# DENTSPLY SIRONA Inc. (XRAY) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from DENTSPLY SIRONA Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/818479/000081847925000035/xray-20241231.htm
Accession: 0000818479-25-000035
Filing date: 2025-02-27
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/XRAY/
All MD&A years: /company/XRAY/mda/
Previous year: /company/XRAY/mda/fy2023/ (FY 2023)
Next year: /company/XRAY/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the Company’s operations and business environment. MD&A is provided as a supplement to, and should be read in conjunction with, the Consolidated Financial Statements and Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K. The following discussion includes forward-looking statements that involve certain risks and uncertainties. See Part I, Item 1, “Business - Forward-Looking Statements and Associated Risks.”

2024 Operational Summary

For the year ended December 31, 2024,

•Net sales decreased 4.3% compared to the prior year. On an organic basis (a Non-GAAP measure as defined under the heading “Key Performance Measurements” below) net sales decreased 3.5% for the year ended December 31, 2024 compared to the prior year. Net sales were negatively impacted by approximately 0.8% due to the strengthening of the U.S. dollar over the prior year period.

•Net loss was $910 million as compared to net loss of $132 million for the prior year primarily due to higher goodwill and intangible asset impairment charges of $1,014 million compared to $307 million in the prior year. Diluted loss per share was $4.48 compared to diluted loss per share of $0.62 in the prior year.

•Cash from operations was $461 million, as compared to $377 million in the prior year.

Company Profile

DENTSPLY SIRONA Inc. (“Dentsply Sirona” or the “Company”), is the world’s largest diversified manufacturer of professional dental products and technologies, with a 138-year history of innovation and service to the dental industry and a vision of improving oral health and continence care globally. Dentsply Sirona develops, manufactures, and markets comprehensive solutions, including technologically advanced dental equipment supported by cloud-enabled 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 innovative products provide high-quality, effective, and connected 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 United States on the Nasdaq stock market under the symbol XRAY.

BUSINESS

Segment Descriptions

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

Connected Technology Solutions

This segment includes the design, manufacture, and sales of the Company’s dental technology and equipment products. These products include the Equipment & Instruments and CAD/CAM product categories. Dental CAD/CAM technologies are products designed for dental professionals to support numerous digital workflows for procedures such as dental restorations through integrations with DS Core, our cloud-based platform.

Essential Dental Solutions

This segment includes the development, manufacture, and sales of the Company’s value-added endodontic, restorative, and preventive consumable products and small equipment used by dental professionals for the treatment of patients. Offerings in this segment also include specialized treatment products including products used in the creation of dental appliances.

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Orthodontic and Implant Solutions

This segment includes the design, manufacture, and sales of the Company’s various digital implant systems and innovative dental implant products, digital dentures and dental professional-directed aligner solutions. Offerings in this segment also include application of our digital services and technology, including those provided by DS Core, our cloud-based platform.

Wellspect Healthcare

This segment includes the design, manufacture, and sales of the Company’s innovative continence care solutions for both urinary and bowel management. This category consists mainly of urology catheters and other healthcare-related consumable products.

Recent Developments

As previously disclosed in the Company’s Current Report on Form 8-K filed February 11, 2025, the Company has initiated a process to evaluate strategic alternatives for its Wellspect Healthcare business. There is no deadline or definitive timetable set for completion of the strategic alternatives process or assurance that the process will result in a transaction. The Company does not intend to make further announcements regarding the review of strategic alternatives unless and until the Board of Directors approves a course of action or otherwise determines further disclosure is appropriate or necessary.

The impact of global economic conditions

Markets in several regions, particularly Europe, continue to experience varying degrees of pressures inhibiting growth and face concerns about the systemic impacts of adverse economic conditions and geopolitical events. Changes in economic conditions, supply chain constraints, higher energy costs, labor shortages, the conflict in Ukraine, and geopolitical tensions in the Middle East and Russia, have all contributed to a period of higher inflation across the industry and the regions in which the Company operates. As a result, the Company has experienced higher prices for certain raw materials, including electronic components, which have led to a negative impact on margins. We expect a continuation of inflationary pressure on the cost of both raw materials and wages into 2025, the effect of which will depend on our ability to successfully mitigate and offset the related impacts.

The challenging macroeconomic conditions have 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 adversely affects volumes for these products. The higher cost of borrowing has also reduced patient demand for elective dental procedures, which affects sales of the Company’s offerings more broadly. The Company has also faced additional competitive pressure for lower-priced options for equipment and other products by dental practices, in particular for imaging products and implants. While the Company has taken steps to address competitive pressures, such as the reintroduction of its Orthophos SL 2D and 3D products, these trends may continue. While patient volumes have largely remained stable in the United States, the impact of macroeconomic declines and high interest rates has been particularly apparent in Germany, which represented 11% of the Company’s sales for the year ended December 31, 2024. Germany was in a recession for most of 2023, largely due to persistent high inflation and falling household spending. Although conditions, including inflation, marginally improved in 2024, demand for investments in new dental equipment continued to be weak, and economic forecasts by the German government project limited growth in 2025. The Company anticipates that the challenging macroeconomic and market conditions in Germany are likely to persist and negatively impact sales of equipment into next year.

In anticipation of a continued inflationary trend and potentially deteriorating macroeconomic environment, we have 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, including the most recent restructuring plan approved by the Board of Directors on July 29, 2024;

•Optimizing our customer management and implementing strategic investments in our commercial sales organization in key markets, particularly the United States; and

•Refining our focus on developing a winning portfolio with global scale to maximize market share in a competitive pricing environment.

