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Document and Entity Information - shares | 9 Months Ended |
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Sep. 30, 2021 | Nov. 02, 2021
Cover [Abstract] |  |
Document Type | 10-Q/A |
Amendment Flag | true |
Amendment Description | Dentsply Sirona Inc. (“Dentsply Sirona” or the “Company”) is filing this Amendment No. 1 to the Quarterly Report on Form 10-Q (this “Form 10-Q/A”) for the quarter ended September 30, 2021, originally filed with the Securities and Exchange Commission (the “SEC”) on November 4, 2021 (the “Form 10-Q” or “Original Filing”), to make certain changes described below. Restatement On October 29, 2022, the Company, in consultation with the Audit and Finance Committee of its Board of Directors (the “Audit and Finance Committee”), reached a determination that the Company’s consolidated financial statements and related disclosures for the three and nine months ended September 30, 2021 and for the fiscal year ended December 31, 2021 should no longer be relied upon because of certain misstatements contained in those financial statements. The Company has determined that it is appropriate to correct the misstatements in the Company’s previously issued financial statements by amending the Original Filing and its Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Form 10-K”). The Audit and Finance Committee and management also discussed this conclusion with the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”). As first disclosed in the Company’s Form 12b-25 filed on May 10, 2022, the Audit and Finance Committee has been conducting an internal investigation into certain financial reporting matters. That investigation has been completed, and the results are discussed below in this Explanatory Note. As a result of a separate but concurrent review by the Company of the accounting for various customer incentive arrangements unrelated to the transactions subject to the internal investigation (the “Accounting Review”), management identified errors related to certain customer incentive programs. During the Accounting Review, it was also determined that the Company utilized incorrect accounting and assumptions in the determination of estimates related to its sales returns provisions, warranty reserve provisions and variable consideration. Management identified misstatements for the three and nine months ended September 30, 2021 and for the fiscal year ended December 31, 2021, in each case, that the Company deemed to be material when considered together with certain qualitative and quantitative considerations such as the fact that the misstatements masked a failure to meet internal financial targets and external financial analyst expectations for the three months ended September 30, 2021 and due to the material weaknesses identified through the course of the Audit and Finance Committee’s investigation. For a more detailed discussion of the correction of these accounting errors, refer to Note 1 Significant Accounting Policies and Restatement to the consolidated financial statements of the Company included in Part I, Item 1 of this Form 10-Q/A. For more information about the specific material weaknesses in internal control over financial reporting and the Company’s remedial actions, please see Part I, Item 4 Controls and Procedures of this Form 10-Q/A. Audit and Finance Committee’s Investigation North America Investigation On May 10, 2022, the Company announced that 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. The Audit and Finance Committee’s investigation was focused on the Company’s use of incentives to sell products to certain distributors in North America in the third and fourth quarters of 2021, whether those incentives were appropriately accounted for, and whether the impact of the sales to which they were applied were adequately disclosed in the Company’s periodic reports filed with the SEC. The Audit and Finance Committee also investigated allegations that certain former members of senior management may have directed the Company’s use of these incentives and other actions to achieve executive compensation targets in 2021. We refer to this portion of the Audit and Finance Committee’s investigation as the North America Investigation. 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 determined 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. The North America Investigation identified instances in which the Company’s distributors in North America were offered incremental incentives, including extended payment terms, to purchase products in order for the Company to attempt to meet certain internal sales targets in the third and fourth quarters of 2021. These incentives were offered in conjunction with net sales transactions amounting to approximately $38 million and $70 million in the third and fourth quarters of 2021, respectively, which in turn contributed to higher levels of distributor inventory at the end of such periods, and lower sales to these distributors in the first and second quarters of 2022. The North America Investigation’s analysis of the incremental incentives and related sales, which included examination of documents supporting the accounting and revenue recognition for both the incentives and related sales, identified two insignificant accrual errors. However, these incremental incentives and the sales to which they applied contributed to the Company’s ability to meet external financial analyst expectations in the third quarter of 2021. The North America Investigation also found that there were inadequate processes in place for approval of these incentives and that the Company also had inadequate processes for maintaining or providing copies of agreements or arrangements with distributors to the accounting department. The North America Investigation noted potential omissions in public disclosures made by the Company regarding the use of these incentives or their potential future impacts in the third and fourth quarters of 2021. However, the North America Investigation did not find evidence that the former Chief Executive Officer and former Chief Financial Officer specifically directed the Company’s use of incentives to achieve executive compensation targets in 2021. Additionally, the investigation noted that the Company’s independent registered accounting firm was not informed of these incremental incentive arrangements in conjunction with the 2021 audit of the consolidated financial statements. Finally, the North America Investigation also identified findings regarding potential control deficiencies. For more information about these material weaknesses and other identified material weaknesses in internal control over financial reporting and the Company’s remedial actions, please see Part I, Item 4 Controls and Procedures of this Form 10-Q/A. Based on the results of the North America Investigation, the Company further analyzed these product shipments and corresponding incentive arrangements between the Company and its distributors and determined that, with the exception of the errors pertaining to the Accounting Review described above, sales were properly recorded in each of the respective periods in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). China Investigation While the North America Investigation was