Quarterly Report (10-q)

Date : 11/07/2019 @ 12:19PM
Source : Edgar (US Regulatory)
Stock : DENTSPLY SIRONA Inc (XRAY)
Quote : 57.37  0.05 (0.09%) @ 1:00AM
After Hours
Last Trade
Last $ 57.37 ◊ 0.00 (0.00%)

Quarterly Report (10-q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
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.)
13320 Ballantyne Corporate Place, Charlotte, North Carolina
28277-3607
(Address of principal executive offices)
(Zip Code)
(844) 848-0137
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $.01 per share XRAY The Nasdaq Stock Market LLC

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   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes   x No   


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.

Large accelerated filer  x
Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

Emerging growth company  
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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Yes   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 November 5, 2019, DENTSPLY SIRONA Inc. had 222,413,682 shares of Common Stock outstanding.



DENTSPLY SIRONA Inc.

TABLE OF CONTENTS
 

2


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 September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net sales $ 962.1    $ 928.4    $ 2,917.7    $ 2,926.6   
Cost of products sold 448.1    452.3    1,363.2    1,383.6   
Gross profit 514.0    476.1    1,554.5    1,543.0   
Selling, general, and administrative expenses 399.3    418.5    1,262.1    1,285.9   
Goodwill impairment —    —    —    1,085.8   
Restructuring and other costs 5.2    12.1    68.1    211.2   
Operating income (loss) 109.5    45.5    224.3    (1,039.9)  
Other income and expenses:
Interest expense 6.6    9.7    23.0    27.9   
Interest income (0.7)   (0.6)   (2.0)   (1.6)  
Other expense (income), net (2.9)   4.7    (4.6)   (30.4)  
Income (loss) before income taxes 106.5    31.7    207.9    (1,035.8)  
Provision (benefit) for income taxes 21.5    4.2    47.3    (23.4)  
Net income (loss) 85.0    27.5    160.6    (1,012.4)  
Less: Net (loss) income attributable to noncontrolling interest —    (0.5)   —    0.4   
Net income (loss) attributable to Dentsply Sirona $ 85.0    $ 28.0    $ 160.6    $ (1,012.8)  
Net income (loss) per common share attributable to Dentsply Sirona:
Basic $ 0.38    $ 0.13    $ 0.72    $ (4.50)  
Diluted $ 0.38    $ 0.13    $ 0.71    $ (4.50)  
Weighted average common shares outstanding:
Basic 223.1    222.4    223.5    224.9   
Diluted 224.9    223.7    225.2    224.9   

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
3


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net income (loss) $ 85.0    $ 27.5    $ 160.6    $ (1,012.4)  
Other comprehensive loss, net of tax:
 Foreign currency translation loss (127.5)   (29.0)   (144.8)   (155.9)  
 Net gain on derivative financial instruments 20.1    2.2    12.0    19.8   
Net realized holding gain on available for sale securities —    —    —    (44.3)  
 Pension liability gain 0.9    1.0    2.7    5.2   
Total other comprehensive loss, net of tax (106.5)   (25.8)   (130.1)   (175.2)  
Total comprehensive (loss) income (21.5)   1.7    30.5    (1,187.6)  
Less: Comprehensive (loss) income attributable to noncontrolling interests —    (0.6)   0.3    0.7   
Total comprehensive (loss) income attributable to Dentsply Sirona $ (21.5)   $ 2.3    $ 30.2    $ (1,188.3)  