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The impact of the Israel-Hamas war

The terrorist attacks by Hamas militants crossing the border from Gaza to Israel in October 2023 and the subsequent military response by the Israeli government in Gaza has resulted in significant unrest and uncertainty within that region. During the course of 2024, the state of Israel has also been a target of coordinated missile and drone attacks launched by the Republic of Iran and by Iran’s terrorist proxy organization in Lebanon. Although a cease-fire agreement was signed between Hamas and the Israeli government in January 2025, the potential for a long-term peace deal and greater stability remains uncertain. A resumption of the violence or the involvement of other terrorist groups or foreign powers in the region could impact our employees and operations in future periods. Additionally, in May 2024, in response to ongoing military actions, the government of Turkey implemented restrictions on the import of goods manufactured within Israel for sale in the Turkish market. Sales of our products made in Israel and sold in Turkey have historically represented approximately 1% of our global sales of the Implant & Prosthetic Solutions reporting unit, but this product category is an area of relatively high potential growth. The loss of sales to Turkey in 2024 was partially offset by sales of implants produced outside of Israel. It is not clear when these restrictions will be lifted or if other countries will institute similar restrictions.

The Company’s operations in Israel consist of two manufacturing facilities for implants products, with one site in northern Israel and one site in southern Israel, which together employ approximately 350 associates. These facilities remain open and continue to operate. We may, however, decide to discontinue production at these facilities for the safety of our employees, or we could face future production slowdowns or interruptions at either location due to the impacts of the war, including personnel absences as a number of our employees have been called to active military duty, or due to other resource constraints such as the inability to source materials for production.

For the year ended December 31, 2024, net sales of products produced at these sites comprised approximately 3% of our consolidated net sales and 13% of the net sales of the Orthodontic and Implant Solutions segment. Net assets within Israel totaled $180 million as of December 31, 2024, consisting primarily of acquired technology, property, plant and equipment, cash, and inventory associated with our operations in the country. Overall, the Company’s operations in Israel have not been materially impacted by the conflict, and consequently, the Company has not recorded any allowance for doubtful accounts, inventory reserves, or fixed asset impairments for the year ended December 31, 2024 due to the conflict. The Company continues to monitor developments and prepare contingency plans to limit potential disruption to its operations in the future.

Additionally, we sell products from across our portfolio to distributors of dental products and direct to dental practices within Israel and its neighboring countries which may face reduced patient traffic and demand for our products in the near term. Net sales for products sold to our customers in Israel comprised approximately 1% of our consolidated net sales for the year ended December 31, 2024.

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. Due to the medical nature of our products, the current sanctions have not materially restricted our ability to continue selling many of our products to customers located in Russia. The Company also sources certain raw materials and components from Russia and Ukraine and has taken actions to minimize any adverse impacts from disrupted supply chains related to these items. The Company’s operations in Ukraine consist primarily of R&D activities, which continue from locations that focus on the safety of employees. 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 for the year ended December 31, 2024 as a result of the conflict.

For the year ended December 31, 2024, net sales in Russia and Ukraine were approximately 2% of our consolidated net sales, and net assets in these countries were $64 million. These net assets include $39 million of cash and cash equivalents held within Russia as of December 31, 2024, as well as inventory and trade accounts receivable. 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 continue to be limited in our ability to transfer this cash balance out of Russia without incurring substantial costs. Additionally, beginning in September 2024, as a result of further restrictions by European financial institutions on receiving payments from Russia, our capacity to receive intercompany payments for the delivery of our products into Russia has been partially reduced, which further limits our ability to use cash received from sales in Russia for our general purposes. It is unclear whether the remaining financial institutions which the Company relies upon for bank transfers from Russia will ultimately be able to continue facilitating payments, or for how long.

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If these restrictions on cash transfers from Russia worsen, or if we are not able to obtain long-term relief from these restrictions, we may need to take additional actions, including potential suspension of our business in Russia.

A significant escalation or expansion of the economic disruption from the conflict could interrupt our supply chain, broaden inflationary costs, impair our assets located in Russia, result in a loss of sales, and have a material adverse effect on our results of operations.

For additional discussion of associated risks, refer to Part I, Item 1A, “Risk Factors” - Risks Related to Our Global Operations.

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. On a short-term basis, sudden changes in the macroeconomic environment, supply chain challenges, or changes in distributor inventory levels can and have impacted the Company’s sales. 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. The Company has expanded the use of technology and has undertaken process improvement initiatives to enhance global efficiency. In addition, management continues to evaluate the worldwide consolidation and simplification of operations and functions to further reduce costs. 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 improve its cost structure in the long-term. 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. Although the professional dental market has experienced consolidation, it remains fragmented.

The Company’s business is subject to quarterly fluctuations in net sales and operating income. The timing of annual price increases, promotional activities, as well as changes in inventory levels at distributors contribute to this fluctuation. Also, the Company distributes approximately two-thirds of its dental consumable and technology and equipment products through third-party distributors whose inventory levels tend to increase in the period leading up to a price increase and decline in the period following the implementation of a price increase, although these fluctuations are mitigated by limits on purchases ahead of these increases. 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. 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. Any of these fluctuations could be material to the Company’s consolidated financial statements. 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 July 29, 2024, the Board of Directors of the Company approved an additional plan to restructure the Company’s business to improve operational performance and drive stockholder value creation (the “2024 Plan”). The Company expects to incur between $35 million and $50 million in non-recurring charges under the 2024 Plan. The Company anticipates that the 2024 Plan will be substantially completed by the end of 2025 and result in $80 million to $100 million in annual cost savings. For details on this plan including the nature of the non-recurring charges incurred during the year, refer to Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K, and to the discussion under the heading “Material Trends in Capital Resources” within MD&A.

