DENTSPLY SIRONA(XRAY) - 2025 Q2 - Quarterly Report

PART I Item 1 – Financial Statements (Unaudited) This section presents the unaudited interim consolidated financial statements for DENTSPLY SIRONA Inc. and its subsidiaries, including statements of operations, comprehensive income (loss), balance sheets, changes in equity, and cash flows, along with detailed notes explaining the basis of presentation, accounting policies, segment information, and other financial disclosures Consolidated Statements of Operations This section details the company's financial performance, including net sales, gross profit, operating income, and net income for the specified periods Consolidated Statements of Operations (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------------- | :------------------ | :------------------ | :------------------- | :------- | | Net sales | $936 | $984 | $(48) | -4.9% | | Gross profit | $490 | $511 | $(21) | -4.1% | | Operating (loss) income | $(128) | $50 | $(178) | -356.0% | | Net (loss) income | $(44) | $(4) | $(40) | -1000.0% | | Net (loss) income attributable to Dentsply Sirona | $(45) | $(4) | $(41) | -1025.0% | | Basic (loss) earnings per common share | $(0.22) | $(0.02) | $(0.20) | -1000.0% | | Diluted (loss) earnings per common share | $(0.22) | $(0.02) | $(0.20) | -1000.0% | Consolidated Statements of Operations (Six Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | % Change | | :----------------------------------- | :------------------ | :------------------ | :------------------- | :------- | | Net sales | $1,815 | $1,937 | $(122) | -6.3% | | Gross profit | $956 | $1,017 | $(61) | -6.0% | | Operating (loss) income | $(65) | $92 | $(157) | -170.7% | | Net (loss) income | $(25) | $13 | $(38) | -292.3% | | Net (loss) income attributable to Dentsply Sirona | $(25) | $14 | $(39) | -278.6% | | Basic (loss) earnings per common share | $(0.13) | $0.07 | $(0.20) | -285.7% | | Diluted (loss) earnings per common share | $(0.13) | $0.07 | $(0.20) | -285.7% | Consolidated Statements of Comprehensive Income (Loss) This section presents the total comprehensive income or loss, including net income and other comprehensive income items like foreign currency translation adjustments Consolidated Statements of Comprehensive Income (Loss) (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :------------------------------------------------ | :------------------ | :------------------ | :------------------- | | Net (loss) income | $(44) | $(4) | $(40) | | Foreign currency translation gain (loss) | $106 | $(10) | $116 | | Net (loss) gain on derivative financial instruments | $(88) | $(1) | $(87) | | Total other comprehensive income (loss), net of tax | $18 | $(11) | $29 | | Total comprehensive (loss) income | $(26) | $(15) | $(11) | | Total comprehensive (loss) income attributable to Dentsply Sirona | $(27) | $(15) | $(12) | Consolidated Statements of Comprehensive Income (Loss) (Six Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :------------------------------------------------ | :------------------ | :------------------ | :------------------- | | Net (loss) income | $(25) | $13 | $(38) | | Foreign currency translation gain (loss) | $193 | $(72) | $265 | | Net (loss) gain on derivative financial instruments | $(104) | $31 | $(135) | | Total other comprehensive income (loss), net of tax | $89 | $(41) | $130 | | Total comprehensive (loss) income | $64 | $(28) | $92 | | Total comprehensive (loss) income attributable to Dentsply Sirona | $64 | $(27) | $91 | Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Consolidated Balance Sheets (Selected Items) | Asset/Liability/Equity | June 30, 2025 (in millions) | December 31, 2024 (in millions) | Change (in millions) | | :-------------------------------- | :--------------------------- | :------------------------------ | :------------------- | | Cash and cash equivalents | $359 | $272 | $87 | | Total Current Assets | $1,966 | $1,746 | $220 | | Total Assets | $6,069 | $5,753 | $316 | | Total Current Liabilities | $1,166 | $1,589 | $(423) | | Long-term debt | $2,218 | $1,586 | $632 | | Total Liabilities | $4,108 | $3,810 | $298 | | Total Dentsply Sirona Equity | $1,960 | $1,942 | $18 | | Total Equity | $1,961 | $1,943 | $18 | Consolidated Statements of Changes in Equity This section outlines the changes in the company's equity components over the reporting periods, including net loss, comprehensive income, and dividends - For