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
4


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)
September 30, 2019 December 31, 2018
Assets
Current Assets:
Cash and cash equivalents $ 226.1    $ 309.6   
Accounts and notes receivables-trade, net 698.4    701.9   
Inventories, net 605.1    598.9   
Prepaid expenses and other current assets, net 281.7    277.6   
Total Current Assets 1,811.3    1,888.0   
Property, plant, and equipment, net 782.5    870.6   
Operating lease right-of-use assets, net 156.7    —   
Identifiable intangible assets, net 2,167.7    2,420.3   
Goodwill, net 3,355.7    3,431.3   
Other noncurrent assets, net 92.9    76.8   
Total Assets $ 8,366.8    $ 8,687.0   
Liabilities and Equity
Current Liabilities:
Accounts payable $ 246.3    $ 283.9   
Accrued liabilities 541.0    578.9   
Income taxes payable 69.9    58.1   
Notes payable and current portion of long-term debt 11.7    92.4   
Total Current Liabilities 868.9    1,013.3   
Long-term debt 1,403.9    1,564.9   
Operating lease liabilities 118.5    —   
Deferred income taxes 500.7    552.8   
Other noncurrent liabilities 415.7    423.0   
Total Liabilities 3,307.7    3,554.0   
Commitments and contingencies —    —   
Equity:
Preferred stock, $1.00 par value; 0.25 million shares authorized; no shares issued —    —   
Common stock, $0.01 par value; 2.6    2.6   
400.0 million shares authorized and 264.5 million shares issued at September 30, 2019 and December 31, 2018
222.3 million and 223.0 million shares outstanding at September 30, 2019 and December 31, 2018, respectively
Capital in excess of par value 6,567.2    6,522.3   
Retained earnings 1,324.3    1,225.9   
Accumulated other comprehensive loss (609.1)   (478.7)  
Treasury stock, at cost, 42.2 million and 41.5 million shares at September 30, 2019 and December 31, 2018, respectively (2,227.7)   (2,151.0)  
Total Dentsply Sirona Equity 5,057.3    5,121.1   
Noncontrolling interests 1.8    11.9   
Total Equity 5,059.1    5,133.0   
Total Liabilities and Equity $ 8,366.8    $ 8,687.0   
5


See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions, except per share amounts)
(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, 2018 $ 2.6    $ 6,522.3    $ 1,225.9    $ (478.7)   $ (2,151.0)   $ 5,121.1    $ 11.9    $ 5,133.0   
Net income —    —    39.2    —    —    39.2    —    39.2   
Other comprehensive (loss) income —    —    —    (58.7)   —    (58.7)   0.3    (58.4)  
Divestiture of noncontrolling interest —    —    —    —    —    —    (10.4)   (10.4)  
Exercise of stock options —    1.5    —    —    18.2    19.7    —    19.7   
Stock based compensation expense —    9.1    —    —    —    9.1    —    9.1   
Funding of Employee Stock Purchase Plan —    0.1    —    —    1.9    2.0    —    2.0   
Restricted Stock Unit "RSU" distributions —    (12.8)   —    —    8.0    (4.8)   —    (4.8)  
RSU dividends —    0.2    (0.2)   —    —    —    —    —   
Cash dividends ($0.0875 per share) —    —    (19.9)   —    —    (19.9)   —    (19.9)  
Balance at March 31, 2019 $ 2.6    $ 6,520.4    $ 1,245.0    $ (537.4)   $ (2,122.9)   $ 5,107.7    $ 1.8    $ 5,109.5   
Net income —    —    36.4    —    —    36.4    —    36.4   
Other comprehensive income —    —    —    34.8    —    34.8    —    34.8   
Exercise of stock options —    6.3    —    —    50.2    56.5    —    56.5   
Stock based compensation expense —    25.2    —    —    —    25.2    —    25.2   
Treasury shares purchased —    —    —    —    (60.0)   (60.0)   —    (60.0)  
RSU distributions —    (0.8)   —    —    0.7    (0.1)   —    (0.1)  
RSU dividends —    0.2    (0.2)   —    —    —    —    —   
Cash dividends ($0.0875 per share) —    —    (19.4)   —    —    (19.4)   —    (19.4)  
Balance at June 30, 2019 $ 2.6    $ 6,551.3    $ 1,261.8    $ (502.6)   $ (2,132.0)   $ 5,181.1    $ 1.8    $ 5,182.9   
Net income —    —    85.0    —    —    85.0    —    85.0   
Other comprehensive loss —    —    —    (106.5)   —    (106.5)   —    (106.5)  
Exercise of stock options —    0.4    —    —    2.0    2.4    —    2.4   
Stock based compensation expense —    15.4    —    —    —    15.4    —    15.4   
Funding of Employee Stock Purchase Plan —    0.2    —    —    2.0    2.2    —    2.2   
Treasury shares purchased —    —    —    —    (100.0)   (100.0)   —    (100.0)  
RSU distributions —    (0.4)   —    —    0.3    (0.1)   —    (0.1)  
RSU dividends —    0.3    (0.3)   —    —    —    —    —   
Cash dividends ($0.1000 per share) —    —    (22.2)   —    —    (22.2)   —    (22.2)  
Balance at September 30, 2019 $ 2.6    $ 6,567.2    $ 1,324.3    $ (609.1)   $ (2,227.7)   $ 5,057.3    $ 1.8    $ 5,059.1   