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. With approximately two-thirds of the Company’s net sales originating from regions

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outside the United States, the Company’s net sales and results of operations are negatively impacted by the strengthening, or positively impacted by the weakening, of the U.S. dollar compared to the primary currencies in which the Company operates.

While the Company employs financial instruments to hedge some of its transactional foreign exchange exposure, these activities do not insulate it completely from those exposures, particularly from the currency exposure arising from translation of non-U.S. dollar functional currency subsidiaries. During fiscal year 2024, 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.

Distribution Arrangements

In July 2024, the Company delivered a one-year notice of non-renewal in connection with its non-exclusive distribution agreements with Patterson Companies, Inc. (“Patterson”) for the distribution of dental equipment in the United States and Canada. It is anticipated that Patterson will continue to be one of the Company’s two largest distributors as a percentage of the Company’s global revenue during the one-year notice period. The Company intends to continue to engage in discussions for new distribution agreements with Patterson. However, failure to successfully renegotiate the distribution agreements or secure potential new agreements with another distributor could have a material adverse effect on the Company’s business, operating results and financial condition. The Company has not incurred any charges against earnings in 2024 related to non-renewal of the distribution agreements. For additional information, see Part 1, Item 1A, “Risk Factors.”

Byte Aligners Business

On October 24, 2024, the Company announced the voluntary suspension of the sale and marketing of its Byte aligner system and impression kits while the Company conducted a review of certain regulatory requirements related to these products. The Company’s decision was made in communication with the U.S. Food and Drug Administration (the “FDA”) and resulted in suspension of the shipment and processing of new and recently placed orders for Byte aligners and impression kits through the remainder of 2024. In January 2025, the Company announced plans that the Byte aligners would no longer be offered to new patients, and the Company now plans to utilize certain Byte resources elsewhere in the aligners portfolio to create orthodontic demand, support a digital clinical workflow, enhance the customer experience, and improve patient monitoring.

As a result of these developments, in the fourth quarter of 2024, the Company recorded $187 million in impairments of assets pertaining to the Byte business including a trademark, fixed assets, capitalized software and working capital. In addition to these impairments, the Company recorded an accrual for expected customer refund and other reimbursement payments stemming from the cessation of sales and business realignment, which resulted in a $35 million reduction to net sales. The suspension of sales in the fourth quarter of 2024 also resulted in a decline in aligner revenues as compared to the prior period. For additional information refer to Item 8, Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements of this Form 10-K, as well as the Results of Operations discussion below.

RESULTS OF OPERATIONS

2024 Compared to 2023

Net Sales and Key Performance Measurements

The Company presents net sales comparing the current year periods to the prior year periods. In addition, the Company also presents the changes in net sales on an organic sales basis, which is a Non-GAAP measure. 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.

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 US GAAP. 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.

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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. The Company believes that this supplemental information is helpful in understanding underlying net sales trends.

A reconciliation of net sales to organic sales for the year ended December 31, 2024 is as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Net sales","","$","3,793","","","$","3,965","","","$","(172)","","","(4.3","%)"],["Unfavorable foreign exchange impact","","","","","","","","(0.8","%)"],["Organic sales","","","","","","","","(3.5","%)"]]
[[/GREPCENT_TABLE]]
Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was primarily driven by lower volumes in the Connected Technology Solutions segment across all regions, lower volumes of orthodontic and lab products within the Orthodontic and Implant Solutions segment, and lower volumes in the Essential Dental Solutions segment, primarily in the United States. These decreases were partially offset by growth in the Wellspect Healthcare segment.

Net Sales by Segment

Connected Technology Solutions

A reconciliation of net sales to organic sales for the year ended December 31, 2024 is as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Net sales","","$","1,062","","","$","1,169","","","$","(107)","","","(9.2","%)"],["Unfavorable foreign exchange impact","","","","","","","","(1.0","%)"],["Organic sales","","","","","","","","(8.2","%)"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was primarily due to lower volumes of imaging equipment, instruments, CAD/CAM equipment, and treatment centers across all three regions, driven in part by competitive pressures particularly from lower-cost competitors, as well as unfavorable economic conditions. The trend of lower volumes for these products is expected to continue into 2025.

Essential Dental Solutions

A reconciliation of net sales to organic sales for the year ended December 31, 2024 is as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Net sales","","$","1,454","","","$","1,468","","","$","(14)","","","(0.9","%)"],["Unfavorable foreign exchange impact","","","","","","","","(0.8","%)"],["Organic sales","","","","","","","","(0.1","%)"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was due to lower volumes of preventive consumable products across all three regions and lower volumes of restorative and endodontic products in the United States. The decrease was partially offset by higher volumes for endodontic products in Rest of World.

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Orthodontic and Implant Solutions

A reconciliation of net sales to organic sales for the year ended December 31, 2024 is as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Net sales","","$","973","","","$","1,040","","","$","(67)","","","(6.5","%)"],["Unfavorable foreign exchange impact","","","","","","","","(1.0","%)"],["Organic sales","","","","","","","","(5.5","%)"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales for the year was primarily driven by a decrease in volume for implants and prosthetics products across the United States and Europe, and weaker sales of aligners in the United States which were negatively impacted by the suspension of the sale and marketing of Byte aligner system and impression kits. The decrease was partially offset by increased sales of SureSmile aligners in Europe and of implants products in Rest of World.

