UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

~~SECURITIES EXCHANGE ACT OF 1934~~

~~For the quarterly period ended~~ ~~June 30, 2017~~

o ~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE~~

SECURITIES EXCHANGE ACT OF 1934

For the ~~transition~~quarterly period ~~from ______________ to _______________~~ended June 30, 2018

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.)



221 West Philadelphia Street, York, PA		17401-2991
(Address of principal executive offices)		(Zip Code)

(717) 845-7511

(Registrant’s telephone number, including area code)

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

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate ~~website,~~Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes x No o

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. (Check one):



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
Emerging growth company o	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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: At

July ~~31, 2017,~~26, 2018, DENTSPLY SIRONA Inc. had ~~229,501,846~~222,344,874 shares of Common Stock outstanding, with a par value of $.01 per share.

DENTSPLY SIRONA Inc.

TABLE OF CONTENTS




PART I	FINANCIAL INFORMATION	Page

Item 1	Financial Statements (unaudited)	3

	Consolidated Statements of Operations	3

	Consolidated Statements of Comprehensive Income (Loss)	4

	Consolidated Balance Sheets	5

	Consolidated Statements of ~~Cash Flows~~Changes in Equity	6

	Consolidated Statements of ~~Changes in Equity~~Cash Flows	7

	Notes to Unaudited Interim Consolidated Financial Statements	8

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3443

Item 3	Quantitative and Qualitative Disclosures About Market Risk	5768

Item 4	Controls and Procedures	5768

PART II	OTHER INFORMATION

Item 1	Legal Proceedings	5869

Item 1A	Risk Factors	5869

Item 2	Unregistered Sales of Securities and Use of Proceeds	5871

Item 6	Exhibits	6072

Signatures		~~Signatures~~	6073

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,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017

Net sales	$	992.7		$	1,022.0		$	1,893.2		$	1,794.6		$	1,042.1		$	992.7		$	1,998.2		$	1,893.2
Cost of products sold	448.5			495.1			857.0			848.8			489.3			448.5			931.3			857.0

Gross profit	544.2			526.9			1,036.2			945.8			552.8			544.2			1,066.9			1,036.2
Selling, general and administrative expenses	417.6			402.1			822.3			744.2			432.2			417.6			867.4			822.3
Goodwill impairment	1,092.9			—			1,092.9			—			1,085.8			1,092.9			1,085.8			1,092.9
Restructuring and other costs	81.7			3.6			84.8			7.7			188.9			81.7			199.1			84.8

Operating (loss) income	(1,048.0		)	121.2			(963.8		)	193.9
Operating loss													(1,154.1		)	(1,048.0		)	(1,085.4		)	(963.8		)

Other income and expenses:
Interest expense	9.6			9.3			18.9			18.5			9.6			9.6			18.2			18.9
Interest income	(0.6		)	(0.4		)	(1.3		)	(0.9		)	(0.4		)	(0.6		)	(1.0		)	(1.3		)
Other expense (income), net	7.8			(11.5		)	6.8			(14.9		)	(1.0		)	7.8			(35.1		)	6.8

(Loss) income before income taxes	(1,064.8		)	123.8			(988.2		)	191.2
(Benefit) provision for income taxes	(14.5		)	17.9			2.4			(40.0		)
Loss before income taxes													(1,162.3		)	(1,064.8		)	(1,067.5		)	(988.2		)
Provision (benefit) for income taxes													(41.3		)	(14.5		)	(27.6		)	2.4

Net (loss) income	(1,050.3		)	105.9			(990.6		)	231.2
Net loss													(1,121.0		)	(1,050.3		)	(1,039.9		)	(990.6		)

Less: Net (loss) income attributable to noncontrolling interests	(0.3		)	0.5			(0.4		)	0.8
Less: Net income (loss) attributable to noncontrolling interests													1.0			(0.3		)	0.9			(0.4		)

Net (loss) income attributable to Dentsply Sirona	$	(1,050.0	)	$	105.4		$	(990.2	)	$	230.4
Net loss attributable to Dentsply Sirona													$	(1,122.0	)	$	(1,050.0	)	$	(1,040.8	)	$	(990.2	)

Net (loss) income per common share attributable to Dentsply Sirona:
Net loss per common share attributable to Dentsply Sirona:
Basic	$	(4.58	)	$	0.45		$	(4.31	)	$	1.13		$	(4.98	)	$	(4.58	)	$	(4.60	)	$	(4.31	)
Diluted	$	(4.58	)	$	0.44		$	(4.31	)	$	1.11		$	(4.98	)	$	(4.58	)	$	(4.60	)	$	(4.31	)

Weighted average common shares outstanding:
Basic	229.4			233.7			229.7			204.2			225.2			229.4			226.2			229.7
Diluted	229.4			237.4			229.7			207.9			225.2			229.4			226.2			229.7

Dividends declared per common share:	$	0.0875		$	0.0775		$	0.1750		$	0.1550		$	0.0875		$	0.0875		$	0.1750		$	0.1750

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016

Net (loss) income $ (1,050.3 ) $ 105.9
$ (990.6 ) $ 231.2

Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss) 222.0
(92.8 ) 271.7
94.0
Net (loss) gain on derivative financial instruments (2.5 ) 8.5
(5.8 ) (16.3 )
Pension liability gain 1.1
0.9
2.3
1.8
Total other comprehensive income (loss), net of tax 220.6
(83.4 ) 268.2
79.5

Total comprehensive (loss) income (829.7 ) 22.5
(722.4 ) 310.7

Less: Comprehensive income attributable

to noncontrolling interests 0.3
0.5
0.1
0.9

Comprehensive (loss) income attributable to Dentsply Sirona $ (830.0 ) $ 22.0
$ (722.5 ) $ 309.8



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017

Net loss	$	(1,121.0	)	$	(1,050.3	)	$	(1,039.9	)	$	(990.6	)

Other comprehensive (loss) income, net of tax:
Foreign currency translation (loss) gain	(192.6		)	222.0			(126.9		)	271.7
Net gain (loss) on derivative financial instruments	29.6			(2.5		)	17.6			(5.8		)
Net realized holding gain on available for sale securities	—			—			(44.3		)	—
Pension liability gain	3.0			1.1			4.2			2.3
Total other comprehensive (loss) income, net of tax	(160.0		)	220.6			(149.4		)	268.2

Total comprehensive loss	(1,281.0		)	(829.7		)	(1,189.3		)	(722.4		)

Less: Comprehensive income attributable
to noncontrolling interests	0.8			0.3			1.3			0.1

Comprehensive loss attributable to Dentsply Sirona	$	(1,281.8	)	$	(830.0	)	$	(1,190.6	)	$	(722.5	)

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

(unaudited)


	June 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Assets
Current Assets:
Cash and cash equivalents	$	268.4		$	383.9		$	239.3		$	320.6
Accounts and notes receivables-trade, net	664.2			636.0			710.3			746.2
Inventories, net	596.8			517.1			666.3			623.1
Prepaid expenses and other current assets, net	236.3			206.5			276.5			312.6

Total Current Assets	1,765.7			1,743.5			1,892.4			2,002.5

Property, plant and equipment, net	841.0			799.8			857.6			876.0
Identifiable intangible assets, net	3,059.4			2,957.6			2,546.8			2,800.7
Goodwill, net	5,023.6			5,952.0			3,457.8			4,539.2
Other noncurrent assets, net	160.3			102.9			67.4			156.1

Total Assets	$	10,850.0		$	11,555.8		$	8,822.0		$	10,374.5

Liabilities and Equity
Current Liabilities:
Accounts payable	$	245.6		$	223.0		$	292.4		$	284.4
Accrued liabilities	455.1			462.7			575.3			585.8
Income taxes payable	31.4			60.8			31.9			54.2
Notes payable and current portion of long-term debt	21.6			21.1			218.1			30.1

Total Current Liabilities	753.7			767.6			1,117.7			954.5

Long-term debt	1,587.3			1,511.1			1,586.6			1,611.6
Deferred income taxes	802.4			751.7			538.0			718.0
Other noncurrent liabilities	432.4			399.5			439.6			462.5

Total Liabilities	3,575.8			3,429.9			3,681.9			3,746.6

Commitments and contingencies							—			—

Equity:
Preferred stock, $1.00 par value; 0.25 million shares authorized; no shares issued	—			—			—			—
Common stock, $.01 par value;	2.6			2.6
400.0 million shares authorized at June 30, 2017 and December 31, 2016, respectively
264.5 million shares issued at June 30, 2017 and December 31, 2016, respectively
229.3 million and 230.1 million shares outstanding at June 30, 2017 and December 31, 2016, respectively
Common stock, $0.01 par value;							2.6			2.6
400.0 million shares authorized and 264.5 million shares issued at June 30, 2018 and December 31, 2017, respectively
222.2 million and 226.8 million shares outstanding at June 30, 2018 and December 31, 2017, respectively
Capital in excess of par value	6,527.4			6,516.7			6,526.2			6,543.9
Retained earnings	2,915.6			3,948.0			1,216.2			2,316.2
Accumulated other comprehensive loss	(438.0		)	(705.7		)	(440.8		)	(291.0		)
Treasury stock, at cost, 35.2 million and 34.4 million shares at June 30, 2017 and December 31, 2016, respectively	(1,745.1		)	(1,647.3		)
Treasury stock, at cost, 42.3 million and 37.7 million shares at June 30, 2018 and December 31, 2017, respectively							(2,177.0		)	(1,955.4		)
Total Dentsply Sirona Equity	7,262.5			8,114.3			5,127.2			6,616.3

Noncontrolling interests	11.7			11.6			12.9			11.6

Total Equity	7,274.2			8,125.9			5,140.1			6,627.9

Total Liabilities and Equity	$	10,850.0		$	11,555.8		$	8,822.0		$	10,374.5

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In millions)

(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, 2016	$	2.6	$	6,516.7		$	3,948.0		$	(705.7	)	$	(1,647.3	)	$	8,114.3		$	11.6		$	8,125.9

Net loss	—		—			(990.2		)	—			—			(990.2		)	(0.4		)	(990.6		)

Other comprehensive income	—		—			—			267.7			—			267.7			0.5			268.2

Exercise of stock options	—		6.3			—			—			39.1			45.4			—			45.4
Stock based compensation expense	—		21.9			—			—			—			21.9			—			21.9
Reclassification on adoption of ASU No. 2016-09	—		1.0			(1.5		)	—			—			(0.5		)	—			(0.5		)
Funding of Employee Stock Ownership Plan	—		3.3			—			—			3.3			6.6			—			6.6
Treasury shares purchased	—		—			—			—			(150.3		)	(150.3		)	—			(150.3		)
RSU distributions	—		(22.1		)	—			—			10.1			(12.0		)	—			(12.0		)
RSU dividends	—		0.3			(0.3		)	—			—			—			—			—
Cash dividends	—		—			(40.4		)	—			—			(40.4		)	—			(40.4		)
Balance at June 30, 2017	$	2.6	$	6,527.4		$	2,915.6		$	(438.0	)	$	(1,745.1	)	$	7,262.5		$	11.7		$	7,274.2



	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, 2017	$	2.6	$	6,543.9		$	2,316.2		$	(291.0	)	$	(1,955.4	)	$	6,616.3		$	11.6	$	6,627.9

Net (loss) income	—		—			(1,040.8		)	—			—			(1,040.8		)	0.9		(1,039.9		)

Other comprehensive (loss) income	—		—			—			(149.8		)	—			(149.8		)	0.4		(149.4		)

Exercise of stock options	—		(6.4		)	—			—			17.6			11.2			—		11.2
Cumulative effect on adoption of ASC 606	—		—			(6.0		)	—			—			(6.0		)	—		(6.0		)
Reclassification on adoption of ASU No. 2016-16	—		—			(2.7		)	—			—			(2.7		)	—		(2.7		)
Reclassification on adoption of ASU No. 2018-02	—		—			8.1			—			—			8.1			—		8.1
Stock based compensation expense	—		9.8			—			—			—			9.8			—		9.8
Treasury shares purchased	—		—			—			—			(250.2		)	(250.2		)	—		(250.2		)
RSU distributions	—		(21.4		)	—			—			11.0			(10.4		)	—		(10.4		)
RSU dividends	—		0.3			(0.3		)	—			—			—			—		—
Cash dividends	—		—			(58.3		)	—			—			(58.3		)	—		(58.3		)
Balance at June 30, 2018	$	2.6	$	6,526.2		$	1,216.2		$	(440.8	)	$	(2,177.0	)	$	5,127.2		$	12.9	$	5,140.1

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

DENTSPLY SIRONA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(unaudited)


	Six Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2018			2017
Cash flows from operating activities:
Net (loss) income	$	(990.6	)	$	231.2
Net loss							$	(1,039.9	)	$	(990.6	)

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	62.1			55.1			68.8			62.1
Amortization of intangible assets	91.8			65.6			100.1			91.8
Amortization of deferred financing costs	1.3			2.1			1.3			1.3
Goodwill impairment	1,092.9			—			1,085.8			1,092.9
Indefinite-lived intangible asset impairment	79.8			—			179.2			79.8
Deferred income taxes	(34.2		)	(70.5		)	(70.8		)	(34.2		)
Stock based compensation expense	21.9			17.4			9.8			21.9
Restructuring and other costs - non-cash	1.0			3.3			9.1			1.0
Stock option income tax benefit	—			(8.8		)
Other non-cash income	5.5			(31.5		)
Other non-cash (income) expense							(2.9		)	5.5
Loss on disposal of property, plant and equipment	0.4			0.5			0.6			0.4
Gain on sale of equity security							(44.1		)	—
Changes in operating assets and liabilities, net of acquisitions:
Accounts and notes receivable-trade, net	1.9			(82.8		)	23.0			1.9
Inventories, net	(49.6		)	44.7			(69.3		)	(49.6		)
Prepaid expenses and other current assets, net	(59.3		)	(8.5		)	(25.7		)	(59.3		)
Other noncurrent assets, net	1.2			1.6			(7.7		)	1.2
Accounts payable	9.5			13.9			(6.5		)	9.5
Accrued liabilities	(19.2		)	(11.1		)	(4.6		)	(19.2		)
Income taxes	(15.4		)	(41.5		)	(28.5		)	(15.4		)
Other noncurrent liabilities	7.7			7.4			(5.7		)	7.7

Net cash provided by operating activities	208.7			188.1			172.0			208.7

Cash flows from investing activities:

Capital expenditures	(64.8		)	(47.8		)	(81.2		)	(64.8		)
Cash assumed in Merger	—			522.3
Cash and deposits paid for acquisitions of businesses and equity investments, net of cash acquired	(125.2		)	(0.4		)
Cash received from sale of business or product line	—			2.4
Cash paid for acquisitions of businesses and equity investments, net of cash acquired							(130.5		)	(125.2		)
Cash received on derivatives contracts	5.3			10.7			1.9			5.3
Cash paid on derivatives contracts	—			(3.6		)	(2.4		)	—
Expenditures for identifiable intangible assets	(5.9		)	—			(5.3		)	(5.9		)
Purchase of short-term investments	(2.3		)	—			—			(2.3		)
Purchase of Company-owned life insurance policies	(0.9		)	(1.7		)	—			(0.9		)
Proceeds from sale of equity security							54.1			—
Proceeds from sale of property, plant and equipment, net	1.9			4.4			3.9			1.9

Net cash (used in) provided by investing activities	(191.9		)	486.3
Net cash used in investing activities							(159.5		)	(191.9		)

Cash flows from financing activities:

Increase (decrease) in short-term borrowings	1.4			(3.6		)
Increase in short-term borrowings							187.3			1.4
Cash paid for treasury stock	(151.5		)	(600.0		)	(250.2		)	(151.5		)
Cash dividends paid	(38.1		)	(28.6		)	(39.7		)	(38.1		)
Proceeds from long-term borrowings	2.9			79.9			0.3			2.9
Repayments on long-term borrowings	(6.6		)	(127.5		)	(0.4		)	(6.6		)
Proceeds from exercised stock options	45.4			20.4			13.9			45.4
Excess tax benefits from stock based compensation	—			8.8

Net cash used in financing activities	(146.5		)	(650.6		)	(88.8		)	(146.5		)

Effect of exchange rate changes on cash and cash equivalents	14.2			3.2			(5.0		)	14.2

Net (decrease) increase in cash and cash equivalents	(115.5		)	27.0
Net decrease in cash and cash equivalents							(81.3		)	(115.5		)

Cash and cash equivalents at beginning of period	383.9			284.6			320.6			383.9

Cash and cash equivalents at end of period	$	268.4		$	311.6		$	239.3		$	268.4

Schedule of non-cash investing activities:
Merger financed by common stock	$	—		$	6,256.2

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.

~~DENTSPLY SIRONA INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY~~

~~(In millions)~~

~~(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, 2015 $ 1.6
$ 237.8
$ 3,591.0
$ (594.0 ) $ (898.4 ) $ 2,338.0
$ 1.4
$ 2,339.4

Net income —
—
230.4
—
—
230.4
0.8
231.2

Other comprehensive income —
—
—
79.4
—
79.4
0.1
79.5

Common stock issuance related to Merger 1.0
6,253.4
6,254.4
1.8
6,256.2
Exercise of stock options —
(4.5 ) —
—
24.8
20.3
—
20.3
Tax benefit from stock options exercised —
8.8
—
—
—
8.8
—
8.8
Stock based compensation expense —
17.4
—
—
—
17.4
—
17.4
Funding of Employee Stock Ownership Plan —
2.1
—
—
4.2
6.3
—
6.3
Treasury shares purchased —
—
—
—
(600.0 ) (600.0 ) —
(600.0 )
RSU distributions —
(16.5 ) —
—
9.4
(7.1 ) —
(7.1 )
RSU dividends —
0.3
(0.3 ) —
—
—
—
—
Cash dividends —
—
(36.4 ) —
—
(36.4 ) —
(36.4 )
Balance at June 30, 2016 $ 2.6
$ 6,498.8
$ 3,784.7
$ (514.6 ) $ (1,460.0 ) $ 8,311.5
$ 4.1
$ 8,315.6

Common
Stock

Capital in
Excess of
Par Value

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Treasury
Stock
Total Dentsply Sirona
Equity
Noncontrolling
Interests

Total
Equity
Balance at December 31, 2016 $ 2.6
$ 6,516.7
$ 3,948.0
$ (705.7 ) $ (1,647.3 ) $ 8,114.3
$ 11.6
$ 8,125.9

Net loss —
—
(990.2 ) —
—
(990.2 ) (0.4 ) (990.6 )

Other comprehensive income —
—
—
267.7
—
267.7
0.5
268.2

Exercise of stock options —
6.3
—
—
39.1
45.4
—
45.4
Stock based compensation expense —
21.9
—
—
—
21.9
—
21.9
Reclassification on adoption of ASU No. 2016-09 (see Note 1) —
1.0
(1.5 ) —
—
(0.5 ) —
(0.5 )
Funding of Employee Stock Ownership Plan —
3.3
—
—
3.3
6.6
—
6.6
Treasury shares purchased —
—
—
—
(150.3 ) (150.3 ) —
(150.3 )
RSU distributions —
(22.1 ) —
—
10.1
(12.0 ) —
(12.0 )
RSU dividends —
0.3
(0.3 ) —
—
—
—
—
Cash dividends —
—
(40.4 ) —
—
(40.4 ) —
(40.4 )
Balance at June 30, 2017 $ 2.6
$ 6,527.4
$ 2,915.6
$ (438.0 ) $ (1,745.1 ) $ 7,262.5
$ 11.7
$ 7,274.2

~~See accompanying Notes to Unaudited Interim Consolidated Financial Statements.~~

DENTSPLY SIRONA Inc. and Subsidiaries

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the U.S. Securities and Exchange Commission (“SEC”). The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by US GAAP. 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, ~~2016.~~

On February 29, 2016, DENTSPLY International Inc. merged with Sirona Dental Systems, Inc. (“Sirona”) to form DENTSPLY SIRONA Inc. (the “Merger”). See Note 5, Business Combinations, for additional information about the Merger.

~~NOTE~~ 1 ~~– SIGNIFICANT ACCOUNTING POLICIES~~2017.

The accounting policies of the Company, as applied in the interim consolidated financial statements presented herein are substantially the same as presented in the Company’s Form 10-K for the year ended December 31, ~~2016,~~2017, except as may be indicated ~~below:~~below.

Revenue Recognition

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied; generally this occurs with the transfer of risk and/or control of Dental and Healthcare Consumables products (“consumable” products), Dental Technology products (“technology” products), or Dental Equipment products (“equipment” products). Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense.

For most of consumable, technology and equipment products, the Company transfers control and recognizes a sale when products are shipped from the manufacturing facility or warehouse to the customer (distributors and direct to dentists). For contracts with customers that contain destination shipping terms, revenue is not recognized until risk has transferred and the goods are delivered to the agreed upon destination. The amount of consideration received and revenue recognized varies with changes in marketing incentives (e.g., discounts, rebates, free goods) and returns offered to customers and their customers. When the Company gives customers the right to return eligible products and receive credit, returns are estimated based on an analysis of historical experience. However, returns of products, excluding warranty related returns, are infrequent and insignificant. The Company adjusts the estimate of revenue at the earlier of when the most likely amount of consideration can be estimated, the amount expected to be received changes, or when the consideration becomes fixed. Consideration received from customers in advance of revenue recognition is classified as deferred revenue.

Depending on the terms of the arrangement, the Company will defer the recognition of a portion of the consideration received when performance obligations are not yet satisfied (e.g., extended maintenance/service contracts, software and licenses, customer loyalty points and coupon programs). The Company uses an observable price, typically average selling price, to determine the stand-alone selling price for separate performance obligations. The Company determines the stand-alone selling price, based on Company geographic sales locations’ database of pricing and discounting practices for the specific product or service when sold separately, and utilizes this data to arrive at average selling prices by product. Revenue is then allocated proportionately, based on the determined stand-alone selling price, to the unsatisfied performance obligation, which is deferred until satisfied. At June 30, 2018, the Company had $26.2 million of deferred revenue recorded in Accrued liabilities on the Consolidated Balance Sheets. The Company expects to recognize significantly all of the deferred revenue within the next twelve months.

The Company has elected to account for shipping and handling activities as a fulfillment cost within the cost of products sold, and records shipping and handling costs collected from customers in net sales. The Company has adopted two practical expedients: the “right to invoice” practical expedient, which allows us to recognize revenue in the amount of the invoice when it corresponds directly with the value of performance completed to date; and relief from considering the existence of a significant financing component when the payment for the good or service is expected to be one year or less.

The Company offers discounts to its customers and distributors if certain conditions are met. Discounts are primarily based on the volume of products purchased or targeted to be purchased by the customer. Discounts are deducted from revenue at the time of sale or when the discount is offered, whichever is later. The Company estimates volume discounts based on an individual customer’s historical and estimated future product purchases.

Certain of the Company’s customers are offered cash rebates based on targeted sales increases. The Company estimates rebates based on the forecasted performance of a customer and their expected level of achievement within the rebate programs. In accounting for these rebate programs, the Company records an accrual and reduces sales ratably as sales occur over the rebate period. The Company updates the accruals for these rebate programs as actual results and updated forecasts impact the estimated achievement for customers within the rebate programs.

A portion of the Company’s net sales is comprised of sales of precious metals generated through its precious metal dental alloy product offerings. As the precious metal content of the Company’s sales is largely a pass-through to customers, the Company uses its cost of precious metal purchased as a proxy for the precious metal content of sales, as the precious metal content of sales is not separately tracked and invoiced to customers. The Company believes that it is reasonable to use the cost of precious metal content purchased in this manner since precious metal alloy sale prices are typically adjusted when the prices of underlying precious metals change.

Accounts and Notes Receivable

The Company records a provision for doubtful accounts, which is included in Selling, general and administrative expenses on the Consolidated Statements of Operations.

Accounts and notes receivables – trade, net are stated net of allowances for doubtful accounts and trade discounts, which were ~~$23.2~~$23.4 million at June 30, ~~2017~~2018 and ~~$22.7~~$22.4 million at December 31, ~~2016.~~2017.

Marketable Securities

~~The~~During the three months ended March 31, 2018, the Company ~~accounts for~~sold its direct investment in the DIO Corporation (“DIO”) ~~using the cost-basis method~~for $54.1 million, resulting in a gain of ~~accounting.~~$44.1 million. At ~~June 30, 2017 and~~ December 31, ~~2016,~~2017, the Company had recorded an unrealized gain of $45.0 million in accumulated other comprehensive loss. This gain was transferred out of Accumulated other comprehensive loss (“AOCI”), and recorded in Other expense (income), net on the Consolidated Statements of Operations. The fair value of the direct investment at December 31, 2017 was ~~$55.7 million and $63.4~~$54.4 million.

~~New~~Income Taxes

The Company has accounted for the tax effects of the Tax Cuts and Jobs Act, enacted on December 22, 2017, on a provisional basis. At December 31, 2017, the accounting for certain income tax effects was incomplete, but the Company determined reasonable estimates for those effects which were included in the financial statements. The Company expects to complete the accounting during 2018 in accordance with the one year measurement period.

Recently Adopted Accounting Pronouncements

~~In May 2014,~~Effective January 1, 2018, the ~~Financial Accounting Standards Board (“FASB”) issued~~Company adopted Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with ~~Customers~~Customers”, as amended (Topic ~~606)” that seeks~~606, commonly referred to ~~provide a single, comprehensive revenue recognition model for~~as ASC 606) to all contracts with customers that improve comparability within industries, across industries and across capital markets. Under this standard, an entity should recognize revenue for the transfer of goods or services equal to the amount it expects to be entitled to receive for those goods or services. Enhanced disclosure requirements regarding the nature, timing and uncertainty of revenue and related cash flows exist. To assist entities in applying the standard, a five step model for recognizing and measuring revenue from contracts with customers has been introduced. Entities have the option to apply the new guidance retrospectively to each prior reporting period presented (full retrospective approach) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method). On July 9, 2015, the FASB issued ASU No. 2015-14, deferring the effective date by one year to annual reporting periods beginning after December 15, 2017. Early adoption is permitted. In April 2016, the FASB issued ASU No. 2016-10, which clarifies the “identifying performance obligations and licensing implementations guidance” aspects of Topic 606. In May 2016, the FASB issued ASU No. 2016-11, which amends and or rescinds certain aspects of the Accounting Standards Codification (“ASC”) to reflect the requirements under Topic 606. Additionally, the FASB issued ASU No. 2016-12, which clarifies the criteria for assessing collectibility, permits an entity to elect an accounting policy to exclude from the transaction price amounts collected from customers for all sales taxes, and provides a practical expedient that permits an entity to reflect the aggregate effect of all contract modifications that occur before the beginning of the earliest period presented in accordance with Topic 606. In December 2016, the FASB issued ASU No. 2016-20, which clarifies several additional aspects of Topic 606 including contract modifications and performance obligations. The Company will adopt these accounting standards on January 1, 2018. The Company has completed its analysis of revenue areas that will be impacted by the adoption of this standard. The primary areas affected are the Company’s promotional and customer loyalty programs. The Company is currently gathering and assessing the impact this standard will have on its

financial position, results of operations, cash flows and disclosures. The Company is also in the process of implementing changes to systems, processes and internal controls to meet the standard update to reporting and disclosure requirements. The Company has not made a decision on the transition method of adoption.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” This accounting standard requires that an entity measure inventory at the lower of cost and net realizable value, as opposed to the lower of cost or market value. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Excluded from this update are the Last In First Out (“LIFO”) and retail inventory methods of accounting for inventory. Prospective application is required for presentation purposes. The Company adopted this accounting standard for the quarter ended March 31, 2017. The adoption of this standard did not materially impact the Company’s financial position or results of operations.

In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes.” This accounting standard seeks to simplify the accounting related to deferred income taxes. Current US GAAP requires an entity to separate deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) into current and noncurrent amounts for each tax jurisdiction based on the classification of the related asset or liability for financial reporting. DTAs and DTLs not related to assets and liabilities for financial reporting are classified based on the expected reversal date. The new standard requires DTAs or DTLs for each tax jurisdiction to be classified as noncurrent in a classified statement of financial position. The Company adopted this accounting standard for the quarter ended March 31, 2017, applying retrospective application to the December 31, 2016, Consolidated Balance Sheet presented in this Form 10-Q. At adoption, the Company reclassified certain deferred charges on the December 31, 2016 Consolidated Balance Sheet. During the quarter ended June 30, 2017, upon further review of these deferred charges, the Company determined that an error was made in the reclassification of certain deferred charges on the December 31, 2016 Consolidated Balance Sheet. As a result the Company corrected the presentation to the December 31, 2016 Consolidated Balance Sheet to increase “Prepaid expenses and other current assets” by $33.0 million and decrease “Deferred income taxes” and “Other noncurrent assets, net” by $28.2 million and $4.8 million, respectively. The Company determined that the error was not material to the Company’s financial position in the periods covered. The adoption of this standard is reflected below in the summary of the classification adjustments, including the correction for the error noted above, by financial statement line item:

(in millions)
December 31, 2016 Classification December 31, 2016
Deferred Tax Assets As Reported Adjustment Revised
Consolidated Balance Sheet Item and Liabilities Balance As Revised Balance
Prepaid expenses and other current assets Current DTAs $ 345.6
$ (139.1 ) $ 206.5
Other noncurrent assets, net Noncurrent DTAs 64.1
38.8
102.9
Income taxes payable Current DTLs 64.2
(3.4 ) 60.8
Deferred income taxes Noncurrent DTLs 848.6
(96.9 ) 751.7

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” This accounting standard seeks to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information as well as to improve and achieve convergence of the FASB and International Accounting Standards Board (“IASB”) standards on the accounting for financial instruments. The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. It also requires enhanced disclosures about those investments and reduces the number of items that are recognized in other comprehensive income. The adoption of this standard is required for interim and fiscal periods beginning after December 15, 2017 and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The Company is currently assessing the impact that this standard may have on its financial position, results of operations, cash flows and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, “Leases.” This accounting standard seeks to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Current US GAAP does not require lessees to recognize assets and liabilities arising from operating leases on the balance sheet. This standard also provides guidance from the lessees prospective on how to determine if a lease is an operating lease or a financing lease and the differences in accounting for each. The adoption of this standard is required for interim and fiscal periods ending after December 15, 2018 and it is required to be applied using the modified retrospective ~~approach. Early adoption is permitted.~~method. The Company ~~is currently assessing~~recognized the ~~impact~~cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Most of the Company’s sales revenue continues to be recognized when products are shipped from manufacturing facilities. For certain customer and dealer incentive programs, such as coupons, customer loyalty and free goods, the Company recognizes the proportionate revenue and cost of product when the incentives are shipped or awarded. Prior to adoption of ASC 606, costs for these types of programs were recognized when triggering events occurred. For contracts with customers where performance occurs over time, such as software sales, the Company recognizes revenue ratably over the performance period.

The new revenue standard also provided additional guidance that ~~this standard will have on its financial position, results~~resulted in reclassifications to or from Net sales, Cost of ~~operations, cash flows~~products sold, Selling, general and ~~disclosures.~~administrative expenses, and the resultant change in Provision (benefit) for income taxes.

In March 2016, the FASB issued ASU No. 2016-09, “Stock Compensation.” This accounting standard seeks to simplify the accounting for all entities that issue stock-based payment awards to their employees.