the six months ended June 30, 2025, Dentsply Sirona's total equity increased by $18 million to $1,961 million. Key changes included a net loss of $45 million, other comprehensive income of $18 million, stock-based compensation expense of $9 million, and cash dividends declared of $32 million[16] - For the six months ended June 30, 2024, total equity increased by $3,064 million. Key changes included a net loss of $4 million, other comprehensive loss of $11 million, stock-based compensation expense of $12 million, treasury shares purchased of $152 million, and cash dividends declared of $34 million[17] Consolidated Statements of Cash Flows This section reports on the cash generated and used by the company across its operating, investing, and financing activities Consolidated Statements of Cash Flows (Six Months Ended June 30) | Cash Flow Activity | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :-------------------------------- | :------------------ | :------------------ | :------------------- | | Net cash provided by operating activities | $55 | $233 | $(178) | | Net cash used in investing activities | $(51) | $(93) | $42 | | Net cash provided by (used in) financing activities | $55 | $(185) | $240 | | Effect of exchange rate changes on cash and cash equivalents | $28 | $(10) | $38 | | Net increase (decrease) in cash and cash equivalents | $87 | $(55) | $142 | | Cash and cash equivalents at end of period | $359 | $279 | $80 | Notes to Unaudited Interim Consolidated Financial Statements This section provides detailed explanations and additional information supporting the interim consolidated financial statements NOTE 1 – Business and Basis of Presentation This note describes the company's business and the accounting principles used in preparing the interim financial statements - The unaudited interim consolidated financial statements are prepared in accordance with US GAAP and SEC rules, including normal recurring adjustments. They should be read in conjunction with the 2024 Form 10-K[20] - The Company adopted ASU No. 2023-09 (Income Tax Disclosures) as of January 1, 2025, impacting annual disclosures but not results of operations, financial position, or cash flows[22] - The Company's business is subject to seasonality, with sales generally stronger in the second and fourth quarters and weaker in the first and third quarters due to factors like dental tradeshows, patient traffic, tax planning, and holidays[25] NOTE 2 – Revenue Recognition This note details the company's policies for recognizing revenue from its various product categories and geographic regions - Revenues are primarily derived from the sale of dental equipment and dental/healthcare consumable products, measured as the consideration expected in exchange for goods/services[26] Net Sales by Product Category (Three Months Ended June 30) | Product Category | 2025 (in millions) | 2024 (in millions) | | :-------------------------- | :------------------ | :------------------ | | Connected Technology Solutions | $243 | $253 | | Essential Dental Solutions | $387 | $375 | | Orthodontic and Implant Solutions | $226 | $276 | | Wellspect Healthcare | $80 | $80 | | Total net sales | $936 | $984 | Net Sales by Geographic Region (Three Months Ended June 30) | Geographic Region | 2025 (in millions) | 2024 (in millions) | | :------------------ | :------------------ | :------------------ | | United States | $293 | $360 | | Europe | $404 | $387 | | Rest of World | $239 | $237 | | Total net sales | $936 | $984 | - Deferred revenue, primarily from advanced billings for orthodontic aligner treatments and loyalty points, totaled $109 million (Accrued liabilities) and $36 million (Other noncurrent liabilities) at June 30, 2025. The Company recognized $29 million and $70 million of previously deferred net sales during the three and six months ended June 30, 2025, respectively[29] NOTE 3 – Stock-Based Compensation This note outlines the expenses related to stock-based compensation plans, categorized by their impact on the cost of products sold and operating expenses Stock-Based Compensation Expense (Three Months Ended June 30) | Expense Category | 2025 (in millions) | 2024 (in millions) | | :-------------------------------- | :------------------ | :------------------ | | Cost of products sold | $0 | $1 | | Selling, general, and administrative expense | $8 | $10 | | Research and development expense | $1 | $1 | | Total stock-based