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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM
10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 29, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number:
001-39054
ENVISTA HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 83-2206728
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
200 S. Kraemer Blvd., Building E 92821-6208
Brea, California
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
714
-
817-7000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Common stock, $0.01 par value NVST New York Stock Exchange
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
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 ((s)232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the Registrant was required to submit such files).
Yes
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 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
The number of shares of common stock outstanding as of April 26, 2024, was
171,858,245
.
-------------------------------------------------------------------------------
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Comprehensive (Loss) Income 3
Condensed Consolidated Statements 4
of Changes in Stockholders' Equity
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 22
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative 31
Disclosures About Market Risk
Item 4. Controls and Procedures 31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 32
Item 1A. Risk Factors 32
Item 2. Unregistered Sales of Equity 32
Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities 32
Item 4. Mine Safety Disclosures 32
Item 5. Other Information 32
Item 6. Exhibits 33
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENVISTA HOLDINGS
CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
($ in millions, except share amounts)
As of
March 29, 2024 December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents $ 948.5 $ 940.0
Trade accounts receivable, less allowance for credit losses of $ 413.0 407.5
19.8
and $
17.3
, respectively
Inventories, net 267.4 258.8
Prepaid expenses and other current assets 143.0 137.4
Total current assets 1,771.9 1,743.7
Property, plant and equipment, net 306.2 309.6
Operating lease right-of-use assets 125.3 125.1
Other long-term assets 174.4 180.5
Goodwill, net 3,259.8 3,292.2
Other intangible assets, net 918.7 954.0
Total assets $ 6,556.3 $ 6,605.1
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 115.5 $ 115.3
Trade accounts payable 174.7 179.5
Accrued expenses and other liabilities 458.6 455.7
Operating lease liabilities 32.5 30.3
Total current liabilities 781.3 780.8
Operating lease liabilities 107.5 109.9
Other long-term liabilities 136.7 142.4
Long-term debt 1,390.5 1,398.1
Commitments and contingencies
Stockholders' equity:
Preferred stock, $ - -
0.01
par value,
15.0
million shares authorized;
no
shares issued or outstanding at March 29, 2024 and December 31, 2023
Common stock, $ 1.7 1.7
0.01
par value,
500.0
million shares authorized;
173.8
million shares issued and
171.9
million shares outstanding at March 29, 2024;
173.3
million shares issued and
171.5
million shares outstanding at December 31, 2023
Additional paid-in capital 3,767.4 3,758.2
Retained earnings 654.8 631.2
Accumulated other comprehensive loss ( (
283.6 217.2
) )
Total stockholders' equity 4,140.3 4,173.9
Total liabilities and stockholders' equity $ 6,556.3 $ 6,605.1
See the accompanying Notes to the Condensed Consolidated Financial Statements.
1
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ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
($ and shares in millions, except per share amounts)
Three Months Ended
March 29, 2024 March 31, 2023
Sales $ 623.6 $ 627.2
Cost of sales 267.3 264.5
Gross profit 356.3 362.7
Operating expenses:
Selling, general and administrative 284.9 266.1
Research and development 23.3 24.5
Operating profit 48.1 72.1
Nonoperating (expense) income:
Other income, net 0.1 0.3
Interest expense, net ( (
12.9 16.7
) )
Income before income taxes 35.3 55.7
Income tax expense 11.7 11.9
Net income $ 23.6 $ 43.8
Earnings per share:
Earnings - basic $ 0.14 $ 0.27
Earnings - diluted $ 0.14 $ 0.25
Average common stock and common equivalent shares outstanding:
Basic 171.9 163.6
Diluted 173.4 177.4
See the accompanying Notes to the Condensed Consolidated Financial Statements.
2
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ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)
($ in millions)
Three Months Ended
March 29, 2024 March 31, 2023
Net income $ 23.6 $ 43.8
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments ( 14.8
66.2
)
Pension plan adjustments ( (
0.2 0.3
) )
Total other comprehensive (loss) income, net of income taxes ( 14.5
66.4
)
Comprehensive (loss) income $ ( $ 58.3
42.8
)
See the accompanying Notes to the Condensed Consolidated Financial Statements.
3
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ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
($ in millions)
Three Months Ended March 29, 2024
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Total
Comprehensive Loss Envista
Equity
Balance, December 31, 2023 $ 1.7 $ 3,758.2 $ 631.2 $ ( $ 4,173.9
217.2
)
Common stock-based award activity 9.2 - - 9.2
Net income - - 23.6 - 23.6
Other comprehensive loss - - - ( (
66.4 66.4
) )
Balance, March 29, 2024 $ 1.7 $ 3,767.4 $ 654.8 $ ( $ 4,140.3
283.6
)
Three Months Ended March 31, 2023
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Total
Comprehensive Loss Envista
Equity
Balance, December 31, 2022 $ 1.6 $ 3,699.0 $ 731.4 $ ( $ 4,206.9
225.1
)
Common stock-based award activity - 13.8 - - 13.8
Net income - - 43.8 - 43.8
Other comprehensive income - - - 14.5 14.5
Balance, March 31, 2023 $ 1.6 $ 3,712.8 $ 775.2 $ ( $ 4,279.0
210.6
)
See the accompanying Notes to the Condensed Consolidated Financial Statements.