The primary areas of change include accounting for income taxes, cash flow statement classification of excess tax benefits and employee taxes paid when an employer withholds shares, accounting for forfeitures and tax withholding requirements. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements and forfeitures should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity ascumulative effect of the ~~beginning of~~changes made on the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid in the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement should be applied prospectively. The Company adopted this accounting standardConsolidated Balance Sheets at December 31, 2017 for the ~~quarter ended March 31, 2017, and~~adoption of ASC 606, is as ~~a result,~~follows:



(in millions)
Consolidated Balance Sheets Item	December 31, 2017 As Reported Balance		Adoption of ASC 606			January 1, 2018 Revised Balance

Assets

Accounts and notes receivable-trade, net	$	746.2	$	0.2		$	746.4
Inventory, net	623.1		(0.3		)	622.8
Prepaid expense and other current assets, net	312.6		1.9			314.5

Liabilities and Equity

Accrued liabilities	585.8		9.9			595.7
Income taxes payable	54.2		(2.1		)	52.1
Retained earnings	2,316.2		(6.0		)	2,310.2

The impact of adopting the ~~Company recorded $4.2 million of excess tax benefit related to employee share-based compensation as a component of income tax expense which impacted~~new revenue recognition standard on the current year tax provision. The Company elected to record forfeitures on stock-based compensation as the participant terminates rather than estimating forfeitures. As result of election to actual-basis forfeitures, the Company recorded a cumulative-effect adjustment of $1.0 million, net of tax, to “Capital in Excess of Par Value” and “Retained Earnings” in theCompany’s Consolidated Statements of ~~Changes in Equity related to prior year’s estimated forfeitures. In addition,~~Operations and Consolidated Balance Sheets is as follows:



(in millions)	Three Months Ended June 30, 2018									Six Months Ended June 30, 2018
Consolidated Statements of Operations Item	As Reported Balance			Balances Without Adoption of ASC 606			Effect of Change Increase/(Decrease)			As Reported Balance			Balances Without Adoption of ASC 606			Effect of Change Increase/(Decrease)

Net sales	$	1,042.1		$	1,044.8		$	(2.7	)	$	1,998.2		$	1,998.8		$	(0.6	)
Cost of products sold	489.3			491.4			(2.1		)	931.3			930.3			1.0
Selling, general and administrative expenses	432.2			432.3			(0.1		)	867.4			868.1			(0.7		)
Provision (benefit) for income taxes	(41.3		)	(41.2		)	(0.1		)	(27.6		)	(27.4		)	(0.2		)
Net loss attributable to Dentsply Sirona	(1,122.0		)	(1,121.6		)	(0.4		)	(1,040.8		)	(1,040.1		)	(0.7		)



(in millions)	Balance at June 30, 2018
Consolidated Balance Sheets Item	As Reported Balance		Balances Without Adoption of ASC 606		Effect of Change Increase/(Decrease)

Assets

Accounts and notes receivables-trade, net	$	710.3	$	710.2	$	0.1
Inventories, net	666.3		666.6		(0.3		)
Prepaid expenses and other current assets, net	276.5		273.4		3.1

Liabilities and Equity

Accrued liabilities	575.3		563.4		11.9
Income taxes payable	31.9		34.2		(2.3		)
Retained earnings	1,216.2		1,222.9		(6.7		)

Effective January 1, 2018, the Company elected to adopt the cash flow classification of excess tax benefits on a prospective basis. The adoption of this standard did not materially impact the Company’s financial position, results of operations, cash flows, or disclosures.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows.” This accounting standard seeks to clarify the presentation of eight specific cash flow issues in order to reduce diversity in practice. The topics of clarification include debt prepayment or extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interest in securitization transactions, and separately identifiable cash flows. The amendments in this update are effective for interim and fiscal periods beginning after December 15, 2017. Early adoption is permitted. The amendments in this update should be applied using a retrospective transition method to each period presented. The Company is currently assessing the impact that this standard will have on the presentation of its Consolidated Statements of Cash Flows.

~~In October 2016, the FASB issued~~adopted ASU No. 2016-16, “Income ~~Taxes.~~Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” This accounting standard seeks to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. ~~Current~~Previously, US GAAP ~~prohibits~~prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to a third party, which is an exception to the principle of comprehensive recognition of current and deferred income taxes in US GAAP. ASU No. 2016-16 eliminates this exception. The ~~amendments in~~Company adopted this ~~update are effective for interim and fiscal periods beginning after December 15, 2017. Early adoption is permitted. The amendments in this update should be applied~~accounting standard using athe modified retrospective ~~basis through~~method with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is currently assessing the impact that this standard will have on its financial position, results of operations, cash flows and disclosures.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations.” This newly issued accounting standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition or disposal of assets or businesses. The amendments in this update provide a screen to determine when a set of assets is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. The amendments in this update are effective for interim and fiscal periods beginning after December 15, 2017. Earlyearnings. Upon adoption, ~~is permitted under certain conditions. The amendments in this update should be applied prospectively.~~

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles, Goodwill and Other.” This newly issued accounting standard seeks to simplify the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test, which requires business to perform procedures to determine the fair value of its assets and liabilities at the impairment testing date. Under this amendment, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments in this update are required for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The amendments in this update should be applied prospectively. As permitted by the accounting standard, the Company ~~early adopted this accounting standard during~~made the three months ended March 31, 2017. The adoption of this standard did not materially impact the Company’s financial position, results of operations, cash flows, or disclosures. During the three months ended June 30, 2017, the Company assessed its goodwillfollowing reclassification:

~~impairment under this new standard and recorded an impairment charge of $1,092.9 million. For further information, see Note 14, Goodwill and Intangibles.~~



(in millions)
Consolidated Balance Sheets Item	December 31, 2017 As Reported Balance		Adoption of ASU 2016-16 Increase/(Decrease)			January 1, 2018 Revised Balance

Assets

Prepaid expenses and other current assets, net	$	312.6	$	(5.6	)	$	307.0
Other noncurrent assets, net	156.1		(73.1		)	83.0

Liabilities and Equity

Deferred income taxes	718.0		(76.0		)	642.0
Retained earnings	2,316.2		(2.7		)	2,313.5

In March 2017, the FASB issued ASU No. 2017-07, “Compensation - Retirement ~~Benefits.~~Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” This newly issued accounting standard is primarily intended to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments in this update require an employer to report the service cost component of net periodic benefit cost in operating income, while the interest cost, amortization, return on assets and any settlement or curtailment expense will be reported below operating income. More specifically, the service cost will be reported in the same line item as other compensation costs arising from the services rendered by the pertinent employee during the period. The amendments in this update are required for annual and interim periods beginning after December 15, ~~2017. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued. The amendments in this update~~2017, and should be applied retrospectively for the presentation of the components of net periodic benefit cost and net periodic postretirement benefit cost in the income statement. The amendment allows a practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company ~~is currently assessing~~adopted this accounting standard on January 1, 2018, and applied the practical expedient upon adoption. The impact ~~that~~of adopting this standard, ~~will have on its results of operations and disclosures.~~by financial statement line item, is reflected below:



(in millions)
Consolidated Statements of Operations Item	Three Months Ended June 30, 2017 As Reported			Adoption of 2017-07 Increase/(Decrease)			Three Months Ended June 30, 2017 Revised

Cost of products sold	$	448.5		$	(0.3	)	$	448.2
Gross profit	544.2			0.3			544.5
Selling, general and administrative expense	417.6			(1.9		)	415.7
Operating loss	(1,048.0		)	2.2			(1,045.8		)
Other expense (income), net	7.8			2.2			10.0



(in millions)
Consolidated Statements of Operations Item	Six Months Ended June 30, 2017 As Reported			Adoption of 2017-07 Increase/(Decrease)			Six Months Ended June 30, 2017 Revised

Cost of products sold	$	857.0		$	(0.8	)	$	856.2
Gross profit	1,036.2			0.8			1,037.0
Selling, general and administrative expense	822.3			(3.6		)	818.7
Operating loss	(963.8		)	4.4			(959.4		)
Other expense (income), net	6.8			4.4			11.2

In ~~May 2017,~~February 2018, the FASB issued ASU No. ~~2017-09, “Compensation~~2018-02, “Income Statement - ~~Stock Compensation.~~Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This newly issued accounting standard ~~provides clarity~~allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from tax rate changes due to the Tax Cuts and reduces both diversity in practice as well cost and complexity when applying Topic 718 “Stock Compensation” as it relates to changes in terms or conditions of share based payments. The amendments in this update provide guidance about what changes to a share based payment should be considered substantive and therefore require modification accounting. More specifically, this update requires entities to apply modification accounting unless the modified awards fair value, vesting conditions and award classification as an equity or liability instrument all remain the same as the original award.Jobs Act. The amendments in this update are required for annual and interim periods beginning after December 15, ~~2017. Early~~2018. This standard also requires the Company to disclose its accounting policy for releasing income tax effects from accumulated other comprehensive income. In general, the Company applies the individual item approach. As permitted by the accounting standard, the Company early adopted this accounting standard on January 1, 2018. As a result of the adoption, the Company elected to reclassify the income tax effects from AOCI to Retained earnings and reclassified $8.1 million.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) with subsequent amendments (collectively, “Topic 842”). This accounting standard seeks to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The adoption of this standard is ~~permitted~~required for interim and fiscal periods ending after December 15, 2018, using the modified retrospective approach. Topic 842 provides for an additional optional transition method that allows application of the new standard beginning January 1, 2019 with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Periods prior to adoption would continue to conform to current US GAAP (Topic 840, Leases) and periods after adoptions would conform to Topic 842. The Company anticipates adopting Topic 842 using the optional transition method and is currently assessing the impact that this standard will have on its financial position, results of operations, cash flows and disclosures.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This newly issued accounting standard improves the financial reporting ~~periods for which~~and disclosure of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial ~~statements have not been issued.~~statements. The amendments in this update make improvements to simplify the application of the hedge accounting guidance in current US GAAP based on the feedback received from preparers, auditors, users and other stakeholders. More specifically, this update expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments in this update are required for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The effect of adoption should be ~~applied prospectively~~reflected as of the beginning of the fiscal year of adoption. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an ~~award modified on or after~~entity adopts the ~~adoption date.~~amendments in this update. The amended presentation and disclosure guidance is required only prospectively. The Company is currently assessing the impact that this standard will have on its financial position, results of operations, cash flows and disclosures.

NOTE 2 – STOCK COMPENSATION

The following table represents total stock based compensation expense for non-qualified stock options, restricted stock units (“RSU”) and the tax related benefit for the three and six months ended June 30, ~~2017~~2018 and ~~2016.~~2017.


	Three Months Ended				Six Months Ended				Three Months Ended					Six Months Ended
(in millions)	2017		2016		2017		2016		2018			2017		2018		2017

Stock option expense	$	2.5	$	3.4	$	5.2	$	5.5	$	2.7		$	2.5	$	3.4	$	5.2
RSU expense	8.0		8.7		15.7		11.1		(2.6		)	8.0		5.9		15.7
Total stock based compensation expense	$	10.5	$	12.1	$	20.9	$	16.6	$	0.1		$	10.5	$	9.3	$	20.9

Related deferred income tax benefit	$	2.5	$	2.8	$	5.8	$	4.1	$	—		$	2.5	$	1.6	$	5.8

For the three and six months ended June 30, ~~2017,~~2018, stock compensation expense of ~~$10.5~~$0.1 million and ~~$20.9~~$9.3 million, respectively, was recorded on the Consolidated Statements of ~~which, $10.3~~Operations. For the three months ended June 30, 2018 the Company lowered the likely payout level on certain performance-based grants. For the three and six months ended June 30, 2018, $1.2 million and ~~$20.4~~$8.3 million, respectively, was recorded in Selling, general, and administrative ~~expenses~~expense, and ~~$0.2~~$0.1 million and ~~$0.5~~$0.4 million, respectively, was recorded in Cost of products sold on the Consolidated Statements of Operations. For the three and six months ended June 30, ~~2016,~~2018, the Company recorded income of $1.2 million and expense of $0.5 million, respectively, in Restructuring and other costs on the Consolidated Statements of Operations.

For the three and six months ended June 30, 2017, stock compensation expense of ~~$12.1~~$10.5 million and ~~$16.6~~$20.9 million, respectively, was recorded on the Consolidated Statements of ~~which $11.9~~Operations. For the three and six months ended June 30, 2017, $10.3 million and ~~$16.3~~$20.4 million, respectively, was recorded in Selling, general, and administrative expense, and $0.2 million and ~~$0.3~~$0.5 million, respectively, was recorded in Cost of products sold on the Consolidated Statements of Operations.

NOTE 3 – COMPREHENSIVE INCOME (LOSS)

The following table summarizes the components of comprehensive income (loss), net of tax, for the three and six months ended June 30, ~~2017~~2018 and ~~2016~~2017:


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
(in millions)	2017			2016			2017			2016			2018			2017			2018			2017

Foreign currency translation gains	$	248.2		$	91.4		$	304.8		$	107.2		$	—		$	248.2		$	—		$	304.8
Foreign currency translation losses													(223.4		)	—			(139.4		)	—
Foreign currency translation gain on hedges of net investments													31.0			—			12.1			—
Foreign currency translation loss on hedges of net investments	(24.2		)	(1.6		)	(33.6		)	(13.3		)	—			(24.2		)	—			(33.6		)

These amounts are recorded in ~~Accumulated other comprehensive loss (“AOCI”),~~AOCI, net of any related tax adjustments. At June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the cumulative tax adjustments were ~~$192.8~~$168.5 million and ~~$166.4~~$203.8 million, respectively, primarily related to foreign currency translation gains and losses.

The cumulative foreign currency translation adjustments included translation losses of ~~$107.5~~$117.3 million and ~~$412.4~~gains $22.1 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, and cumulative losses on loans designated as hedges of net investments of ~~$111.8~~$114.5 million and ~~$78.1~~$126.6 million, respectively. These foreign currency translation gains and losses were partially offset by movements on derivative financial instruments, which are discussed in Note 10, Financial Instruments and Derivatives.

Changes in AOCI, net of tax, by component for the six months ended June 30, 2018 and 2017 ~~and 2016:~~were as follows:

(in millions) Foreign Currency Translation Gain (Loss) Gain and (Loss) on Derivative Financial Instruments Designated as Cash Flow Hedges Gain and (Loss) on Derivative Financial Instruments Pension Liability Gain (Loss) Total

Balance, net of tax, at December 31, 2016 $ (490.5 ) $ (3.2 ) $ (116.8 ) $ (95.2 ) $ (705.7 )
Other comprehensive income (loss) before reclassifications and tax impact 245.8
(2.7 ) (4.2 ) —
238.9
Tax (expense) benefit 25.4
0.2
0.8
—
26.4
Other comprehensive income (loss), net of tax, before reclassifications 271.2
(2.5 ) (3.4 ) —
265.3
Amounts reclassified from accumulated other comprehensive income (loss), net of tax —
0.1
—
2.3
2.4
Net increase (decrease) in other comprehensive income 271.2
(2.4 ) (3.4 ) 2.3
267.7
Balance, net of tax, at June 30, 2017 $ (219.3 ) $ (5.6 ) $ (120.2 ) $ (92.9 ) $ (438.0 )



(in millions)	Foreign Currency Translation Gain (Loss)			Gain and (Loss) on Derivative Financial Instruments Designated as Cash Flow Hedges			Gain and (Loss) on Derivative Financial Instruments			Net Unrealized Holding Gain (Loss) on Available-for-Sale Securities			Pension Liability Gain (Loss)			Total

Balance, net of tax, at December 31, 2017	$	(104.5	)	$	(12.6	)	$	(127.6	)	$	44.3		$	(90.6	)	$	(291.0	)
Other comprehensive (loss) income before reclassifications and tax impact	(106.6		)	(4.2		)	29.4			—			2.4			(79.0		)
Tax (expense) benefit	(20.7		)	0.5			(14.5		)				(0.6		)	(35.3		)
Other comprehensive (loss) income, net of tax, before reclassifications	(127.3		)	(3.7		)	14.9			—			1.8			(114.3		)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	—			6.4			—			(44.3		)	2.4			(35.5		)
Net (decrease) increase in other comprehensive income	(127.3		)	2.7			14.9			(44.3		)	4.2			(149.8		)
Balance, net of tax, at June 30, 2018	$	(231.8	)	$	(9.9	)	$	(112.7	)	$	—		$	(86.4	)	$	(440.8	)

(in millions) Foreign Currency Translation Gain (Loss) Gain and (Loss) on Derivative Financial Instruments Designated as Cash Flow Hedges Gain and (Loss) on Derivative Financial Instruments Pension Liability Gain (Loss) Total

Balance, net of tax, at December 31, 2015 $ (401.2 ) $ (1.2 ) $ (110.2 ) $ (81.4 ) $ (594.0 )
Other comprehensive (loss) income before reclassifications and tax impact 86.0
(4.6 ) (17.2 ) —
64.2
Tax (expense) benefit 7.9
1.7
6.6
—
16.2
Other comprehensive (loss) income, net of tax, before reclassifications 93.9
(2.9 ) (10.6 ) —
80.4
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax —
(2.8 ) —
1.8
(1.0 )
Net (decrease) increase in other comprehensive income 93.9
(5.7 ) (10.6 ) 1.8
79.4
Balance, net of tax, at June 30, 2016 $ (307.3 ) $ (6.9 ) $ (120.8 ) $ (79.6 ) $ (514.6 )



(in millions)	Foreign Currency Translation Gain (Loss)			Gain and (Loss) on Derivative Financial Instruments Designated as Cash Flow Hedges			Gain and (Loss) on Derivative Financial Instruments			Pension Liability Gain (Loss)			Total

Balance, net of tax, at December 31, 2016	$	(490.5	)	$	(3.2	)	$	(116.8	)	$	(95.2	)	$	(705.7	)
Other comprehensive income (loss) before reclassifications and tax impact	245.8			(2.7		)	(4.2		)	—			238.9
Tax benefit	25.4			0.2			0.8			—			26.4
Other comprehensive income (loss), net of tax, before reclassifications	271.2			(2.5		)	(3.4		)	—			265.3
Amounts reclassified from accumulated other comprehensive income, net of tax	—			0.1			—			2.3			2.4
Net increase (decrease) in other comprehensive income	271.2			(2.4		)	(3.4		)	2.3			267.7
Balance, net of tax, at June 30, 2017	$	(219.3	)	$	(5.6	)	$	(120.2	)	$	(92.9	)	$	(438.0	)

Reclassifications out of ~~accumulated other comprehensive income (expense)~~AOCI to the Consolidated Statements of Operations for the three and six months ended June 30, ~~2017~~2018 and ~~2016:~~2017 were as follows:


(in millions)
Details about AOCI Components	Amounts Reclassified from AOCI						Affected Line Item in the Consolidated Statements of Operations		Amounts Reclassified from AOCI						Affected Line Item on the Consolidated Statements of Operations
	Three Months Ended								Three Months Ended
	2017			2016					2018			2017

Gain and (loss) on derivative financial instruments:
(Loss) gain on derivative financial instruments:								(Loss) gain on derivative financial instruments:
Interest rate swaps	$	(0.4	)	$	(0.9	)	Interest expense		$	(0.5	)	$	(0.4	)	Interest expense
Foreign exchange forward contracts	0.5			2.1			Cost of products sold		(4.3		)	0.5			Cost of products sold
Commodity contracts	—			0.2			Cost of products sold
Net (loss) gain before tax	0.1			1.4					(4.8		)	0.1
Tax impact	—			(0.1		)	(Benefit) provision for income taxes		0.7			—			Provision (benefit) for income taxes
Net (loss) gain after tax	$	0.1		$	1.3				$	(4.1	)	$	0.1

Amortization of defined benefit pension and other postemployment benefit items:
Amortization of prior service benefits	$	0.1		$	0.1		(a)		$	—		$	0.1		(a)
Amortization of net actuarial losses	$	(1.7	)	$	(1.4	)	(a)		(1.7		)	(1.7		)	(a)
Net loss before tax	(1.6		)	(1.3		)			(1.7		)	(1.6		)
Tax impact	0.5			0.4			(Benefit) provision for income taxes		0.5			0.5			Provision (benefit) for income taxes
Net loss after tax	$	(1.1	)	$	(0.9	)			$	(1.2	)	$	(1.1	)

Total reclassifications for the period	$	(1.0	)	$	0.4				$	(5.3	)	$	(1.0	)

(a) These ~~accumulated other comprehensive income~~AOCI components are included in the computation of net periodic benefit cost for the three months ended June 30, ~~2017~~2018 and ~~2016~~2017 (see Note 8, Benefit Plans, for additional details).


(in millions)
Details about AOCI Components	Amounts Reclassified from AOCI						Affected Line Item in the Consolidated Statements of Operations		Amounts Reclassified from AOCI						Affected Line Item on the Consolidated Statements of Operations
	Six Months Ended								Six Months Ended
	2017			2016					2018			2017

Gain and (loss) on derivative financial instruments:
Loss on derivative financial instruments:								Loss on derivative financial instruments:
Interest rate swaps	$	(1.1	)	$	(2.0	)	Interest expense		$	(1.1	)	$	(1.1	)	Interest expense
Foreign exchange forward contracts	1.0			5.2			Cost of products sold		(6.1		)	1.0			Cost of products sold
Foreign exchange forward contracts	—			0.1			SG&A expenses
Commodity contracts	—			(0.1		)	Cost of products sold
Net (loss) gain before tax	(0.1		)	3.2
Net loss before tax									(7.2		)	(0.1		)
Tax impact	—			(0.4		)	(Benefit) provision for income taxes		0.8			—			Provision (benefit) for income taxes
Net (loss) gain after tax	$	(0.1	)	$	2.8
Net loss after tax									$	(6.4	)	$	(0.1	)

Net realized holding gain on available-for-sale securities:								Net realized holding gain on available-for-sale securities:
Available-for-sale securities									$	45.0		$	—		Other expense (income), net
Tax impact									(0.7		)	—			Provision (benefit) for income taxes
Net gain after tax									$	44.3		$	—

Amortization of defined benefit pension and other postemployment benefit items:
Amortization of prior service benefits	$	0.1		$	0.1		(a)		$	—		$	0.1		(a)
Amortization of net actuarial losses	$	(3.4	)	$	(2.6	)	(a)		(3.4		)	(3.4		)	(a)
Net loss before tax	(3.3		)	(2.5		)			(3.4		)	(3.3		)
Tax impact	1.0			0.7			(Benefit) provision for income taxes		1.0			1.0			Provision (benefit) for income taxes
Net loss after tax	$	(2.3	)	$	(1.8	)			$	(2.4	)	$	(2.3	)

Total reclassifications for the period	$	(2.4	)	$	1.0				$	35.5		$	(2.4	)

(a) These ~~accumulated other comprehensive income~~AOCI components are included in the computation of net periodic benefit cost for the six months ended June 30, ~~2017~~2018 and ~~2016~~2017 (see Note 8, Benefit Plans, for additional details).

NOTE 4 – EARNINGS PER COMMON SHARE

~~The following table sets forth the computation of basic and diluted earnings per common share for the~~ ~~three and six~~ ~~months ended~~ ~~June 30, 2017~~ ~~and~~ ~~2016~~:

Basic Earnings Per Common Share Computation Three Months Ended Six Months Ended
(in millions, except per share amounts) 2017 2016 2017 2016

Net (loss) income attributable to Dentsply Sirona $ (1,050.0 ) $ 105.4
$ (990.2 ) $ 230.4

Weighted average common shares outstanding 229.4
233.7
229.7
204.2

Earnings per common share - basic $ (4.58 ) $ 0.45
$ (4.31 ) $ 1.13

Diluted Earnings Per Common Share Computation

(in millions, except per share amounts)

Net (loss) income attributable to Dentsply Sirona $ (1,050.0 ) $ 105.4
$ (990.2 ) $ 230.4

Weighted average common shares outstanding 229.4
233.7
229.7
204.2
Incremental weighted average shares from assumed exercise of
dilutive options from stock-based compensation awards
—
3.7
—
3.7
Total weighted average diluted shares outstanding 229.4
237.4
229.7
207.9

Earnings per common share - diluted $ (4.58 ) $ 0.44
$ (4.31 ) $ 1.11

The calculation of weighted average diluted common shares outstanding excludes stock options and RSUs of ~~0.8~~5.5 million and ~~1.2~~4.7 million equivalent shares of common stock that were outstanding during the three and six months ended June 30, ~~2017~~,2018, respectively,

because their effect would be antidilutive. There were ~~0.5~~0.8 million and ~~0.8~~1.2 million antidilutive equivalent shares of common stock outstanding during the three and six months ended June 30, ~~2016,~~2017, respectively.

NOTE 5 – BUSINESS COMBINATIONS

On ~~February 29, 2016, DENTSPLY merged with Sirona in an all-stock transaction and the registrant was renamed DENTSPLY SIRONA Inc. During the three months ended March 31, 2017,~~May 1, 2018, the Company ~~finalized~~acquired all of the ~~valuation analysis~~outstanding shares of ~~identifiable~~privately held OraMetrix, Inc. for $120.0 million, with an additional payment totaling $30.0 million, subject to meeting earn-out provisions. OraMetrix specializes in orthodontic treatment planning software, wire bending, and clear aligner manufacturing and is headquartered in Richardson, Texas. At June 30, 2018, the Company recorded a preliminary estimate of $62.8 million in goodwill related to the fair value of assets acquired and liabilities assumed and ~~allocated~~ the consideration ~~based~~given for the acquisition. The purchase price has been assigned on the ~~final~~basis of the preliminary estimate of the fair values of ~~those identifiable assets acquired and liabilities assumed related to the Merger.~~

~~The following table summarizes the final fair value of identifiable assets acquired and liabilities assumed at the date of the Merger:~~

(in millions)

Cash and cash equivalents $ 522.3
Trade receivables 143.0
Inventory 220.7
Prepaid expenses and other current assets 111.1
Property, plant and equipment 237.1
Identifiable intangible assets 2,435.0
Goodwill 3,758.1
Other long-term assets 6.9
Total assets 7,434.2
Accounts payable 68.0
Other current liabilities 197.9
Debt 57.5
Deferred income taxes 749.1
Other long-term liabilities 95.3
Total liabilities 1,167.8
Noncontrolling interest 10.2
Total identifiable net assets $ 6,256.2

Weighted average useful lives for intangible assets were determined based upon the useful economic lives of the intangible assets that are expected to contribute to future cash flows. The acquired definite-lived intangible assets are being amortized on a straight-line basis over their expected useful lives. Intangible assets acquired consist of the following:

(in millions, except for useful life) Weighted Average

Useful Life
Amount (in years)

Customer relationships $ 495.0
14
Developed technology and patents 1,035.0
12
Trade names and trademarks 905.0
Indefinite
Total $ 2,435.0

The fair values assigned to intangible assets were determined through the use of the income approach, specifically the relief from royalty method was used to fair value the developed technology and patents and tradenames and trademarks and the multi-period excess earnings method was used to fair value customer relationships. Both valuation methods rely on management’s judgments, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, peer group cost of capital and royalty rates as well as other factors. The valuation of tangible assets was derived using a combination of the income approach, the market approach and the cost approach. Significant judgments used in valuing tangible assets include estimated reproduction or replacement cost, weighted average useful lives of assets, estimated selling prices, costs to complete and reasonable profit.

~~The $3,758.1 million of goodwill is attributable to the excess of the purchase price over the fair value of the net tangible and~~

~~intangible~~ assets acquired and liabilities assumed. Goodwill is considered to represent the value associated with workforce and synergies the two companies anticipate realizing as a combined company. ~~Goodwill of $3,645.4 million has been assigned to the Company's Technologies segment and $112.7 million has been assigned to the Company’s Dental and Healthcare Consumables segment.~~ The goodwill is not expected to be deductible for tax purposes.

Sirona contributed net sales of $498.2 million and operating loss of $1,108.8 million to the Company's Consolidated Statements of Operations during the period from January 1, 2017 to June 30, 2017, which is primarily included in the Technologies segment. The operating loss includes a goodwill impairment charge of $1,092.9 million and an indefinite-lived intangible asset impairment charge of $79.8 million. For the period from February 29, 2016 to June 30, 2016, Sirona contributed net sales of $438.3 million and operating income of $102.4 million, which is primarily included in the Technologies segment.

~~The following unaudited pro forma financial information reflects the consolidated results of operations~~Intangible assets acquired consist of the Company had the Merger occurred on January 1, 2015. Sirona’s financial information has been compiled in a manner consistent with the accounting policies adopted by DENTSPLY. The following unaudited pro forma financial information for the three and six months ended June 30, 2016, has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the Merger occurred on January 1, 2015, nor are they indicative of any future results.following:

Pro forma - unaudited
Three Months Ended Six Months Ended
(in millions, except per share amount) 2016 2016

Net sales $ 1,022.0
$ 1,962.2
Net income attributable to Dentsply Sirona $ 141.2
$ 234.9
Diluted earnings per common share $ 0.59
$ 0.99

These pro forma amounts were calculated after applying the Company’s accounting policies and adjusting Sirona’s results to reflect adjustments that are directly attributable to the Merger. These adjustments mainly included additional intangible asset amortization, depreciation, inventory fair value adjustments, transaction costs and taxes that would have been charged assuming the fair value adjustments had been applied from January 1, 2015, together with the consequential tax effects at the statutory rate. Pro forma results do not include any anticipated synergies or other benefits of the Merger.



			Weighted Average
			Useful Life
(in millions, except for useful life)	Amount		(in years)

Customer relationships	$	17.5	15
Developed technology and patents	63.4		15
Trade names and trademarks	12.8		Indefinite
Total	$	93.7

During the quarter ended June 30, 2017, the Company acquired ~~RTD,~~Recherche Techniques Dentaires (“RTD”), a privately-held France-based manufacturer of endodontic posts for ~~$129.0 million which is subject to final purchase price adjustments. At June 30, 2017, the~~$132.0 million. The Company recorded ~~a preliminary estimate of $81.8~~$83.9 million in goodwill related to the fair value of assets acquired and liabilities assumed and the consideration given for the acquisition. Goodwill is considered to represent the value associated with workforce and synergies the two companies anticipate realizing as a combined company. The goodwill is not expected to be deductible for tax purposes.

Intangible assets acquired consist of the following:


						Weighted Average
						Useful Life
(in millions, except for useful life)			Weighted Average	Amount		(in years)
			Useful Life
	Amount		(in years)

Customer relationships	$	23.6	15	$	18.1	15
Developed technology and patents	23.6		15	22.4		15
Trade names and trademarks	9.0		Indefinite	8.5		Indefinite
Total	$	56.2		$	49.0

The results of ~~operation~~operations for ~~this business~~these businesses have been included in the accompanying financial statements as of the effective date of ~~the transaction. The purchase price has been assigned on the basis of the preliminary estimate of the fair values of assets acquired and liabilities assumed. This transaction was~~each transactions. These transactions were not material to the Company’s net sales and net ~~(loss) income~~loss attributable to Dentsply Sirona for the quarter ended June 30, ~~2017.~~2018.

NOTE 6 – SEGMENT INFORMATION

The Company has numerous operating businesses covering a wide range of dental consumable products and dental technology ~~products and certain healthcare~~ products primarily serving the professional dental ~~market.~~market, and certain healthcare products. Professional dental products represented approximately 92% of net sales for ~~the three and six months ended June 30, 2017 and June 30, 2016.~~all periods presented.

The operating businesses are combined into two operating groups, which generally have overlapping geographical presence, customer bases, distribution channels, and regulatory oversight. These operating groups are considered the Company’s reportable

segments as the Company’s chief operating decision-maker regularly reviews financial results at the operating group level and uses this information to manage the Company’s operations. The accounting policies of the segments are consistent with those described in the Company’s most recently filed Form 10-K, in the summary of significant accounting policies.

