	$	(554)
Other comprehensive income before reclassifications and tax impact	31		3		1		—		35
Tax benefit (expense)	6		(2)		(1)		—		3
Other comprehensive income, net of tax, before reclassifications	37		1		—		—		38
Amounts reclassified from accumulated other comprehensive income, net of tax