6


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions, except per share amounts)
(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, 2017 $ 2.6    $ 6,543.9    $ 2,316.2    $ (291.0)   $ (1,955.4)   $ 6,616.3    $ 11.6    $ 6,627.9   
Net income (loss) —    —    81.2    —    —    81.2    (0.1)   81.1   
Other comprehensive income —    —    —    10.0    —    10.0    0.6    10.6   
Exercise of stock options —    (1.8)   —    —    9.4    7.6    —    7.6   
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 —    —    7.6    —    —    7.6    —    7.6   
Stock based compensation expense —    9.3    —    —    —    9.3    —    9.3   
RSU distributions —    (19.9)   —    —    9.9    (10.0)   —    (10.0)  
RSU dividends —    0.2    (0.2)   —    —    —    —    —   
Cash dividends ($0.0875 per share) —    —    (20.2)   —    —    (20.2)   —    (20.2)  
Balance at March 31, 2018 $ 2.6    $ 6,531.7    $ 2,375.9    $ (281.0)   $ (1,936.1)   $ 6,693.1    $ 12.1    $ 6,705.2   
Net (loss) income —    —    (1,122.0)   —    —    (1,122.0)   1.0    (1,121.0)  
Other comprehensive loss —    —    —    (159.8)   —    (159.8)   (0.2)   (160.0)  
Exercise of stock options —    (4.6)   —    —    8.2    3.6    —    3.6   
Reclassification on adoption of ASU No. 2018-02 —    —    0.5    —    —    0.5    —    0.5   
Stock based compensation expense —    0.5    —    —    —    0.5    —    0.5   
Treasury shares purchased —    —    —    —    (250.2)   (250.2)   —    (250.2)  
RSU distributions —    (1.5)   —    —    1.1    (0.4)   —    (0.4)  
RSU dividends —    0.1    (0.1)   —    —    —    —    —   
Cash dividends ($0.175 per share) —    —    (38.1)   —    —    (38.1)   —    (38.1)  
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   
Net income (loss) —    —    28.0    —    —    28.0    (0.5)   27.5   
Other comprehensive loss —    —    —    (25.7)   —    (25.7)   (0.1)   (25.8)  
Exercise of stock options —    (0.7)   —    —    9.5    8.8    —    8.8   
Stock based compensation expense —    5.3    —    —    —    5.3    —    5.3   
RSU distributions —    (2.2)   —    —    1.1    (1.1)   —    (1.1)  
RSU dividends —    0.1    (0.1)   —    —    —    —    —   
Cash dividends ($0.0 per share) —    —    (0.5)   —    —    (0.5)   —    (0.5)  
Balance at September 30, 2018 $ 2.6    $ 6,528.7    $ 1,243.6    $ (466.5)   $ (2,166.4)   $ 5,142.0    $ 12.3    $ 5,154.3   