The Company evaluates performance of the segments based on the groups’ net third party sales, excluding precious metal content, and segment adjusted operating income. The Company defines net third party sales excluding precious metal content as the Company’s net sales excluding the precious metal cost within the products sold, which is considered a measure not calculated in accordance with US GAAP, and is therefore considered a non-US GAAP measure. Management believes that the presentation of net sales, excluding precious metal content, provides useful information to investors because a portion of Dentsply Sirona’s net sales is comprised of sales of precious metals generated through sales of the Company’s precious metal dental alloy products, which are used by third parties to construct crown and bridge materials. Due to the fluctuations of precious metal prices and because the cost of the precious metal content of the Company’s sales is largely passed through to customers and has minimal effect on earnings, Dentsply Sirona reports net sales both with and without precious metal content to show the Company’s performance independent of precious metal price volatility and to enhance comparability of performance between periods. The Company uses its cost of precious metal purchased as a proxy for the precious metal content of sales, as the precious metal content of sales is not separately tracked and invoiced to customers. The Company believes that it is reasonable to use the cost of precious metal content purchased in this manner since precious metal dental alloy sale prices are typically adjusted when the prices of underlying precious metals change. The Company’s exclusion of precious metal content in the measurement of net third party sales enhances comparability of performance between periods as it excludes the fluctuating market prices of the precious metal content. The Company also evaluates segment performance based on each segment’s adjusted operating income before provision for income taxes and interest. Segment adjusted operating income is defined as operating income before income taxes and before certain corporate headquarter unallocated costs, restructuring and other costs, interest expense, interest income, other expense (income), net, amortization of intangible assets and depreciation resulting from the fair value step-up of property, plant and equipment from acquisitions. The Company’s segment adjusted operating income is considered a non-US GAAP measure. A description of the products and services provided within each of the Company’s two operating segments is provided below.

~~Dental and Healthcare Consumables~~Technologies & Equipment

This segment includes responsibility for the worldwide design, manufacture, sales and distribution of the Company’s Dental and Healthcare Consumable Products which include preventive, restorative, instruments, endodontic, and laboratory dental products as well as consumable medical device products.

~~Technologies~~

This segment is responsible for the worldwide design, manufacture, sales and distribution of the Company’s Dental Technology and Equipment Products ~~which includes~~and Healthcare Consumable Products. These products include dental implants, laboratory dental products, CAD/CAM systems, imaging systems, treatment centers, as well as consumable medical device products.

Consumables

This segment is responsible for the worldwide design, manufacture, sales and distribution of the Company’s Dental Consumable Products which include preventive, restorative, instruments, endodontic, and orthodontic dental products.

The following tables set forth information about the Company’s segments for the three and six months ended June 30, ~~2017~~2018 and ~~2016~~2017:. Certain reclassifications have been made to the prior year’s data in order to conform to the current year presentation:

Third Party Net Sales

Three Months Ended Six Months Ended
(in millions) 2017 2016 2017 2016

Dental and Healthcare Consumables $ 554.1
$ 543.8
$ 1,065.3
$ 1,032.7
Technologies 438.6
478.2
827.9
761.9
Total net sales $ 992.7
$ 1,022.0
$ 1,893.2
$ 1,794.6



	Three Months Ended				Six Months Ended
(in millions)	2018		2017		2018		2017

Technologies & Equipment	$	548.8	$	532.8	$	1,057.1	$	1,011.8
Consumables	493.3		459.9		941.1		881.4
Total net sales	$	1,042.1	$	992.7	$	1,998.2	$	1,893.2

Third Party Net Sales, Excluding Precious Metal Content


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
(in millions)	2017		2016		2017		2016		2018		2017		2018		2017

Dental and Healthcare Consumables	$	544.4	$	526.7	$	1,044.6	$	997.5
Technologies	438.6		478.0		827.8		761.7
Technologies & Equipment									$	539.4	$	523.1	$	1,037.4	$	991.0
Consumables									493.3		459.9		941.1		881.4
Total net sales, excluding precious metal content	983.0		1,004.7		1,872.4		1,759.2		1,032.7		983.0		1,978.5		1,872.4
Precious metal content of sales	9.7		17.3		20.8		35.4		9.4		9.7		19.7		20.8
Total net sales, including precious metal content	$	992.7	$	1,022.0	$	1,893.2	$	1,794.6	$	1,042.1	$	992.7	$	1,998.2	$	1,893.2

Segment Adjusted Operating Income


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
(in millions)	2017			2016			2017			2016			2018			2017			2018			2017

Dental and Healthcare Consumables	$	162.2		$	151.7		$	298.7		$	282.4
Technologies	65.0			112.1			119.0			165.9
Technologies & Equipment													$	77.1		$	98.0		$	151.8		$	151.9
Consumables													146.0			122.8			253.2			238.9
Segment adjusted operating income before income taxes and interest	227.2			263.8			417.7			448.3			223.1			220.8			405.0			390.8

Reconciling items expense (income):
All Other (a)	52.7			93.8			109.2			178.9			50.5			46.3			101.8			82.3
Goodwill impairment	1,092.9			—			1,092.9			—			1,085.8			1,092.9			1,085.8			1,092.9
Restructuring and other costs	81.7			3.6			84.8			7.7			188.9			81.7			199.1			84.8
Interest expense	9.6			9.3			18.9			18.5			9.6			9.6			18.2			18.9
Interest income	(0.6		)	(0.4		)	(1.3		)	(0.9		)	(0.4		)	(0.6		)	(1.0		)	(1.3		)
Other expense (income), net	7.8			(11.5		)	6.8			(14.9		)	(1.0		)	7.8			(35.1		)	6.8
Amortization of intangible assets	46.6			43.8			91.8			65.6			50.2			46.5			100.1			91.8
Depreciation resulting from the fair value step-up of property, plant and equipment from business combinations	1.3			1.4			2.8			2.2			1.8			1.4			3.6			2.8
(Loss) income before income taxes	$	(1,064.8	)	$	123.8		$	(988.2	)	$	191.2
Loss before income taxes													$	(1,162.3	)	$	(1,064.8	)	$	(1,067.5	)	$	(988.2	)

(a) Includes the results of unassigned Corporate headquarter costs, inter-segment eliminations and one distribution warehouse not managed by named segments.

NOTE 7 – INVENTORIES

Inventories are stated at the lower of cost and net realizable value. The cost of inventories determined by the last-in, first-out (“LIFO”) method at June 30, ~~2017~~2018 and December 31, ~~2016~~2017 were $~~11.6~~12.7 million and ~~$8.6~~$12.4 million, respectively. The cost of ~~other~~remaining inventories was determined by the first-in, first-out (“FIFO”) or average cost methods. If the FIFO method had been used to determine the cost of LIFO inventories, the amounts at which net inventories are stated would be higher than reported at June 30, ~~2017~~2018 and December 31, ~~2016~~2017 by $~~7.0~~8.8 million and ~~$6.8~~$10.6 million, respectively.

Inventories, net of inventory valuation reserves, consist of the following:


(in millions)	June 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017

Finished goods	$	355.9	$	311.3	$	441.6	$	387.6
Work-in-process	91.3		77.1		88.4		90.4
Raw materials and supplies	149.6		128.7		136.3		145.1
Inventories, net	$	596.8	$	517.1	$	666.3	$	623.1

The inventory valuation ~~reserves were $49.4~~allowance was $75.1 million and $~~37.5~~71.7 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

NOTE 8 – BENEFIT PLANS

The following sets forth the components of net periodic benefit cost of the Company’s defined benefit plans ~~and for the Company’s other postemployment benefit plans~~ for the three and six months ended June 30, ~~2017~~2018 and ~~2016~~2017:


Defined Benefit Plans	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended						Location on Consolidated Statements of Operations
(in millions)	2017			2016			2017			2016			2018			2017 (a)			2018			2017 (a)

Service cost	$	3.9		$	3.9		$	7.7		$	7.7		$	1.9		$	2.0		$	3.7		$	3.7		Cost of products sold
Service cost													2.1			1.9			4.5			4.0			Selling, general and administrative expenses
Interest cost	1.8			2.0			3.5			3.8			1.9			1.8			3.6			3.5			Other expense (income), net
Expected return on plan assets	(1.2		)	(1.2		)	(2.3		)	(2.4		)	(1.3		)	(1.2		)	(2.7		)	(2.3		)	Other expense (income), net
Amortization of prior service credit	(0.1		)	(0.1		)	(0.1		)	(0.1		)	(0.1		)	(0.1		)	(0.1		)	(0.1		)	Other expense (income), net
Amortization of net actuarial loss	1.7			1.3			3.3			2.5			1.7			1.7			3.4			3.3			Other expense (income), net
Net periodic benefit cost	$	6.1		$	5.9		$	12.1		$	11.5		$	6.2		$	6.1		$	12.4		$	12.1

Other Postemployment Benefit Plans Three Months Ended Six Months Ended
(in millions) 2017 2016 2017 2016

Service cost $ 0.1
$ 0.1
$ 0.2
$ 0.2
Interest cost 0.1
0.1
0.2
0.3
Amortization of net actuarial loss —
0.1
0.1
0.1
Net periodic benefit cost $ 0.2
$ 0.3
$ 0.5
$ 0.6
(a) Prior period presented reflects adoption of ASU 2017-07. For further discussion on the reclassification, refer to Note 1, Significant Accounting Policies.

The following sets forth the information related to the contributions to the Company’s defined benefit plans for ~~2017:~~2018:


(in millions)	Pension Benefits		Other Postemployment Benefits		Pension Benefits

Actual contributions through June 30, 2017	$	6.1	$	0.2
Actual contributions through June 30, 2018					$	7.7
Expected contributions for the remainder of the year	8.5		0.5		8.4
Total expected contributions	$	14.6	$	0.7
Total actual and expected contributions					$	16.1

NOTE 9 – RESTRUCTURING AND OTHER COSTS

Restructuring Costs

During the three and six months ended June 30, 2018, the Company recorded net restructuring costs and other costs of $188.9 million and $199.1 million, respectively, which includes net restructuring costs of $3.4 million and $10.8 million, respectively. During the three and six months ended June 30, 2017, the Company recorded net restructuring costs and other ~~costs~~cost of $81.7 million and $84.8 million, respectively, which includes net restructuring costs of $1.5 million and $3.8 ~~million, respectively. During the three and six months ended June 30, 2016, the Company recorded net restructuring costs and other costs of $3.6 million and $7.7~~ million, respectively. These costs are recorded in Restructuring and other costs on the Consolidated Statements of Operations and the associated liabilities are recorded in Accrued liabilities on the Consolidated Balance Sheets.

At June 30, ~~2017~~2018, the Company’s restructuring accruals were as follows:


	Severance												Severance
(in millions)	2015 and Prior Plans			2016 Plans			2017 Plans			Total			2016 and Prior Plans			2017 Plans			2018 Plans			Total

Balance at December 31, 2016	$	20.6		$	8.2		$	—		$	28.8
Balance at December 31, 2017													$	7.7		$	48.2		$	—		$	55.9
Provisions	0.4			(0.2		)	1.4			1.6			0.7			0.2			10.8			11.7
Amounts applied	(4.8		)	(3.1		)	(0.6		)	(8.5		)	(1.8		)	(7.7		)	(5.9		)	(15.4		)
Change in estimates	(0.6		)	(0.1		)	—			(0.7		)	(0.1		)	(1.8		)	(0.2		)	(2.1		)
Balance at June 30, 2017	$	15.6		$	4.8		$	0.8		$	21.2
Balance at June 30, 2018													$	6.5		$	38.9		$	4.7		$	50.1


	Lease/Contract Terminations												Lease/Contract Terminations
(in millions)	2015 and Prior Plans			2016 Plans			2017 Plans			Total			2016 and Prior Plans			2017 Plans			Total

Balance at December 31, 2016	$	2.7		$	0.3		$	—		$	3.0
Balance at December 31, 2017													$	0.4		$	0.2		$	0.6
Provisions	0.4			—			0.1			0.5			0.3			(0.1		)	0.2
Amounts applied	(1.1		)	(0.1		)	(0.1		)	(1.3		)	(0.5		)	(0.1		)	(0.6		)
Change in estimates	(0.1		)	—			—			(0.1		)
Balance at June 30, 2017	$	1.9		$	0.2		$	—		$	2.1
Balance at June 30, 2018													$	0.2		$	—		$	0.2


	Other Restructuring Costs												Other Restructuring Costs
(in millions)	2015 and Prior Plans			2016 Plans			2017 Plans			Total			2016 and Prior Plans			2017 Plans			2018 Plans			Total

Balance at December 31, 2016	$	0.5		$	0.2		$	—		$	0.7
Balance at December 31, 2017													$	2.1		$	1.7		$	—		$	3.8
Provisions	0.7			0.9			0.3			1.9			0.2			0.4			0.2			0.8
Amounts applied	(0.7		)	(0.9		)	(0.2		)	(1.8		)	(1.5		)	(0.4		)	(0.2		)	(2.1		)
Change in estimate	0.5			—			—			0.5
Balance at June 30, 2017	$	1.0		$	0.2		$	0.1		$	1.3
Balance at June 30, 2018													$	0.8		$	1.7		$	—		$	2.5

The following table provides the year-to-date changes in the restructuring accruals by segment:


(in millions)	December 31, 2016		Provisions		Amounts Applied			Change in Estimates			June 30, 2017			December 31, 2017		Provisions		Amounts Applied			Change in Estimates			June 30, 2018

Dental and Healthcare Consumables	$	27.9	$	3.0	$	(10.3	)	$	—		$	20.6
Technologies	4.5		0.7		(1.0		)	(0.1		)	4.1
Technologies & Equipment														$	46.9	$	7.2	$	(7.9	)	$	(1.8	)	$	44.4
Consumables														13.3		4.1		(8.2		)	(0.3		)	8.9
All Other	0.1		0.3		(0.3		)	(0.2		)	(0.1		)	0.1		1.4		(2.0		)	—			(0.5		)
Total	$	32.5	$	4.0	$	(11.6	)	$	(0.3	)	$	24.6		$	60.3	$	12.7	$	(18.1	)	$	(2.1	)	$	52.8

In October 2016, the Company announced that it is proposing plans in Germany to reorganize and combine portions of its manufacturing, logistics and distribution networks within both of the Company’s segments. As required under German law, the Company has entered into a statutory co-determination process under which it will collaborate with the appropriate labor groups to jointly define the infrastructure and staffing adjustments necessary to support this initiative. The Company continues to initiate similar actions in other regions of the world. The Company estimates the cost of these initiatives to be approximately $97.0 million, primarily for severance related benefits for employees, which is expected to be incurred as actions are implemented over the next two years.

Other ~~costs~~Costs

Other costs for the three and six months ended June 30, 2018 were $185.5 million and $188.3 million, respectively. Other costs for the three and six months ended June 30, 2017 were $80.2 million and $81.0 million, respectively. ~~The~~

For the three months ended June 30, 2018, the Company recorded an impairment charge of ~~$79.8 million for the three months ended June 30, 2017.~~$179.2 million. The impaired indefinite-lived intangibles are tradenames and trademarks related to two reporting units inwithin the Technologies & Equipment segment and one reporting unit within the Consumables segment. For further information, see Note 14, Goodwill and Intangibles.

For the three months ended June 30, 2017, the Company recorded an impairment charge of $79.8 million. The impaired indefinite-lived intangibles are tradenames and trademarks related to two reporting units within the Technologies & Equipment segment.

NOTE 10 – FINANCIAL INSTRUMENTS AND DERIVATIVES

Derivative Instruments and Hedging Activities

The Company’s activities expose it to a variety of market risks, which primarily include the risks related to the effects of changes in foreign currency exchange rates and interest ~~rates and commodity prices.~~rates. These financial exposures are monitored and managed by the Company as part of its overall risk management program. The objective of this risk management program is to reduce the volatility that these market risks may have on the Company’s operating results and equity. The Company employs

derivative financial instruments to hedge certain anticipated transactions, firm commitments, or assets and liabilities denominated in foreign currencies. Additionally, the Company utilizes interest rate swaps to convert variable rate debt to fixed rate debt.

Derivative Instruments Designated as Hedging

Cash Flow Hedges

The following table summarizes the notional amounts of cash flow hedges by derivative instrument type at June 30, ~~2017~~2018 and the notional amounts expected to mature during the next 12 months, with a discussion of the various cash flow hedges by derivative instrument type following the table:


	Aggregate Notional Amount			Aggregate Notional Amount Maturing within 12 Months				Aggregate Notional Amount				Aggregate Notional Amount Maturing within 12 Months

(in millions)

Foreign exchange forward contracts		$	303.2			$	175.9			$	301.4			$	232.7
Interest rate swaps	111.6			—				113.2				—
Total derivative instruments designated as cash flow hedges	$	414.8		$	175.9			$	414.6			$	232.7

Foreign Exchange Risk Management

The Company uses a layered hedging program to hedge select anticipated foreign currency cash flows to reduce volatility in both cash flows and reported earnings of the consolidated Company. The Company accounts for the designated foreign exchange forward contracts as cash flow hedges. As a result, the Company records the fair value of the contracts primarily through AOCI based on the ~~tested~~assessed effectiveness of the foreign exchange forward contracts. The Company measures the effectiveness of cash flow hedges of anticipated transactions on a spot-to-spot basis rather than on a forward-to-forward basis. Accordingly, the spot-to-spot change in the derivative fair value will be deferred in AOCI and released and recorded on the Consolidated Statements of Operations in the same period that the hedged transaction is recorded. The time value component of the fair value of the derivative is deemed ineffective and is reported currently in Other expense (income), net on the Consolidated Statements of Operations in the period which it is applicable. Any cash flows associated with these instruments are included in cash from operating activities inon the Consolidated Statements of Cash Flows. The Company hedges various currencies, with the most significant activity occurring in euros, Swedish kronor, Canadian dollars, British pounds, Swiss francs, Japanese yen and Australian dollars.

These foreign exchange forward contracts generally have maturities up to 18 months and the counterparties to the transactions are typically large international financial institutions.

Interest Rate Risk Management

The Company uses interest rate swaps to convert a portion of its variable interest rate debt to fixed interest rate debt. At June 30, ~~2017,~~2018, the Company has one significant exposure hedged with interest rate contracts. The exposure is hedged with derivative contracts having notional amounts totaling 12.6 billion Japanese yen, which effectively converts the underlying variable interest rate debt facility to a fixed interest rate of 0.9% for an initial term of five years ending September 2019.

The Company enters into interest rate swap contracts infrequently as they are only used to manage interest rate risk on long-term debt instruments and not for speculative purposes. Any cash flows associated with these instruments are included in cash from operating activities inon the Consolidated Statements of Cash Flows.

~~Commodity Risk Management~~

The Company enters into precious metal commodity swap contracts to effectively fix certain variable raw material costs typically for up to 18 months. These swaps are used to stabilize the cost of components used in the production of certain products. The Company generally accounts for the commodity swaps as cash flow hedges in the same manner as described above in foreign exchange risk management.

Cash Flow Hedge Activity

The following tables summarize the amount of gains (losses) recorded in AOCI on the Consolidated Balance Sheets and income (expense) on the Company’s Consolidated Statements of Operations related to all cash flow hedges for the three months ended June 30, ~~2017~~2018 and ~~2016:~~2017:


	June 30, 2017												June 30, 2018
	Gain (Loss) in AOCI			Consolidated Statements of Operations Location		Effective Portion Reclassified from AOCI into Income (Expense)				Ineffective Portion Recognized in Income (Expense)			Gain (Loss) in AOCI			Consolidated Statements of Operations Location		Effective Portion Reclassified from AOCI into Income (Expense)				Ineffective Portion Recognized in Income (Expense)

(in millions)

Effective Portion:
Interest rate swaps	$	(0.2	)		Interest expense		$	(0.4	)		$	—		$	—		Interest expense		$	(0.6	)		$	—
Foreign exchange forward contracts	(1.2		)		Cost of products sold		0.5				—			2.8			Cost of products sold		(4.2		)		—

Ineffective Portion:
Foreign exchange forward contracts	—			Other expense (income), net		—				(0.2		)	—			Other expense (income), net		—				(0.3		)
Total in cash flow hedging	$	(1.4	)			$	0.1			$	(0.2	)	$	2.8				$	(4.8	)		$	(0.3	)


	June 30, 2016												June 30, 2017
	Gain (Loss) in AOCI			Consolidated Statements of Operations Location		Effective Portion Reclassified from AOCI into Income (Expense)				Ineffective Portion Recognized in Income (Expense)			Gain (Loss) in AOCI				Consolidated Statements of Operations Location		Effective Portion Reclassified from AOCI into Income (Expense)				Ineffective Portion Recognized in Income (Expense)

(in millions)

Effective Portion:
Interest rate swaps	$	(0.3	)		Interest expense		$	(0.9	)		$	—		$	(0.2	)		Interest expense		$	(0.4	)		$	—
Foreign exchange forward contracts	1.8				Cost of products sold		2.1				—			(1.2		)		Cost of products sold		0.5				—
Foreign exchange forward contracts	0.1			SG&A expenses		—				—
Commodity contracts	0.3			Cost of products sold		0.2				—

Ineffective Portion:
Foreign exchange forward contracts	—			Other expense (income), net		—				(0.1		)	—				Other expense (income), net		—				(0.2		)
Total for cash flow hedging	$	1.9				$	1.4			$	(0.1	)	$	(1.4	)				$	0.1			$	(0.2	)

The following tables summarize the amount of ~~gains~~gain (losses) recorded in AOCI on the Consolidated Balance Sheets and income (expense) on the Company’s Consolidated Statements of Operations related to all cash flow hedges for the six months ended June 30, ~~2017~~2018 and ~~2016:~~

2017:


	June 30, 2017												June 30, 2018
	Gain (Loss) in AOCI			Consolidated Statements of Operations Location		Effective Portion Reclassified from AOCI into Income (Expense)				Ineffective Portion Recognized in Income (Expense)			Gain (Loss) in AOCI				Consolidated Statements of Operations Location		Effective Portion Reclassified from AOCI into Income (Expense)				Ineffective Portion Recognized in Income (Expense)

(in millions)

Effective Portion:
Interest rate swaps	$	—			Interest expense		$	(1.1	)		$	—		$	(0.1	)		Interest expense		$	(1.1	)		$	—
Foreign exchange forward contracts	(2.7		)		Cost of products sold		1.0				—			(4.1		)		Cost of products sold		(6.1		)		—

Ineffective Portion:
Foreign exchange forward contracts	—			Other expense (income), net		—				(0.5		)	—				Other expense (income), net		—				(0.4		)
Total in cash flow hedging	$	(2.7	)			$	(0.1	)		$	(0.5	)	$	(4.2	)				$	(7.2	)		$	(0.4	)


	June 30, 2016												June 30, 2017
	Gain (Loss) in AOCI			Consolidated Statements of Operations Location		Effective Portion Reclassified from AOCI into Income (Expense)				Ineffective Portion Recognized in Income (Expense)			Gain (Loss) in AOCI				Consolidated Statements of Operations Location		Effective Portion Reclassified from AOCI into Income (Expense)				Ineffective Portion Recognized in Income (Expense)

(in millions)

Effective Portion:
Interest rate swaps	$	(1.5	)		Interest expense		$	(2.0	)		$	—		$	—			Interest expense		$	(1.1	)		$	—
Foreign exchange forward contracts	(3.1		)		Cost of products sold		5.2				—			(2.7		)		Cost of products sold		1.0				—
Foreign exchange forward contracts	(0.2		)	SG&A expenses		0.1				—
Commodity contracts	0.2			Cost of products sold		(0.1		)		—

Ineffective Portion:
Foreign exchange forward contracts	—			Other expense (income), net		—				(0.1		)	—				Other expense (income), net		—				(0.5		)
Total in cash flow hedging	$	(4.6	)			$	3.2			$	(0.1	)
Total for cash flow hedging													$	(2.7	)				$	(0.1	)		$	(0.5	)

Overall, the derivatives designated as cash flow hedges are considered to be highly effective. At June 30, ~~2017,~~2018, the Company expects to reclassify ~~$1.8~~$6.5 million of deferred net losses on cash flow hedges recorded in AOCI toon the Consolidated Statements of Operations during the next 12 months. The term over which the Company is hedging exposures to variability of cash flows (for all forecasted transactions, excluding interest payments on variable interest rate debt) is typically 18 months.

For the rollforward of derivative instruments designated as cash flow hedges in AOCI see Note 3, Comprehensive Income.

Hedges of Net Investments in Foreign Operations

The Company has significant investments in foreign subsidiaries the most significant of which are denominated in euros, Swiss francs, Japanese yen and Swedish kronor. The net assets of these subsidiaries are exposed to volatility in currency exchange rates. The Company employs both derivative and non-derivative financial instruments to hedge a portion of this exposure. The derivative instruments consist of foreign exchange forward ~~contracts.~~contracts and cross currency basis swaps. The non-derivative instruments consist of foreign currency denominated debt held at the parent company level. Translation gains and losses related to the net assets of the foreign subsidiaries are offset by gains and losses in derivative and non-derivative financial instruments designated as hedges of net investments, which are included in AOCI. Any cash flows associated with these instruments are included in investing activities inon the Consolidated Statements of Cash Flows except for derivative instruments that include an other-than-insignificant financing element, infor which ~~case~~ all cash flows ~~will be~~are classified as financing activities inon the Consolidated Statements of Cash Flows.

On January 2, 2018, the Company entered into a 245.6 million euro cross currency basis swap maturing in August 2021, that was designated as a hedge of net investments. This contract effectively converts the $295.7 million bond coupon from 4.1% to 1.7%, which will result in a net reduction of interest expense through maturity in 2021.

The following table summarizes the notional ~~amounts~~amount of hedges of net investments by derivative instrument ~~type~~ at June 30, ~~2017~~2018 and the notional amounts expected to mature during the next 12 months:


	Aggregate Notional Amount			Aggregate Notional Amount Maturing within 12 Months			Aggregate Notional Amount				Aggregate Notional Amount Maturing within 12 Months

(in millions)

Foreign exchange forward contracts		$	33.6		$	33.6			$	600.6			$	299.5
Cross currency basis swaps							286.5				—
Total for instruments not designated as hedges							$	887.1			$	299.5

The fair value of the foreign exchange forward contracts is the estimated amount the Company would receive or pay at the reporting date, taking into account the effective interest rates and foreign exchange rates. The effective portion of the change in the value of these derivatives is recorded in AOCI, net of tax effects.

The following tables summarize the amount of gains (losses) recorded in AOCI on the Consolidated Balance Sheets and ~~other income (expense)~~Other expense (income), net on the Company’s Consolidated Statements of Operations related to the hedges of net investments for the three months ended June 30, ~~2017~~2018 and ~~2016:~~2017:


	June 30, 2017								June 30, 2018
	Gain (Loss) in AOCI			Consolidated Statements of Operations Location		Recognized in Income (Expense)			Gain (Loss) in AOCI		Consolidated Statements of Operations Location		Recognized in Income (Expense)

(in millions)

Effective Portion:
Cross currency basis swaps									$	16.0	Interest expense		$	1.9
Foreign exchange forward contracts	$	(2.4	)		Other expense (income), net		$	0.3		31.3		Other expense (income), net		3.9
Total for net investment hedging	$	(2.4	)			$	0.3		$	47.3			$	5.8


	June 30, 2016							June 30, 2017
	Gain (Loss) in AOCI		Consolidated Statements of Operations Location		Recognized in Income (Expense)			Gain (Loss) in AOCI				Consolidated Statements of Operations Location		Recognized in Income (Expense)

(in millions)

Effective Portion:
Foreign exchange forward contracts	$	13.2		Other expense (income), net		$	2.2		$	(2.4	)		Other expense (income), net		$	0.3
Total for net investment hedging	$	13.2			$	2.2		$	(2.4	)				$	0.3

The following tables summarize the amount of ~~gains~~gain (losses) recorded in AOCI on the Consolidated Balance Sheets and ~~other~~ income (expense) on the Company’s Consolidated Statements of Operations related to the hedges of net investments for the six months ended June 30, ~~2017~~2018 and ~~2016:~~2017:



	June 30, 2018
	Gain (Loss) in AOCI		Consolidated Statements of Operations Location	Recognized in Income (Expense)

(in millions)

Effective Portion:
Cross currency basis swaps	$	9.6	Interest expense	$	3.6
			Other expense (income), net	(6.6		)
Foreign exchange forward contracts	19.8		Other expense (income), net	5.4
Total for net investment hedging	$	29.4		$	2.4



	June 30, 2017
	Gain (Loss) in AOCI			Consolidated Statements of Operations Location	Recognized in Income (Expense)

(in millions)

Effective Portion:
Foreign exchange forward contracts	$	(4.2	)	Other expense (income), net	$	0.8
Total for net investment hedging	$	(4.2	)		$	0.8

June 30, 2016
Gain (Loss) in AOCI Consolidated Statements of Operations Location Recognized in Income (Expense)

(in millions)

Effective Portion:
Foreign exchange forward contracts $ (17.2 ) Other expense (income), net $ 4.7
Total for net investment hedging $ (17.2 ) $ 4.7

Derivative Instruments Not Designated as Hedges

The Company enters into derivative instruments with the intent to partially mitigate the foreign exchange revaluation risk associated with recorded assets and liabilities that are denominated in a non-functional currency. The gains and losses on these derivative transactions offset the gains and losses generated by the revaluation of the underlying non-functional currency balances and are recorded in Other expense (income), net on the Consolidated Statements of Operations. The Company primarily uses foreign exchange forward contracts and cross currency basis swaps to hedge these risks. Any cash flows associated with the foreign exchange forward contracts and interest rate swaps not designated as hedges are included in cash from operating activities inon the Consolidated Statements of Cash Flows. Any cash flows associated with the cross currency basis swaps not designated as hedges are included in investing activities inon the Consolidated Statements of Cash Flows except for derivative instruments that

include an other-than-insignificant financing element, infor which ~~case~~ the cash flows ~~will be~~are classified as financing activities inon the Consolidated Statements of Cash Flows.

The following tables summarize the aggregate notional amounts of the Company’s economic hedges not designated as hedges by derivative instrument types at June 30, ~~2017~~2018 and the notional amounts expected to mature during the next 12 months:


	Aggregate Notional Amount			Aggregate Notional Amount Maturing within 12 Months				Aggregate Notional Amount				Aggregate Notional Amount Maturing within 12 Months

(in millions)

Foreign exchange forward contracts		$	340.7			$	340.7			$	388.0			$	388.0
Interest rate swaps	0.6			0.6
Total for instruments not designated as hedges	$	341.3		$	341.3			$	388.0			$	388.0

The following table summarizes the amounts of gains (losses) recorded on the Company’s Consolidated Statements of Operations related to the economic hedges not designated as hedging for the three and six months ended June 30, ~~2017~~2018 and ~~2016:~~2017:


	Consolidated Statements of Operations Location		Gain (Loss) Recognized							Consolidated Statements of Operations Location		Gain (Loss) Recognized
		Three Months Ended									Three Months Ended
(in millions)		2017				2016					2018				2017

Foreign exchange forward contracts (a)		Other expense (income), net		$	(2.3	)		$	9.0		Other expense (income), net		$	3.6			$	(2.3	)
Total for instruments not designated as hedges			$	(2.3	)		$	9.0				$	3.6			$	(2.3	)

(a) The gains and losses on these derivative transactions offset the gains and losses generated by the revaluation of the underlying non-functional currency balances which are recorded in Other expense (income), net on the Consolidated Statements of Operations.



	Consolidated Statements of Operations Location	Gain (Loss) Recognized
		Six Months Ended
(in millions)		2018		2017

Foreign exchange forward contracts (a)	Other expense (income), net	$	4.3	$	(5.1	)
Total for instruments not designated as hedges		$	4.3	$	(5.1	)

Consolidated Statements of Operations Location Gain (Loss) Recognized
Six Months Ended
(in millions) 2017 2016

Foreign exchange forward contracts (a) Other expense (income), net $ (5.1 ) $ (7.4 )
Total for instruments not designated as hedges $ (5.1 ) $ (7.4 )

During March 2016, the Company established hedges totaling 316.5 million euros to offset a euro denominated intercompany note receivable at a U.S. dollar functional entity. The change in the value of the hedges resulted in a $12.1 million loss, which were offset by the changes in the value of the euro denominated intercompany note receivable at a U.S. dollar functional entity.

