Dentsply Sirona's officers probed for fiduciary breach

Financial Statements

A Louisiana law firm is investigating whether the officers and directors of dental equipment manufacturer Dentsply Sirona breached their fiduciary duties to its shareholders or otherwise violated state or federal laws.

Charles Foti Jr., a partner at the law firm Kahn Swick & Foti in New Orleans, announced in a February 24 press release that the firm initiated an investigation into Dentsply Sirona, a Charlotte, NC-based company that makes dental x-ray equipment and drills.

The investigation follows the sudden termination of the manufacturer's CEO Donald Casey that was "effective immediately" and made public in April 2022, according to the press release. In September, Simon Campion was named Dentsply Sirona's new CEO and president.

In May 2022, Dentsply Sirona disclosed an ongoing investigation by its audit and finance committee, outside counsel, and a forensic accounting firm into whether "former and current members of senior management" used improper means to achieve executive compensation goals and other matters relating to financial reporting, according to the release.

The company did not file its U.S. Securities and Exchange Commission (SEC) Form 10-Q in a timely manner for the first quarter of 2022, according to the release. Form 10-Q is a financial performance report that publicly listed companies are required to file with the SEC. A 10-Q filing provides unaudited financial statements from the previous financial quarter and an overview of a company's financial position.

Foti, who is a former Louisiana attorney general, asserts that securities class action lawsuits have been filed against Dentsply Sirona for failing to disclose material information and violating U.S. securities laws. These cases remain pending.

For fiscal year 2022, the company reported on February 28 in a press release that net sales totaled approximately $3.9 million. The figure is a 7% decrease from the $4.2 million in net sales it reported in 2021. The company reported a net loss of $950 million in 2022. In the prior year, Dentsply Sirona reported a net income of $411 million, according to the company's press release.

The company noted that it spent $61 million on its internal financial investigation. Of these total costs, $31 million was paid for professional service fees and $30 million covered the cost of turnover and other employee-related selling, general, and administrative expenses, according to the release.

Roughly a week earlier, Dentsply Sirona announced cost-cutting measures. Its board of directors approved an organizational restructuring plan, which included laying off up to 10% of its employees, that was expected to achieve at least $200 million in savings over the next 18 months, according to a company press release dated February 16. In 2021, the company reported having about 15,000 employees, which means up to 1,500 people could lose their jobs.

The restructuring, which aims to improve operational performance and shareholder value creation, includes the following measures:

  • Implementing five global business units that will be charged with driving enterprise integration and aligning the company's product portfolio with its growth strategy
  • Commencing central functions and infrastructure optimization to support the company's efficiency
  • Creating a senior vice president of quality and regulatory position in which the individual will oversee the quality and regulatory functions within management and the entire organization
  • Simplifying the management structure to align the company with industry best practices

In connection with its restructuring plan, Dentsply Sirona expects to incur up to $165 million in nonrecurring charges, the majority of which will be expensed in 2023. The cost savings are expected to fund growth investments in 2023 and beyond across areas like global commercial organization, information technology, and compliance.

Additionally, Dentsply Sirona is reviewing its product offering on a stock-keeping unit basis to inform decisions that can be made concerning its portfolio and to deliver higher returns, according to the company.

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