Wellspect Healthcare

A reconciliation of net sales to organic sales for the year ended December 31, 2024 is as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Net sales","","$","304","","","$","288","","","$","16","","","5.9","%"],["Favorable foreign exchange impact","","","","","","","","0.1","%"],["Organic sales","","","","","","","","5.8","%"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

The increase in organic sales was primarily driven by higher volumes across all regions, particularly in Europe, primarily driven by new product launches.

Net Sales by Region

United States

A reconciliation of net sales to organic sales for the year ended December 31, 2024 is as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Net sales","","$","1,348","","","$","1,437","","","$","(89)","","","(6.2","%)"],["Foreign exchange impact","","","","","","","","\u2014","%"],["Organic sales","","","","","","","","(6.2","%)"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was primarily due to changes in the operation of our direct-to-consumer aligners business during the course of the year, and particularly during the fourth quarter as described above under the heading “Byte Aligners Business.” Prior to the suspension of sales of aligners and impression kits beginning in October 2024, legislative trends relating to teledentistry in certain states had already prompted us to make adjustments to the Byte business model which resulted in reductions of sales of aligners by approximately $15 million during the first nine months of 2024. The subsequent suspension of sales in October resulted in a decline in revenues relative to the prior year, and we also recorded an estimate of customer refund and other reimbursement payments stemming from these actions which resulted in an additional $35 million reduction to revenue for the year ended December 31, 2024.

In addition to the impact from Byte, the decrease in sales in the United States was also due to lower volumes for consumables products within the Essential Dental Solutions segment, lower volumes for implants and prosthetics products, and lower volumes of products within the Connected Technology Solutions segment. These decreases were partially offset by lower

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customer incentives and higher volumes of Wellspect products as a result of new product launches.

Organic sales were also negatively affected by wholesale volumes for CAD/CAM products relative to the year ended December 31, 2023 due in part to timing of distributor orders. Volumes of CAD/CAM units held by distributors at December 31, 2024 decreased $8 million compared to the beginning of 2024, whereas volumes of CAD/CAM inventory held by distributors at December 31, 2023 remained consistent with the beginning of 2023. Volumes of imaging products held by distributors at December 31, 2024 decreased $7 million compared to the beginning of 2024, whereas volumes of imaging products held by distributors at December 31, 2023 increased by $1 million compared to the beginning of 2023. Distributor inventory levels for both CAD/CAM and imaging products remained low as of December 31, 2024 relative to historical averages.

Europe

A reconciliation of net sales to organic sales for the year ended December 31, 2024 is as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Net sales","","$","1,518","","","$","1,550","","","$","(32)","","","(2.1","%)"],["Favorable foreign exchange impact","","","","","","","","0.1","%"],["Organic sales","","","","","","","","(2.2","%)"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was primarily due to lower volumes of products within the Connected Technology Solutions segment and lower volumes of implants and prosthetics products within the Orthodontic and Implant Solutions segment. These decreases were partially offset by positive performance in the Wellspect Healthcare segment with new product launches, and higher volumes of SureSmile aligners in the Orthodontic and Implant Solutions segment.

Rest of World

A reconciliation of net sales to organic sales for the year ended December 31, 2024 is as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Net sales","","$","927","","","$","978","","","$","(51)","","","(5.1","%)"],["Unfavorable foreign exchange impact","","","","","","","","(3.6","%)"],["Organic sales","","","","","","","","(1.5","%)"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

The decrease in organic sales was primarily driven by lower volumes and unfavorable pricing for Connected Technology Solutions products, particularly in Japan, which saw lower volumes due to competitive pressures. These decreases were partially offset by increased volumes for implant and endodontic products, particularly in China. The local volume-based procurement program in China resulted in increased volumes for implants products during 2024, particularly during the first half of the year, with a decline in the second half of the year due to current macroeconomic conditions.

Gross Profit

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Gross profit","","$","1,958","","","$","2,086","","","$","(128)","","","(6.1","%)"],["Gross profit as a percentage of net sales","","51.6","%","","52.6","%","","(100) bps"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

Gross profit declined due to lower volumes and the impact of the Byte refunds as described above, higher manufacturing and input costs, and unfavorable mix, particularly within the Connected Technology Solutions segment. These drivers were partially offset by lower customer incentives, and a decrease in warranty costs and inventory obsolescence charges.

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Operating Expenses

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Selling, general, and administrative expenses","","$","1,605","","","$","1,613","","","$","(8)","","","(0.4","%)"],["Research and development expenses","","165","","","184","","","(19)","","","(10.5","%)"],["Goodwill and intangible asset impairments","","1,014","","","307","","","707","","","NM"],["Restructuring costs","","53","","","67","","","(14)","","","NM"],["SG&A as a percentage of net sales","","42.3","%","","40.7","%","","160 bps"],["R&D as a percentage of net sales","","4.3","%","","4.6","%","","(30) bps"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

NM - Not meaningful

SG&A Expenses

SG&A expenses decreased primarily due to lower headcount costs, lower travel costs, and lower professional service costs. The decrease was also due to lower sales and advertising costs for Byte products after the suspension of sales noted above. The overall decrease in expenses was partially offset by an increase in general and administrative costs within the Orthodontic and Implant Solutions segment, primarily as a result of bad debt expense for the write-off of Byte receivables.

R&D Expenses

R&D expenses decreased compared to the prior year as the Company continues to take a disciplined approach with ongoing investments in digital workflow solutions, product development initiatives, and software development, including the clinical application suite and cloud deployment. The Company expects to continue to maintain a level of investment in R&D that is at least 4% of annual net sales.