Consolidated Balance Sheets Location of Derivative Fair Values

The following tables summarize the fair value and the location of the Company’s derivatives on the Consolidated Balance Sheets at June 30, ~~2017~~2018 and December 31, ~~2016:~~2017:


	June 30, 2017														June 30, 2018
(in millions)	Prepaid Expenses and Other Current Assets, Net		Other Noncurrent Assets, Net				Accrued Liabilities				Other Noncurrent Liabilities				Prepaid Expenses and Other Current Assets, Net				Other Noncurrent Assets, Net				Accrued Liabilities				Other Noncurrent Liabilities
Designated as Hedges							Accrued Liabilities				Other Noncurrent Liabilities				Prepaid Expenses and Other Current Assets, Net				Other Noncurrent Assets, Net				Accrued Liabilities				Other Noncurrent Liabilities
	Prepaid Expenses and Other Current Assets, Net
Foreign exchange forward contracts	$	2.6	Other Noncurrent Assets, Net		$	0.7			$	1.9			$	1.3			$	11.4			$	10.4			$	6.5			$	1.0
Interest rate swaps	—		—				0.2				0.2				—				—				0.3				—
Cross currency basis swaps															—				3.0				—				—
Total	$	2.6	$	0.7			$	2.1			$	1.5			$	11.4			$	13.4			$	6.8			$	1.0

Not Designated as Hedges

Foreign exchange forward contracts	$	3.4	$	—			$	2.3			$	—			$	2.7			$	—			$	4.3			$	—
Total	$	3.4	$	—			$	2.3			$	—			$	2.7			$	—			$	4.3			$	—


	December 31, 2016														December 31, 2017
(in millions)	Prepaid Expenses and Other Current Assets, Net		Other Noncurrent Assets, Net				Accrued Liabilities				Other Noncurrent Liabilities				Prepaid Expenses and Other Current Assets, Net				Other Noncurrent Assets, Net				Accrued Liabilities				Other Noncurrent Liabilities
Designated as Hedges							Accrued Liabilities				Other Noncurrent Liabilities				Prepaid Expenses and Other Current Assets, Net				Other Noncurrent Assets, Net				Accrued Liabilities				Other Noncurrent Liabilities
	Prepaid Expenses and Other Current Assets, Net
Foreign exchange forward contracts	$	12.8	Other Noncurrent Assets, Net		$	0.6			$	1.0			$	—			$	1.4			$	—			$	13.4			$	4.5
Interest rate swaps	—		—				0.2				0.3				—				—				0.3				0.1
Total	$	12.8	$	0.6			$	1.2			$	0.3			$	1.4			$	—			$	13.7			$	4.6

Not Designated as Hedges

Foreign exchange forward contracts	$	1.3	$	—			$	1.5			$	—			$	3.4			$	—			$	3.7			$	—
Total	$	1.3	$	—			$	1.5			$	—			$	3.4			$	—			$	3.7			$	—

Balance Sheet Offsetting

Substantially all of the Company’s derivative contracts are subject to netting arrangements, whereby the right to offset occurs in the event of default or termination in accordance with the terms of the arrangements with the counterparty. While these contracts contain the enforceable right to offset through netting arrangements with the same counterparty, the Company elects to present them on a gross basis on the Consolidated Balance Sheets.

Offsetting of financial assets and liabilities under netting arrangements at June 30, ~~2017~~2018:


							Gross Amounts Not Offset in the Consolidated Balance Sheets													Gross Amounts Not Offset on the Consolidated Balance Sheets
(in millions)	Gross Amounts Recognized		Gross Amount Offset in the Consolidated Balance Sheets		Net Amounts Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received/Pledged		Net Amount		Gross Amounts Recognized		Gross Amount Offset on the Consolidated Balance Sheets		Net Amounts Presented on the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received/Pledged		Net Amount

Assets
Foreign exchange forward contracts	$	6.7	$	—	$	6.7	$	(4.7	)	$	—	$	2.0	$	24.9	$	—	$	24.9	$	(9.5	)	$	—	$	15.4
Cross currency basis swaps														3.0		—		3.0		(2.7		)	—		0.3
Total Assets	$	6.7	$	—	$	6.7	$	(4.7	)	$	—	$	2.0	$	27.9	$	—	$	27.9	$	(12.2	)	$	—	$	15.7


							Gross Amounts Not Offset in the Consolidated Balance Sheets													Gross Amounts Not Offset on the Consolidated Balance Sheets
(in millions)	Gross Amounts Recognized		Gross Amount Offset in the Consolidated Balance Sheets		Net Amounts Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received/Pledged		Net Amount		Gross Amounts Recognized		Gross Amount Offset on the Consolidated Balance Sheets		Net Amounts Presented on the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received/Pledged		Net Amount

Liabilities
Foreign exchange forward contracts	$	5.5	$	—	$	5.5	$	(4.6	)	$	—	$	0.9	$	12.2	$	—	$	12.2	$	(12.0	)	$	—	$	0.2
Interest rate swaps	0.4		—		0.4		(0.1		)	—		0.3		0.3		—		0.3		(0.2		)	—		0.1
Total Liabilities	$	5.9	$	—	$	5.9	$	(4.7	)	$	—	$	1.2	$	12.5	$	—	$	12.5	$	(12.2	)	$	—	$	0.3

Offsetting of financial assets and liabilities under netting arrangements at December 31, ~~2016:~~2017:


							Gross Amounts Not Offset in the Consolidated Balance Sheets													Gross Amounts Not Offset on the Consolidated Balance Sheets
(in millions)	Gross Amounts Recognized		Gross Amount Offset in the Consolidated Balance Sheets		Net Amounts Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received/Pledged		Net Amount		Gross Amounts Recognized		Gross Amount Offset on the Consolidated Balance Sheets		Net Amounts Presented on the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received/Pledged		Net Amount

Assets
Foreign exchange forward contracts	$	14.7	$	—	$	14.7	$	(2.8	)	$	—	$	11.9	$	4.8	$	—	$	4.8	$	(3.9	)	$	—	$	0.9
Total Assets	$	14.7	$	—	$	14.7	$	(2.8	)	$	—	$	11.9	$	4.8	$	—	$	4.8	$	(3.9	)	$	—	$	0.9


							Gross Amounts Not Offset in the Consolidated Balance Sheets													Gross Amounts Not Offset on the Consolidated Balance Sheets
(in millions)	Gross Amounts Recognized		Gross Amount Offset in the Consolidated Balance Sheets		Net Amounts Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received/Pledged		Net Amount		Gross Amounts Recognized		Gross Amount Offset on the Consolidated Balance Sheets		Net Amounts Presented on the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received/Pledged		Net Amount

Liabilities
Foreign exchange forward contracts	$	2.5	$	—	$	2.5	$	(2.5	)	$	—	$	—	$	21.6	$	—	$	21.6	$	(3.8	)	$	—	$	17.8
Interest rate swaps	0.5		—		0.5		(0.3		)	—		0.2		0.4		—		0.4		(0.1		)	—		0.3
Total Liabilities	$	3.0	$	—	$	3.0	$	(2.8	)	$	—	$	0.2	$	22.0	$	—	$	22.0	$	(3.9	)	$	—	$	18.1

NOTE 11 – FAIR VALUE MEASUREMENT

The Company records financial instruments at fair value with unrealized gains and losses related to certain financial instruments reflected in AOCI on the Consolidated Balance Sheets. In addition, the Company recognizes certain liabilities at fair value. The Company applies the market approach for recurring fair value measurements. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities that are recorded at fair value as of the balance sheet date are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The fair value of financial instruments is determined by reference to various market data and other valuation techniques as appropriate. The Company believes the carrying amounts of cash and cash equivalents, accounts receivable (net of allowance for doubtful accounts), prepaid expenses and other current assets, accounts payable, accrued liabilities, income taxes payable and notes payable approximate fair value due to the short-term nature of these instruments. The Company estimated the fair value using Level 1 inputs and carrying value of total long-term debt, including the current portion, was $~~1,611.6~~$1,598.5 million and $~~1,597.3~~$1,595.4 million,, respectively at June 30, ~~2017~~.2018. At December 31, ~~2016,~~2017, the Company estimated the fair value and carrying value, including the current portion, was $~~1,525.7~~$1,629.9 million and $~~1,522.2~~$1,620.8 million,, respectively. The variable interest rate on the Japanese yen term loan is consistent with current market conditions, therefore the fair value approximates the loan’s carrying value.

The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis at June 30, ~~2017~~2018 and December 31, 2016, which are classified as Cash and cash equivalents, Prepaid expenses and other current assets, net, Other noncurrent assets, net, Accrued liabilities, and Other noncurrent liabilities on the Consolidated Balance Sheets. Financial assets and liabilities that are recorded at fair value as of the balance sheet date are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.2017:


	June 30, 2017								June 30, 2018
(in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3

Assets
Cross currency basis swaps									$	3.0	$	—	$	3.0	$	—
Foreign exchange forward contracts	$	6.7	$	—	$	6.7	$	—	24.5		—		24.5		—
Total assets	$	6.7	$	—	$	6.7	$	—	$	27.5	$	—	$	27.5	$	—

Liabilities
Interest rate swaps	$	0.4	$	—	$	0.4	$	—	$	0.3	$	—	$	0.3	$	—
Foreign exchange forward contracts	5.5		—		5.5		—		11.8		—		11.8		—
Contingent considerations on acquisitions	8.6		—		—		8.6		8.8		—		—		8.8
Total liabilities	$	14.5	$	—	$	5.9	$	8.6	$	20.9	$	—	$	12.1	$	8.8


	December 31, 2016								December 31, 2017
(in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3

Assets
Foreign exchange forward contracts	$	14.7	$	—	$	14.7	$	—	$	4.8	$	—	$	4.8	$	—
Available-for-sale security									54.4		—		54.4		—
Total assets	$	14.7	$	—	$	14.7	$	—	$	59.2	$	—	$	59.2	$	—

Liabilities
Interest rate swaps	$	0.5	$	—	$	0.5	$	—	$	0.4	$	—	$	0.4	$	—
Foreign exchange forward contracts	2.5		—		2.5		—		21.6		—		21.6		—
Contingent considerations on acquisitions	7.6		—		—		7.6		8.6		—		—		8.6
Total liabilities	$	10.6	$	—	$	3.0	$	7.6	$	30.6	$	—	$	22.0	$	8.6

There have been no transfers between levels during the six months ended June 30, 2018 and 2017.

Derivative valuations are based on observable inputs to the valuation model including interest rates, foreign currency exchange rates ~~future commodities prices~~ and credit risks. The Company utilizes ~~commodity contracts,~~ interest rate swaps and foreign exchange forward contracts that are considered cash flow hedges. In addition, the Company at times employs forward exchange contracts that are considered hedges of net investment in foreign operations. Designated derivative instruments are further discussed in Note 10, Financial Instruments and Derivatives.

The Company’s Level 3 liabilities at June 30, ~~2017~~2018 and December 31, ~~2016~~2017 are related to earn-out obligations on prior acquisitions. The following table presents a reconciliation of the Company’s Level 3 holdings measured at fair value on a recurring basis using unobservable inputs:


	Earn-out		Earn-out
(in millions)	Obligations		Obligations

Balance at December 31, 2016	$	7.6
Unrealized gain:
Balance at December 31, 2017			$	8.6
Fair value adjustment:
Reported in Other expense (income), net	0.4		0.4
Effect of exchange rate changes	0.6		(0.2		)
Balance at June 30, 2017	$	8.6
Balance at June 30, 2018			$	8.8

For the six months ended June 30, ~~2017,~~2018, there were no other purchases, issuances or transfers of Level 3 financial instruments.

NOTE 12 – INCOME TAXES

Uncertainties in Income Taxes

The Company recognizes in the interim consolidated financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position.

It is reasonably possible that certain amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date of the Company’s interim consolidated financial statements. Final settlement and resolution of outstanding tax matters in various jurisdictions during the next twelve months are not expected to be significant.

Other Tax Matters

During the quarter ended June 30, 2018, the Company recorded the following discrete tax items, $0.5 million of excess tax benefit related to employee share-based compensation, tax benefits of $0.7 million related to valuation allowances, $2.5 million related to enacted statutory rate changes and $0.6 million of tax benefit for other discrete tax matters. The Company also recorded a $50.4 million tax benefit as a discrete item related to the indefinite-lived intangible asset impairment charge, $1.1 million for the fixed asset impairment charge, and $3.3 million related to goodwill that was tax-deductible for the three months ended June 30, 2018. In addition the Company also recorded a $0.6 million tax benefit as a discrete item related to the gain on sale of marketable securities.

During the quarter ended June 30 2017, the Company recorded the following discrete tax items, $4.2 million of excess tax benefit related to employee share-based compensation, $0.5 million of tax expense related to enacted statutory rate changes and $1.5 million of tax expense for other discrete tax matters. The Company also recorded a $23.5 million tax benefit as a discrete item related to the indefinite-lived intangible asset impairment charge recorded during the three months ended June 30, 2017. The goodwill impairment charge isfor the quarter ended June 30, 2017 was non-deductible for income tax purposes. ~~For further information, see Note 14, Goodwill and Intangibles.~~

~~During~~U.S. Federal Legislative Changes

On December 22, 2017, the ~~first six months~~Tax Cuts and Jobs Act (the "Act" or "U.S. tax reform") was enacted. U.S. tax reform, among other things, reduced the U.S. federal income tax rate to 21% in 2018 from 35%, instituted a dividends received deduction for foreign earnings with a related tax for the deemed repatriation of ~~2016,~~unremitted foreign earnings and created a new U.S. minimum tax on earnings of foreign subsidiaries. In addition, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for enactment effects of the Act and provides a measurement period of up to one year from the Act’s enactment date for companies to complete their accounting under Accounting Standards Codification No. 740 “Income Taxes”, (“ASC 740”). In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Act. The Company has accounted for the tax effects of the Act on a provisional basis. At December 31, 2017, the accounting for certain income tax effects was incomplete, but the Company determined reasonable estimates for those effects which were included in the financial statements. The Company expects to complete the accounting during 2018 to comply with the one year measurement period.

Based on information available, at December 31, 2017, the Company estimated the cumulative undistributed foreign earnings and recorded a provisional estimate of income tax ~~benefit from~~expense related to the ~~release~~one-time deemed repatriation toll charge. There is still uncertainty as to the application of ~~a valuation allowance~~the Act, in particular as it relates to state income taxes. Further, the Company has not yet completed the analysis of the components of the computation, including the amount of the foreign earnings subject to U.S. income tax, and the portion of the foreign earnings held in cash or other specified assets. At June 30, 2018, the estimated cash liability for the deemed repatriation of foreign earnings is approximately ~~$78.6~~$1.0 million primarily due to the utilization of foreign tax credit carryforwards and certain other tax attributes. However, as the Company completes its analysis an additional liability could be recorded and the Company would elect to make installment payments as allowed under the Act.

As a result of the Merger related to previously unrecognized tax assets on foreign interest deduction carryforwards of a non-U.S. legacy DENTSPLY subsidiary. In addition, for the three and six months ended June 30, 2016,Act, the Company ~~recorded $4.1 million~~can repatriate the cumulative undistributed foreign earnings back to the U.S. when needed with minimal U.S. income tax consequences other than the one-time deemed repatriation toll charge. The Company is still evaluating whether to change its indefinite reinvestment assertion in light of the Act and ~~$0.5 million of tax expense related~~consider that conclusion to ~~other discrete tax matters.~~be incomplete in accordance SAB 118.

For the Global Intangible Low Tax Income (“GILTI”) provision of the Act, the Company recorded an estimate for the six months ended June 30, 2018, as a period expense based on current guidance, but the Company has not yet completed its assessment or elected an accounting policy to either recognize deferred taxes for basis differences expected to reverse as GILTI or to record GILTI as period costs if and when incurred.

In accordance with SEC guidance, provisional amounts may be refined as a result of additional guidance from, and interpretations by, U.S. regulatory and standard-setting bodies, and changes in assumptions. In subsequent periods, provisional amounts will be adjusted for the effects, if any, of interpretative guidance issued by the U.S. Department of the Treasury. The effects of the Act may be subject to changes for items that were previously reported as provisional amounts, as well as any element of the Act that a provisional estimate could not be made, and such changes could be material.

NOTE 13 – FINANCING ARRANGEMENTS

The Company’s revolving credit facility, term loans and Senior Notes contain certain affirmative and negative covenants relating to the Company's operations and financial condition. At June 30, ~~2017,~~2018, the Company was in compliance with all debt covenants.

At June 30, ~~2017,~~2018, there were no outstanding borrowings under the current $500.0 million multi-currency revolving credit facility. During the quarter ended June 30, 2018, the Company had issued $205.0 million of Commercial Paper which was outstanding at June 30, 2018. The multi-currency revolving credit facility serves as a back-stop facility for the Company’s $500.0 million Commercial Paper program.

On July 27, 2018, the Company amended and extended its $500.0 million multicurrency revolving credit facility increasing the total available to $700.0 million through July 27, 2023. In addition, certain new lenders joined the bank group. The Company has access to the full $700.0 million through July 27, 2023. The facility is unsecured and contains certain affirmative and negative covenants relating to the operations and financial condition of the Company. The most restrictive of these covenants pertain to asset dispositions and prescribed ratios of indebtedness to total capital and operating income, plus depreciation and amortization to interest expense.

At June 30, ~~2017,~~2018, the Company had ~~$545.0~~$322.9 million of borrowing available under lines of credit, including lines available under its short-term arrangements and revolving credit agreement.

NOTE 14 – GOODWILL AND INTANGIBLE ASSETS

The Company performed its annual impairment tests of goodwill as of April 30, ~~2017~~2018 on 11 reporting units. To determine the fair value of the Company’s reporting units, the Company uses a discounted cash flow model with market-based support as its valuation technique to measure the fair value for its reporting units. The discounted cash flow model uses five- to ten- year forecasted cash flows plus a terminal value based on a multiple of earnings or by capitalizing the last period’s cash flows using a perpetual growth rate. 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. These future expectations include, but are not limited to, new product development and distribution channel changes for the respective reporting units. The Company also considers the current and projected market conditions for dental and medical device industries, both in the U.S. and globally, when determining its assumptions. The total forecasted cash flows are discounted based on a range between ~~7.8%~~7.9% to ~~9.5%, which includes assumptions regarding~~10.5%. The discount rate used is based on the ~~Company’s~~ weighted-average cost of ~~capital. The use of estimates~~capital adjusted for the relevant risk associated with business-specific characteristics and the ~~development~~uncertainty related to the reporting unit’s ability to execute on the projected cash flows. The Company’s significant estimates in the discounted cash flow models include, but is not limited to, the weighted average cost of ~~assumptions results in uncertainties around forecasted cash flows.~~capital, long-term rate of growth and profitability of the reporting unit’s business and working capital effects. A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on the Company’s results of operations.

Unfavorable developments in the market for the dental or medical device industries, an increase in discount rates, unfavorable changes in earnings multiples or a decline in future cash flow projections, among other factors, may cause a change in circumstances indicating that the carrying value of the indefinite-lived assets and goodwill within the Company’s reporting units may not be recoverable.

~~As a result~~In connection with the updating of ~~updating~~ the estimates and assumptions ~~following recent changes in circumstances, and in connection~~ with the annual impairment tests of goodwill and the preparation of the financial statements for the three months ended June 30, ~~2017,~~2018, the Company determined that the goodwill associated with the CAD/CAM, Imaging and ~~Treatment Center~~ Orthodontics reporting units was impaired. Additionally, near the end of the quarter, the Company recognized that the CAD/CAM and Imaging reporting units’ (“equipment reporting ~~units were impaired.~~units”) revenue and operating margins would not meet forecasted expectations for the quarter as a result of several significant unfavorable developments which also affected the reporting units’ projections for future revenue and operating margins. As a result, the Company recorded a goodwill impairment charge of ~~$1,092.9~~$1,085.8 million. ~~These~~The CAD/CAM and Imaging reporting units are ~~all~~ within the Technologies & Equipment segment and the Orthodontics reporting unit is within the Consumables segment. The significant unfavorable developments in the current period which are reflected in the Company’s April 30, 2018 goodwill impairment testing model, are as follows:

The equipment reporting units were negatively affected in connection with the continued transition of the Company’s distribution relationships primarily in the U.S. from exclusive to non-exclusive. The Company’s expectations for revenue growth from its non-exclusive distribution relationships, which replaced its former long-term exclusive distribution relationship, were not met. As a result, the Company’s forecasts of current and future third-party demand have been reduced as the Company’s U.S. distributors continue to offer and promote competitive alternatives to the Company’s full CAD/CAM systems and lower-priced alternatives to the Imaging reporting units’ products.

The Imaging reporting unit observed revenue and operating margins being negatively impacted by aggressive competition with a focus on value-based products in the marketplace as opposed to the reporting unit’s premium products. This has resulted in increased competition from low-cost products in certain regions throughout the world causing the reporting unit to offer additional product features at the current price levels and to offer additional promotions and reduce its future sales forecasts.

The CAD/CAM and Imaging reporting units have also experienced lower than expected sales with respect to higher margin products as well as a regional shift in sales to emerging markets each of which has negatively impacted the reporting units’ overall operating margins as compared to the original forecasts for the period and for future sales forecasts.

The equipment reporting units were also further impacted by the unfavorable change in the discount rate due primarily to a higher risk factor, which represents management’s assessment of increased risk with respect to the CAD/CAM and Imaging reporting units’ forecasts primarily due to the factors described above, and to a lesser extent a higher risk-free interest rate for all reporting units.

The increased reduction of inventory being held by the Company’s U.S. distributors in the second quarter, which was larger than anticipated for the period, and planned further reductions of inventory, will impact the Company’s near-term results.

As a result of the factors described above, and the resulting reduced revenue and profitability expectations for these reporting units, we have forecasted reductions in unit volume growth rates and operating margins and lower future cash flows used to estimate the fair value of these reporting units, which resulted in a determination that an impairment adjustment was required.

The Orthodontics reporting unit goodwill impairment charge was primarily driven by ~~unfavorable changes~~lower operating margins and lower sales growth. The products manufactured and sold within this reporting unit have consisted mainly of traditional orthodontic treatment products, i.e., brackets, bands and wires. The impairment charge is unrelated to the Company’s acquisition of OraMetrix. The Company has observed a continuing decline in ~~estimates and assumptions used~~operating margins as the marketplace has seen higher than expected price competition primarily due to forecast discounted cash flows, including lower forecasted revenues and operating margin rates, which resulted in a lower fair value for these reporting units. The forecasted revenues and operating margin rates were negatively impacted by recent unfavorable developmentsincreased supply of traditional orthodontic products in the ~~marketplace. These developments included significantly~~market. In addition, the Company has seen lower ~~retail sales for the fiscal quarter ended April 2017 reported by the Company’s exclusive North America equipment distributor~~than expected revenue growth which is reflected in May 2017, significant acceleration of sales declines in the Company’s quarter ended June 30, 2017, and the execution of new distribution agreements with Patterson Companies, Inc. and Henry Schein, Inc. in May and June 2017.its future forecast. The Company ~~also observed an increase in~~believes the revenue trend is the result of competition ~~unfavorable changes in the end-user business model~~ as well as ~~changes in channels~~the growing end-user demand for newer orthodontic treatment options.

For the Company’s reporting units that were not impaired, the Company applied a hypothetical sensitivity analysis. Had the discount rate of ~~distribution~~each of these reporting units been hypothetically increased by 100 basis points at April 30, 2018, the fair value of one reporting unit, Treatment Centers, would not exceed net book value. If the fair value of each of these reporting units had been hypothetically reduced by 10% at April 30, 2018, the fair value of one reporting unit, Treatment Centers, would not exceed net book value. Goodwill for the Treatment Centers reporting unit totals $292.7 million at June 30, 2018.

In conjunction with the goodwill and indefinite-lived intangibles impairment test, the Company ~~and~~utilized its ~~competitors. The estimates~~best estimate of ~~discounted~~ future cash flows as of April 30, 2018, which include significant management assumptions such as future revenue growth rates, operating margins, weighted average cost of capital, and future economic and market conditions affecting the dental and medical device industries. Any changes to these assumptions and estimates could have a negative impact on the fair value of these reporting units and may result in further impairment. Given the uncertainty in the marketplace and other factors affecting management’s assumptions underlying the Company’s discounted cash flow model, these estimates could vary significantly in the future, which may result in a goodwill impairment charge at that time. The goodwill impairment charge is not expected to result in future cash expenditures.

The Company also assessed the annual impairment of indefinite-lived intangible assets as of April 30, ~~2017,~~2018, which largely consists of acquired tradenames, in conjunction with the annual impairment tests of goodwill. As a result of the annual impairment tests of indefinite-lived intangible assets, the Company recorded an impairment charge of ~~$79.8~~$179.2 million for the three months ended June 30, ~~2017~~2018 which was recorded in ~~“Restructuring~~Restructuring and other ~~costs”~~costs on the Consolidated Statements of Operations. The impaired indefinite-lived intangible assets are tradenames and trademarks related to the CAD/CAM, Imaging, and ~~Imaging equipment~~Instrument reporting units. The impairment charge was primarily driven by a decline in forecasted ~~sales.~~sales resulting from increased competition and the impact of low-cost competitive products, as discussed above with respect to goodwill. In addition, the unfavorable impact of an increase in the equipment reporting units’ respective risk factors, along with increases in the risk-free rate, increased the discount rate. The assumptions and estimates used in determining the fair

value of the indefinite-lived intangible assets contain uncertainties, and any changes to these assumptions and estimates could have a negative impact and result in a future impairment.

In conjunction with the goodwill and indefinite-lived intangibles impairment test, the Company utilized its best estimate of future revenue growth and operating margin rates as of April 30, 2017. Given the uncertainty in the new distribution agreements, these estimates could vary significantly in the future, which may result in a goodwill impairment charge at that time.

A reconciliation of changes in the Company’s goodwill by reportable segment is as follows:


(in millions)	Dental and Healthcare Consumables			Technologies			Total			Technologies & Equipment			Consumables			Total

Balance at December 31, 2016	$	1,091.2		$	4,860.8		$	5,952.0
Balance at December 31, 2017										$	3,660.6		$	878.6		$	4,539.2
Acquisition related additions	81.8			—			81.8			—			66.5			66.5
Measurement period adjustments on prior acquisitions	(24.3		)	4.6			(19.7		)	—			0.5			0.5
Impairment	—			(1,092.9		)	(1,092.9		)	(1,017.2		)	(68.5		)	(1,085.7		)
Effects of exchange rate changes	30.7			71.7			102.4			(51.3		)	(11.4		)	(62.7		)
Balance at June 30, 2017	$	1,179.4		$	3,844.2		$	5,023.6
Balance at June 30, 2018										$	2,592.1		$	865.7		$	3,457.8

The following table provides the gross carrying amount of goodwill and the cumulative goodwill impairment:



	June 30, 2018							December 31, 2017
(in millions)	Gross Carrying Amount		Cumulative Impairment			Net Carrying Amount		Gross Carrying Amount		Cumulative Impairment			Net Carrying Amount

Technologies & Equipment	$	5,260.2	$	(2,668.1	)	$	2,592.1	$	5,311.5	$	(1,650.9	)	$	3,660.6
Consumables	934.2		(68.5		)	865.7		878.6		—			878.6
Total effect of cumulative impairment	6,194.4		(2,736.6		)	3,457.8		6,190.1		(1,650.9		)	4,539.2

Identifiable definite-lived and indefinite-lived intangible assets consist of the following:


	June 30, 2017							December 31, 2016							June 30, 2018							December 31, 2017
(in millions)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Patents and developed technology	$	1,308.6	$	(248.8	)	$	1,059.8	$	1,189.5	$	(177.3	)	$	1,012.2	$	1,416.1	$	(353.5	)	$	1,062.6	$	1,385.5	$	(305.0	)	$	1,080.5
Trademarks	78.9		(43.1		)	35.8		65.3		(38.7		)	26.6		82.6		(61.5		)	21.1		76.4		(46.5		)	29.9
Licensing agreements	30.9		(24.1		)	6.8		33.5		(26.7		)	6.8		36.1		(25.4		)	10.7		31.2		(24.8		)	6.4
Customer relationships	1,082.1		(228.0		)	854.1		1,004.8		(181.2		)	823.6		1,098.8		(301.8		)	797.0		1,109.1		(272.0		)	837.1
Total definite-lived	$	2,500.5	$	(544.0	)	$	1,956.5	$	2,293.1	$	(423.9	)	$	1,869.2	$	2,633.6	$	(742.2	)	$	1,891.4	$	2,602.2	$	(648.3	)	$	1,953.9

Indefinite-lived Trademarks and In-process R&D	$	1,102.9	$	—		$	1,102.9	$	1,088.4	$	—		$	1,088.4
Indefinite-lived tradenames and trademarks															$	655.4	$	—		$	655.4	$	846.8	$	—		$	846.8

Total identifiable intangible assets	$	3,603.4	$	(544.0	)	$	3,059.4	$	3,381.5	$	(423.9	)	$	2,957.6	$	3,289.0	$	(742.2	)	$	2,546.8	$	3,449.0	$	(648.3	)	$	2,800.7

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Litigation

On June 18, 2004, Marvin Weinstat, DDS and Richard Nathan, DDS filed a class action suit in San Francisco County, California alleging that the Company misrepresented that its Cavitron® ultrasonic scalers are suitable for use in oral surgical procedures. The Complaint sought a recall of the product and refund of its purchase price to dentists who have purchased it for use in oral surgery. The Court certified the case as a class action in June 2006 with respect to the breach of warranty and unfair business practices claims. The certified class is defined as California dental professionals who, at any time during the period beginning June 18, 2000 through September 14, 2012, purchased and used one or more Cavitron® ultrasonic scalers for the performance of oral surgical procedures on their patients, which Cavitrons® were accompanied by Directions for Use that “Indicated” Cavitron® use for “periodontal debridement for all types of periodontal disease.” The case went to trial in September 2013, and on January 22, 2014, the San Francisco Superior Court issued its decision in the Company’s favor, rejecting all of the plaintiffs’ claims. The plaintiffs have appealed the Superior Court’s decision, and the appeal is now pending. The Company is defending against this appeal.

On December 12, 2006, Carole Hildebrand, DDS, and Robert Jaffin, DDS, filed a Complaint in the Eastern District of Pennsylvania (the Plaintiffs subsequently added Dr. Mitchell Goldman as a named class representative). The same law firm that filed the Weinstat case in California filed this case. The Complaint asserts putative class action claims on behalf of dentists located in New Jersey and Pennsylvania. The Complaint asserts that the Company’s Cavitron® ultrasonic scaler was negligently designed and sold in breach of contract and warranty arising from alleged misrepresentations about the potential uses of the product because the Company cannot assure the delivery of potable or sterile water through the device. The Court granted the Company’s Motion for Dismissal of the case for lack of jurisdiction. Following that dismissal, the plaintiffs filed a second complaint under the name of Dr. Hildebrand’s corporate practice, Center City Periodontists, asserting the same allegations. The plaintiffs moved to have the case certified as a class action and the Company objected. The Court granted the Company’s Motion to Dismiss plaintiffs’ New Jersey Consumer Fraud and negligent design claims, leaving only a breach of express warranty claim. The Court subsequently denied the Company’s Motion for Summary Judgment on the express warranty claim. The Court held hearings during 2016 on plaintiffs’ class certification motion. On July 24, 2017, the Court issued a Memorandum Opinion and Order denying class certification on multiple, independently sufficient grounds. The claims of the individual plaintiffs remain pending.

~~On January 20, 2014, the Company was served with a~~ ~~qui tam~~ complaint filed by two former and one current employee of the Company under the Federal False Claims Act and equivalent state and city laws. The lawsuit was previously under seal in the U.S. District Court for the Eastern District of Pennsylvania. The complaint alleges, among other things, that the Company engaged in various illegal marketing activities, and thereby caused dental and other healthcare professionals to file false claims for reimbursement with federal and state governments. The relators seek injunctive relief, fines, treble damages, and attorneys’ fees and costs. On January 27, 2014, the United States filed with the Court a notice that it had elected not to intervene in the ~~qui tam~~ action at this time. The United States’ notice indicated that the named state and city co-plaintiffs had authorized the United States to communicate to the Court that they also had decided not to intervene at this time. These non-intervention decisions do not prevent the ~~qui tam~~ relators from litigating this action, and the United States and/or the named states and/or cities may seek to intervene in the action at a later time. On September 4, 2014, the Company’s motion to dismiss the complaint was granted in part and denied in part. The Company filed a motion for summary judgment in December 2015. In April 2016, the Court granted the Company’s motion for summary judgment, which disposes of all remaining claims against the Company in the matter. The plaintiffs filed a notice of appeal in May 2016. In May 2017, the parties resolved the matter and the appeal has been voluntarily dismissed.

