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Dentsply Sirona Earned $7 Million Less Than It Reported In 2020

Dental products firm says it has adjusted 2020 results but we see no evidence of the change.

March 1, 2022

Dentsply Sirona (XRAY), a dental products and technology company, acknowledges it overstated pre-tax and net income in 2020. The revelation was made in the company’s latest 10-K, in which Dentsply blamed the error on prior year accruals:

“Additionally, results for the year ended December 31, 2020, included adjustments to accruals from prior years which resulted in a net $9 million and $7 million decrease to pre-tax income and net income respectively in that period.”

Besides providing no detail regarding the accrual adjustments, Dentsply does not appear to have actually adjusted 2020’s financial results accordingly. The latest annual report shows 2020 pre-tax income of ($60) and net income of ($83) which is no different from the previous year’s annual report.

DuDil has contacted Dentsply and requested an explanation as the discrepancy appears significant; the adjustments are the equivalent of 15% of Dentsply’s 2020 pre-tax income and 8.4% of net income.

Since the company has experienced problems recently appropriately accruing for certain items, investors might be interested to know it may also have an impact on revenue recognition. Dentsply cites the accruals made in relation to sales rebates as a matter requiring significant judgment and notes:

“The accruals for these rebate programs are updated as actual results and updated forecasts impact the estimated achievement for customers within the rebate programs.”

Separately, Dentsply changed from LIFO to FIFO inventory accounting in 2021, artificially boosting gross margin in the short term. The change, which was made in the second quarter, reduced COGS by approximately $4 million, adding approximately 16-basis points to gross profit.

Related: ALGN, SDC, HSIC

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