See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
7


DENTSPLY SIRONA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Nine Months Ended September 30,
2019 2018
Cash flows from operating activities:
Net income (loss) $ 160.6    $ (1,012.4)  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation 101.6    103.4   
Amortization of intangible assets 142.9    149.7   
Amortization of deferred financing costs 2.1    2.0   
Fixed asset impairment 33.4    —   
Goodwill impairment —    1,085.8   
Indefinite-lived intangible asset impairment 5.3    179.2   
Definite-lived intangible asset impairment 3.8    —   
Deferred income taxes (39.9)   (97.9)  
Stock based compensation expense 49.8    15.1   
Restructuring and other costs - non-cash 15.2    19.2   
Other non-cash income (12.4)   (2.0)  
Loss on disposal of property, plant and equipment 2.9    2.7   
Gain on divestiture of noncontrolling interest (8.7)   —   
Loss on sale of non-strategic businesses and product lines 14.0    —   
Gain on sale of equity security —    (44.1)  
Changes in operating assets and liabilities, net of acquisitions:
Accounts and notes receivable-trade, net (20.7)   25.1   
Inventories, net (48.4)   (83.3)  
Prepaid expenses and other current assets, net (3.6)   (47.3)  
Other noncurrent assets, net (14.4)   (10.3)  
Accounts payable (30.5)   10.1   
Accrued liabilities (35.5)   (7.1)  
Income taxes 11.4    13.2   
Other noncurrent liabilities 4.6    (3.5)  
Net cash provided by operating activities 333.5    297.6   
Cash flows from investing activities:
Capital expenditures (86.9)   (130.6)  
Cash paid for acquisitions of businesses and equity investments, net of cash acquired (3.3)   (130.5)  
Cash received on sale of non-strategic businesses or product lines 11.6    —   
Cash received on derivatives contracts 34.5    3.7   
Cash paid on derivatives contracts —    (2.4)  
Expenditures for identifiable intangible assets —    (5.5)  
Purchase of short-term investments —    (0.1)  
Liquidation of short-term investments 0.1    —   
Proceeds from sale of equity security —    54.1   
Proceeds from sale of property, plant, and equipment, net 4.3    6.3   
Net cash used in investing activities (39.7)   (205.0)  
Cash flows from financing activities:
Repayments on short-term borrowings, net (67.4)   124.3   
Cash paid for treasury stock (160.0)   (250.2)  
Cash dividends paid (58.7)   (59.1)  
Proceeds from long-term borrowings, net of deferred financing costs 118.9    0.3   
Repayments on long-term borrowings (251.2)   (9.3)  
Proceeds from exercised stock options 78.8    22.8   
Cash paid for contingent consideration on prior acquisitions (30.7)   —   
Net cash used in financing activities (370.3)   (171.2)  
Effect of exchange rate changes on cash and cash equivalents (7.0)   (8.9)  
Net decrease in cash and cash equivalents (83.5)   (87.5)  
Cash and cash equivalents at beginning of period 309.6    320.6   
Cash and cash equivalents at end of period $ 226.1    $ 233.1   
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
8


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, 2018.

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, 2018, except as may be indicated below.

Revenue Recognition

At September 30, 2019, the Company had $28.8 million of deferred revenue recorded in Accrued liabilities in the Consolidated Balance Sheets. The Company expects to recognize significantly all of the deferred revenue within the next 12 months.

Accounts and Notes Receivable

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

Accounts and notes receivables – trade, net are stated net of allowances for doubtful accounts and trade discounts, which were $29.7 million at September 30, 2019 and $24.5 million at December 31, 2018.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) with subsequent amendments (collectively, “ASC 842”). The Company adopted the new leasing standards on January 1, 2019 using the modified retrospective approach transition method. Results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior periods are not adjusted and continue to be reported in accordance with historic accounting under ASC 840. The Company elected the package of practical expedients permitted under the transition guidance within the standard, which eliminates the reassessment of past leases, their classification and initial direct costs for existing leases. The Company did not elect to adopt the hindsight practical expedient. The Company recognized material right-of-use assets and liabilities in the Consolidated Balance Sheets for its operating lease commitments with terms greater than 12 months. See Note 8, Leases for additional information. The impact of adopting this standard, by financial statement line item, on January 1, 2019 were as follows:

9


(in millions) January 1, 2019
Assets
Operating lease right-of-use assets, net $ 167.1   
Property, plant, and equipment, net 1.8   
Liabilities
Accrued liabilities $ 39.4   
Notes payable and current portion of long-term debt 0.2
Long-term debt 1.5
Operating lease liabilities 126.5

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging.” This newly issued accounting standard improves the financial reporting and disclosure of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial 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 instruments and the hedged items in the financial statements. The effect of adoption should be 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 entity adopts the amendments in this update. The amended presentation and disclosure guidance is required only prospectively. The Company adopted this accounting standard during the three months ended March 31, 2019. The adoption of this standard did not materially impact the statements of operations, financial position, cash flows, and disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-14 "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." This newly issued accounting standard changes disclosure requirements for defined benefit plans, including removal and modification of existing disclosures. The amendments in this standard are required for fiscal years ending after December 15, 2020. Early adoption is permitted. The amendments should be applied on a retrospective basis for all periods presented. The Company is currently assessing the impact that this standard will have on its disclosures.
10


NOTE 2 – STOCK COMPENSATION

The following represents total stock based compensation expense for non-qualified stock options, RSUs and the tax related benefit for the three and nine months ended September 30, 2019 and 2018:
Three Months Ended Nine Months Ended
(in millions) 2019 2018 2019 2018
Stock option expense $ 0.6    $ 1.7    $ 5.6    $ 5.1   
RSU expense 14.6    3.4    43.4    9.2   
Total stock based compensation expense $ 15.2    $ 5.1    $ 49.0    $ 14.3   
Related deferred income tax benefit $ 1.8    $ 0.8    $ 6.8    $ 2.4   

For the three and nine months ended September 30, 2019, stock compensation expense was $15.2 million and $49.0 million, respectively, of which $14.7 million and $47.5 million, respectively, was recorded in Selling, general, and administrative expense, and $0.5 million and $1.5 million, respectively, was recorded in Cost of products sold in the Consolidated Statements of Operations.

For the three and nine months ended September 30, 2018, stock compensation expense was $5.1 million and $14.3 million, respectively, of which $4.4 million and $12.6 million, respectively, was recorded in Selling, general, and administrative expense, and $0.1 million and $0.5 million, respectively, was recorded in Cost of products sold in the Consolidated Statements of Operations. For the three and nine months ended September 30, 2018, the Company recorded expense of $0.6 million and $1.2 million, respectively, in Restructuring and other costs in the Consolidated Statements of Operations. For the nine months ended September 30, 2018, the Company lowered the likely payout level on certain performance-based grants.

During the nine months ended September 30, 2019, the Company granted certain performance-based RSUs issued under the 2016 Omnibus Incentive Plan to provide performance targets for the Company's three year restructuring program. The adjusted operating income margin performance target approximates the adjusted operating income margin targets previously disclosed by the Company as part of its effort to support revenue growth and margin expansion. For vesting to occur an adjusted operating income margin target must be achieved over a period of four consecutive quarters, and an adjusted operating income margin above that target threshold as measured at the end of the subsequent quarter, all calculated on a trailing four quarter basis. The performance period began on January 1, 2019 and concludes on December 31, 2022.

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NOTE 3 – COMPREHENSIVE INCOME (LOSS)

The following summarizes the components of Other comprehensive income (loss), net of tax, for the three and nine months ended September 30, 2019 and 2018:

Three Months Ended Nine Months Ended
(in millions) 2019 2018 2019 2018
Foreign currency translation losses $ (147.2)   $ (30.1)   $ (164.2)   $ (169.5)  
Foreign currency translation gain on hedges of net investments 19.7    1.2    19.1    13.3   

These amounts are recorded in Accumulated other comprehensive loss ("AOCI"), net of any related tax adjustments. At September 30, 2019 and December 31, 2018, the cumulative tax adjustments were $143.8 million and $157.4 million, respectively, primarily related to foreign currency translation gains and losses.