The Company does not believe a loss is probable related to the above litigation. Further, a reasonable estimate of a possible range of loss cannot be made. In the event that one or more of these matters is unfavorably resolved, it is possible the Company’s results from operations, financial position or liquidity could be materially impacted.

In 2012, the Company received subpoenas from the U. S. Attorney’s Office for the Southern District of Indiana (the “USAO”) and from the Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC”) requesting documents and information related to compliance with export controls and economic sanctions regulations by certain of its subsidiaries. The Company has voluntarily contacted OFAC and the Bureau of Industry and Security of the U. S. Department of Commerce (“BIS”), in connection with these matters as well as regarding compliance with export controls and economic sanctions regulations by certain other business units of the Company identified in connection with an internal review by the Company. On September 1, 2016, the Company entered into an extension of the tolling agreement originally entered into in August 2014, such that the statute of limitations was tolled to May 1, 2017. The Company's discussions with OFAC to resolve this matter are ongoing.

At this stage of the inquiries, the Company is unable to predict the ultimate outcome of these matters or what impact, if any, the outcome of these matters might have on the Company’s consolidated financial position, results of operations or cash flows. Violations of export control or economic sanctions laws or regulations could result in a range of governmental enforcement actions, including fines or penalties, injunctions and/or criminal or other civil proceedings, which actions could have a material adverse effect on the Company’s reputation, business, financial condition and results of operations. At this time, no claims have been made against the Company.

The SEC’s Division of Enforcement has asked the Company to provide documents and information concerning the Company’s accounting and ~~disclosures, including its accounting and disclosures relating to transactions with a significant distributor of the Company.~~disclosures. The Company is cooperating with the SEC’s investigation. The Company is unable to predict the ultimate outcome of this matter, or whether it will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

On May 5, 2015, Roth Licensing, LLC (“Roth Licensing”) filed a demand for arbitration alleging that GAC International, LLC, a subsidiary of the Company (“GAC”), infringes a registered trademark of Roth Licensing pursuant to the Lanham Act, California Civil Code Section 3344.1, and certain other common law causes of action. On August 9, 2017, the arbitrator issued an interim decision on liability finding that GAC had willfully infringed the registered trademark of Roth Licensing. On November 8, 2017, the arbitrator served his Final Award on damages awarding Roth Licensing approximately $16.0 million for damages, attorneys’ fees and costs as well as injunctive relief regarding the ROTH mark and any reproduction, counterfeit, copy, or colorable imitation of the ROTH mark and Dr. Roth’s image. The Company believes that the arbitrator failed to follow the applicable arbitration procedures, and it has filed a Motion to Vacate Arbitration Award with the Eastern District of New York.

On January 11, 2018, Thomas Redlich, a former employee, filed a lawsuit against the Company, demanding supplemental compensation pursuant to an agreement allegedly entered into with Sirona Dental GmbH which was intended to entice Mr. Redlich to continue to work for the company for no less than eight years following the date of this agreement. The Company filed its response on April 4, 2018, denying the authenticity and enforceability of, and all liability under, the alleged agreement. The Court held an initial hearing on the matter on April 11, 2018, allowing Mr. Redlich to file a reply to the Company’s response on July 9, 2018, and allowing the Company to respond to that reply. The Court has set a further hearing on August 30, 2018 for this matter. The Company intends to defend this claim vigorously.

On January 25, 2018, Futuredontics, Inc. received service of a purported class action lawsuit brought by Henry Olivares and other similarly situated individuals in the Superior Court of the State of California for the County of Los Angeles. The plaintiff class alleges several violations of the California wage and hours laws, including, but not limited to, failure to provide rest and meal breaks and the failure pay overtime. The Company has filed its answer to the complaint and the parties have initiated written and other discovery. The Company continues to vigorously defend against this matter.

On June 7, 2018, John Castronovo filed a putative class action suit in the County of New York alleging that the Company and certain of its present and former officers and directors violated U.S. securities laws by allegedly making false and misleading statements in connection with a February 2016 registration statement issued in connection with the acquisition of and merger with former Sirona Dental Systems, Inc. by former Dentsply International Inc. The Company intends to defend itself vigorously.

In addition to the matters disclosed above, the Company is, from time to time, subject to a variety of litigation and similar proceedings incidental to its business. These legal matters primarily involve claims for damages arising out of the use of the Company’s products and services and claims relating to intellectual property matters including patent infringement, employment matters, tax matters, commercial disputes, competition and sales and trading practices, personal injury and insurance coverage. The Company may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained

from, or representations, warranties or indemnities provided in connection with, divested businesses. Some of these lawsuits may include claims for punitive and consequential, as well as compensatory damages. Based upon the Company’s experience, current information and applicable law, it does not believe that these proceedings and claims will have a material adverse effect on its consolidated results of operations, financial position or liquidity. However, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations or liquidity.

While the Company maintains general, product, property, workers’ compensation, automobile, cargo, aviation, crime, fiduciary and directors’ and officers’ liability insurance up to certain limits that cover certain of these claims, this insurance may be insufficient or unavailable to cover such losses. In addition, while the Company believes it is entitled to indemnification from third parties for some of these claims, these rights may also be insufficient or unavailable to cover such losses.

Purchase Commitments

From time to time, the Company enters into long-term inventory purchase commitments with minimum purchase requirements for raw materials and finished goods to ensure the availability of products for production and distribution. These commitments may have a significant impact on levels of inventory maintained by the Company.

DENTSPLY SIRONA Inc. and Subsidiaries

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~This report~~Information included in or incorporated by reference in this Form 10-Q, and other filings with the U. S. Securities and Exchange Commission (the “SEC”) and the Company’s press releases or other public statements, contains ~~information that~~or may ~~constitute “forward-looking statements” within the meaning of Section 27A~~contain forward-looking statements. Please refer to a discussion of the ~~Securities Act of 1933, as amended,~~Company’s forward-looking statements and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by the use of forward-looking terminology, including “may,” “believe,” “will,” “expect,” “anticipate,” “plan,” “intend,” “project,” “forecast,” or other similar words. All statements that address operating performance, events or developments that the Company expects or anticipates will occurassociated risks in ~~the future are forward-looking statements. Statements contained in this report are based on information presently available to the Company~~Part I, “Forward-Looking Statements” and ~~assumptions that the Company believes to be reasonable. These risks and uncertainties include, but are not limited to, those described in~~ Part I, Item 1A ~~(“Risk~~“Risk Factors”) of the ~~Company’s~~Company's Form 10-K for the year ended December 31, 2016 and those described from time to time in our future reports filed with the Securities and Exchange Commission. The Company is not assuming any duty to update this information if those facts change or if the assumptions are no longer believed to be reasonable. Investors are cautioned that all such statements involve risks and uncertainties, and important factors could cause actual events or results to differ materially from those indicated by such forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.

~~References to the “Combined Businesses” are included below to provide comparisons of net sales performance year over year as if the businesses were combined on January 1, 2016.~~2017.

OVERVIEW

Highlights

For the three months ended June 30, ~~2017,~~2018, the Company reported a sales ~~decrease~~increase of ~~2.9%, on~~5.0% compared to the three months ended June 30, 2017. On a constant currency basis sales declined 1.0% and internal growth was negative 3.6%. Based on the Company’s estimate, both constant currency and internal sales growth were unfavorably impacted by approximately $19 million as a result of current quarter over prior year quarter net changes in equipment inventory levels at certain distributors in North America and Europe. Based on the Company’s estimate, inventory held by these distributors decreased by approximately $17 million during the current three month periodincreased 1.3% compared to ~~an increase of approximately $2 million in~~ the same three month period in 2016. The inventory decrease in the current three month period was less than anticipated, in the Company’s assessment, as a result of lower than expected equipment sales to end-users combined with higher than expected inventory purchases by certain distributors.year ago period.

On a geographic basis, the Company generated constant currency sales growth of ~~5.7% in Europe, 1.3%~~4.2% in the Rest of World region, ~~while~~a decline of 1.4% in Europe, and growth in the United States ~~generated a decline~~ of ~~9.6%~~2.3% for the three month period ended June 30, ~~2017.~~2018.

For the three months ended June 30, ~~2017~~2018, the Company generated a loss per diluted share of ~~$4.58 as~~$4.98 compared to ~~income~~a loss per diluted share of ~~$0.44~~$4.58 for the three months ended June 30, 2016. This decline largely reflects the impact of the goodwill and intangible asset impairments and lower sales and gross profit (including the impact of distribution channel transition). This also reflects foreign exchange headwinds partially offset by a favorable effective tax rate and common share count.2017. On an adjusted basis (a non-US GAAP ~~measure),~~measure as reconciled under Net income attributable to Dentsply Sirona below) for the three months ended June 30, ~~2017 income~~2018 earnings per diluted share was ~~$0.65~~$0.60 as compared to ~~$0.76~~$0.65 earnings per diluted share for the three months ended ~~June30, 2016.~~June 30, 2017.

Cash flow from operations for the first six months of 2018 was $172.0 million, as compared to $208.7 million in the first six months of 2017.

Company Profile

Dentsply Sirona is the world’s largest manufacturer of professional dental products and technologies, with over a century of innovation and service to the dental industry and patients worldwide. Dentsply Sirona develops, manufactures, and markets a comprehensive solutions offering including dental and oral health products as well as other consumable medical devices under a strong portfolio of world class brands. As The Dental Solutions ~~Company™,~~Company, Dentsply Sirona’s products provide innovative, high-quality and effective solutions to advance patient care and deliver better, safer and faster dentistry. Dentsply Sirona’s global headquarters is located in York, ~~Pennsylvania, and the international headquarters is based in Salzburg, Austria.~~Pennsylvania. The Company’s shares are listed in the United States on ~~NASDAQ~~Nasdaq under the symbol XRAY.

BUSINESS

The Company operates in two business ~~segments, Dental and Healthcare Consumables and Technologies.~~

The Dental and Healthcare Consumables segment includes responsibility for the worldwide design, manufacture, sales and distribution of the Company’s Dental and Healthcare Consumable Products which include preventive, restorative, instruments, endodontic, and laboratory dental products as well as consumable medical device products.segments:

The Technologies & Equipment segment is responsible for the worldwide design, manufacture, sales and distribution of the Company’s Dental Technology, Equipment Products ~~which includes~~and Healthcare Consumable Products. These products include dental implants, laboratory dental products, CAD/CAM systems, imaging systems, treatment centers ~~and orthodontic~~as well as consumable medical device products.

The Company recently announced that it was changing from two operating segments to three operating segments as a result of realigning management responsibilities. The Company will begin reporting under the new segmentsConsumables segment is responsible for the ~~period ending September 30, 2017.~~worldwide design, manufacture, sales and distribution of the Company’s Dental Consumable Products which includes preventive, restorative, instruments and endodontic and orthodontic dental products.

Principal Measurements

The principal measurements used by the Company in evaluating its business are: (1) constant currency sales growth by segment and geographic region; (2) internal sales growth by segment and geographic region; and (3) adjusted operating income and margins of each reportable segment, which excludes the impacts of purchase accounting, corporate expenses, and certain other items to enhance the comparability of results period to period. These principal measurements are not calculated in accordance with accounting principles generally accepted in the United States; therefore, these items represent non-US GAAP measures. These non-US GAAP measures may differ from 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.

The Company defines “constant currency” sales growth as the increase or decrease in net sales from period to period excluding precious metal content and the impact of changes in foreign currency exchange rates. This impact is calculated by comparing current-period revenues to prior-period revenues, with both periods converted at the U.S. dollar to local currency foreign exchange rate for each month of the prior period, for the currencies in which the Company does business. The Company defines “internal” sales growth as constant currency sales growth excluding the impacts of net acquisitions and divestitures, Merger accounting impacts and discontinued products.

Business Drivers

The primary drivers of internal growth include macroeconomic factors, global dental market growth, innovation and new product launches by the Company, as well as continued investments in sales and marketing resources, including clinical education. Management believes that the Company’s ability to execute its strategies should allow it to grow faster than the underlying dental market over time. On a short term basis, changes in strategy or distributor inventory levels, competition and the impact of low-cost products can impact the Company’s internal growth.

The Company has a focus on maximizing operational efficiencies on a global basis. The Company has expanded the use of technology as well as process improvement initiatives to enhance global efficiency. In addition, management continues to evaluate the consolidation of operations and functions, as part of integration activities, to further reduce costs. While the current period results continue to reflect the unfavorable impact of incomplete integration related ~~inefficiencies,~~activities, the Company believes that the future benefits from these global efficiency and integration initiatives will improve its cost structure. In 2017, the Company targeted a cost ~~structure and help mitigate~~reduction initiative of approximately $100 million expected to be achieved over the ~~impacts~~next several years as the benefits of ~~rising costs such as energy, employee benefits and regulatory oversight and compliance.~~these initiatives, net of related investments, are realized over time. The Company expects that it will record restructuring charges, from time to time, associated with such initiatives. ~~These~~Consistent with these efforts, the Company is currently evaluating plans to simplify the organizational structure and consolidate its supply chain. The Company expects to announce final plans by the end of 2018. Future restructuring charges could be material to the Company’s consolidated financial statements and there can be no assurance that the ~~target adjusted operating income margins~~cost reduction will ~~continue to~~ be achieved.

Product innovation is a key component of the Company’s overall growth strategy. New advances in technology are anticipated to have a significant influence on future products in the dentistry and consumable medical device markets in which the Company

operates. As a result, the Company continues to pursue research and development initiatives to support technological development, including collaborations with various research institutions and dental schools. In addition, the Company licenses and purchases technologies developed by third parties. Although the Company believes these activities will lead to new innovative dental, healthcare consumable and dental technology products, they involve new technologies and there can be no assurance that commercialized products will be developed.

The Company’s business is subject to quarterly fluctuations of consolidated net sales and net income. Price increases, promotional activities as well as changes in inventory levels at distributors contribute to this fluctuation. The Company typically implements most of its price increases in October or January of a given year across most of its businesses. Distributor 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. Required minimum purchase commitments under agreements with key distributors may increase inventory levels in excess of retail demand. These net inventory changes have impacted the Company’s consolidated net sales and net income in the past, and may continue to do so in the future, over a given period or multiple periods. In addition, the Company may from time to time, engage in new distributor relationships that could cause quarterly fluctuations of consolidated net sales and net income. Distributor inventory levels may fluctuate, and may differ from the Company’s predictions, resulting in the Company’s projections of future results being different than expected. There can be no assurance that the Company’s dealers and customers will maintain levels of inventory in accordance with the Company’s predictions or past history, or that the timing of customers’ inventory build or liquidation will be in accordance with the Company’s predictions or past history. Any of these fluctuations could be material to the Company’s consolidated financial statements.

The Company ~~had two exclusive~~continues to be impacted by the transition in distribution ~~agreements~~strategy with Patterson Companies, Inc. (“Patterson”) ~~for the marketing~~ and sales of certain legacy Sirona products and equipment in the United States and Canada. In order to maintain exclusivity, certain purchase targets had to be achieved. In the fourth quarter of 2016, Patterson’s decision not to extend the exclusivity beyond September 2017 was announced. Following that announcement, in May 2017, the Company entered into a new three-year agreement with Patterson whereby Patterson would continue to distribute the Company’s equipment lines in the United States on a non-exclusive basis. In the second quarter of 2017, the Company also entered into two separate multi-year agreements with Henry Schein, Inc. (“Henry Schein”). During 2017, the Company signed new distribution agreements with Patterson and Henry Schein for ~~the distribution of~~ the Company’s equipment ~~lines in the United States and Canada. While the agreement with Henry Schein with respect to the United States is effective September 1, 2017, the agreement relating to Canada is effective June, 2017.~~products. The Company ~~began shipping~~shipped initial stocking orders for the equipment products to Henry Schein under the agreements primarily in the second ~~quarter~~and third quarters of 2017 and expects orders will continue through the balance of 2017. During the second quarter of 2017, the Company also modified its distribution agreement with Henry Schein with respect to the distribution of certain productswhich resulted in ~~France.~~unfavorable year-over-year sales growth comparisons. Based on the Company’s estimate, year-over-year changes in distributor inventories associated with these agreements negatively impacted the Company’s reported sales growth in the first six months of ~~2017~~2018 by approximately ~~$46~~$5 million. Based on the Company’s estimate, distributor inventories increased during the first half of 2016 by approximately $17 million primarily associated with certain distributors making minimum purchase targets required in order to maintain exclusivity. Inventory held by distributors decreased during the first six months of 2017 by approximately $29 million ~~based on~~as compared to a decrease of approximately $34 million during the ~~Company’s estimate.~~first six months of 2018. At this time, the Company ~~believes~~estimates that net changes in distributor inventories will ~~decrease~~unfavorably impact the Company’s sales by approximately ~~$10~~$130 million to $135 million for the balance of ~~2017, which~~2018. Based on the Company’s estimate, year-over-year changes in distributor inventories associated with these agreements is projected to unfavorably impact the Company’s reported sales growth for the full year of 2018 by approximately ~~the same impact as the last six month in 2016.~~$135 million to $140 million.

The Company will continue to pursue opportunities to expand the Company’s product offerings, technologies and sales and service infrastructure through partnerships and acquisitions. Although the professional dental and the consumable medical device markets in which the Company operates have experienced consolidation, they remain fragmented. Management believes that there will continue to be adequate opportunities to participate as a consolidator in the industry for the foreseeable future.

Impact of Foreign Currencies and Interest Rates

Due to the Company’s significant international presence, movements in foreign exchange and interest rates may impact the Consolidated Statements of Operations. With approximately ~~two thirds~~two-thirds of the Company’s net sales located in regions outside the United States, the Company’s consolidated net sales are impacted negatively by the strengthening or positively impacted by the weakening of the U.S. dollar. Additionally, movements in certain foreign exchange ~~and interest~~ rates may unfavorably or favorably impact the Company’s results of operations, financial condition and ~~liquidity. For~~liquidity as a number of the ~~six months ended June 30, 2017, net sales, excluding precious metal content, were unfavorably impacted by approximately 1.4%~~Company’s manufacturing and ~~earnings per diluted common share by approximately $0.03 due to movements in foreign currency exchange rates when compared~~distribution operations are located outside of the U.S.

Reclassification of Prior Year Amounts

Certain reclassifications have been made to the ~~same period~~prior year’s data in ~~2016.~~

order to conform to the current year presentation.

RESULTS OF OPERATIONS, QUARTER ENDED JUNE 30, ~~2017~~2018 COMPARED TO QUARTER ENDED JUNE 30, ~~2016~~2017

Net Sales

The discussion below summarizes the Company’s sales growth which excludes precious metal content, into the following components: (1) ~~impact of the Merger;~~constant currency sales growth, which includes internal sales growth and net acquisition sales growth, and (2) ~~the results of the “Combined Businesses” as if the businesses were merged on January 1, 2016.~~foreign currency impacts. These disclosures of net sales growth provide the reader with sales results on a comparable basis between periods.

Management believes that the presentation of net sales, excluding precious metal content, provides useful information to investors because a portion of Dentsply Sirona’s net sales is comprised of sales of precious metals generated through sales of the Company’s precious metal dental alloy products, which are used by third parties to construct crown and bridge materials. Due to the fluctuations of precious metal prices and because the cost of the precious metal content of the Company’s sales is largely passed through to customers and has minimal effect on earnings, Dentsply Sirona reports net sales both with and without precious metal content to show the Company’s performance independent of precious metal price volatility and to enhance comparability of performance between periods. The Company uses its cost of precious metal purchased as a proxy for the precious metal content of sales, as the precious metal content of sales is not separately tracked and invoiced to customers. The Company believes that it is reasonable to use the cost of precious metal content purchased in this manner since precious metal dental alloy sale prices are typically adjusted when the prices of underlying precious metals change.

The presentation of net sales, excluding precious metal content, is considered a measure not calculated in accordance with US GAAP, and is therefore considered a non-US GAAP measure. The Company provides the following reconciliation of net sales to net sales, excluding precious metal content. The Company’s definitions and calculations of net sales, excluding precious metal content, and other operating measures derived using net sales, excluding precious metal content, may not necessarily be the same as those used by other companies.


	Three Months Ended									Three Months Ended
	June 30,									June 30,
(in millions)	2017		2016		$ Change			% Change		2018		2017		$ Change			% Change

Net sales	$	992.7	$	1,022.0	$	(29.3	)	(2.9	%)	$	1,042.1	$	992.7	$	49.4		5.0	%
Less: precious metal content of sales	9.7		17.3		(7.6		)	(43.9	%)	9.4		9.7		(0.3		)	(3.1	%)
Net sales, excluding precious metal content	$	983.0	$	1,004.7	$	(21.7	)	(2.2	%)	$	1,032.7	$	983.0	$	49.7		5.1	%

Net sales, excluding precious metal content, for the three months ended June 30, ~~2017~~2018 were ~~$983.0~~$1,032.7 million, ~~a decrease~~an increase of ~~$21.7~~$49.7 million from the three months ended June 30, ~~2016.~~2017. The ~~decrease~~increase in net sales, excluding precious metal content, was ~~unfavorably~~negatively impacted, based on the Company’s estimate, by approximately ~~$19~~$9 million as a result of net changes in equipment inventory levels in the current quarter as compared to the prior year quarter at certain distributors in North America and Europe, that the Company believes is related to the transition in distribution strategy (see “Business Drivers” under this section for further detail). Based on the Company’s estimate, inventory held by these distributors decreased by approximately ~~$17~~$26 million during the ~~current~~ three ~~month period~~months ended June 30, 2018, compared to ~~an increase~~a decrease of approximately $2$17 million in the same three month period in 2016. Additionally, in the Company’s assessment, net sales, excluding precious metal content, were negatively impacted by lower equipment sales to end-users, primarily in the U.S., as result of transition challenges at our exclusive distributor.2017. At this time, the Company ~~believes~~estimates that net changes in distributor inventories will ~~decrease~~unfavorably impact the Company’s sales by approximately ~~$10~~$130 million to $135 million for the balance of ~~2017, which~~2018. Based on the Company’s estimate, year-over-year changes in distributor inventories associated with these agreements is projected to unfavorably impact the Company’s reported sales growth for the full year of 2018 by approximately ~~the same impact as the last six month in 2016. The decrease in net sales, excluding precious metal content, was partially offset by an increase in sales of Dental and Healthcare Consumable products.~~

~~Sales related~~$135 million to precious metal content declined 43.9% in the quarter as compared to the same three month period in 2016, which was primarily due to the continuing reduction in the use of precious metal alloys in dentistry.$140 million.

For the three months ended June 30, ~~2017,~~2018, net sales, excluding precious metal content, ~~declined 1.0%~~increased 1.3% on a constant currency basis. This includes a benefit of ~~2.6%~~0.4% from acquisitions, which results in ~~negative~~ internal sales growth of ~~3.6%~~0.9%. Net sales, excluding precious metal content, were ~~negatively~~positively impacted by approximately ~~1.2%~~3.8% due to the ~~strengthening~~weakening of the U.S. dollar over the prior year period. ~~Based on the Company’s assessment, the negative~~The internal sales growth was ~~primarily a result of~~attributable to the ~~current quarter over prior year quarter net changes in equipment inventory levels as well as the impact of lower equipment sales to end-users discussed above, partially~~Consumables segment, offset by ~~increased sales~~a decline in ~~Dental and Healthcare Consumables. A reconciliation of reported net sales to net sales, excluding precious metal content, is as follows:~~

Three Months Ended
June 30,
(in millions) 2017 2016 $ Change % Change

Net sales $ 992.7
$ 1,022.0
$ (29.3 ) (2.9 %)
Less: precious metal content of sales 9.7
17.3
(7.6 ) (43.9 %)
Net sales, excluding precious metal content 983.0
1,004.7
(21.7 ) (2.2 %)
Merger related adjustments (a)
1.5
1.6
(0.1 ) (6.3 %)
Non-US GAAP net sales, excluding precious metal content $ 984.5
$ 1,006.3
$ (21.8 ) (2.2 %)

~~(a) Represents an adjustment to reflect deferred subscription and warranty revenue that was eliminated under business combination accounting standards.~~the Technologies & Equipment segment.

Sales Growth by Region

Net sales, excluding precious metal content, by geographic region is as follows:


	Three Months Ended									Three Months Ended
	June 30,									June 30,
(in millions)	2017		2016		$ Change			% Change		2018		2017		$ Change		% Change

United States	$	330.1	$	365.9	$	(35.8	)	(9.8	%)	$	337.1	$	330.1	$	7.0	2.1	%

Europe	395.0		382.2		12.8			3.3	%	419.4		395.0		24.4		6.2	%

Rest of World	257.9		256.6		1.3			0.5	%	276.2		257.9		18.3		7.1	%

A reconciliation of reported net sales to non-US GAAP net sales, excluding precious metal content, by geographic region is as follows:



	Three Months Ended
	June 30, 2018
(in millions)	United States		Europe		Rest of World		Total

Net sales	$	338.4	$	426.7	$	277.0	$	1,042.1
Less: precious metal content of sales	1.3		7.3		0.8		9.4
Net sales, excluding precious metal content	337.1		419.4		276.2		1,032.7
Acquisition related adjustments (a)	2.1		—		—		2.1
Non-US GAAP net sales, excluding precious metal content	$	339.2	$	419.4	$	276.2	$	1,034.8

(a) Represents an adjustment to reflect deferred revenue that was eliminated under business combination accounting standards.



	Three Months Ended
	June 30, 2017
(in millions)	United States		Europe		Rest of World		Total

Net sales	$	331.6	$	402.2	$	258.9	$	992.7
Less: precious metal content of sales	1.5		7.2		1.0		9.7
Net sales, excluding precious metal content	330.1		395.0		257.9		983.0
Merger related adjustments (a)	1.5		—		—		1.5
Non-US GAAP net sales, excluding precious metal content	$	331.6	$	395.0	$	257.9	$	984.5

(a) Represents an adjustment to reflect deferred subscription and warranty revenue that was eliminated under business combination accounting ~~standards.~~

Three Months Ended
June 30, 2016
(in millions) United States Europe Rest of World Total

Net sales $ 367.2
$ 392.4
$ 262.4
$ 1,022.0
Less: precious metal content of sales 1.3
10.2
5.8
17.3
Net sales, excluding precious metal content 365.9
382.2
256.6
1,004.7
Merger related adjustments (a)
1.1
0.5
—
1.6
Non-US GAAP net sales, excluding precious metal content $ 367.0
$ 382.7
$ 256.6
$ 1,006.3

~~(a) Represents an adjustment~~standards to ~~reflect deferred subscription~~make the 2018 and ~~warranty revenue that was eliminated under business combination accounting standards.~~2017 non-U.S. GAAP results comparable.

United States

~~Reported net~~Net sales increased by 2.1% in the quarter ended June 30, 2018 as compared to the quarter ended June 30, 2017. Net sales, excluding precious metal content, ~~decreased~~increased by ~~9.8%~~2.1% in the second quarter of ~~2017~~2018 as compared to the second quarter of ~~2016. The decrease in~~2017.

For the three month period ended June 30, 2018, net sales, excluding precious metal content, increased 2.3% on a constant currency basis. This includes a benefit of 1.0% from acquisitions, which results in internal sales growth of 1.3%. The internal sales growth was ~~unfavorably impacted, based~~attributable to both the Technologies & Equipment and Consumables segments.

Based on the Company’s estimate, sales growth for the three months ended June 30, 2018 was negatively impacted by approximately ~~$14~~$11 million ~~as a result of~~from net changes in equipment inventory levels in the current quarter as compared to the prior year quarter at the two distributors in the United States ~~related to the transition in distribution strategy (see~~

“Business Drivers” under this section for further detail). Additionally, based on the Company’s assessment, net sales, excluding precious metal content, were negatively impacted by lower equipment sales to end-users as a result of transition challenges at the Company’s exclusive distributor.

For the three month period ended June 30, 2017, sales declined 9.6% on a constant currency basis. This includes a benefit of 1.5% from acquisitions, which results in a negative internal sales growth rate of 11.1%. Based on the Company’s assessment, the negative internal sales growth was primarily a result of the current quarter over prior year quarter net changes in equipment inventory levels as well as the impact of lower end-user demand for equipment discussed above.

~~Europe~~

Reported net sales, excluding precious metal content, increased by 3.3% in the second quarter of 2017 as compared to the second quarter of 2016. The increase in net sales, excluding precious metal content, is primarily the result of higher demand in both segments after the biennial International Dental Show. The increase in net sales, excluding precious metal content, was unfavorably impacted, based on the Company’s estimate, by approximately $2 million as a result of net changes in equipment inventory levels in the current quarter as compared to the prior year quarter at a certain distributor in Europe that the Company believes is related to the transition in distribution strategy (see “Business Drivers” under this section for further detail). Based on the Company’s estimate, inventory held by these distributors decreased by approximately $24 million during the three months ended June 30, 2018 compared to a decrease of approximately $13 million during the three months of June 30, 2017. At this time, the Company estimates that net changes in distributor inventories will unfavorably impact the Company’s sales by approximately $130 million to $135 million for the balance of 2018 in the United States. Based on the Company’s estimate, year-over-year changes in distributor inventories associated with these agreements is projected to unfavorably impact the Company’s reported sales growth for the full year of 2018 by approximately $135 million to $140 million in this region.

Europe

Net sales increased by 6.1% in the quarter ended June 30, 2018 as compared to the quarter ended June 30, 2017. Net sales, excluding precious metal content, increased by 6.2% in the second quarter of 2018 as compared to the second quarter of 2017, which was positively impacted by approximately 7.6% due to the weakening of the U.S. dollar over the prior year period.

For the three month period ended June 30, ~~2017,~~2018, net sales, excluding precious metal content, decreased 1.4% on a constant currency basis, resulting in negative internal sales growth of 1.4%. The decline in internal sales growth was driven primarily by the Technologies & Equipment segment.

Rest of World

Net sales increased ~~5.7%~~by 7.0% in the quarter ended June 30, 2018 as compared to the quarter ended June 30, 2017. Net sales, excluding precious metal content, increased 7.1% in the second quarter of 2018 as compared to the second quarter of 2017, which was positively impacted by approximately 2.9% due to the weakening of the U.S. dollar over the prior year period.

For the three month period ended June 30, 2018, sales, excluding precious metal content, increased 4.2% on a constant currency basis. This includes a benefit of ~~3.4%~~0.2% from acquisitions, which results in internal sales growth of ~~2.3%~~4.0%. ~~Net~~Internal sales ~~excluding precious metal content, were negatively impacted by approximately 2.4% due to the strengthening of the U.S. dollar over the prior year period. Growth~~growth was driven by ~~the Technologies segment partially offset by net changes in equipment inventory levels discussed above.~~both segments.

~~Rest of World~~

Reported net sales, excluding precious metal content, increased by 50 basis points for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016. The increase in net sales, excluding precious metal content, was unfavorably impacted, based on the Company’s estimate, by approximately $3 million as a result of net changes in equipment inventory levels in the current quarter as compared to the prior year quarter at a certain distributor in Canada that the Company believes is related to the transition in distribution strategy (see “Business Drivers” under this section for further detail).

For the three month period ended June 30, 2017, sales increased 1.3% on a constant currency basis. This includes a benefit of 3.1% from acquisitions, which results in a negative internal sales growth rate of 1.8%. Net sales, excluding precious metal content, were negatively impacted by approximately 80 basis points due to the strengthening of the U.S. dollar over the prior year period. The negative internal growth rate was driven by sales declines in the Technologies segment.