Goodwill and Intangible Asset Impairments

Goodwill and intangible asset impairments increased compared to the prior year, due to a higher level of impairment charges, specifically related to the goodwill pertaining to the Implant & Prosthetic Solutions reporting unit, a write-off of the Byte trademark, and certain intangible assets within the Connected Technology Solutions segment. For further information, see Item 8, Note 11, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statements of this Form 10-K.

Restructuring and Other Costs

During the year ended December 31, 2024, we recorded net expense of $53 million of restructuring costs which consist primarily of charges associated with the restructuring plans announced in February 2023 and July 2024. For further information, see Item 8, Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements of this Form 10-K.

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Segment Adjusted Operating Income

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages) (a)","","2024","","2023","","$ Change","","% Change"],["Connected Technology Solutions","","$","70","","","$","101","","","$","(31)","","","(30.3","%)"],["Essential Dental Solutions","","479","","","478","","","1","","","0.2","%"],["Orthodontic and Implant Solutions","","80","","","156","","","(76)","","","(48.6","%)"],["Wellspect Healthcare","","98","","","87","","","11","","","12.7","%"]]
[[/GREPCENT_TABLE]]
Percentages are based on actual values and may not recalculate due to rounding.                                                        

(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 US GAAP income.

Connected Technology Solutions

The decrease in segment adjusted operating income is due to the lower sales volumes noted above, unfavorable manufacturing leverage from lower volumes, and unfavorable product mix as a result of lower sales for certain higher margin CAD/CAM equipment products. These decreases were partially offset by lower headcount-related costs and product warranty and return costs.

Essential Dental Solutions

Segment adjusted operating income is flat due to favorable product mix and favorable pricing being offset primarily by the lower volumes noted above.

Orthodontic and Implant Solutions

The decrease in segment adjusted operating income is due to the impact from suspending sales of Byte clear aligners to new customers in October 2024 as previously described, the Byte refunds and inventory write-offs, and higher distribution and manufacturing costs. As noted above, operating income was also unfavorably impacted by a decline in sales for implant and prosthetics products, as well as higher general and administrative costs primarily as a result of bad debt expense for the write-off of Byte receivables, partly offset by lower sales and advertising costs for Byte products.

Wellspect Healthcare

The increase in segment adjusted operating income was driven by the increase in organic sales noted above due to new product launches, as well as margin improvements due to favorable manufacturing leverage from higher volumes.

Other Income and Expenses

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023","","$ Change","","% Change"],["Interest expense, net","","$","69","","","$","81","","","$","(12)","","","(14.5","%)"],["Other (income) expense, net","","(12)","","","9","","","(21)","","","NM"],["Net interest and other expense","","$","57","","","$","90","","","$","(33)"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

NM - Not meaningful

Interest expense, net

Net interest expense for the year ended December 31, 2024 decreased as compared to the year ended December 31, 2023, driven primarily by lower short-term and other borrowings.

50

Other (income) expense, net

Other (income) expense, net for the year ended December 31, 2024 compared to the year ended December 31, 2023 was as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions)","","2024","","2023","","$ Change"],["Foreign exchange gains (a)","","(21)","","","(3)","","","(18)"],["Loss from equity method investments","","\u2014","","","4","","","(4)"],["Defined benefit pension plan expenses","","8","","","7","","","1"],["Other non-operating loss","","1","","","1","","","\u2014"],["Other (income) expense, net","","$","(12)","","","$","9","","","$","(21)"]]
[[/GREPCENT_TABLE]]

(a) Foreign exchange gains include a benefit from our Swiss franc net investment hedge totaling $22 million, offset by revaluation of short-term intercompany receivables and payables of $1 million.

Income Taxes and Net Loss

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except per share data and percentages)","","2024","","2023","","$ Change"],["Benefit for income taxes","","$","(26)","","","$","(43)","","","$","17"],["Effective income tax rate","","2.8","%","","24.8","%"],["Net loss attributable to Dentsply Sirona","","$","(910)","","","$","(132)","","","$","(778)"],["Net loss per common share - diluted","","$","(4.48)","","","$","(0.62)"]]
[[/GREPCENT_TABLE]]

Percentages are based on actual values and may not recalculate due to rounding.

Benefit for income taxes

An income tax benefit of $26 million and $43 million was recorded for the years ended December 31, 2024 and December 31, 2023, respectively. The increase in tax benefit is primarily due to additional impairments recorded in the year ended December 31, 2024.

Further information regarding the details of income taxes is presented in Note 16, Income Taxes, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

2023 Compared to 2022

Discussion of the results of operations for the year ended December 31, 2023 as compared to December 31, 2022 was included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 29, 2024.

51

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. 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, when determining significant estimates, management 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. Some events as described below could cause results to differ significantly from those determined using estimates. The Company has identified the following accounting estimates as those which are critical to its business and results of operations.

Goodwill and Indefinite-Lived Intangible Assets

Assessment of the potential impairment of goodwill and indefinite-lived intangible assets is an integral part of the Company’s normal ongoing review of operations. 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. 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. If there are unfavorable changes in these assumptions, particularly changes in the Company’s discount rates, revenue growth rates, and operating margins, the Company may be required to recognize impairment charges.

The determination of fair value involves uncertainties around the forecasted cash flows as it requires management to make assumptions and apply judgment to estimate future business expectations. Those future expectations relate to, among other things, distribution channel changes, impact from competition, and new product developments. 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. 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.