compensation expense | $9 | $12 | Stock-Based Compensation Expense (Six Months Ended June 30) | Expense Category | 2025 (in millions) | 2024 (in millions) | | :-------------------------------- | :------------------ | :------------------ | | Cost of products sold | $1 | $2 | | Selling, general, and administrative expense | $17 | $20 | | Research and development expense | $1 | $1 | | Total stock-based compensation expense | $19 | $23 | NOTE 4 – Comprehensive Loss This note details the components of accumulated other comprehensive loss, including foreign currency translation adjustments and derivative financial instruments - Accumulated other comprehensive loss (AOCI), net of tax, decreased from $(730) million at December 31, 2024, to $(641) million at June 30, 2025, primarily due to a $106 million foreign currency translation gain and an $(88) million net loss on derivative financial instruments for the three months ended June 30, 2025[32][33] - Cumulative foreign currency translation adjustments included translation losses of $275 million at June 30, 2025, a significant improvement from $552 million at December 31, 2024[34] NOTE 5 – (Loss) Earnings Per Common Share This note presents the basic and diluted loss or earnings per common share, reflecting the company's profitability on a per-share basis Basic and Diluted (Loss) Earnings Per Common Share (Three Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------------ | :---- | :---- | | Net (loss) income attributable to Dentsply Sirona (in millions) | $(45) | $(4) | | Weighted average common shares outstanding (in millions) | 199.3 | 205.6 | | Basic (loss) earnings per common share | $(0.22) | $(0.02) | | Diluted (loss) earnings per common share | $(0.22) | $(0.02) | Basic and Diluted (Loss) Earnings Per Common Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------------ | :---- | :---- | | Net (loss) income attributable to Dentsply Sirona (in millions) | $(25) | $14 | | Weighted average common shares outstanding (in millions) | 199.2 | 206.5 | | Basic (loss) earnings per common share | $(0.13) | $0.07 | | Diluted (loss) earnings per common share | $(0.13) | $0.07 | NOTE 6 – Segment Information This note provides financial data for the company's operating segments, including net sales and adjusted operating income - The Company operates in four reportable segments: Connected Technology Solutions, Essential Dental Solutions, Orthodontic and Implant Solutions, and Wellspect Healthcare[37] Segment Net Sales (Three Months Ended June 30) | Segment | 2025 (in millions) | 2024 (in millions) | | :-------------------------------- | :------------------ | :------------------ | | Connected Technology Solutions | $243 | $253 | | Essential Dental Solutions | $387 | $375 | | Orthodontic and Implant Solutions | $226 | $276 | | Wellspect Healthcare | $80 | $80 | | Total Net Sales | $936 | $984 | Segment Adjusted Operating Income (Three Months Ended June 30) | Segment | 2025 (in millions) | 2024 (in millions) | | :-------------------------------- | :------------------ | :------------------ | | Connected Technology Solutions | $12 | $3 | | Essential Dental Solutions | $151 | $125 | | Orthodontic and Implant Solutions | $45 | $42 | | Wellspect Healthcare | $25 | $24 | NOTE 7 – Inventories This note details the composition of the company's inventories, including raw materials, work-in-process, and finished goods Inventories, Net (in millions) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Raw materials and supplies | $198 | $172 | | Work-in-process | $88 | $72 | | Finished goods | $389 | $320 | | Inventories, net | $675 | $564 | - The Company's inventory reserve increased from $98 million at December 31, 2024, to $103 million at June 30, 2025[50] NOTE 8 – Restructuring and Other Costs This note outlines the costs associated with the company's restructuring plans, including workforce reductions and operational improvements Total Restructuring and Other Costs (in millions) | Period | 2025 | 2024 | | :-------------------------- | :---- | :---- | | Three Months Ended June 30 | $4 | $23 | | Six Months Ended June 30 | $14 | $27 | - The 2024 Plan, approved on July 29, 2024, aims to improve operational performance and stockholder value, anticipating a 2% to 4% global workforce reduction and expected to be substantially completed by end of 2025. $30 million in restructuring charges have been incurred since inception, primarily for employee transition