Gross Profit


	Three Months Ended										Three Months Ended
	June 30,										June 30,
(in millions)	2017			2016			$ Change		% Change		2018			2017			$ Change		% Change

Gross profit	$	544.2		$	526.9		$	17.3	3.3	%	$	552.8		$	544.2		$	8.6	1.6	%

Gross profit as a percentage of net sales, including precious metal content	54.8		%	51.6		%					53.0		%	54.8		%
Gross profit as a percentage of net sales, excluding precious metal content	55.4		%	52.4		%					53.5		%	55.4		%

Gross profit as a percentage of net sales, excluding precious metal content, ~~increased~~decreased by ~~300~~190 basis points for the quarter ended June 30, ~~2017~~2018 as compared to the same three month period ended June 30, ~~2016.~~2017.

For the three months ended June 30, ~~2017,~~2018, the ~~improvement~~decrease in the gross profit rate was primarily driven by ~~a net reduction in~~unfavorable product mix, increased manufacturing costs and unfavorable product pricing which impacted the ~~roll-off of merger and acquisition related fair value adjustments and expenses of~~rate approximately ~~430~~225 basis points, partially offset by ~~approximately 140 basis points associated with~~ the ~~equipment businesses primarily as a result~~benefit of ~~lower sales related to~~ the ~~transition in distribution strategy of~~Company’s global efficiency initiatives as compared to the three months ended June 30, ~~2016.~~

2017.

Operating Expenses


	Three Months Ended										Three Months Ended
	June 30,										June 30,
(in millions)	2017			2016			$ Change		% Change		2018			2017			$ Change			% Change

Selling, general and administrative expenses (“SG&A”)	$	417.6		$	402.1		$	15.5	3.9	%	$	432.2		$	417.6		$	14.6		3.5	%
Goodwill impairment	1,092.9			—			1,092.9		NM		1,085.8			1,092.9			(7.1		)	(0.6	%)
Restructuring and other costs	81.7			3.6			78.1		NM		188.9			81.7			107.2			NM

SG&A as a percentage of net sales, including precious metal content	42.1		%	39.3		%					41.5		%	42.1		%
SG&A as a percentage of net sales, excluding precious metal content	42.5		%	40.0		%					41.9		%	42.5		%

NM - Not meaningful

SG&A ~~Expenses~~Expense

SG&A expenses, including research and ~~developing~~development expenses, as a percentage of net sales, excluding precious metal content, for the quarter ended June 30, ~~2017 increased 250~~2018 decreased 60 basis points compared to the quarter ended June 30, ~~2016.~~2017. The ~~comparison~~lower rate was ~~negatively impacted~~primarily driven by ~~approximately 80 basis points as~~ a ~~result of the sales impact from the net changes~~reduction in ~~equipment inventory levels in the current quarter as compared to the prior year quarter at certain distributors. Additionally, increases associated with~~ business combination related costs and ~~amortization of purchased intangible assets negatively~~favorable foreign currency which impacted the ~~SG&A~~ rate by 60approximately 130 basis points, ~~in the quarter ended June 30, 2017~~mostly offset by increased compensation costs as compared to the ~~quarter~~three months ended June 30, ~~2016. Additional rate increases of 110 basis points during the quarter ended June 30, 2017 as compared to the quarter ended June 30, 2016 were primarily driven by higher professional service costs.~~2017.

Goodwill impairment

For the three months ended June 30, ~~2017,~~2018, the Company recorded a goodwill impairment charge of ~~$1,092.9~~$1,085.8 million. The charge is related to ~~three~~two reporting units inwithin the Technologies & Equipment segment and one reporting within the Consumables segment. For further information see Note 14, Goodwill and Intangible Assets, in the Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q.

For the three months ended June 30, 2017, the Company recorded a goodwill impairment charge of $1,092.9 million. This charge is related to three reporting units within the Technologies & Equipment segment.

Restructuring and ~~other cost~~Other Cost

The Company recorded net restructuring and other costs of $188.9 million for the three months ended June 30, 2018 compared to $81.7 million for the three months ended June 30, ~~2017 compared to $3.6 million for~~2017.

During the three months ended June 30, ~~2016.~~ 2018, the Company recorded an impairment charge of $179.2 million related to certain tradenames within the reporting units in the Technologies & Equipment segment that were impaired during the Company’s annual impairment testing as well as an intangible with the Consumables segment. For further information see Note 14, Goodwill and Intangible Assets, in the Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q.

During the three months ended June 30, 2017, the Company recorded an impairment charge of $79.8 million related to certain tradenames within the reporting units in the Technologies & Equipment segment that were ~~impaired. For further information see Note 14, Goodwill~~impaired during the Company’s annual impairment testing.

The Company is currently evaluating plans to simplify the organizational structure and ~~Intangible Assets, in~~consolidate its supply chain. The Company expects to announce final plans by the ~~Notes to Unaudited Interim Consolidated Financial Statements in Part 1, Item 1~~end of ~~this Form 10-Q.~~2018.

Other Income and Expense


	Three Months Ended June 30,							Three Months Ended June 30,
(in millions)	2017		2016			Change		2018			2017		Change

Net interest expense	$	9.0	$	8.9		$	0.1	$	9.2		$	9.0	$	0.2
Other expense (income), net	7.8		(11.5		)	19.3		(1.0		)	7.8		(8.8		)
Net interest and other expense	$	16.8	$	(2.6	)	$	19.4	$	8.2		$	16.8	$	(8.6	)

Net Interest Expense

Net interest expense for the three months ended June 30, ~~2017~~2018 increased ~~$0.1~~$0.2 million compared to the three months ended June 30, ~~2016. Increased debt levels in 2017 partially offset by lower average interest rates when compared to the prior year period resulted in an increase in net interest expense.~~

2017.

Other Expense (Income), Net

Other expense (income), net for the three months ended June 30, ~~2017~~2018 was ~~expense~~income of ~~$7.8~~$1.0 million, comprised primarily of ~~$4.5~~$5.7 million curtailment gain recorded on the termination of a post-employment medical benefit plan partially offset by $2.0 million currency transaction losses and ~~$3.3~~$2.7 million of other non-operating expense. Other expense (income), net for the three months ended June 30, ~~2016~~2017 was ~~income~~expense of ~~$11.5~~$7.8 million, comprised primarily of $4.5 million of currency transaction ~~gains~~losses and $3.3 of ~~$13.2 million principally due to the United Kingdom Brexit referendum impacts on foreign currency denominated intercompany balances at June 30, 2016, partially offset by~~ non-operating ~~expense of $1.7 million.~~expense.

Income Taxes and Net Income

Three Months Ended June 30,
(in millions, except per share data) 2017 2016 $ Change

(Benefit) provision for income taxes $ (14.5 ) $ 17.9
$ (32.4 )

Effective income tax rate NM
14.5 %

Net (loss) income attributable to Dentsply Sirona $ (1,050.0 ) $ 105.4
$ (1,155.4 )

Net (loss) income per common share - diluted $ (4.58 ) $ 0.44



	Three Months Ended June 30,
(in millions, except per share data)	2018			2017			$ Change

Provision (benefit) for income taxes	$	(41.3	)	$	(14.5	)	$	(26.8	)

Effective income tax rate	NM			NM

Net loss attributable to Dentsply Sirona	$	(1,122.0	)	$	(1,050.0	)	$	(72.0	)

Net loss per common share - diluted	$	(4.98	)	$	(4.58	)

NM - Not meaningful

Provision for Income Taxes

For the three months ended June 30, ~~2017,~~2018, income taxes were a net benefit of ~~$14.5~~$41.3 million as compared to a net ~~expense~~benefit of ~~$17.9~~$14.5 million in the quarter ended June 30, ~~2016.~~2017.

During the quarter ended June 30, 2018, the Company recorded the following discrete tax items, $0.5 million of excess tax benefit related to employee share-based compensation, tax benefits of $0.7 million related to valuation allowances, $2.5 million related to enacted statutory rate changes and $0.6 million of tax benefit for other discrete tax matters. The Company also recorded a $50.4 million tax benefit as a discrete item related to the indefinite-lived intangible asset impairment charge, $1.1 million for the fixed asset impairment charge, and $3.3 million related to tax-deductible goodwill for the three months ended June 30, 2018. In addition the Company also recorded $0.6 million of tax benefit as a discrete item related to the gain on sale of marketable securities. Excluding these discrete tax items and adjusting pretax income for the gain on the sale of marketable securities and adjusting for the pretax loss related to the impairment of indefinite-lived intangible assets, tax deductible and non-deductible goodwill impairment charges, the Company’s effective tax rate was 17.02%.

For the second quarter of 2017, the Company recorded the following discrete tax items, $4.2 million of excess tax benefit related to employee share-based compensation, $0.5 million of tax expense related to enacted statutory rate changes and $1.5 million of tax expense related to other discrete tax matters. The Company also recorded a $23.5 million tax benefit as a discrete item related to the indefinite-lived intangible asset impairment charge recorded during the three months ended June 30, 2017. Excluding these discrete tax items and adjusting pretax loss to exclude the pretax loss related to the impairment of the indefinite-lived intangible assets and non-deductible goodwill impairment charge, the Company’s effective tax rate was 10.4%. The effective tax rate was favorably impacted by the Company’s change in the mix of consolidated earnings.

~~During~~The Company’s effective income tax rate for the second quarter of ~~2016,~~2018 included the ~~Company recorded $2.1~~net impact of restructuring program related costs and other costs, amortization of purchased intangible assets, business combination related costs, credit risk and fair value adjustments, business combination related costs and income tax related adjustments which impacted income before income taxes and the provision for income taxes by $1,337.7 million of tax benefit related to discrete tax matters during the quarter. Excluding these tax matters, the Company’s effective tax rate was 16.1%. The effective tax rate was favorably impacted by the Company’s change in the mix of consolidated earnings.and $78.9 million, respectively.

The Company’s effective income tax rate for the second quarter of 2017 included the net impact of restructuring program related costs and other costs, amortization of purchased intangible assets, business combination related costs, fair value adjustments, credit risk and fair value adjustments and income tax related adjustments which impacted the loss before income taxes and the provision for income taxes by $1,244.2 million and ~~$46.3~~$43.5 million, respectively. ~~For~~

On December 22, 2017, the ~~full~~Tax Cuts and Jobs Act (the "Act" or "U.S. tax reform") was enacted. U.S. tax reform, among other things, reduced the U.S. federal income tax rate to 21% in 2018 from 35%, instituted a dividends received deduction for foreign earnings with a related tax for the deemed repatriation of unremitted foreign earnings and created a new U.S. minimum tax on earnings of foreign subsidiaries. In addition, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for enactment effects of the Act and provides a measurement period of up to one year ~~ended~~from the Act’s enactment date for companies to complete their accounting under Accounting Standards Codification No. 740 “Income Taxes”, (“ASC 740”). In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Act. The Company has accounted for the tax effects of the Act on a provisional basis. At December 31, 2017, the accounting for certain income tax effects was incomplete, but the Company determined reasonable estimates for those effects which were included in the financial statements. The Company expects to complete the accounting during 2018 to comply with the one year measurement period.

Based on information available, at December 31, 2017, the Company ~~estimates~~estimated the ~~non-US GAAP~~cumulative undistributed foreign earnings and recorded a provisional estimate of income tax ~~rate~~expense related to the one-time deemed repatriation toll charge. There is still uncertainty as to the application of the Act, in particular as it relates to state income taxes. Further, the Company has not yet completed the analysis of the components of the computation, including the amount of the foreign earnings subject to U.S. income tax, and the portion of the foreign earnings held in cash or other specified assets. At June 30, 2018, primarily due to the utilization of foreign tax credit carryforwards and certain other tax attributes the estimated cash liability for the deemed repatriation of foreign earnings is approximately $1.0 million. However, as the Company completes its analysis an additional liability could be recorded and the Company would elect to make installment payments as allowed under the Act.

As a result of the Act, the Company can repatriate the cumulative undistributed foreign earnings back to the U.S. when needed with minimal U.S. income tax consequences other than the one-time deemed repatriation toll charge. The Company is still evaluating whether to change its indefinite reinvestment assertion in light of the Act and consider that conclusion to be ~~17.5%.~~incomplete under SAB 118.

~~The Company’s effective income tax rate~~

For the three months ended June 30, 2018, for the ~~second quarter~~Global Intangible Low Tax Income (“GILTI”) provision of ~~2016 included~~ the ~~net impact~~Act, an estimate was recorded based on current guidance as a period expense, but the Company has not yet completed its assessment or elected an accounting policy to either recognize deferred taxes for basis differences expected to reverse as GILTI or to record GILTI as period costs if and when incurred.

In accordance with SEC guidance, provisional amounts may be refined as a result of ~~business combination related costs~~additional guidance from, and ~~fair value adjustments, amortization~~interpretations by, U.S. regulatory and standard-setting bodies, and changes in assumptions. In subsequent periods, provisional amounts will be adjusted for the effects, if any, of ~~purchased intangible assets, income tax related adjustments, restructuring program related costs~~interpretative guidance issued by the U.S. Department of the Treasury. The effects of the Act may be subject to changes for items that were previously reported as provisional amounts, as well as any element of the Act that a provisional estimate could not be made, and ~~other costs and credit risk and fair value adjustments which impacted income before income taxes and the provision for income taxes by $111.9 million and $36.4 million, respectively.~~such changes could be material.

Net ~~(loss) income~~loss attributable to Dentsply Sirona

In addition to the results reported in accordance with US GAAP, the Company provides adjusted net income attributable to Dentsply Sirona and adjusted earnings per diluted common share (“adjusted EPS”). The Company discloses adjusted net income attributable to Dentsply Sirona to allow investors to evaluate the performance of the Company’s operations exclusive of certain items that impact the comparability of results from period to period and may not be indicative of past or future performance of the normal operations of the Company and certain large non-cash charges related to intangible assets either purchased or acquired through a business combination. The Company believes that this information is helpful in understanding underlying operating trends and cash flow generation.

Adjusted net income and adjusted EPS are important internal measures for the Company. Senior management receives a monthly analysis of operating results that includes adjusted net income and adjusted EPS and the performance of the Company is measured on this basis along with other performance metrics.

The adjusted net income attributable to Dentsply Sirona consists of net income attributable to Dentsply Sirona adjusted to exclude the following:

(1) Business combination related costs and fair value adjustments. These adjustments include costs related to integrating and consummating mergers and recently acquired businesses, as well as costs, gains and losses related to the disposal of businesses or significant product lines. In addition, this category includes the roll off to the consolidated statement of operations of fair value adjustments related to business combinations, except for amortization expense noted below. These items are irregular in timing and as such may not be indicative of past and future performance of the Company and are therefore excluded to allow investors to better understand underlying operating trends.

(2) Restructuring program related costs and other costs. These adjustments include costs related to the implementation of restructuring initiatives as well as certain other costs. These costs can include, but are not limited to, severance costs, facility closure costs, lease and contract terminations costs, related professional service costs, duplicate facility and labor costs associated with specific restructuring initiatives, as well as, legal settlements and impairments of assets. These items are irregular in timing, amount and impact to the Company’s financial performance. As such, these items may not be indicative of past and future performance of the Company and are therefore excluded for the purpose of understanding underlying operating trends.

(3) Amortization of purchased intangible assets. This adjustment excludes the periodic amortization expense related to purchased intangible assets. Amortization expense has been excluded from adjusted net income attributed to Dentsply Sirona to allow investors to evaluate and understand operating trends excluding these large non-cash charges.

(4) Credit risk and fair value adjustments. These adjustments include both the cost and income impacts of adjustments in certain assets and liabilities including the Company’s pension obligations, that are recorded through net income which are due solely to the changes in fair value and credit risk. These items can be variable and driven more by market conditions than the Company’s operating performance. As such, these items may not be indicative of past and future performance of the Company and therefore are excluded for comparability purposes.

(5) ~~Certain fair value adjustments related to an unconsolidated affiliated company.~~Gain on sale of marketable securities. This adjustment represents the ~~fair value adjustment~~gain on the sale of ~~the unconsolidated affiliated company’s convertible debt instrument~~marketable securities held by the Company. The ~~affiliate is accounted for under the equity method of accounting. The fair value adjustment is driven by open market pricing of the affiliate’s equity instruments, which~~gain has ~~a high degree of variability~~been excluded from adjusted net income attributed to Dentsply Sirona to allow investors to evaluate and ~~may not be indicative of the~~understand operating ~~performance of the affiliate or the Company.~~trends excluding this gain.

(6) Income tax related adjustments. These adjustments include both income tax expenses and income tax benefits that are representative of income tax adjustments mostly related to prior periods, as well as the final settlement of income tax audits, and discrete tax items resulting from the implementation of restructuring ~~initiatives.~~initiatives and the vesting and exercise of employee share-based compensation. These adjustments are irregular in timing and amount and may significantly impact the Company’s operating performance. As such, these items may not be indicative of past and future performance of the Company and therefore are excluded for comparability purposes.

Adjusted earnings per diluted common share is calculated by dividing adjusted net (loss) income attributable to Dentsply Sirona by diluted weighted-average common shares outstanding. Adjusted net income attributable to Dentsply Sirona and adjusted earnings per diluted common share are considered measures not calculated in accordance with US GAAP, and therefore are non-US GAAP measures. These non-US GAAP measures may differ from other companies. Income tax related adjustments may include the impact to adjust the interim effective income tax rate to the expected annual effective tax rate. The non-US GAAP financial information should not be considered in isolation from, or as a substitute for, measures of financial performance prepared in accordance with US GAAP.



	Three Months Ended
	June 30, 2018
(in millions, except per share amounts)	Net (Loss) Income			Per Diluted Common Share

Net loss attributable to Dentsply Sirona	$	(1,122.0	)	$	(4.98	)
Pre-tax non-US GAAP adjustments:
Restructuring program related costs and other costs	1,278.5
Amortization of purchased intangible assets	50.1
Business combination related costs and fair value adjustments	6.6
Credit risk and fair value adjustments	2.5
Tax impact of the pre-tax non-US GAAP adjustments (a)	(72.6		)
Subtotal non-US GAAP adjustments	1,265.1			5.57
Adjustment for calculating non-US GAAP net income per diluted common share (b)				0.04
Income tax related adjustments	(6.3		)	(0.03		)
Adjusted non-US GAAP net income	$	136.8		$	0.60

(a) The tax amount was calculated using the applicable statutory tax rate in the tax jurisdiction where the non-US GAAP adjustments were generated.
(b) The Company had a net loss for the three months ended June 30, 2018, but had net income on a non-US GAAP basis. The shares used in calculating diluted non-US GAAP net income per share includes the dilutive effect of common stock.
Shares used in calculating diluted GAAP net loss per share				225.2
Shares used in calculating diluted non-US GAAP net income per share				226.9

Three Months Ended
June 30, 2017
(in millions, except per share amounts) Net Income
Per Diluted
Common Share

Net loss attributable to Dentsply Sirona $ (1,050.0 ) $ (4.58 )
Pre-tax non-US GAAP adjustments:

Restructuring program related costs and other costs 1,177.6

Amortization of purchased intangible assets 46.5

Business combination related costs and fair value adjustments 19.3

Credit risk and fair value adjustments 0.8

Tax impact of the pre-tax non-US GAAP adjustments (a)
(44.4 )
Subtotal non-US GAAP adjustments 1,199.8
5.14
Adjustment for calculating non-US GAAP net income per diluted common share (b)
0.08
Income tax related adjustments 0.9
0.01
Adjusted non-US GAAP net income $ 150.7
$ 0.65

(a) The tax amount was calculated using the applicable statutory tax rate in the tax jurisdiction where the non-US GAAP adjustments were generated.
(b) The Company had a net loss for the three months ended June 30, 2017, but had net income on a non-US GAAP basis. The shares used in calculating diluted non-US GAAP net income per share includes the dilutive effect of common stock.
Shares used in calculating diluted GAAP net loss per share 229.4
Shares used in calculating diluted non-US GAAP net income per share 233.3


	Three Months Ended							Three Months Ended
	June 30, 2016							June 30, 2017
(in millions, except per share amounts)	Net Income			Per Diluted Common Share				Net (Loss) Income			Per Diluted Common Share

Net income attributable to Dentsply Sirona	$	105.4		$	0.44
Net loss attributable to Dentsply Sirona								$	(1,050.0	)	$	(4.58	)
Pre-tax non-US GAAP adjustments:
Restructuring program related costs and other costs								1,177.6
Amortization of purchased intangible assets								46.5
Business combination related costs and fair value adjustments	62.0							19.3
Amortization of purchased intangible assets	43.6
Restructuring program related costs and other costs	4.3
Credit risk and fair value adjustments	2.0							0.8
Tax impact of the pre-tax non-US GAAP adjustments (a)	(30.2		)					(44.4		)
Subtotal non-US GAAP adjustments	81.7			0.35				1,199.8			5.14
Adjustment for calculating non-US GAAP net income per diluted common share (b)											0.08
Income tax related adjustments	(6.2		)	(0.03		)		0.9			0.01
Adjusted non-US GAAP net income	$	180.9		$	0.76			$	150.7		$	0.65

(a) The tax amount was calculated using the applicable statutory tax rate in the tax jurisdiction where the non-US GAAP adjustments were generated.
(b) The Company had a net loss for the three months ended June 30, 2017, but had net income on a non-US GAAP basis. The shares used in calculating diluted non-US GAAP net income per share includes the dilutive effect of common stock.							(b) The Company had a net loss for the three months ended June 30, 2017, but had net income on a non-US GAAP basis. The shares used in calculating diluted non-US GAAP net income per share includes the dilutive effect of common stock.
Shares used in calculating diluted GAAP net loss per share											229.4
Shares used in calculating diluted non-US GAAP net income per share											233.3

Adjusted Operating Income and Margin

Adjusted operating income and margin is another important internal measure for the Company. Operating income in accordance with US GAAP is adjusted for the items noted above which are excluded on a pre-tax basis to arrive at adjusted operating income, a non-US GAAP measure. The adjusted operating margin is calculated by dividing adjusted operating income by net sales, excluding precious metal content.

Senior management receives a monthly analysis of operating results that includes adjusted operating income. The performance of the Company is measured on this basis along with the adjusted non-US GAAP earnings noted above as well as other performance metrics. This non-US GAAP measure may differ from 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.



	Three Months Ended
	June 30, 2018
(in millions)	Operating (Loss) Income			Percentage of Net Sales, Excluding Precious Metal Content

Operating Loss	$	(1,154.1	)	(111.8	)%
Restructuring program related costs and other costs	1,278.5			123.8	%
Amortization of purchased intangible assets	50.1			4.9	%
Business combination related costs and fair value adjustments	5.8			0.5	%
Adjusted non-US GAAP Operating Income	$	180.3		17.4	%

Three Months Ended
June 30, 2017
(in millions) Operating Income Percentage of Net Sales, Excluding Precious Metal Content

Operating loss attributable to Dentsply Sirona $ (1,048.0 ) (106.6 )%
Restructuring program related costs and other costs 1,176.7
119.7 %
Amortization of purchased intangible assets 46.5
4.7 %
Business combination related costs and fair value adjustments 19.1
1.9 %
Credit risk and fair value adjustments 0.8
0.1 %
Adjusted non-US GAAP Operating Income $ 195.1
19.8 %


	Three Months Ended				Three Months Ended
	June 30, 2016				June 30, 2017
(in millions)	Operating Income		Percentage of Net Sales, Excluding Precious Metal Content		Operating (Loss) Income			Percentage of Net Sales, Excluding Precious Metal Content

Operating income attributable to Dentsply Sirona	$	121.2	12.1	%
Operating Loss					$	(1,048.0	)	(106.6	)%
Restructuring program related costs and other costs					1,176.7			119.7	%
Amortization of purchased intangible assets					46.5			4.7	%
Business combination related costs and fair value adjustments	62.0		6.2	%	19.1			1.9	%
Amortization of purchased intangible assets	43.6		4.3	%
Restructuring program related costs and other costs	4.3		0.4	%
Credit risk and fair value adjustments	1.3		0.1	%	0.8			0.1	%
Adjusted non-US GAAP Operating Income	$	232.4	23.1	%	$	195.1		19.8	%

Operating Segment Results

Third Party Net Sales, Excluding Precious Metal Content

Three Months Ended
June 30,
(in millions) 2017 2016 $ Change % Change

Dental and Healthcare Consumables $ 544.4
$ 526.7
$ 17.7
3.4 %

Technologies 438.6
478.0
(39.4 ) (8.2 %)



	Three Months Ended
	June 30,
(in millions)	2018		2017		$ Change		% Change

Technologies & Equipment	$	539.4	$	523.1	$	16.3	3.1	%

Consumables	493.3		459.9		33.4		7.3	%

Segment Operating Income

Three Months Ended
June 30,
(in millions) 2017 2016 $ Change % Change

Dental and Healthcare Consumables $ 162.2
$ 151.7
$ 10.5
6.9 %

Technologies 65.0
112.1
(47.1 ) (42.0 %)



	Three Months Ended
	June 30,
(in millions)	2018		2017		$ Change			% Change

Technologies & Equipment	$	77.1	$	98.0	$	(20.9	)	(21.3	%)

Consumables	146.0		122.8		23.2			18.9	%

A reconciliation of reported net sales to non-US GAAP net sales, excluding precious metal content, by segment is as follows:


	Three Months Ended						Three Months Ended
	June 30, 2017						June 30, 2018
(in millions)	Dental and Healthcare Consumables		Technologies		Total		Technologies & Equipment		Consumables		Total

Net sales	$	554.1	$	438.6	$	992.7	$	548.8	$	493.3	$	1,042.1
Less: precious metal content of sales	9.7		—		9.7		9.4		—		9.4
Net sales, excluding precious metal content	544.4		438.6		983.0		539.4		493.3		1,032.7
Merger related adjustments (a)	—		1.5		1.5
Acquisition related adjustments (a)							—		2.1		2.1
Non-US GAAP net sales, excluding precious metal content	$	544.4	$	440.1	$	984.5	$	539.4	$	495.4	$	1,034.8

(a) Represents an adjustment to reflect deferred revenue that was eliminated under business combination accounting standards.



	Three Months Ended
	June 30, 2017
(in millions)	Technologies & Equipment		Consumables		Total

Net sales	$	532.8	$	459.9	$	992.7
Less: precious metal content of sales	9.7		—		9.7
Net sales, excluding precious metal content	523.1		459.9		983.0
Merger related adjustments (a)	1.5		—		1.5
Non-US GAAP net sales, excluding precious metal content	$	524.6	$	459.9	$	984.5

(a) Represents an adjustment to reflect deferred subscription and warranty revenue that was eliminated under business combination accounting ~~standards.~~

Three Months Ended
June 30, 2016
(in millions) Dental and Healthcare Consumables Technologies Total

Net sales $ 543.8
$ 478.2
$ 1,022.0
Less: precious metal content of sales 17.1
0.2
17.3
Net sales, excluding precious metal content 526.7
478.0
1,004.7
Merger related adjustments (a)
—
1.6
1.6
Non-US GAAP net sales, excluding precious metal content $ 526.7
$ 479.6
$ 1,006.3

~~Dental and Healthcare Consumables~~Technologies & Equipment

~~Reported net~~Net sales increased by 3.0% in the quarter ended June 30, 2018 as compared to the quarter ended June 30, 2017. Net sales, excluding precious metal content, increased by ~~3.4%~~3.1% in the second quarter of ~~2017~~2018 as compared to the second quarter of ~~2016.~~

For the three month period ended June 30, 2017, sales grew 3.0% on a constant currency basis. This includes a benefit of approximately 1.0% from acquisitions, which results in internal growth of 2.0%.2017. Net sales, excluding precious metal content, were ~~negatively~~positively impacted by approximately ~~1.0%~~4.0% due to the ~~strengthening~~weakening of the U.S. dollar over the prior year period. The increase in net sales, excluding precious metal content, was ~~driven by increased sales in all regions led by Rest of World.~~

~~The operating income increased $10.5 million or 6.9% for the three months ended June 30, 2017 as compared to the same three month period in 2016~~, ~~which reflects increased sales in all regions.~~

~~Technologies~~

Reported net sales, excluding precious metal content, decreased 8.2% for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016. The decrease in net sales, excluding precious metal content, was unfavorably impacted, based on the Company’s estimate, by approximately ~~$19~~$9 million as a result of net changes in equipment inventory levels in the current quarter as compared to the prior year quarter at certain distributors in North America and Europe, that the Company believes is related to the transition in distribution strategy (see “Business Drivers” under this section for further detail). ~~Additionally,~~Based on the Company’s estimate, inventory held by these distributors decreased by approximately $26 million during the three months ended June 30, 2018, compared to a decrease of approximately $17 million in the same three month period in 2017. At this time, the Company estimates that net changes in distributor inventories will unfavorably impact the Company’s ~~assessment,~~sales by approximately $130 million to $135 million for the balance of 2018. Based on the Company’s estimate, year-over-year changes in distributor inventories associated with these agreements is projected to unfavorably impact the Company’s reported sales growth for the full year of 2018 by approximately $135 million to $140 million.

For the three months ended June 30, 2018, net sales, excluding precious metal content, decreased 1.2% on a constant currency basis compared to the three months ended June 30, 2017. This includes a decrease of approximately 0.1% related to the disposal of a non-strategic business, which results in negative internal sales growth of 1.1%. The decline in internal sales growth was driven by Europe, mostly offset by internal sales growth in Rest of World region.

The operating income decreased $20.9 million or 21.3% for the three months ended June 30, 2018 as compared to the same three month period in 2017. The decrease is primarily related to unfavorable product pricing and product mix as compared to the three months ended June 30, 2017.

Consumables

Net sales increased by 7.3% in the quarter ended June 30, 2018 as compared to the quarter ended June 30, 2017. Net sales, excluding precious metal content, increased 7.3% for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. Net sales, excluding precious metal content, were ~~negatively~~positively impacted by ~~lower equipment sales~~approximately 3.5% due to ~~end-users, primarily in~~the weakening of the U.S.~~, as result of transition challenges at our exclusive distributor.~~ dollar over the same prior year period.

For the three month period ended June 30, ~~2017,~~2018, net sales, ~~declined 5.6%~~excluding precious metal content, increased 4.2% on a constant currency basis. This includes a benefit of ~~4.4%~~0.9% from acquisitions, which results in ~~a negative~~ internal sales growth ~~rate~~ of ~~10.0%~~3.3%. Net sales, excluding precious metal content, were negatively impacted by approximately 1.3% due to the strengthening of the U.S. dollar over the prior year period. Based on the Company’s assessment, the negativeThe internal sales growth was ~~primarily a result~~positive in all regions led by Rest of ~~the current quarter as compared to the prior year quarter net changes in equipment inventory levels as well as the impact of lower equipment sales to end-users as~~

~~discussed above. The negative internal sales was primarily driven by sales declines in the United States region, partially offset by sales increases in Europe.~~World region.

The operating income ~~decreased $47.1~~increased $23.2 million or ~~42.0%~~18.9% for the three months ended June 30, ~~2017~~2018 as compared to the same three month period in ~~2016, which, in the Company’s assessment, reflects the impact~~2017. The increase is primarily related to ~~a change in net equipment inventory~~higher sales volume as ~~well as~~compared to the ~~impact of lower equipment sales to end-users as previously discussed.~~three months ended June 30, 2017.