A change in any of the estimates and assumptions used in the Company’s annual goodwill impairment test as described below or unfavorable changes in the overall markets served by the Company’s reporting units, among other factors, could have a negative material impact to the fair value of the Company’s reporting units and indefinite-lived intangible assets and could result in a future impairment charge.

Goodwill

Goodwill represents the excess cost over the fair value of the identifiable net assets of business acquired and is allocated among the Company’s reporting units. Goodwill is not amortized; instead, it is tested for impairment at the reporting unit level annually at April 1 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. Such indicators may include a decline in expected cash flows, unanticipated competition, increased interest rates, 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. 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. The Company’s reporting units are either an operating segment or one level below its operating segments, as determined in accordance with US GAAP.

52

The quantitative evaluation of impairment involves comparing the current fair value of each reporting unit to its net book value, including goodwill. The Company uses a discounted cash flow model (“DCF model”) as its valuation technique to measure the fair value for its reporting units when testing for impairment, as management believes forecasted operating cash flows are the best indicator of such fair value. The discounted cash flow model uses ten-year forecasted cash flows plus a terminal value based on capitalizing the last period’s cash flows using a perpetual growth rate. 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. Operating cash flow forecasts are based on approved business-unit operating plans for the early years and historical relationships and projections in later years. In the development of the forecasted cash flows, the Company applies revenue, gross profit, and operating expense assumptions taking into consideration historical trends as well as future expectations. 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. These rates are developed based on market participant data, which include assumptions regarding the Company’s weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit’s ability to execute on the projected cash flows. As part of the annual test, the Company reconciled the aggregate fair values of its reporting units to its market capitalization, which included a reasonable control premium based on market conditions. The Company has not materially changed its methodology for goodwill impairment testing for the years presented.

Indefinite-Lived Intangible Assets

Indefinite-lived intangible assets consist of trade names, trademarks, and in-process R&D and are not subject to amortization; instead, they are tested for impairment annually at April 1 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 discontinue or divest a business. 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. 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.

The fair value of acquired trade names 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. Under this method, an owner of an indefinite-lived intangible asset determines the arm’s length royalty that likely would have been charged if the owner had to license the asset from a third party. 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. Other assumptions are consistent with those applied to goodwill impairment testing.

Goodwill and Indefinite-Lived Intangible Asset Impairment Results

The Company assessed the goodwill of its reporting units and its indefinite-lived intangible assets for impairment as of April 1, 2024. Based on the Company's April 1 impairment test, it was determined that the fair values of its reporting units and indefinite-lived intangible assets more likely than not exceeded their carrying values, resulting in no impairment.

In the quarter ended September 30, 2024, the Company identified indicators of a more likely than not impairment for two of its reporting units, Orthodontic Aligner Solutions and Implant & Prosthetic Solutions, which together comprise all of the Orthodontic and Implant Solutions segment. As a result, the Company recorded pre-tax goodwill impairment charges as of September 30, 2024 of $145 million for the Orthodontic Aligner Solutions reporting unit and $359 million for the Implant & Prosthetic Solutions reporting unit, both within the Orthodontic and Implant Solutions segment. The charges were recorded in Goodwill and intangible asset impairment in the Consolidated Statement of Operations. The impairment charge related to the Orthodontic Aligner Solutions reporting unit resulted in a full write-off of the remaining goodwill balance for this reporting unit.

53

In the quarter ended December 31, 2024, the Company identified indicators of a more likely than not impairment for its Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment. The decline in fair value of this reporting unit was driven by a weaker trend in sales volumes, particularly in North America, increased competition from lower-priced alternatives impacting global markets, and adverse macroeconomic pressures impacting demand for elective dental procedures and premium implant solutions. These factors contributed to reduced forecasted revenues, lower operating margins, and reduced expectations for future cash flows. The fair value of the Implant & Prosthetic Solutions reporting unit was computed using a discounted cash flow model with inputs developed using internal projections and market-based data. As a result, the Company recorded a pre-tax goodwill impairment charge as of December 31, 2024 of $269 million for the Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment. This charge was recorded in Goodwill and intangible asset impairment in the Consolidated Statement of Operations.

Additionally, in the quarter ended December 31, 2024, the Company also identified indicators of more likely than not impairments for certain indefinite-lived intangible assets including trade names and trademarks within the Connected Technology Solutions segment, and certain trade names within the Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment. The decline in fair value of the trade names and trademarks was driven by weakened demand for the Company’s premium equipment and implant products, competitive pricing pressures, and a sustained higher cost of capital, which are contributing to reduced forecasted revenues. These indefinite-lived intangible assets were evaluated for impairment using an income approach, specifically a relief from royalty methodology. As a result, the Company recorded indefinite-lived intangible asset impairment charges of $82 million and $1 million for the Connected Technology Solutions and Orthodontic and Implant Solutions segments, respectively, for the three months ended December 31, 2024. These charges were recorded in Goodwill and intangible asset impairment in the Consolidated Statements of Operations.

The remaining goodwill balance of the Implant & Prosthetic Solutions reporting unit was $503 million as of December 31, 2024, and the carrying values of indefinite-lived intangible assets with impairments in the fourth quarter were $76 million and $149 million for the Implant & Prosthetic Solutions and Connected Technology Solutions reporting units, respectively, as of December 31, 2024. As the fair values of the Implant & Prosthetic Solutions reporting unit and the indefinite-lived assets within the Implant & Prosthetic Solutions and Connected Technology Solutions reporting units, respectively, continue to approximate carrying value as of December 31, 2024, any further decline in key assumptions could result in additional impairments in future periods.