ongoing, the Audit and Finance Committee was informed in June 2022 that the Company had identified higher returns of products from distributors in China during the fourth quarter of 2021 that did not align with historical trends identified through an operational audit executed by the Company’s Corporate Audit department. Accordingly, the Audit and Finance Committee determined that the scope of the internal investigation should be expanded to analyze the increase in returns of products in China during the fourth quarter of 2021. We refer to this portion of the Audit and Finance Committee’s investigation as the China Investigation. The China Investigation found that the Company processed returns and/or exchanges that were not in accordance with the return and/or exchange provisions contained in existing distributor agreements and sales contracts in China. The China Investigation also found that members of the Company’s local commercial team in China failed to provide information requested by the Company’s local accounting organization in connection with the return and/or exchange of products in China during the fourth quarter of 2021. The China Investigation concluded that these employees, 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 organization, 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 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. These employees, including the head of the Company’s Asia-Pacific commercial organization, also did not maintain and promote an appropriate control environment in certain areas of the Company’s business focused on compliance, nor did they sufficiently promote, monitor or enforce adherence to the Company’s Code of Ethics and Business Conduct. The China Investigation also identified concerns regarding control deficiencies, including ineffective communication among the China commercial operations, financial planning & analysis (“FP&A”) and accounting teams, resulting in a heightened risk of incomplete or insufficient information required to maintain accurate books and records related to incentive provisions, specifically concerning expanded concessions regarding the return or exchange of products from distributors. For more information about the specific material weaknesses in internal control over financial reporting and the Company’s remedial actions, please see Part I, Item 4 Controls and Procedures of this Form 10-Q/A. The failure to appropriately account for these returns and/or exchanges and allowing for the product exchanges referred to above resulted in an overstatement of Net sales in the third quarter of 2021 of approximately $4 million which should have been recorded in the fourth quarter of 2021, and is reflected in the restated interim financial statements for the three and nine month periods ended September 30, 2021 included in this form 10-Q/A. For a more detailed discussion of the correction of these accounting errors, refer to Note 1, Significant Accounting Policies and Restatement to the consolidated financial statements of the Company included in Part I, Item 1 of this Form 10-Q/A. Controls and Procedures In connection with the restatement of the financial statements and related disclosures for the three and nine months ended September 30, 2021 and for the fiscal year ended December 31, 2021, management re-evaluated the effectiveness of the Company’s internal control over financial reporting and identified material weaknesses in the Company’s internal control over financial reporting as of September 30, 2021. The Company’s current Chief Executive Officer and current Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2021, due to the material weaknesses described in Part I, Item 4 of this Form 10-Q/A. Accordingly, the Company is filing this Form 10-Q/A to amend management’s assessment of the Company’s disclosure controls and procedures to conclude that they were not effective due to the identification of material weaknesses as of September 30, 2021. Additionally, the Company is amending Part I, Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations to provide additional disclosure regarding the future impact of certain incremental incentive arrangements identified in the North America Investigation. Amendment to Form 10-Q In accordance with Rule 12b-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the following Items of the Original Filing have been amended and restated and the complete text of those is set out in this Form 10-Q/A: Part I - Item 1. Financial Statements (unaudited) Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Part I - Item 4. Controls and Procedures Part II - Item 1A. Risk Factors Part II - Item 6. Exhibits Please note that the only changes to the Original Filing are those related to the matters described herein and only in the Items listed above. Item 1A "Risk Factors" has been updated to reflect risks as of the date of this amended filing. Except as described above, no changes have been made to the Original Filing, and this Form 10-Q/A does not modify, amend or update any of the other financial information or other information contained in the Original Filing. In addition, in accordance with SEC rules, this Form 10-Q/A includes updated certifications from our Chief Executive Officer and Chief Financial Officer as Exhibits 31.1, 31.2 and 32. Otherwise, the information contained in this Form 10-Q/A is as of the date of the Original Filing and does not reflect any information or events occurring after the date of the Original Filing. Such subsequent information or events include, among others, the information and events described in the Company’s Amendment No. 1 on Form 10-K/A filed on November 7, 2022 (the “Form 10-K/A”), our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2022 and June 30, 2022, each of which are being filed concurrently with this Form 10-Q/A, and the information and events described in our Current Reports on Form 8-K filed subsequent to the date of the Original Filing. For a description of such subsequent information and events, please read our reports filed pursuant to the Exchange Act subsequent to the date of the Original Filing, which update and supersede certain information contained in the Original Filing and this Form 10-Q/A. |
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Document Period End Date | Sep. 30, 2021 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2021 |
Document Fiscal Period Focus | Q3 |
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Entity File Number | 0-16211 |
Entity Registrant Name | DENTSPLY SIRONA Inc. |
Entity Central Index Key | 0000818479 |
Entity Incorporation, State or Country Code | DE |
Entity Tax Identification Number | 39-1434669 |
Entity Address, Address Line One | 13320 Ballantyne Corporate Place |
Entity Address, City or Town | Charlotte |
Entity Address, State or Province | NC |
Entity Address, Postal Zip Code | 28277-3607 |
City Area Code | 844 |
Local Phone Number | 848-0137 |
Title of 12(b) Security | Common Stock, par value $.01 per share |
Trading Symbol | XRAY |
Security Exchange Name | NASDAQ |
Entity Current Reporting Status | No |
Entity Interactive Data Current | No |
Entity Filer Category | Large Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding |  | 218,607,026

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