RESULTS OF OPERATIONS, SIX MONTHS ENDED JUNE 30, ~~2017~~2018 COMPARED TO SIX MONTHS ENDED JUNE 30, ~~2016~~2017

Net Sales


	Six Months Ended									Six Months Ended
	June 30,									June 30,
(in millions)	2017		2016		$ Change			% Change		2018		2017		$ Change			% Change

Net sales	$	1,893.2	$	1,794.6	$	98.6		5.5	%	$	1,998.2	$	1,893.2	$	105.0		5.5	%
Less: precious metal content of sales	20.8		35.4		(14.6		)	(41.2	%)	19.7		20.8		(1.1		)	(5.3	%)
Net sales, excluding precious metal content	$	1,872.4	$	1,759.2	$	113.2		6.4	%	$	1,978.5	$	1,872.4	$	106.1		5.7	%

Net sales, excluding precious metal content, for the six months ended June 30, ~~2017~~2018 were ~~$1,872.4~~$1,978.5 million, an increase of ~~$113.2~~$106.1 million from the six months ended June 30, ~~2016.~~2017. The increase in net sales, excluding precious metal content, ~~reflects sales of $112.7 million as a result of the consolidation of two additional months of Sirona for the six months ended June 30, 2017 as compared to the same period in 2016, and~~ was ~~unfavorably~~negatively impacted, based on the Company’s estimate, by approximately ~~$46~~$5 million as a result of net changes in equipment inventory levels in the current ~~six month period~~year as compared to the prior year ~~six month period~~ at certain distributors in North America and Europe, that the Company believes is related to the transition in distribution strategy (see “Business Drivers” under this section for further detail). Based on the Company’s estimate, inventory held by these distributors decreased by approximately ~~$29~~$34 million during the ~~current~~ six ~~month period~~months ended June 30, 2018, compared to ~~an increase~~a decrease of approximately ~~$15~~$29 million in the same six month period in 2016. Additionally, based on the Company’s assessment, net sales, excluding precious metal content, were negatively impacted by lower equipment sales to end-users, primarily in the United States, as result of transition challenges at our exclusive distributor.2017. At this time, the Company ~~believes~~estimates that net changes in distributor inventories will ~~decrease~~unfavorably impact the Company’s sales by approximately ~~$10~~$130 million to $135 million for the balance of ~~2017, which~~2018. Based on the Company’s estimate, year-over-year changes in distributor inventories associated with these agreements is projected to unfavorably impact the Company’s reported sales growth for the full year of 2018 by approximately ~~the same impact as the last six month in 2016.~~

~~Sales related~~$135 million to ~~precious metal content declined 41.2% as compared to the same period in 2016, which was primarily due to the continuing reduction in the use of precious metal alloys in dentistry.~~$140 million.

For the six months ended June 30, ~~2017,~~2018, net sales, ~~of our Combined Businesses declined 1.6%~~excluding precious metal content, increased 0.2% on a constant currency basis. This includes a benefit of ~~2.5%~~0.4% from acquisitions, which results in negative internal sales growth of ~~4.1%~~0.2%. Net sales, excluding precious metal content, were ~~negatively~~positively impacted by approximately ~~1.2%~~5.4% due to the ~~strengthening~~weakening of the U.S. dollar over the prior year period. ~~Based on the Company’s assessment, the negative~~The decline in internal sales growth was ~~primarily~~attributable to a ~~result of changes~~decrease in ~~inventory levels at certain distributors~~the Technologies & Equipment segment partially offset by an increase in ~~North America and Europe as well as~~ the ~~impact of lower equipment sales to end-users as discussed above. A reconciliation of reported net sales to net sales, excluding precious metal content, of the combined business is as follows:~~

Six Months Ended
June 30,
(in millions) 2017 2016 $ Change % Change

Net sales $ 1,893.2
$ 1,794.6
$ 98.6
5.5 %
Less: precious metal content of sales 20.8
35.4
(14.6 ) (41.2 %)
Net sales, excluding precious metal content 1,872.4
1,759.2
113.2
6.4 %
Sirona net sales (a)
—
160.7
(160.7 ) NM
Merger related adjustments (b)
3.0
10.4
(7.4 ) NM
Elimination of intercompany net sales —
(0.4 ) 0.4
NM
Non-US GAAP Combined Business, net sales, excluding precious metal content $ 1,875.4
$ 1,929.9
$ (54.5 ) (2.8 %)

~~(a) Represents Sirona sales for January and February 2016.~~

(b) Represents an adjustment to reflect deferred subscription and warranty revenue that was eliminated under business combination accounting standards to make the 2017 and 2016 non-U.S. GAAP combined business results comparable.

~~NM - Not meaningful~~Consumables segment.

Sales Growth by Region

Net sales, excluding precious metal content, by geographic region is as follows:


	Six Months Ended									Six Months Ended
	June 30,									June 30,
(in millions)	2017		2016		$ Change			% Change		2018		2017		$ Change			% Change

United States	$	642.3	$	644.4	$	(2.1	)	(0.3	%)	$	627.6	$	642.3	$	(14.7	)	(2.3	%)

Europe	759.1		682.1		77.0			11.3	%	836.8		759.1		77.7			10.2	%

Rest of World	471.0		432.7		38.3			8.9	%	514.1		471.0		43.1			9.2	%

A reconciliation of reported net sales to non-US GAAP net sales, excluding precious metal content, ~~of the combined business~~ by geographic region is as follows:



	Six Months Ended
	June 30, 2018
(in millions)	United States		Europe		Rest of World		Total

Net sales	$	630.2	$	852.2	$	515.8	$	1,998.2
Less: precious metal content of sales	2.6		15.4		1.7		19.7
Net sales, excluding precious metal content	627.6		836.8		514.1		1,978.5
Acquisition related adjustments (a)	2.1		—		—		2.1
Non-US GAAP net sales, excluding precious metal content	$	629.7	$	836.8	$	514.1	$	1,980.6

(a) Represents an adjustment to reflect deferred revenue that was eliminated under business combination accounting standards.



	Six Months Ended
	June 30, 2017
(in millions)	United States		Europe		Rest of World		Total

Net sales	$	645.2	$	774.9	$	473.1	$	1,893.2
Less: precious metal content of sales	2.9		15.8		2.1		20.8
Net sales, excluding precious metal content	642.3		759.1		471.0		1,872.4
Merger related adjustments (a)	3.0		—		—		3.0
Non-US GAAP net sales, excluding precious metal content	$	645.3	$	759.1	$	471.0	$	1,875.4

(a) Represents an adjustment to reflect deferred subscription and warranty revenue that was eliminated under business combination accounting standards to make the 2018 and 2017 ~~and 2016 non-U.S.~~non-US GAAP ~~combined business results comparable.~~

Six Months Ended
June 30, 2016
(in millions) United States Europe Rest of World Total

Net sales $ 647.0
$ 703.6
$ 444.0
$ 1,794.6
Less: precious metal content of sales 2.6
21.5
11.3
35.4
Net sales, excluding precious metal content 644.4
682.1
432.7
1,759.2
Sirona net sales (a)
60.5
59.4
40.8
160.7
Merger related adjustments (b)
9.9
0.5
—
10.4
Elimination of intercompany net sales (0.1 ) (0.3 ) —
(0.4 )
Non-US GAAP Combined Business, net sales, excluding precious metal content $ 714.7
$ 741.7
$ 473.5
$ 1,929.9

~~(a) Represents Sirona sales for January and February 2016.~~

United States

~~Reported net~~Net sales ~~excluding precious metal content,~~ decreased by ~~30 basis points for~~2.3% in the six months ended June 30, ~~2017~~2018 as compared to the six months ended June 30, ~~2016.~~2017. Net sales, excluding precious metal content, decreased by 2.3% in the six months ended June 30, 2018 as compared to the same six month period of 2017.

For the six month period ended June 30, 2018, net sales, excluding precious metal content, decreased 2.4% on a constant currency basis. This includes a benefit of 0.6% from acquisitions, which results in negative internal sales growth of 3.0%. The decline in internal sales growth was ~~unfavorably impacted, based~~attributable to both the Technologies & Equipment and Consumables segments.

Based on the Company’s estimate, net sales, excluding precious metal content, was negatively impacted by approximately ~~$35~~$11 million as a result of net changes in equipment inventory levels in the current ~~six month period~~year as compared to the prior year ~~six month period~~ at the two distributors in the United States that the Company believes is related to the transition in distribution strategy in North America for the six months ended June 30, 2016 as compared to the six months ended June 30, 2017 (see “Business Drivers” under this section for further detail). The decrease in net sales, excluding precious metal content, was partially offset by sales of $27.0 million as a result of the consolidation of two additional months of Sirona for the six months ended June 30, 2017 as compared to the same period in 2016. Additionally, based on the Company’s assessment, net sales, excluding precious metal content, were negatively impacted by lower equipment sales to end-users, as result of transition challenges at our exclusive distributor.

For the six months ended June 30, 2017, sales of our Combined Businesses declined 9.6% on a constant currency basis. This includes a benefit of 1.3% from acquisitions, which results in a negative internal sales growth rate of 10.9%. The negative internal sales growth was driven by the Technologies segment. In the Company’s assessment,the negative internal sales growth in the Technologies segment was the result of the current six month period over the prior year six month period net changes in equipment inventory levels at two distributors as well as the impact of lower equipment sales to end-users discussed above.

~~Europe~~

Reported net sales, excluding precious metal content, increased by 11.3% for the six months ended June 30, 2017, as compared to the the six months ended June 30, 2016. The increase in net sales, excluding precious metal content, reflects sales of $53.8 million as a result of the consolidation of two additional months of Sirona for the six months ended June 30, 2017, as compared to the same period in 2016. The increase in net sales, excluding precious metal content, was unfavorably impacted, based on the Company’s estimate, by approximately $7 million as a result of net changes in equipment inventory levels in the current six month period as compared to the prior year six month period at a certain distributor in Europe that the Company believes is related to the transition in distribution strategy (see “Business Drivers” under this section for further detail). Based on the Company’s estimate, inventory held by these distributors decreased by approximately $30 million during the six months ended June 30, 2018 as compare to $19 million during the six months ended June 30, 2017. At this time, the Company estimates that net changes in distributor inventories will unfavorably impact the Company’s sales by approximately $130 million to $135 million for the balance of 2018. Based on the Company’s estimate, year-over-year changes in distributor inventories associated with these agreements is projected to unfavorably impact the Company’s reported sales growth for the full year of 2018 by approximately $135 million to $140 million.

~~For~~Europe

Net sales increased by 10.0% in the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. Net sales, excluding precious metal content, increased by 10.2% in the six months ended June 30, 2018 as compared to the six months ended June 30, 2017, which was positively impacted by approximately 10.6% due to the weakening of the U.S. dollar over the prior year period.

For the six month period ended June 30, 2018, net sales, ~~of our Combined Businesses grew 5.3%~~excluding precious metal content, decreased 0.5% on a constant currency basis. This includes a benefit of ~~3.2%~~0.2% from acquisitions, which results in negative internal sales growth of ~~2.1%~~0.7%. The decline in internal sales growth was driven by the Technologies & Equipment segment partially offset by an increase in the Consumables segment.

Rest of World

Net sales increased by 8.9% in the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. Net sales, excluding precious metal content, ~~were negatively~~increased 9.2% in the six months ended June 30, 2018 as compared to the six months ended June 30, 2017, which was positively impacted by approximately ~~3.0%~~4.5% due to the ~~strengthening~~weakening of the U.S. dollar over the prior year period. ~~Internal sales growth in this region was primarily driven by higher demand in the Dental and Healthcare Consumables segment.~~

~~Rest of World~~

Reported net sales, excluding precious metal content, increased by 8.9% for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016. The increase in net sales, excluding precious metal content, reflects sales of $31.9 million as a result of the consolidation of two additional months of Sirona for the six months ended June 30, 2017 as compared to the same period in 2016. The increase in net sales, excluding precious metal content, was unfavorably impacted, based on the Company’s estimate, by approximately $4 million as a result of net changes in equipment inventory levels in the current six month

period as compared to the prior year six month period at a certain distributor in Canada that the Company believes is related to the transition in distribution strategy (see “Business Drivers” under this section for further detail).

For the six month period ended June 30, ~~2017,~~2018, sales, ~~of our Combined Businesses decreased 40 basis points~~excluding precious metal content, increased 4.7% on a constant currency basis. This includes a benefit of ~~3.0%~~0.4% from acquisitions, which results in ~~a negative~~ internal sales growth ~~rate~~ of ~~3.4%~~4.3%. ~~Net~~Internal sales ~~excluding precious metal content, were negatively impacted by approximately 20 basis points due to the strengthening of the U.S. dollar over the prior year period. The negative~~ growth was driven by ~~lower demand in the Technologies segment.~~both segments.

Gross Profit


	Six Months Ended										Six Months Ended
	June 30,										June 30,
(in millions)	2017			2016			$ Change		% Change		2018			2017			$ Change		% Change

Gross profit	$	1,036.2		$	945.8		$	90.4	9.6	%	$	1,066.9		$	1,036.2		$	30.7	3.0	%

Gross profit as a percentage of net sales, including precious metal content	54.7		%	52.7		%					53.4		%	54.7		%
Gross profit as a percentage of net sales, excluding precious metal content	55.3		%	53.8		%					53.9		%	55.3		%

Gross profit as a percentage of net sales, excluding precious metal content, ~~increased~~decreased by ~~150~~140 basis points for the six ~~month period~~months ended June 30, ~~2017~~2018 as compared to the same six month period ended June 30, ~~2016.~~2017.

For the six months ended June 30, ~~2017,~~2018, the ~~improvement~~decrease in the gross profit rate was primarily driven by ~~net reductions in~~unfavorable manufacturing costs, product mix and the ~~roll-off~~impact of ~~merger-related fair value adjustments and expenses of~~foreign currency which impacted the rate approximately ~~340~~190 basis ~~points. This increase was~~points, partially offset by ~~approximately 130 basis points associated with~~ the ~~equipment businesses primarily as a result~~benefit of ~~lower sales related to~~ the ~~transition in distribution strategy, as well as 60 basis points primarily from unfavorable product mix and foreign currency impacts~~Company’s global efficiency initiatives as compared to the six months ended June 30, ~~2016.~~2017.

Operating Expenses


	Six Months Ended										Six Months Ended
	June 30,										June 30,
(in millions)	2017			2016			$ Change		% Change		2018			2017			$ Change			% Change

Selling, general and administrative expenses (“SG&A”)	$	822.3		$	744.2		$	78.1	10.5	%	$	867.4		$	822.3		$	45.1		5.5	%
Goodwill impairment	1,092.9			—			1,092.9		NM		1,085.8			1,092.9			(7.1		)	(0.6	%)
Restructuring and other costs	84.8			7.7			77.1		NM		199.1			84.8			114.3			NM

SG&A as a percentage of net sales, including precious metal content	43.4		%	41.5		%					43.4		%	43.4		%
SG&A as a percentage of net sales, excluding precious metal content	43.9		%	42.3		%					43.8		%	43.9		%

NM - Not meaningful

SG&A ~~Expenses~~Expense

SG&A expenses, including research and ~~developing~~development expenses, as a percentage of net sales, excluding precious metal content, for the six months ended June 30, ~~2017 increased 160~~2018 decreased 10 basis points compared to the six months ended June 30, 2016. The comparison was negatively impacted by approximately 100 basis points as a result of net changes in equipment inventory levels in the current six month period as compared to the prior year six month period at certain distributors. During the six months ended June 30, ~~2017,~~2017. The lower rate was primarily driven by a reduction in business combination related costs ~~partially~~and favorable foreign currency which impacted the rate by approximately 100 basis points, mostly offset by ~~an increase in the amortization of purchased intangible assets favorably impacted the SG&A rate by 110 basis points~~increased compensation costs as compared to the six months ended June 30, ~~2016. Additional rate increases of 170 basis points during~~2017.

Goodwill impairment

For the six months ended June 30, ~~2017 were primarily driven by~~2018, the ~~biennial trade show~~Company recorded a goodwill impairment charge of $1,085.8 million. The charge is related to two reporting units within the Technologies & Equipment segment and ~~other selling events, higher professional services~~one reporting unit within the Consumables segment. For further information see Note 14, Goodwill and Intangible Assets, in the ~~effects~~Notes to Unconsolidated Financial Statements in Part I, Item I of ~~acquisitions as compared to the six months ended June 30, 2016.~~

~~Goodwill impairment~~this Form 10-Q.

For the six months ended June 30, 2017, the Company recorded a goodwill impairment charge of $1,092.9 million. The charge is related to three reporting units within the Technologies & Equipment segment.

Restructuring and Other Cost

The Company recorded net restructuring and other costs of $199.1 million for the six months ended June 30, 2018 compared to $84.8 million for the six months ended June 30, 2017. The Company recorded $10.8 million in restructuring costs during the six months ended June 30, 2018 as compared to $3.8 million in restructuring costs during the six months ended June 30, 2017.

During the six months ended June 30, 2018, the Company recorded an impairment charge of $179.2 million related to certain tradenames within the reporting units in the Technologies & Equipment segment that were impaired during the Company’s annual impairment testing as well as an intangible with the Consumables segment. For further information see Note 14, Goodwill and Intangible Assets, in the Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q.

~~Restructuring and other cost~~

~~The Company recorded net restructuring and other costs of $84.8 million for the six months ended June 30, 2017 compared to $7.7 million for the six months ended June 30, 2016.~~ During the six months ended June 30, 2017, the Company recorded an impairment charge of $79.8 million related to certain tradenames within the reporting units in the Technologies & Equipment segment that were impaired during the Company’s annual impairment testing. ~~For further information see Note 14, Goodwill~~

The Company is currently evaluating plans to simplify the organizational structure and ~~Intangible Assets, in~~consolidate its supply chain. The Company expects to announce final plans by the ~~Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1~~end of ~~this Form 10-Q.~~2018.

Other Income and Expense


	Six Months Ended June 30,							Six Months Ended
(in millions)	2017		2016			Change		2018			2017		Change

Net interest expense	$	17.6	$	17.6		$	—	$	17.2		$	17.6	$	(0.4	)
Other expense (income), net	6.8		(14.9		)	21.7		(35.1		)	6.8		(41.9		)
Net interest and other expense	$	24.4	$	2.7		$	21.7	$	(17.9	)	$	24.4	$	(42.3	)

Net Interest Expense

Net interest expense for the six months ended June 30, ~~2017 was the same as~~2018 decreased $0.4 million compared to the six months ended June 30, ~~2016. Increased debt levels in 2017 were offset by lower average interest rates when compared to the prior year period.~~2017.

Other Expense (Income), Net

Other expense (income), net for the six months ended June 30, 2018 was income of $35.1 million, comprised primarily of a gain recorded on the sale of marketable securities. Other expense (income), net for the six months ended June 30, 2017 was expense of $6.8 million, comprised primarily of $3.3 million of currency transaction losses and non-operating expense of $3.5 million. Other expense (income), net for the six months ended June 30, 2016 was income of $14.9 million, comprised primarily of currency transaction gains of $10.9 million principally due to the United Kingdom Brexit referendum impacts on foreign currency denominated intercompany balances at June 30, 2016, and non-operating income of $4.0 million including a $5.7 million gain on the sale of a business in the March 2016 quarter.

Income Taxes and Net Income

Six Months Ended June 30,
(in millions, except per share data) 2017 2016 $ Change

(Benefit) provision for income taxes $ 2.4
$ (40.0 ) $ 42.4

Effective income tax rate NM
NM

Net (loss) income attributable to Dentsply Sirona $ (990.2 ) $ 230.4
$ (1,220.6 )

Net (loss) income per common share - diluted $ (4.31 ) $ 1.11



	Six Months Ended
(in millions, except per share data)	2018			2017			$ Change

Provision (benefit) for income taxes	$	(27.6	)	$	2.4		$	(30.0	)

Effective income tax rate	NM			NM

Net loss attributable to Dentsply Sirona	$	(1,040.8	)	$	(990.2	)	$	(50.6	)

Net loss per common share - diluted	$	(4.60	)	$	(4.31	)

NM - Not meaningful

Provision for Income Taxes

For the six months ended June 30, ~~2017,~~2018, income taxes were a net ~~expense~~benefit of ~~$2.4~~$27.6 million as compared to a net ~~benefit~~expense of ~~$40.0~~$2.4 million in the six months ended June 30, ~~2016.~~2017.

In the first six months of 2018, the Company recorded the following discrete tax items, $2.7 million of excess tax benefit related to employee share-based compensation, tax expense of $0.5 million related to valuation allowances, tax benefit of $2.3 million related to enacted statutory rate changes, tax expense of $ 6.6 million for other discrete tax matters and $3.4 million tax benefit related to U.S. tax reform. The Company also recorded a $50.4 million tax benefit as a discrete item related to the indefinite-lived intangible asset impairment charge, $1.1 million for the fixed asset impairment charge, and $3.3 related to tax-deductible goodwill for the six months ended June 30, 2018. In addition the Company also recorded $0.5 million of tax expense as a discrete item related to the gain on sale of marketable securities. Excluding these discrete tax items and adjusting pretax income for the gain on the sale of marketable securities, net of tax and adjusting for the pretax loss related to the impairment of indefinite-lived intangible assets, tax deductible and non-deductible goodwill impairment charges, the Company’s effective tax rate was 17.6%.

In the first six months of 2017, the Company recorded the following discrete tax items, $10.5 million of excess tax benefit related to employee share-based compensation, $12.7 million of tax expense related to enacted statutory rate changes and $0.1 million of tax expense related to other discrete tax matters. The Company also recorded a $23.5 million tax benefit as a discrete item related to the indefinite-lived intangible asset impairment charge recorded during the six months ended June 30, 2017.

Excluding these discrete tax items and adjusting pretax loss to exclude the pretax loss related to the impairment of the indefinite-lived intangible assets and non-deductible goodwill impairment charge the Company’s effective tax rate was 12.8%. The effective tax rate was favorably impacted by the Company’s change in the mix of consolidated earnings.

InThe Company’s effective income tax rate for the first six months of ~~2016,~~2018 included the Company recorded a tax benefit from the release of a valuation allowance on previously unrecognized tax assets related to foreign interest deduction carryforwards of a non-U.S. legacy DENTSPLY subsidiary of approximately $78.6 million, resulting from the Merger. The Company also recorded $4.6 million of tax expense related to other discrete tax matters. Excluding thenet impact of ~~these~~restructuring program related costs and other costs, amortization of purchased intangible assets, credit risk and fair value adjustments, business combination related costs, income tax ~~matters,~~related adjustments and the ~~Company’s effective tax rate was 17.8%. In addition,~~gain on sale of marketable securities which impacted income before income taxes and the ~~effective tax rate was favorably impacted~~provision for income taxes by ~~the Company’s change in the mix of consolidated earnings.~~$1,373.5. million and $93.1 million, respectively.

The Company’s effective income tax rate for the first six months of 2017 included the net impact of restructuring program related costs and other costs, amortization of purchased intangible assets, business combination related costs, fair value adjustments, credit risk and fair value adjustments and income tax related adjustments which impacted the loss before income taxes and the provision for income taxes by $1,308.1 million and ~~$56.4~~$53.6 million, respectively. ~~For~~

On December 22, 2017, the ~~full~~Tax Cuts and Jobs Act (the "Act" or "U.S. tax reform") was enacted. U.S. tax reform, among other things, reduced the U.S. federal income tax rate to 21% in 2018 from 35%, instituted a dividends received deduction for foreign earnings with a related tax for the deemed repatriation of unremitted foreign earnings and created a new U.S. minimum tax on earnings of foreign subsidiaries. In addition, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for enactment effects of the Act and provides a measurement period of up to one year from the Act’s enactment date for companies to complete their accounting under Accounting Standards Codification No. 740 “Income Taxes”, (“ASC 740”). In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Act. The Company has accounted for the tax effects of the Act on a provisional basis. At December 31, 2017, the accounting for certain income tax effects was incomplete, but the Company determined reasonable estimates for those effects which were included in the financial statements. During the six months ended June 30, 2018, a tax benefit of $3.4 million related to provisional estimates was recorded. The Company expects to complete the accounting during 2018 to comply with the one year measurement period.

~~The Company’s effective income tax rate~~

For the six months ended June 30, 2018, for the ~~first six months~~Global Intangible Low Tax Income (“GILTI”) provision of ~~2016 included~~ the ~~net impact~~Act, an estimate was recorded based on current guidance as a period expense, but the Company has not yet completed its assessment or elected an accounting policy to either recognize deferred taxes for basis differences expected to reverse as GILTI or to record GILTI as period costs if and when incurred.

In accordance with SEC guidance, provisional amounts may be refined as a result of ~~business combination related costs~~additional guidance from, and ~~fair value adjustments, amortization~~interpretations by, U.S. regulatory and standard-setting bodies, and changes in assumptions. In subsequent periods, provisional amounts will be adjusted for the effects, if any, of ~~purchased intangible assets, restructuring program related costs~~interpretative guidance issued by the U.S. Department of the Treasury. The effects of the Act may be subject to changes for items that were previously reported as provisional amounts, as well as any element of the Act that a provisional estimate could not be made, and other costs, credit risk and fair value adjustments and income tax related adjustments which impacted income before income taxes and the benefit for income taxes by $203.8 million and $130.9 million, respectively.such changes could be material.

Net ~~(loss) income~~loss attributable to Dentsply Sirona


	Six Months Ended							Six Months Ended
	June 30, 2017							June 30, 2018
(in millions, except per share amounts)	Net Income			Per Diluted Common Share				Net (Loss) Income			Per Diluted Common Share

Net loss attributable to Dentsply Sirona	$	(990.2	)	$	(4.31	)		$	(1,040.8	)	$	(4.60	)
Pre-tax non-US GAAP adjustments:
Restructuring program related costs and other costs	1,182.8							1,294.3
Amortization of purchased intangible assets	91.8							100.1
Credit risk and fair value adjustments								13.3
Business combination related costs and fair value adjustments	30.1							9.9
Credit risk and fair value adjustments	3.4
Gain on sale of marketable securities								(44.1		)
Tax impact of the pre-tax non-US GAAP adjustments (a)	(57.2		)					(95.4		)
Subtotal non-US GAAP adjustments	1,250.9			5.36				1,278.1			5.60
Adjustment for calculating non-US GAAP net income per diluted common share (b)				0.07							0.04
Income tax related adjustments	3.6			0.01				2.3			0.01
Adjusted non-US GAAP net income	$	264.3		$	1.13			$	239.6		$	1.05

(a) The tax amount was calculated using the applicable statutory tax rate in the tax jurisdiction where the non-US GAAP adjustments were generated.
(b) The Company had a net loss for the six months ended June 30, 2017, but had net income on a non-US GAAP basis. The shares used in calculating diluted non-US GAAP net income per share includes the dilutive effect of common stock.
Shares used in calculating diluted GAAP net loss per share				229.4
(b) The Company had a net loss for the six months ended June 30, 2018, but had net income on a non-US GAAP basis. The shares used in calculating diluted non-US GAAP net income per share includes the dilutive effect of common stock.							(b) The Company had a net loss for the six months ended June 30, 2018, but had net income on a non-US GAAP basis. The shares used in calculating diluted non-US GAAP net income per share includes the dilutive effect of common stock.
Shares used in calculating diluted US GAAP net loss per share											226.2
Shares used in calculating diluted non-US GAAP net income per share				233.3							228.3


	Six Months Ended							Six Months Ended
	June 30, 2016							June 30, 2017
(in millions, except per share amounts)	Net Income			Per Diluted Common Share				Net (Loss) Income			Per Diluted Common Share

Net income attributable to Dentsply Sirona	$	230.4		$	1.11
Net loss attributable to Dentsply Sirona								$	(990.2	)	$	(4.31	)
Pre-tax non-US GAAP adjustments:
Restructuring program related costs and other costs								1,182.8
Amortization of purchased intangible assets								91.8
Business combination related costs and fair value adjustments	131.2							30.1
Amortization of purchased intangible assets	65.4
Restructuring program related costs and other costs	4.3
Credit risk and fair value adjustments	2.9							3.4
Tax impact of the pre-tax non-US GAAP adjustments (a)	(53.0		)					(57.2		)
Subtotal non-US GAAP adjustments	150.8			0.72				1,250.9			5.36
Adjustment for calculating non-US GAAP net income per diluted common share (b)											0.07
Income tax related adjustments	(77.9		)	(0.37		)		3.6			0.01
Adjusted non-US GAAP net income	$	303.3		$	1.46			$	264.3		$	1.13

(a) The tax amount was calculated using the applicable statutory tax rate in the tax jurisdiction where the non-US GAAP adjustments were generated.
(b) The Company had a net loss for the six months ended June 30, 2017, but had net income on a non-US GAAP basis. The shares used in calculating diluted non-US GAAP net income per share includes the dilutive effect of common stock.							(b) The Company had a net loss for the six months ended June 30, 2017, but had net income on a non-US GAAP basis. The shares used in calculating diluted non-US GAAP net income per share includes the dilutive effect of common stock.
Shares used in calculating diluted US GAAP net loss per share											229.4
Shares used in calculating diluted non-US GAAP net income per share											233.3

Adjusted Operating Income and Margin


	Six Months Ended					Six Months Ended
	June 30, 2017					June 30, 2018
(in millions)	Operating Income			Percentage of Net Sales, Excluding Precious Metal Content		Operating (Loss) Income			Percentage of Net Sales, Excluding Precious Metal Content

Operating loss attributable to Dentsply Sirona	$	(963.8	)	(51.5	)%
Operating Loss						$	(1,085.4	)	(54.9	)%
Restructuring program related costs and other costs	1,181.7			63.1	%	1,294.3			65.5	%
Amortization of purchased intangible assets	91.8			4.9	%	100.1			5.0	%
Business combination related costs and fair value adjustments	29.7			1.6	%	8.8			0.4	%
Credit risk and fair value adjustments	3.4			0.2	%
Adjusted non-US GAAP Operating Income	$	342.8		18.3	%	$	317.8		16.0	%


	Six Months Ended				Six Months Ended
	June 30, 2016				June 30, 2017
(in millions)	Operating Income		Percentage of Net Sales, Excluding Precious Metal Content		Operating (Loss) Income			Percentage of Net Sales, Excluding Precious Metal Content

Operating income attributable to Dentsply Sirona	$	193.9	11.0	%
Operating Loss					$	(963.8	)	(51.5	)%
Restructuring program related costs and other costs					1,181.7			63.1	%
Amortization of purchased intangible assets					91.8			4.9	%
Business combination related costs and fair value adjustments	130.8		7.4	%	29.7			1.6	%
Amortization of purchased intangible assets	65.4		3.7	%
Restructuring program related costs and other costs	9.2		0.5	%
Credit risk and fair value adjustments	2.6		0.1	%	3.4			0.2	%
Adjusted non-US GAAP Operating Income	$	401.9	22.7	%	$	342.8		18.3	%

Operating Segment Results

Third Party Net Sales, Excluding Precious Metal Content

Six Months Ended
June 30,
(in millions) 2017 2016 $ Change % Change

Dental and Healthcare Consumables $ 1,044.6
$ 997.5
$ 47.1
4.7 %

Technologies 827.8
761.7
66.1
8.7 %



	Six Months Ended
	June 30,
(in millions)	2018		2017		$ Change		% Change

Technologies & Equipment	$	1,037.4	$	991.0	$	46.4	4.7	%

Consumables	941.1		881.4		59.7		6.8	%

Segment Operating Income

Six Months Ended
June 30,
(in millions) 2017 2016 $ Change % Change

Dental and Healthcare Consumables $ 298.7
$ 282.4
$ 16.3
5.8 %

Technologies 119.0
165.9
(46.9 ) (28.3 %)



	Six Months Ended
	June 30,
(in millions)	2018		2017		$ Change			% Change

Technologies & Equipment	$	151.8	$	151.9	$	(0.1	)	(0.1	%)

Consumables	253.2		238.9		14.3			6.0	%

A reconciliation of reported net sales to non-US GAAP net sales, excluding precious metal content, ~~of the combined business~~ by segment is as follows:


	Six Months Ended						Six Months Ended
	June 30, 2017						June 30, 2018
(in millions)	Dental and Healthcare Consumables		Technologies		Total		Technologies & Equipment		Consumables		Total

Net sales	$	1,065.3	$	827.9	$	1,893.2	$	1,057.1	$	941.1	$	1,998.2
Less: precious metal content of sales	20.7		0.1		20.8		19.7		—		19.7
Net sales, excluding precious metal content	1,044.6		827.8		1,872.4		1,037.4		941.1		1,978.5
Merger related adjustments (a)	—		3.0		3.0
Acquisition related adjustments (a)							—		2.1		2.1
Non-US GAAP net sales, excluding precious metal content	$	1,044.6	$	830.8	$	1,875.4	$	1,037.4	$	943.2	$	1,980.6

(a) )Represents an adjustment to reflect deferred revenue that was eliminated under business combination accounting standards.