Based on quantitative and qualitative analyses performed for the other reporting units and the Company’s other indefinite-lived intangible assets, the Company believes there is no indication that the carrying value more likely than not exceeds the fair value in each case as of December 31, 2024. For the Company's reporting units that were not impaired, the Company applied a hypothetical sensitivity analysis by increasing the discount rate of these reporting units by 50 basis points. The results of this sensitivity analysis at December 31, 2024, indicate that none of the other reporting units would have been impaired.

For further information, see Note 11, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Income Taxes

Income taxes are determined using the liability method of accounting for income taxes. 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. The Company recognizes in the consolidated financial statements the impact of a tax position if that position is more likely than not of being sustained upon examination by the taxing authorities based on the technical merits of the position.

Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes. Deferred tax assets are recognized if it is more likely than not that the assets will be realized in future years. The Company establishes a valuation allowance for deferred tax assets for which realization is not likely. At December 31, 2024, the Company has a valuation allowance of $1,503 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. The Company operates within multiple taxing jurisdictions throughout the world and in the normal course of business is examined by taxing authorities in those jurisdictions. Adjustments to the uncertain tax positions are recorded when taxing authority examinations are completed,

54

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.

55

LIQUIDITY AND CAPITAL RESOURCES

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions)","2024","","2023","","$ Change"],["Cash provided by (used in):"],["Operating activities","","$","461","","","$","377","","","$","84"],["Investing activities","","(197)","","","(89)","","","(108)"],["Financing activities","","(302)","","","(307)","","","5"],["Effect of exchange rate changes on cash and cash equivalents","","(24)","","","(12)","","","(12)"],["Net decrease in cash and cash equivalents","","$","(62)","","","$","(31)","","","$","(31)"]]
[[/GREPCENT_TABLE]]

Cash provided by operating activities increased compared to the prior year primarily as a result of changes in working capital, including higher collections on accounts receivable due largely to timing of customer remittances, decreased inventory levels, and timing of estimated tax payments. These increases in operating cash were offset by other changes in working capital including the timing of payments to vendors compared to the prior year. For the year ended December 31, 2024, the number of days for sales outstanding in accounts receivable decreased by 4 days to 55 days at December 31, 2024 as compared to 59 days at December 31, 2023, and the number of days of sales in inventory decreased by 2 days to 124 days at December 31, 2024 as compared to 126 days at December 31, 2023.

The cash used in investing activities increased compared to the prior year primarily due to higher capital expenditures of $31 million, lower net cash proceeds on settlement of derivatives of $38 million, and in the prior year, the Company’s sale of a minority interest investment resulted in proceeds of $13 million. For the year ended December 31, 2023, capital expenditures were $149 million, and for the year ended December 31, 2024, capital expenditures were $180 million. The Company estimates capital expenditures to be in the range of approximately $160 million to $190 million for the twelve months ending December 31, 2025 and expects these investments to include expenses for the ongoing implementation of a new global Enterprise Resource Planning (“ERP”) system, equipment upgrades, and capacity expansion to support product innovation and consolidate operations for enhanced efficiencies.

The decrease of cash used in financing activities compared to the prior year was primarily driven by an increase in net borrowings of $51 million on short-term debt compared to the prior year and a decrease in cash paid on share repurchases of $50 million compared to the prior year. The decrease of cash used in financing activities was mostly offset by an increase of $10 million in dividends paid compared to the prior year and an increase of $81 million in payments on long-term borrowings compared to the prior year. The Company’s total borrowings increased by a net $17 million during the year ended December 31, 2024.

During the year ended December 31, 2024, the Company repurchased approximately 9.4 million shares under its open market share repurchase plan for a cost of $250 million at a volume-weighted average price of $26.65. On November 7, 2023, the Board of Directors approved an increase to the authorized share repurchase program of $1.0 billion. At December 31, 2024, $1.2 billion 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. At December 31, 2024, the Company held 65.7 million shares of treasury stock.

56

The Company’s ratio of total net debt to total capitalization was as follows:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions, except percentages)","","2024","","2023"],["Current portion of debt","","$","549","","","$","322"],["Long-term debt","","1,586","","","1,796"],["Less: Cash and cash equivalents","","272","","","334"],["Net debt","","$","1,863","","","$","1,784"],["Total equity","","1,943","","","3,294"],["Total capitalization","","$","3,806","","","$","5,078"],["Total net debt to total capitalization ratio","","48.9","%","","35.1","%"]]
[[/GREPCENT_TABLE]]

At December 31, 2024, the Company had $313 million of borrowings available under lines of credit, including lines available under its short-term arrangements and revolving credit facility. The Company’s borrowing capacity includes a $700 million multi-currency revolving credit facility which expires in May 2028. The Company also has access to an aggregate $700 million under a U.S. dollar commercial paper facility, which was expanded in December 2024 from its previous capacity of $500 million. The $700 million revolver serves as a back-up to the commercial paper facility, thus the total available credit under the commercial paper facility and the multi-currency revolving credit facility in the aggregate is $700 million. The Company had $410 million outstanding borrowings under the commercial paper facility at December 31, 2024 resulting in $290 million remaining available under the revolving credit and commercial paper facilities. The Company also has access to $34 million in uncommitted short-term financing under lines of credit from various financial institutions, the availability of which is reduced by other short-term borrowings. The lines of credit have no major restrictions and are provided under demand notes between the Company and the lending institutions. At December 31, 2024, the Company has $11 million outstanding under these 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 most restrictive of these covenants are: (1) a ratio of total debt outstanding to total capital not to exceed 0.6, and (2) a ratio of operating income excluding depreciation and amortization to interest expense of not less than 3.0 times, in each case, as such terms are defined in the relevant agreement. Any breach of any such covenants would result in a default under the existing debt agreements that would permit the lenders to declare all borrowings under such debt agreements to be immediately due and payable and, through cross default provisions, would entitle the Company’s other lenders to accelerate their loans. At December 31, 2024, the Company was in compliance with these covenants.

