Dentsply Sirona logoDentsply Sirona (Nasdaq: XRAY) announced today that its board’s audit committee found no evidence of intentional wrongdoing or fraud on the part of its former CEO or CFO.

The dental tech company fired former CEO Don Casey in April. Previous CFO Jorge Gomez soon left his new job at Moderna. Former BD executive Simon Campion is now CEO, with former Integra Lifesciences COO Glenn Coleman joining as CFO in September.

Dentsply Sirona had already disclosed to the SEC that it was investigating the use of incentives to sell products to distributors during the third and fourth quarters of 2021. Even though the company board’s internal inquiry is over, the SEC continues to look into matters at the company, Dentsply Sirona said in a Form 8-K filed Oct. 29.

Though the board’s investigation found no evidence of intentional wrongdoing or fraud by Casey or Gomez, it did find that they violated the company’s code of ethics and business conduct.

The investigation found instances in which the company’s distributors in North America were offered incremental incentives, including extended payment terms, to purchase products in order for the company to attempt to meet certain internal sales targets in the third and fourth quarters of 2021, according to the Form 8-K.  The incentives were offered in conjunction with net sales transactions amounting to roughly $38 million and $70 million in the third and fourth quarters of 2021, respectively.

Dentsply Sirona’s Form 8-K goes on to say:

“The North America investigation noted potential omissions in public disclosures made by the company regarding the use of these incentives or their potential future impacts in the third and fourth quarters of 2021. However, the North America Investigation did not find evidence that the former chief executive officer and former chief financial officer specifically directed the company’s use of incentives to achieve executive compensation targets in 2021.”

Meanwhile, the internal investigation discovered accounting problems with Dentsply Sirona’s China operations. It ended up concluding Dentsply Sirona employees in China processed returns and/or exchanges that were not in accordance with the return and/or exchange provisions contained in existing distributor agreements and sales contracts in that country.

Dentsply Sirona plans to restate its Q3 2021 quarterly report and 2021 annual report.

“The Audit and Finance Committee’s thorough process conducted along with independent counsel and advisors resulted in findings and conclusions which have the full support of the board,” said Eric Brandt, chairperson of the Dentsply Sirona Board of Directors.

“The company has already taken decisive and meaningful steps to address the findings and is now implementing enhancements and remedial measures to ensure these issues are thoroughly resolved,” Brandt said in a news release today.  “With a management team that is committed to accountability, operational rigor and integrity, coupled with the remedial measures, the entire Dentsply Sirona organization can move forward focused on delivering long-term growth and value creation.”

A more than $1 billion goodwill impairment

In other news today, Dentsply Sirona announced that it expects to record a $1–1.3 billion goodwill impairment charge for the first nine months of 2022. The charge is due primarily to macroeconomic factors such as higher cost of capital, cost inflation, unfavorable foreign currency impacts, and increased supply chain costs. The economic and supply chain situation is resulting in reduced forecasted revenues, lower operating margins and reduced expectations for future cash flows, according to the company.

On a preliminary basis, Dentsply Sirona expects third quarter 2022 net sales will be roughly $947 million, a slight decline in organic sales versus the prior year. Based on expected demand trends and foreign exchange impacts, the company expects sequential sales to decline in the low-single digits in the fourth quarter of 2022.

Dentsply Sirona will announce its full third quarter 2022 financial results on or around Nov. 9.