and severance[52] - The 2023 Plan's annual cost savings target of $200 million has been substantially met, with $86 million in restructuring charges incurred since inception, primarily for employee transition, severance, and facility closure costs[53] NOTE 9 – Financial Instruments and Derivatives This note describes the company's use of derivative financial instruments to manage foreign currency and interest rate risks - The Company uses derivative financial instruments to hedge foreign currency exchange rates and interest rates, including hedges of net investments (foreign exchange forward contracts, cross currency basis swaps) and fair value hedges (interest rate swaps)[55][57][61] Aggregate Notional Amounts of Derivative Instruments (June 30, 2025) | Derivative Type | Aggregate Notional Amount (in millions) | Amount Maturing within 12 Months (in millions) | | :------------------------------------------------ | :------------------------------------- | :-------------------------------------------- | | Hedges of Net Investments: Foreign exchange forward contracts | $898 | $220 | | Hedges of Net Investments: Cross currency basis swaps | $315 | $0 | | Fair Value Hedges: Interest rate swaps | $150 | $0 | | Derivative Instruments not Designated as Hedges: Foreign exchange forward contracts | $572 | $572 | - On July 1, 2025, the Company entered into $1.1 billion in USD to CHF cross-currency basis swaps designated as hedges of net investments, with maturities ranging from 5 to 10 years[63][64] NOTE 10 – Fair Value Measurement This note provides information on the fair value of the company's financial assets and liabilities, including debt and derivative instruments - The estimated fair value of the Company's total debt was $2,329 million at June 30, 2025, compared to a carrying value of $2,402 million. This is considered a Level 2 fair value measurement[73] Financial Assets and Liabilities Measured at Fair Value (June 30, 2025) | Category | Total (in millions) | Level 2 (in millions) | | :-------------------------- | :------------------ | :------------------ | | Assets: Foreign exchange forward contracts | $4 | $4 | | Liabilities: Interest rate swaps | $15 | $15 | | Liabilities: Cross currency basis swaps | $11 | $11 | | Liabilities: Foreign exchange forward contracts | $99 | $99 | NOTE 11 – Income Taxes This note explains the company's effective income tax rates and the factors influencing them for the reporting periods Effective Tax Rates | Period | 2025 | 2024 | | :-------------------------- | :---- | :---- | | Three Months Ended June 30 | 71.2% | 114.4% | | Six Months Ended June 30 | 76.9% | 81.2% | - The decrease in the effective tax rate is primarily due to additional impairments recorded in the three and six months ended June 30, 2025[76] NOTE 12 – Financing Arrangements This note details the company's credit facilities, debt issuances, and compliance with debt covenants - The Company has a $700 million multi-currency revolving facility expiring May 2028 and a $700 million commercial paper program, with no outstanding borrowings under either at June 30, 2025[77][79] - On March 19, 2025, the Company entered into a $435 million 364-day Bridge Loan Facility, which was fully repaid on June 12, 2025, using proceeds from the issuance of $550 million aggregate principal amount of 8.375% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2055[78] - Debt covenants were amended on June 3, 2025, to establish a senior debt to capitalization ratio limit of 0.6 and increase the maximum consolidated leverage ratio to 0.65. The Company was in compliance with these covenants at June 30, 2025[80] NOTE 13 – Goodwill and Intangible Assets This note discusses goodwill and intangible asset impairment charges, their causes, and the remaining carrying values by segment - The Company recorded a pre-tax goodwill impairment charge of $156 million for the Implant & Prosthetic Solutions reporting unit within the Orthodontic and Implant Solutions segment as of June 30, 2025. This was driven by tariffs and lower projected volumes due to competitive pressures[83] - Pre-tax intangible asset impairment charges of $79 million were recorded as of June 30, 2025, including $64 million in Connected Technology Solutions and $15 million in Implant & Prosthetic Solutions. This was due to tariffs reducing royalty rates and lower volumes for premium equipment and implant products[84] Goodwill, Net by Reportable Segment (in millions) | Segment | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :------------------ | :------------------ | | Connected Technology Solutions | $0 | $0 | | Essential Dental Solutions | $829 | $860 | | Orthodontic and Implant Solutions | $503 | $376 | | Wellspect Healthcare | $265 | $292 | | Total Goodwill, net | $1,597 | $1,528 | - Remaining goodwill for the Implant & Prosthetic Solutions reporting unit was $376 million at June 30, 2025. Fair values of certain indefinite-lived intangible assets in Connected Technology Solutions and Orthodontic and Implant Solutions segments continued to approximate carrying values, with a risk of future material impairments if key assumptions decline[85][86] NOTE 14 – Commitments and Contingencies This note outlines the company's legal proceedings, tax examinations, and non-cancelable purchase commitments - A putative class action filed in 2018 regarding alleged securities law violations related to the 2016 merger and distributor inventory was preliminarily settled for $84 million in January 2025, with an offsetting insurance receivable of approximately $78 million[88] - Multiple securities litigation and stockholder derivative suits (e.g., City of Miami, San Antonio Fire and Police Pension Fund, Presura, Snee, Manfre, North Collier, O'Connor, Andreotti) are ongoing, alleging false/misleading statements regarding revenue recognition, distributor rebate programs, and the performance of the Byte aligners business. Several derivative litigations have been consolidated and stayed[89][90][91][92][93][94][95][96][97][98][99][100][101] - An arbitration claim by Mr. Carlo Gobbetti for €28 million was rejected by the arbitral tribunal on July 22, 2024, but Mr. Gobbetti appealed the ruling to the Court of Appeals of Milan on December 2, 2024. A final hearing is scheduled for February 11, 2026[102][103][104] - The IRS is examining the Company's U.S. federal income tax returns for 2015 and 2016, proposing an adjustment related to a 2016 internal reorganization and stock redemption that could result in additional federal income taxes and loss of foreign tax credits. The Company is contesting this[107] Non-Cancelable Purchase Commitments (in millions) | Year | Amount | | :--- | :----- | | 2025 | $94 | | 2026 | $107 | | 2027 | $66 | | 2028 | $43 | | Total | $310 | Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, including an overview of its business segments, the impact of macroeconomic and geopolitical factors, detailed analysis of net sales, gross profit, operating expenses, and segment performance, as well as critical accounting estimates, liquidity, capital resources, and restructuring plans Company Profile This section introduces DENTSPLY SIRONA Inc. as a leading global manufacturer of professional dental products and technologies - DENTSPLY SIRONA Inc. is the world's largest diversified manufacturer of professional dental products and technologies, with a 138-year history of innovation. It develops, manufactures, and markets comprehensive solutions including dental equipment, products, and healthcare consumable products[119] Business Overview This section describes the company's reportable segments and discusses the impact of global economic and geopolitical factors on its operations - The Company's four reportable segments are: Connected Technology Solutions (dental technology, equipment, CAD/CAM), Essential Dental Solutions (endodontic, restorative, preventive consumables), Orthodontic and Implant Solutions (digital implant systems, aligners), and Wellspect Healthcare (continence care solutions)[121][122][123][124] - Global economic conditions, including inflation, trade policies, and geopolitical events, are expected to weigh on growth. Germany, representing 11% of sales, experienced a recession in 2023-2024, impacting equipment sales[125][126] - Tariffs, particularly from the U.S. on goods from Europe and other specified nations, could increase import costs. The Company is implementing competitive pricing and evaluating sourcing options to mitigate impacts[127][128] - Geopolitical conflicts in the Middle East and Russia-Ukraine have not materially impacted overall operations, but Turkey's import restrictions on Israeli-made products affect the Implant & Prosthetic Solutions unit. Restrictions on cash repatriation from Russia continue to pose challenges[131][132][133][134] - The Company issued a one-year notice of non-renewal for