The Company expects on an ongoing basis to be able to finance operating cash requirements, capital expenditures, and debt service from the current cash, cash equivalents, cash flows from operations and amounts available under its existing borrowing facilities. 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. The Company has the ability to 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. At December 31, 2024, management believed that sufficient liquidity was available in the United States and expects this to continue for the next twelve months. 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. Repatriation activities both performed and contemplated to date have not resulted in, and are not expected to result in, any significant incremental tax liability to the Company.

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, 2024, the Company held $34 million of precious metals on consignment from several financial institutions. Under these consignment arrangements, the financial institutions own the precious metal, and, accordingly, the

57

Company does not report this consigned inventory as part of its inventory on the Consolidated Balance Sheets. These consignment agreements allow the Company to acquire the precious metal at market rates at a point in time, which is approximately the same time, and for the same price as alloys are sold to the Company’s customers. 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. For additional details, see Item 7A “Quantitative and Qualitative Disclosure About Market Risk - Consignment Arrangements.”

Contractual Obligations

The Company’s scheduled contractual cash obligations at December 31, 2024 were as follows:

[[GREPCENT_TABLE]]
[["","","Within1 Year","","Years 2-3","","Years 4-5","","GreaterThan5 Years","","Total"],["(in millions)"],["Long-term borrowings, including finance leases","","$","128","","","$","300","","","$","227","","","$","1,093","","","$","1,748"],["Operating leases","","52","","","61","","","28","","","10","","","151"],["Purchase commitments","","194","","","112","","","40","","","\u2014","","","346"],["Interest on long-term borrowings, net of interest rate swap agreements","","41","","","73","","","64","","","17","","","195"],["Postemployment obligations","","25","","","51","","","46","","","131","","","253"],["Precious metal consignment agreements","","34","","","\u2014","","","\u2014","","","\u2014","","","34"],["","","$","474","","","$","597","","","$","405","","","$","1,251","","","$","2,727"]]
[[/GREPCENT_TABLE]]

Due to the uncertainty with respect to the timing of future cash flows associated with the Company’s unrecognized tax benefits at December 31, 2024, the Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority; therefore, $51 million of unrecognized tax benefits has been excluded from the contractual obligations table above. See Note 16, Income Taxes, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Material Trends in Capital Resources

On July 29, 2024, the Board of Directors of the Company approved an additional plan to restructure the Company’s business to improve operational performance and drive stockholder value creation (the “2024 Plan”). In connection with the 2024 Plan, the Company anticipates a net reduction in the Company’s global workforce of approximately 2% to 4%. The Company anticipates that the 2024 Plan will be substantially completed by the end of 2025 and result in $80 million to $100 million in annual cost savings. The proposed changes are subject to co-determination processes with employee representative groups in countries where required.

As of December 31, 2024, in conjunction with the 2024 Plan, the Company has incurred $28 million in restructuring charges from inception, primarily related to employee transition, severance payments and employee benefits. Actions taken under the 2024 Plan seek to further streamline the Company’s operations and global footprint, as well as improve alignment of the Company’s cost structure with its strategic growth objectives. The Company expects to incur between $35 million and $50 million in non-recurring restructuring charges under the 2024 Plan which are expected to be expensed and paid in cash by the end of 2025.

On February 14, 2023, the Board of Directors of the Company approved a plan to restructure the business through a new operating model with five global business units, optimize central functions and overall management infrastructure, and implement other efforts aimed at cost savings (the “2023 Plan”). The Company estimated a reduction in its global workforce of approximately 8% to 10% and annual cost savings of approximately $200 million pursuant to the 2023 Plan. The target for cost savings has been substantially met, with the benefits mostly offset in the short term by additional investments in sales personnel, the Company’s new global ERP system, and other transformation initiatives.

As of December 31, 2024, in conjunction with the 2023 Plan, the Company incurred $87 million in restructuring charges, from inception, primarily related to employee transition, severance payments, employee benefits, and facility closure costs, and $20 million in other non-recurring costs related to restructuring activities, which mostly consist of consulting, legal and other professional service fees. Remaining restructuring charges attributable to the 2023 Plan are not expected to be material.

58

The estimates of the charges and expenditures that the Company expects to incur in connection with the 2024 Plan, and the timing thereof, are subject to several assumptions, including local law requirements in various jurisdictions and co-determination aspects in countries where required. Actual amounts may differ materially from estimates. In addition, the Company may incur additional charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the 2024 Plan. For further information, refer to Note 18, Restructuring and Other Costs, in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Beginning in the second quarter of 2022, the Company’s financial results have also been impacted by the costs associated with the internal investigation conducted by the Audit and Finance Committee of the Company’s Board of Directors, along with associated litigation and an external investigation by the SEC, both of which are ongoing. For the year ended December 31, 2022, these costs totaled approximately $61 million. For the year ended December 31, 2023, these costs totaled $19 million. The costs in 2023 were offset by a $17 million gain from release of employee compensation accruals resulting from a settlement in the three months ended September 30, 2023. For the year ended December 31, 2024, these costs totaled $11 million. The Company expects that it will continue to incur such costs into 2025 pertaining to the matters described in Note 21, Commitments and Contingencies, in the Notes to 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.