The cumulative foreign currency translation adjustments included translation losses of $337.1 million and $172.9 million at September 30, 2019 and December 31, 2018, respectively, and cumulative gains on loans designated as hedges of net investments of $92.7 million and $111.8 million, respectively. These foreign currency translation gains and losses were partially offset by movements on derivative financial instruments.

Changes in AOCI, net of tax, by component for the nine months ended September 30, 2019 and 2018 were as follows:

(in millions) Foreign Currency Translation Gain (Loss) Gain (Loss) on Cash Flow Hedges Gain (Loss) on Net Investment Hedges Pension Liability Gain (Loss) Total
Balance, net of tax, at December 31, 2018 $ (284.7)   $ 0.6    $ (111.4)   $ (83.2)   $ (478.7)  
Other comprehensive (loss) income before reclassifications and tax impact (134.0)   (18.6)   31.7    —    (120.9)  
Tax (expense) benefit (11.1)   4.5    (7.0)   —    (13.6)  
Other comprehensive (loss) income, net of tax, before reclassifications (145.1)   (14.1)   24.7    —    (134.5)  
Amounts reclassified from accumulated other comprehensive income, net of tax —    1.4    —    2.7    4.1   
Net (decrease) increase in other comprehensive loss (145.1)   (12.7)   24.7    2.7    (130.4)  
Balance, net of tax, at September 30, 2019 $ (429.8)   $ (12.1)   $ (86.7)   $ (80.5)   $ (609.1)  

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(in millions) Foreign Currency Translation Gain (Loss) Gain (Loss) on Cash Flow Hedges Gain (Loss) on Net Investment Hedges Net Unrealized Holding Gain 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 (131.6)   (2.2)   28.9    —    2.4    (102.5)  
Tax (expense) benefit (24.6)   —    (15.3)   —    (0.6)   (40.5)  
Other comprehensive (loss) income, net of tax, before reclassifications (156.2)   (2.2)   13.6    —    1.8    (143.0)  
Amounts reclassified from accumulated other comprehensive income (loss), net of tax —    8.4    —    (44.3)   3.4    (32.5)  
Net (decrease) increase in other comprehensive loss (156.2)   6.2    13.6    (44.3)   5.2    (175.5)  
Balance, net of tax, at September 30, 2018 $ (260.7)   $ (6.4)   $ (114.0)   $ —    $ (85.4)   $ (466.5)  

Reclassifications out of AOCI to the Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 were as follows:

Details about AOCI Components Amounts Reclassified from AOCI Affected Line Item in the Consolidated Statements of Operations
Three Months Ended
(in millions) 2019 2018
Loss on derivative financial instruments:
Interest rate swaps $ (0.7)   $ (0.6)   Interest expense
Foreign exchange forward contracts 0.5    (1.8)   Cost of products sold
Net loss before tax (0.2)   (2.4)  
Tax impact —    0.4    Provision (benefit) for income taxes
Net loss after tax $ (0.2)   $ (2.0)  
Amortization of defined benefit pension and other postemployment benefit items:
Amortization of prior service benefits $ 0.2    $ 0.1   
(a)
Amortization of net actuarial losses (1.4)   (1.5)  
(a)
Net loss before tax (1.2)   (1.4)  
Tax impact 0.3    0.4    Provision (benefit) for income taxes
Net loss after tax $ (0.9)   $ (1.0)  
Total reclassifications for the period $ (1.1)   $ (3.0)  
(a) These AOCI components are included in the computation of net periodic benefit cost for the three months ended September 30, 2019 and 2018.
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Details about AOCI Components Amounts Reclassified from AOCI Affected Line Item in the Consolidated Statements of Operations
Nine Months Ended
(in millions) 2019 2018
Loss on derivative financial instruments:
Interest rate swaps $ (1.8)   $ (1.7)   Interest expense
Foreign exchange forward contracts 0.4    (7.9)   Cost of products sold
Net loss before tax (1.4)   (9.6)  
Tax impact —    1.2