its non-exclusive distribution agreements with Patterson Companies, Inc. for dental equipment in the U.S. and Canada, with ongoing discussions for new agreements[135] Results of Operations (Three and Six Months Ended June 30, 2025 vs. 2024) This section analyzes the company's financial performance, including net sales, gross profit, and operating expenses, for the three and six months ended June 30 Net Sales Performance (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | $ Change | % Change | Constant Currency % Change | | :-------------------------- | :------------------ | :------------------ | :------- | :------- | :------------------------- | | Total Net Sales | $936 | $984 | $(48) | -4.9% | -6.7% | | Connected Technology Solutions | $243 | $253 | $(10) | -3.8% | -5.9% | | Essential Dental Solutions | $387 | $375 | $12 | 2.9% | 1.1% | | Orthodontic and Implant Solutions | $226 | $276 | $(50) | -18.1% | -19.4% | | Wellspect Healthcare | $80 | $80 | $0 | 1.2% | -2.5% | - Overall net sales decreased on a constant currency basis for both periods, primarily due to lower volumes in Orthodontic and Implant Solutions (suspension of Byte sales) and reduced CAD/CAM, imaging, and implants/prosthetics products, partially offset by growth in Essential Dental Solutions[140] Gross Profit and Operating Expenses (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | $ Change | % Change | | :----------------------------------- | :------------------ | :------------------ | :------- | :------- | | Gross profit | $490 | $511 | $(21) | -4.0% | | Gross profit as a percentage of net sales | 52.4% | 51.9% | 50 bps | - | | SG&A expenses | $342 | $399 | $(57) | -14.5% | | R&D expenses | $37 | $41 | $(4) | -8.6% | | Goodwill and intangible asset impairments | $235 | $0 | $235 | NM | | Restructuring and other costs | $4 | $21 | $(17) | NM | - SG&A expenses decreased due to lower headcount and advertising costs for Byte products, as well as restructuring and cost-saving initiatives. R&D expenses decreased as the Company maintains a disciplined investment approach, targeting at least 4% of annual net sales[164][165] - Interest expense, net, increased for both periods due to a higher average carrying balance of total borrowings[178] - The effective income tax rate decreased for both periods, primarily driven by additional impairment charges recorded in 2025[181] Critical Accounting Estimates This section discusses key accounting estimates, particularly those related to goodwill and intangible asset impairment testing - Goodwill and indefinite-lived intangible assets are tested for impairment annually (April 1) or more frequently if indicators arise. The Company recorded a $156 million goodwill impairment and $79 million intangible asset impairment as of June 30, 2025, primarily due to tariffs, lower projected volumes, and competitive pressures[183][184][185][186] - Fair values of certain indefinite-lived intangible assets in Connected Technology Solutions and Orthodontic and Implant Solutions segments continued to approximate carrying values at June 30, 2025, indicating a risk of additional material impairments if key assumptions (e.g., discount rate, revenues, margins) decline further[187] Liquidity and Capital Resources This section analyzes the company's cash flow activities, debt levels, and share repurchase authorization - Net cash provided by operating activities decreased by $178 million for the six months ended June 30, 2025, primarily due to lower net sales and changes in working capital (higher accounts receivable and inventory build)[189] - Net cash used in investing activities decreased by $42 million, driven by lower capital expenditures ($35 million decrease) and reduced cash paid on derivative settlements[190] - Net cash provided by financing activities increased by $240 million, mainly due to proceeds from the issuance of $550 million in Notes, partially offset by repayments of the Bridge Loan Facility and commercial paper[191][192] Total Net Debt to Total Capitalization Ratio | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------- | :--------------------------- | :------------------------------ | | Net debt | $2,043 | $1,863 | | Total equity | $1,961 | $1,943 | | Total capitalization | $4,004 | $3,806 | | Total net debt to total capitalization ratio | 51.0% | 48.9% | - The Company had $1.19 billion remaining authorization for share repurchases at June 30, 2025, following a $1.0 