	Six Months Ended
	June 30, 2017
(in millions)	Technologies & Equipment		Consumables		Total

Net sales	$	1,011.8	$	881.4	$	1,893.2
Less: precious metal content of sales	20.8		—		20.8
Net sales, excluding precious metal content	991.0		881.4		1,872.4
Merger related adjustments (a)	3.0		—		3.0
Non-US GAAP net sales, excluding precious metal content	$	994.0	$	881.4	$	1,875.4

Technologies & Equipment

Six Months Ended
June 30, 2016
(in millions) Dental and Healthcare Consumables Technologies Total

Net sales $ 1,032.7
$ 761.9
$ 1,794.6
Less: precious metal content of sales 35.2
0.2
35.4
Net sales, excluding precious metal content 997.5
761.7
1,759.2
Sirona net sales (a)
15.7
145.0
160.7
Merger related adjustments (b)
—
10.4
10.4
Elimination of intercompany net sales (0.4 ) —
(0.4 )
Non-US GAAP Combined Business, net sales, excluding precious metal content $ 1,012.8
$ 917.1
$ 1,929.9

~~(a) Represents Sirona~~Net sales ~~for January and February 2016.~~

~~Dental and Healthcare Consumables~~

~~Reported net sales, excluding precious metal content,~~ increased by ~~4.7% for~~4.5% in the six months ended June 30, ~~2017,~~2018 as compared to the six months ended June 30, ~~2016.~~2017. Net sales, excluding precious metal content, increased by 4.7% in the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. Net sales, excluding precious metal content, were positively impacted by approximately 5.8% due to the weakening of the U.S. dollar over the prior year period. The increase in net sales, excluding precious metal content, ~~reflects sales of $14.1 million as a result of the consolidation of two additional months of Sirona for the six months ended June 30, 2017, as compared to the same period in 2016.~~

For the six month period ended June 30, 2017, sales of the Combined Businesses grew 3.0% on a constant currency basis. This includes a benefit of approximately 70 basis points from acquisitions, which results in internal growth of 2.3%. Net sales, excluding precious metal content, werewas negatively ~~impacted by approximately 1.2% due to the strengthening of the U.S. dollar over the prior year period. Internal sales growth in this segment reflects increased demand in all regions led by Europe.~~

~~The operating income increased $16.3 million or 5.8% for the six months ended June 30, 2017 as compared to 2016~~, ~~which reflects increased demand primarily in Europe.~~

~~Technologies~~

Reported net sales, excluding precious metal content, increased 8.7% for the six months ended June 30, 2017 as compared to the six months ended June 30, 2016. The increase in net sales, excluding precious metal content, reflects sales of $98.6 million as a result of the consolidation of two additional months of Sirona for the six months ended June 30, 2017 as compared to the same period in 2016. Net sales, excluding precious metal content, was unfavorably impacted, based on the Company’s estimate, by approximately ~~$46~~$5 million as a result of net changes in equipment inventory levels in the current ~~six month period~~year as compared to the prior year ~~six month period~~ at certain distributors in North America and Europe, that the Company believes is related to the transition in distribution strategy (see “Business Drivers” under this section for further detail). ~~Additionally, based~~Based on the Company’s ~~assessment,~~estimate, inventory held by these distributors decreased by approximately $34 million during the six months ended June 30, 2018, compared to an decrease of approximately $29 million in the same six month period in 2017. At this time, the Company estimates that net changes in distributor inventories will unfavorably impact the Company’s sales by approximately $130 million to $135 million for the balance of 2018. Based on the Company’s estimate, year-over-year changes in distributor inventories associated with these agreements is projected to unfavorably impact the Company’s reported sales growth for the full year of 2018 by approximately $135 million to $140 million.

For the six months ended June 30, 2018, net sales, excluding precious metal content, decreased 1.4% on a constant currency basis compared to the six months ended June 30, 2017. This includes a decrease of approximately 0.1% related to the disposal of a non-strategic business, which results in negative internal sales growth of 1.3%. The decline in internal sales growth was driven by the U.S., mostly offset by internal sales growth in Rest of World region.

The operating income decreased $0.1 million or 0.1% for the six months ended June 30, 2018 as compared to the same six month period in 2017. The decrease is primarily related to unfavorable product pricing and product mix as compared to the six months ended June 30, 2017.

Consumables

Net sales increased by 6.8% in the six months June 30, 2018 as compared to the six months ended June 30, 2017. Net sales, excluding precious metal content, increased 6.8% for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. Net sales, excluding precious metal content, were ~~negatively~~positively impacted by ~~lower equipment sales~~approximately 5.0% due to ~~end-users, primarily in~~ the ~~United States, as result~~weakening of ~~transition challenges at our exclusive distributor.~~the U.S. dollar over the same prior year period.

For the six month period ended June 30, ~~2017,~~2018, net sales, ~~of our Combined Businesses declined 6.7%~~excluding precious metal content, increased 2.0% on a constant currency basis. This includes a benefit of ~~4.6%~~0.9% from acquisitions, which results in ~~a negative~~ internal sales growth ~~rate~~ of ~~11.3%~~1.1%. ~~Net~~The internal sales ~~excluding precious metal content, were negatively impacted~~growth was primarily driven by ~~approximately 1.3% due to~~ the ~~strengthening~~Rest of World region partially offset by a decline in the U.S. ~~dollar over the prior year period.~~

The operating income ~~decreased $46.9~~increased $14.3 million or ~~28.3%~~6.0% for the six months ended June 30, ~~2017~~2018 as compared to the same six month period in ~~2016, which, based on the Company’s assessment, reflects the impact~~2017. The increase is primarily related to ~~a change in net equipment inventory as well as the impact of lower equipment~~increased sales ~~to end-users as previously discussed~~volume and favorable product pricing partially offset by higher operating costs as compared to the ~~consolidation of two additional~~six months ~~of Sirona.~~

ended June 30, 2017.

CRITICAL ACCOUNTING POLICIES

Except as noted below, there have been no other significant material changes to the critical accounting policies as disclosed in the Company’s Form 10-K for the year ended December 31, ~~2016.~~2017.

Annual Goodwill Impairment Testing

Goodwill

Goodwill is not amortized; instead, it is tested for impairment annually or more frequently if indicators of impairment exist or if a decision is made to sell a business. The valuation date for annual impairment testing is April 30.

As a result of the annual impairment tests of goodwill and in conjunction with the preparation of the financial statements for the three months ended June 30, ~~2017,~~2018, the Company recorded a goodwill impairment charge of ~~$1,092.9~~$1,085.8 million related to the CAD/CAM, Imaging and Treatment Center equipment reporting units all within the Technologies segment and the Orthodontics reporting unit within the Consumables segment. The goodwill impairment charge was primarily driven by a change in forecasted sales and gross profit which resulted in a lower fair value for these reporting units. The equipment reporting units were also further impacted by the unfavorable change in the discount rate due primarily to a higher risk factor, which represents management’s assessment of increased risk with respect to these reporting units’ forecasts, and to a lesser extent a higher risk-free interest rate as compared to the year ended December 31, 2017. The assumptions and estimates used in determining the fair value of these reporting units contain uncertainties, and any changes to these assumptions and estimates could have a negative impact and result in a future impairment. For further information see Note 14, Goodwill and Intangible Assets, in the Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q.

For the Company’s reporting units that were not impaired, the Company applied a hypothetical sensitivity analysis. Had the ~~WACC~~discount rate of each of these reporting units been hypothetically increased by 100 basis points at April 30, ~~2017,~~2018, the fair value of ~~those~~one reporting ~~units~~unit, Treatment Centers, would ~~still exceed net book value. If the fair value of each of these reporting units had been hypothetically reduced by 5% at April 30, 2016, the fair value of those reporting units would still~~not exceed net book value. If the fair value of each of these reporting units had been hypothetically reduced by 10% at April 30, ~~2017,~~2018, the fair value of one reporting unit, ~~within the Company’s Technologies segment,~~Treatment Centers, would ~~have a fair value that would approximate~~not exceed net book value. Goodwill for ~~that~~the Treatment Centers reporting unit totals ~~$53.8~~$292.7 million at June 30, ~~2017.~~2018.

Should the Company’s analysis in the future indicate an increase in discount rates or a degradation in the overall markets served by these reporting units, it could result in impairment of the carrying value of goodwill to its implied fair value. There can be no assurance that the Company’s future goodwill impairment testing will not result in a charge to earnings.

Indefinite-Lived Assets

Indefinite-lived intangible assets consist of tradenames and are not subject to amortization; instead, they are tested for impairment annually or more frequently if indicators of impairment exist or if a decision is made to sell a business. The valuation date for annual impairment testing is April 30.

The Company also assessed the annual impairment of indefinite-lived intangible assets as of April 30, ~~2017,~~2018, which largely consists of acquired tradenames, in conjunction with the annual impairment tests of goodwill. As a result of the annual impairment tests of indefinite-lived intangible assets, the Company recorded an impairment charge of ~~$79.8~~$179.2 million for the three months ended June 30, ~~2017~~2018 which was recorded in “Restructuring and other costs” on the Consolidated Statements of Operations. The impaired indefinite-lived intangibles assets are tradenames and trademarks related to the CAD/CAM and Imaging equipment reporting units. The impairment charge was primarily driven by a decline in forecasted ~~sales.~~sales as well as an unfavorable change in the discount rate due primarily to a higher risk factor, which represents management’s assessment of increased risk with respect to these reporting units’ forecasts, and to a lesser extent a higher risk-free interest rate as compared to the year ended December 31, 2017. The assumptions and estimates used in determining the fair value of the indefinite-lived intangible assets contain uncertainties, and any changes to these assumptions and estimates could have a negative impact and result in a future impairment. For further information see Note 14, Goodwill and Intangible Assets, in the Notes to Unaudited Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q.

For the Company’s indefinite-lived assets that were not impaired, the Company applied a hypothetical sensitivity analysis. If the fair value of each of these indefinite-lived intangibles assets had been hypothetically reduced by 10% or the discount rate had been hypothetically increased by 50 basis points at April 30, ~~2017,~~2018, the fair value of these assets would still exceed their book value.

Should the Company’s analysis in the future indicate an increase in discount rates or a degradation in the use of the tradenames, it could result in impairment of the carrying value of the indefinite-lived assets to its implied fair value. There can be no assurance that the Company’s future indefinite-lived asset impairment testing will not result in a charge to earnings.

Income Taxes

The Company has accounted for the tax effects of The Tax Cuts and Jobs Act, enacted on December 22, 2017, on a provisional basis. At December 31, 2017, the accounting for certain income tax effects was incomplete, but the Company determined reasonable estimates for those effects which were included in the financial statements. The Company expects to complete the accounting during 2018 to comply with the one year measurement period.

LIQUIDITY AND CAPITAL RESOURCES

Six months ended June 30, ~~2017~~2018 OPEN

~~The Company’s cash and cash equivalents~~Net income decreased ~~by $115.5~~$49.3 million compared to ~~$268.4 million during~~ the ~~six months ended~~ June 30, 2017 ~~as a result of the items noted below.~~

~~The goodwill and indefinite-lived intangible asset~~period, primarily due to increased impairment charges, recorded during the six months ended June 30, 2017 resulted in a net loss of $990.6 million which is $1,221.8 million lower compared to net income of $231.2 million for the six months ended June 30, 2016. These impairment charges are non-cash and ~~are added back to arrive at cash from operations.~~SG&A expenses. Cash flow from operating activities during the six months ended June 30, ~~2017~~2018 was ~~$208.7~~$172.0 million compared to ~~$188.1~~$208.7 million during the six months ended June 30, ~~2016.~~2017. Cash from operations ~~increased $20.6~~decreased $36.7 million for the first six months of ~~2017~~2018 as compared to the same period in ~~2016~~2017 and was primarily ~~related~~due to ~~two additional months~~payments of ~~consolidated Sirona results, decreases in merger transaction related fees~~accrued liabilities and ~~integrations costs, a decrease in accounts receivables and lower tax payments. These increases in cash from operations were~~higher inventory levels partially offset by ~~the unfavorable impact of the transition in distribution strategy as well as increased inventory levels in~~lower accounts receivable. The Company’s cash and cash equivalents decreased by $81.3 million to $239.3 million during the six months ended June 30, ~~2017 as compared to the same period in 2016. During the six month period in 2016, the Company paid approximately $40 million of merger transaction related fees and integration costs.~~2018.

For the six months ended June 30, ~~2017,~~2018, on a constant currency basis, the number of days of sales outstanding in accounts receivable increased by 1 day to 5962 days as compared to 5861 days at December 31, ~~2016.~~2017. On a constant currency basis, the number of days of sales in inventory increased by 1711 days to ~~130~~142 days at June 30, ~~2017~~2018 as compared to ~~113~~131 days at December 31, ~~2016.~~2017.

Cash used in investing activities during the first six months of ~~2017~~2018 included capital expenditures of ~~$64.8~~$81.2 million as well as capital deployment of ~~$125.2~~$135.8 million related to ~~an acquisition~~acquisitions and the purchase of intellectual property. The Company expects capital expenditures to be in the range of approximately ~~$130~~$190 million to ~~$150~~$200 million for the full year ~~2017.~~2018.

Cash used in financing activities for the six months ended June 30, ~~2017~~2018 was primarily related to ~~share repurchase activity and~~ dividend payments ~~partially~~and share repurchases of $289.9 million, offset by proceeds from stock option ~~exercises.~~exercises and short term borrowings.

~~At June 30, 2017, the Company had authorization to maintain up to 39.0 million shares of treasury stock under its stock repurchase program as approved by~~On April 25, 2018, the Board of ~~Directors. Under this program,~~Directors of the Company approved an increase in the authorized number of shares of common stock that may be repurchased ~~2.4~~under the share repurchase program for a total remaining authorization of $1.0 billion of shares of common stock. For the six months ended June 30, 2018, the Company purchased 5.4 million shares ~~during~~or $250.2 million at an average price of $45.92. Additional share repurchases, if any, will 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 ~~first six months of 2017 for $150.3 million.~~Company deems appropriate based upon prevailing market and business conditions and other factors. As of June 30, ~~2017,~~2018, the Company held ~~35.2~~42.3 million shares of treasury stock. The Company received proceeds of ~~$45.4~~$13.9 million as a result of the exercise of ~~1.2~~0.4 million of stock options during the six months ended June 30, ~~2017.~~2018.

The Company's total borrowings increased by a net ~~$76.8~~$163.0 million during the six months ended June 30, ~~2017,~~2018, which includes ~~an increase~~a decrease of ~~$79.1~~$25.4 million due to exchange rate fluctuations on debt denominated in foreign currencies. At June 30, ~~2017,~~2018, the Company's ratio of total net debt to total capitalization was ~~15.5%~~23.3% compared to ~~12.4%~~16.6% at December 31, ~~2016.~~2017. The Company defines net debt as total debt, including current and long-term portions, less cash and cash equivalents and total capitalization as the sum of net debt plus equity.

The Company is obligated to pay annual principal amortization of $8.8 million representing a 5% mandatory principal amortization due in each of the first nine years under the terms of the PNC Term Loan with a final maturity of August 25, 2020. The ~~fourth~~fifth annual installment in the amount of $8.8 million will be due in August ~~2017~~2018 and has been classified as current on the Consolidated Balance ~~Sheet.~~Sheets.

~~Under~~

Effective July 27, 2018, the Company amended and extended its ~~five-year multi-currency~~$500 million multicurrency revolving credit ~~agreement,~~facility increasing the total available to $700 million for an additional five year through July 27, 2023. In addition, certain new lenders joined the bank group. The Company ~~is able~~has access to ~~borrow up to $500.0~~the full $700 million through July ~~23, 2021.~~27, 2023. The facility is unsecured and contains certain affirmative and negative covenants relating to the operations and financial condition of the Company. The most restrictive of these covenants pertain to asset dispositions and prescribed ratios of indebtedness to total capital and operating income, plus depreciation and amortization to interest expense. At June 30, ~~2017,~~2018, the Company was in compliance with these covenants. The Company also has available an aggregate $500.0 million under a U.S. dollar commercial paper facility. The five-year 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 facilities in the aggregate is ~~$500.0~~$700.0 million. At June 30, ~~2017,~~2018, there were no outstanding borrowings under the ~~current~~previous $500.0 million multi-currency revolving credit facility. The Company had issued and outstanding $205.0 million Commercial Paper as of June 30, 2018.

The Company also has access to ~~$53.6~~$32.0 million in uncommitted short-term financing under lines of credit from various financial institutions. The lines of credit have no major restrictions and are provided under demand notes between the Company and the lending institutions. At June 30, ~~2017,~~2018, the Company had ~~$41.9~~$4.1 million outstanding under these short-term lines of credit. At June

30, ~~2017,~~2018, the Company had total unused lines of credit related to the revolving credit agreement and the uncommitted short-term lines of credit of ~~$545.0~~$322.9 million.

At June 30, ~~2017,~~2018, the Company held ~~$38.2~~$41.1 million of precious metals on consignment from several financial institutions. The 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. In the event that the financial institutions would discontinue offering these consignment arrangements, and if the Company could not obtain other comparable arrangements, the Company may be required to obtain third party financing to fund an ownership position in the required precious metal inventory levels.

~~At June 30, 2017, approximately $195.4~~As a result of U.S. tax reform, $271.7 million of ~~the Company's~~ cash and cash equivalents ~~were~~ held ~~outside of~~by the ~~United States. Most~~Company’s non-U.S. subsidiaries was subject to current tax in the U.S. in 2017. At June 30, 2018 the Company had not repatriated any of these ~~balances could be repatriated~~funds to the ~~United States, however, under current law, would potentially~~U.S. However, to the extent the Company repatriates these funds to the U.S., the Company will be ~~subject~~required to pay income taxes in certain U.S. ~~federal income tax, less~~states and applicable foreign ~~tax credits. Historically,~~withholding taxes on those amounts during the Company has generated more than sufficient operating cash flows in the United States to fund domestic operations. Further, the Company expects on an ongoing basis, to be able to finance domestic and international cash requirements, including capital expenditures, stock repurchases, debt service, operating leases and potential future acquisitions, from the funds generated from operations and amounts available under its existing credit facilities. The Company intends to finance the current portion of long-term debt due within the next twelve months utilizing the available commercial paper and the revolving credit facilities as well as other sources of credit.period when such repatriation occurs.

Except as stated above, there have been no material changes to the Company's scheduled contractual cash obligations disclosed in its Form 10-K for the year ended December 31, ~~2016.~~2017.

The Company continues to review its debt portfolio and may refinance additional debt in the near-term as interest rates remain at historically low levels.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Part 1, Item 1, Note 1, Significant Accounting Policies, to the Unaudited Interim Consolidated Financial Statements of this Form 10-Q for a discussion of recent accounting standards and pronouncements.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

There have been no significant material changes to the market risks as disclosed in the Company’s Form 10-K for the year ended December 31, ~~2016.~~2017.

Item 4 – Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report were effective to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that it is accumulated and communicated

to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended June 30, ~~2017,~~2018, that have materially affected, or are likely to materially affect, its internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

Reference to Part I, Item 1, Note 15 Commitments and Contingencies, in the Notes to Unaudited Interim Consolidated Financial Statements of this Form 10-Q.

Item 1A – Risk Factors

Except as noted below, there have been no significant material changes to the risk factors as disclosed in ~~Part1, Item~~Part 1A, “Risk Factors” in the Company’s Form 10-K for the year ended December 31, ~~2016.~~2017.

The Company has recognized athree substantial goodwill impairment ~~charge in~~charges within the ~~current period~~last 15 months, including the most recent fiscal quarter, and may be required to recognize additional goodwill and intangible asset impairment charges in the future.

~~Under US GAAP,~~

We acquire other companies and intangible assets and may not realize all the ~~Company reviews its~~economic benefit from those acquisitions, which could cause an impairment of goodwill ~~and~~or intangibles. We review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. ~~Additionally,~~We test goodwill ~~and indefinite-lived intangible assets are required to be tested~~ for impairment at least annually. ~~The valuation models used to determine~~Factors that may be a change in circumstances, indicating that the ~~fair~~carrying value of our goodwill or amortizable intangible assets ~~are dependent upon various~~may not be recoverable, include reduced future cash flow estimates, slower growth rates in industry segments in which we participate and a decline in our stock price and market capitalization. We may be required to record a significant charge in our consolidated financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, negatively affecting our results of operations.

During the past 15 months, the Company has recorded an aggregate of $3.3 billion in charges for the impairment of certain financial reporting units:

In connection with the Company’s April 30, 2017 annual goodwill impairment test and the preparation of the financial statements for the quarter ended June 30, 2017, the Company recorded a $1,092.9 million non-cash goodwill impairment charge associated with the CAD/CAM, Imaging and Treatment Center equipment reporting units. In addition, the Company tested the indefinite-lived intangible assets related to the CAD/CAM and Imaging reporting units and determined that certain tradenames and trademarks were impaired, resulting in the recording of an impairment charge of $79.8 million for the three months ended June 30, 2017.

In preparing the financial statements for the year ended December 31, 2017, the Company identified a triggering event and recorded a $558.0 million non-cash goodwill impairment charge associated with the CAD/CAM, Imaging and Treatment Center equipment reporting units. In addition, the Company tested the indefinite-lived intangible assets related to these reporting units and determined that certain tradenames and trademarks were impaired, resulting in the recording of an impairment charge of $266.9 million for the three months ended December 31, 2017.

In connection with the Company’s April 30, 2018 annual goodwill impairment test and the preparation of the financial statements for the quarter ended June 30, 2018, the Company recorded a $1,085.8 million non-cash goodwill impairment charge associated with the CAD/CAM and Imaging equipment reporting units and the Orthodontics reporting unit. In addition, the Company tested the indefinite-lived intangible assets related to the equipment reporting units and determined that certain tradenames and trademarks were impaired, resulting in the recording of an impairment charge of $179.2 million for the three months ended June 30, 2018.

These charges resulted from changes in the Company’s estimates of discounted cash flows which, in turn, resulted from changes in management’s assumptions ~~and reflect management’s best estimates. Significant management assumptions, which are critical in this fair value determination, include, without limitation,~~such as future revenue growth rates, operating margins, weighted average cost of capital, and future economic and market conditions ~~(including with respect to~~affecting the dental and medical device ~~industries), net sales growth, gross profit rates, discount rates, earnings multiples~~industries. Given the uncertainty in the marketplace and ~~future~~other factors affecting management’s assumptions underlying the Company’s discounted cash flow ~~projections. The~~model, the Company’s current estimates could vary significantly in the future, which may result in a goodwill impairment charge at that time. For example, for the Company’s reporting units that were not impaired at April 30, 2018, the Company ~~has previously made disclosures about~~applied a hypothetical sensitivity analysis. Had the discount rate of each of these reporting units been hypothetically increased by 100 basis points at April 30, 2018, the fair ~~values~~value of certain reporting units and indefinite-lived intangible assets approximating the book values within Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Critical Accounting Judgments and Policies” of the Company’s most recently filed Form 10-K. Specifically included in the disclosures is one reporting unit, ~~within~~Treatment Centers, would not exceed net book value. If the ~~Technologies segment as well as the four~~fair value of each of these reporting units ~~created in connection with~~had been hypothetically reduced by 10% at April 30, 2018, the ~~Merger (three within~~fair value of one reporting unit, Treatment Centers, would not exceed net book value. Goodwill for the ~~Technologies segment and one within the Dental and Healthcare Consumables segment).~~ Treatment Centers reporting unit totals $292.7 million at June 30, 2018.

Any changes to the assumptions and estimates made by management may cause a change in circumstances indicating that the carrying value of the goodwill and indefinite-lived assets in ~~these five~~the Treatment Centers reporting ~~units~~unit may not be ~~recoverable~~

In connection with the Company’s annual goodwill impairment test and the preparation of the financial statements for the quarter ended June 30, 2017, the Company determined it was necessary to record a $1,092.9 million non-cash impairment charge related to goodwill associated with the CAD/CAM, Imaging and Treatment Center equipment reporting units. The impairment takes into consideration the Company’s updated business outlook for the remainder of fiscal year 2017, pursuant to which the Company updated future assumptions and projections related to these reporting units. After updating the assumptions and projections, the Company then calculated an estimate of the fair value for these reporting units. As of June 30, 2017, the Company determined that three reporting units had an indication of impairment. In determining the impairment loss, the Company recorded an amount equal to the excess of the assets’ carrying amount over its fair value as determined by an analysis of discounted future cash flows.recoverable. See Note 14, Goodwill and Intangible Assets, in the Notes to Unaudited Interim Consolidated Financial Statements in Part 1, Item 1 of this Form ~~10-Q.~~10-Q and Note 9, Goodwill and Intangible Assets, in the Notes to Consolidated Financial Statement in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

The ~~goodwill impairment analysis is sensitive~~Company may fail to ~~changes in key assumptions used, such as future cash flows, discount rates~~realize the expected benefits of its announced cost reduction and ~~growth rates~~restructuring efforts.

In order to operate more efficiently and control costs, the Company may announce restructuring plans from time to time, including workforce reductions, global facility consolidations and other cost reduction initiatives that are intended to generate operating expense or cost of goods sold savings through direct and indirect overhead expense reductions as well as ~~current market conditions in both~~other savings. In 2017, the ~~U.S.~~Company announced that it had targeted a cost reduction initiative of approximately $100 million expected to be achieved over the next several years as the benefits of these initiatives, net of related investments, are realized over time.

The Company’s ability to achieve the anticipated cost savings and ~~globally. If~~other benefits from these initiatives within the expected time frame is subject to many estimates and assumptions and ~~projections used~~other factors that we may not be able to control. We may also incur significant charges related to restructuring plans, which would reduce our profitability in the ~~analysis~~periods such charges are ~~not realized, it is possible that an additional impairment charge may need to be recorded in the future.~~incurred. The Company ~~cannot accurately predict~~is currently evaluating plans to simplify the ~~amount~~organizational structure and ~~timing~~consolidate its supply chain. The Company expects to announce final plans by the end of ~~any impairment~~2018.

Due to the complexities inherent in implementing these types of ~~goodwill or other intangible assets. Further, as~~cost reduction and restructuring activities, and the ~~year progresses, Company will need to continue to evaluate the carrying value~~quarterly phasing of ~~goodwill for these reporting units. Any additional impairment charges that~~related investments, the Company may ~~take~~fail to realize expected efficiencies and benefits, or may experience a delay in ~~the future~~realizing such efficiencies and benefits, and its operations and business could be disrupted. Company management may be required to divert their focus to managing these disruptions, and implementation may require the agreement of third party’s, such as labor unions or works councils. Risks associated with these actions and other workforce management issues include delays in implementation of anticipated workforce reductions, additional unexpected costs, changes in restructuring plans that increase or decrease the number of employees affected, negative impact on the Company’s relationship with labor unions or works councils, adverse effects on employee morale, and the failure to meet operational targets due to the loss of employees, any of which may impair the Company’s ability to achieve anticipated cost reductions or may otherwise harm its business, and could have a material ~~to Company’s~~adverse effect on its competitive position, results of operations, ~~and~~cash flows or financial ~~position.~~

condition.

Item 2 – Unregistered Sales of Securities and Use of Proceeds

Issuer Purchases of Equity Securities

At ~~June 30, 2017, the Company had authorization to maintain up to 39.0 million shares of treasury stock under the stock repurchase program as approved by~~On February 14, 2018, the Board of Directors ~~on September 21, 2016. During the quarter ended~~ ~~June 30, 2017~~,of the Company ~~had~~approved an increase in the ~~following activity with respect~~authorized number of shares of common stock that may be repurchased under the share repurchase program for a total remaining authorization of $500.0 million of shares of common stock. On April 25, 2018, the Board of Directors of the Company approved a further increase in the share repurchase authorization to ~~this repurchase program:~~

a total of $1.0 billion. Additional share repurchases, if any, will 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 deems appropriate based upon prevailing market and business conditions and other factors.

(in millions, except per share amounts)

Period

Total Number
of Shares
Purchased

Average Price
Paid Per
Share

Total Cost
of Shares
Purchased

Number of
Shares that
May be Purchased
Under the Stock
Repurchase
Program

April 1, 2017 to April 30, 2017 0.8
$ 62.68
$ 49.9
3.8
May 1, 2017 to May 31, 2017 0.2
63.69
15.7
3.8
June 1, 2017 to June 30, 2017 —
—
—
3.8
1.0
$ 62.92
$ 65.6



(in millions, except per share amounts) Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Cost of Shares Purchased		Dollar Value of Shares that May be Purchased Under the Stock Repurchase Program

April 1, 2018 to April 30, 2018	—	$	—	$	—	$	1,000.0
May 1, 2018 to May 31, 2018	4.3	46.77		200.2		799.8
June 1, 2018 to June 30, 2018	1.1	42.79		50.0		749.8
	5.4	$	45.92	$	250.2

Item 6 – Exhibits



Exhibit Number		Description
10.1		Credit Agreement, dated as of July 27, 2018, among DENTSPLY SIRONA Inc., JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Syndication Agent, Commerzbank AG, New York Branch, MUFG Bank, Ltd., Wells Fargo Bank, National Association, Unicredit Bank AG, New York Branch and TD Bank, N.A., as Co-Documentation Agents, and the several lenders party thereto (1)
10.2		Employee Stock Purchase Plan Agreement, dated May 23, 2018 (Filed herewith)
10.3		Non-Employee Director Compensation Policy, dated June 26, 2018 (Filed herewith)
31.1		Section 302 Certification Statement Chief Executive Officer
31.2		Section 302 Certification Statement Chief Financial Officer
32		Section 906 Certification Statements
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
(1) Incorporated by reference to Exhibit 10.1 in the Company’s Form 8-K dated July 30, 2018, File No. 0-16211.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

DENTSPLY SIRONA Inc.



/s/	~~Jeffrey T. Slovin~~Donald M. Casey, Jr.	August ~~9, 2017~~7, 2018
	~~Jeffrey T. Slovin~~Donald M. Casey, Jr.	Date
	Chief Executive Officer



/s/	~~Ulrich Michel~~Nicholas W. Alexos	August ~~9, 2017~~7, 2018
	~~Ulrich Michel~~Nicholas W. Alexos	Date
	Executive Vice President and
	Chief Financial Officer

6073



(in millions)
		December 31, 2016		Classification			December 31, 2016
	Deferred Tax Assets	As Reported		Adjustment			Revised
Consolidated Balance Sheet Item	and Liabilities	Balance		As Revised			Balance
Prepaid expenses and other current assets	Current DTAs	$	345.6	$	(139.1	)	$	206.5
Other noncurrent assets, net	Noncurrent DTAs	64.1		38.8			102.9
Income taxes payable	Current DTLs	64.2		(3.4		)	60.8
Deferred income taxes	Noncurrent DTLs	848.6		(96.9		)	751.7



	Pro forma - unaudited
	Three Months Ended		Six Months Ended
(in millions, except per share amount)	2016		2016

Net sales	$	1,022.0	$	1,962.2
Net income attributable to Dentsply Sirona	$	141.2	$	234.9
Diluted earnings per common share	$	0.59	$	0.99



Other Postemployment Benefit Plans	Three Months Ended				Six Months Ended
(in millions)	2017		2016		2017		2016

Service cost	$	0.1	$	0.1	$	0.2	$	0.2
Interest cost	0.1		0.1		0.2		0.3
Amortization of net actuarial loss	—		0.1		0.1		0.1
Net periodic benefit cost	$	0.2	$	0.3	$	0.5	$	0.6