billion increase approved in November 2023[193] Restructuring Plans This section provides updates on the company's 2024 and 2023 restructuring plans, including cost savings targets and incurred charges - The 2024 Plan, approved July 29, 2024, aims for $80 million to $100 million in annual cost savings and a 2% to 4% global workforce reduction, with $30 million in charges incurred by June 30, 2025[200][201] - The 2023 Plan's $200 million annual cost savings target has been substantially met, with $86 million in restructuring charges and $20 million in other non-recurring costs incurred through 2024[202] New Accounting Pronouncements This section directs readers to Note 1 for details on recently adopted and not yet adopted accounting pronouncements - Refer to Note 1 for a discussion of recently adopted and not yet adopted accounting pronouncements[204] Item 3 – Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the Company's quantitative and qualitative disclosures about market risk since its 2024 Form 10-K filing - No material changes to market risk disclosures from the 2024 Form 10-K[205] Item 4 – Controls and Procedures This section details the effectiveness of the Company's disclosure controls and procedures and outlines changes in internal control over financial reporting, particularly concerning the ongoing implementation of a new ERP system - The Company's disclosure controls and procedures were deemed effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[206] - The Company is implementing a new global ERP system in phases over several years, which necessitates ongoing updates to internal control over financial reporting to accommodate business process and accounting procedure modifications[207][208] PART II Item 1 – Legal Proceedings This section refers to Note 14 of the financial statements for detailed information on the Company's legal proceedings - Details on legal proceedings are provided in Note 14, Commitments and Contingencies, of the Unaudited Consolidated Financial Statements[209] Item 1A – Risk Factors This section highlights material changes to risk factors, specifically focusing on the substantial goodwill and indefinite-lived intangible asset impairment charges recognized in the quarter ended June 30, 2025, and the potential for future impairments - The Company recognized substantial goodwill and indefinite-lived intangible asset impairment charges in the quarter ended June 30, 2025, totaling $156 million for goodwill and $79 million for intangible assets[211][213][214] - These impairments were primarily driven by the impact of tariffs and lower projected volumes due to competitive pressures in the U.S. and European markets, leading to reduced forecasted revenues and operating margins[213][214] - There is a risk of future impairment charges if actual financial results are lower than forecasts, valuation assumptions change adversely, equity valuations decline, interest rates increase, or the use of intangible assets changes[218] Item 2 – Unregistered Sales of Securities and Use of Proceeds This section reports on the Company's share repurchase program, noting no repurchases during the quarter and the remaining authorization - No repurchases of common shares were made under the stock repurchase program during the three months ended June 30, 2025[219] - As of June 30, 2025, the Company had $1.19 billion of authorization remaining for share repurchases under the program approved in November 2023[219] Item 5 – Other Information This section provides disclosure regarding Rule 10b5-1 trading plans - None of the Company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[220] Item 6 – Exhibits This section lists all exhibits filed with the Form 10-Q, including various agreements, certifications, and XBRL documents - The exhibits include Note Purchase Agreement Amendments, a Second Supplemental Indenture, Form of Junior Subordinated Notes, an Amendment to the 2024 Omnibus Incentive Plan, Offer Letter, First Amendment to Credit Agreement, Employment Agreement, Separation and Release of Claims Agreement, and Section 302 and 906 Certification Statements[221] Signatures This section contains the required signatures of the Company's authorized officers, certifying the filing of the report - The report is signed by Daniel T. Scavilla, President and Chief Executive Officer, and Matthew E. Garth, Executive Vice President and Chief Financial Officer, on August 7, 2025[227]