4
-------------------------------------------------------------------------------
ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($ in millions)
Three Months Ended
March 29, 2024 March 31, 2023
Cash flows from operating activities:
Net income $ 23.6 $ 43.8
Noncash items:
Depreciation 9.5 8.5
Amortization 22.6 27.9
Allowance for credit losses 4.5 2.0
Stock-based compensation expense 11.0 15.0
Restructuring charges ( 0.1
0.2
)
Impairment charges 0.8 0.3
Amortization of right-of-use assets 7.3 6.5
Amortization of debt discount and issuance costs 1.2 1.0
Change in trade accounts receivable ( (
16.3 8.5
) )
Change in inventories ( (
12.2 7.1
) )
Change in trade accounts payable ( (
2.7 38.1
) )
Change in prepaid expenses and other assets ( 1.3
3.8
)
Change in accrued expenses and other liabilities 4.3 (
41.3
)
Change in operating lease liabilities ( (
9.3 8.3
) )
Net cash provided by operating activities 40.3 3.1
Cash flows from investing activities:
Payments for additions to property, plant and equipment ( (
11.0 17.5
) )
All other investing activities, net 0.3 (
4.5
)
Net cash used in investing activities ( (
10.7 22.0
) )
Cash flows from financing activities:
Proceeds from stock option exercises 1.3 4.6
Tax withholding payment related to net settlement of equity awards ( (
3.3 6.1
) )
All other financing activities ( -
0.6
)
Net cash used in financing activities ( (
2.6 1.5
) )
Effect of exchange rate changes on cash and cash equivalents ( (
18.5 1.3
) )
Net change in cash and cash equivalents 8.5 (
21.7
)
Beginning balance of cash and cash equivalents 940.0 606.9
Ending balance of cash and cash equivalents $ 948.5 $ 585.2
Supplemental data:
Cash paid for interest $ 16.7 $ 14.3
Cash paid for taxes $ 3.8 $ 6.6
ROU assets obtained in exchange for operating lease obligations $ 11.5 $ 7.6
See the accompanying Notes to the Condensed Consolidated Financial Statements.
5
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ENVISTA HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1.
BUSINESS AND BASIS OF PRESENTATION
Business Overview
The Company provides products that are used to diagnose, treat and prevent
disease and ailments of the teeth, gums and supporting bone, as well as to
improve the aesthetics of the human smile. The Company is a worldwide provider
of a broad range of dental implants, orthodontic appliances, diagnostic
solutions, general dental consumables, equipment and services and is dedicated
to driving technological innovations that help dental professionals improve
clinical outcomes and enhance productivity.
The Company operates in
two
business segments: Specialty Products & Technologies and Equipment &
Consumables.
The Company's Specialty Products & Technologies segment primarily develops,
manufactures and markets dental implant systems, including regenerative
solutions, dental prosthetics and associated treatment software and
technologies, as well as orthodontic bracket systems, aligners and lab
products. The Company's Equipment & Consumables segment primarily develops,
manufactures and markets dental equipment and supplies used in dental offices,
including digital imaging systems, software and other visualization/magnificatio
n systems; endodontic systems and related consumables; and restorative
materials and instruments, rotary burs, impression materials, bonding agents
and cements and infection prevention products.
Basis of Presentation
All revenues and costs as well as assets and liabilities directly associated
with the business activity of the Company are included in the financial
statements. All significant intercompany accounts and transactions between the
businesses comprising the Company have been eliminated in the accompanying
Condensed Consolidated Financial Statements.
The Condensed Consolidated Financial Statements included herein have been
prepared by the Company without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles ("GAAP") have been
condensed or omitted pursuant to such rules and regulations; however, the
Company believes that the disclosures are adequate to make the information
presented not misleading. The accompanying Condensed Consolidated Financial
Statements contain all adjustments (consisting of only normal recurring
adjustments and reclassifications to conform to current year presentation)
necessary to present fairly the financial position of the Company as of March
29, 2024 and December 31, 2023, and its results of operations and cash flows
for the three month periods ended March 29, 2024 and March 31, 2023. The
information included in this Quarterly Report on Form 10-Q should be read in
conjunction with the Company's Consolidated Financial Statements and
accompanying notes for the three years ended December 31, 2023, included in
the Annual Report on Form 10-K filed by the Company with the SEC on February
15, 2024.
Accounting Standards Not Yet Adopted
In December 2023, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740):
Improvements to Income Tax Disclosures. The update requires a public business
entity to disclose, on an annual basis, a tabular rate reconciliation using
both percentages and currency amounts, broken out into specified categories
with certain reconciling items further broken out by nature and jurisdiction
to the extent those items exceed a specified threshold. In addition, all
entities are required to disclose income taxes paid, net of refunds received
disaggregated by federal, state/local, and foreign and by jurisdiction if the
amount is at least 5% of total income tax payments, net of refunds received.
Adoption of the ASU allows for either the prospective or retrospective
application of the amendment and is effective for annual periods beginning
after December 15, 2024, with early adoption permitted. The Company has not
yet completed its assessment of the impact of ASU 2023-09 on the Company's
Condensed Consolidated Financial Statements.
6
-------------------------------------------------------------------------------
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting - Improving
Reportable Segment Disclosures" (Topic 280). The update is intended to improve
reportable segment disclosure requirements, primarily through enhanced
disclosures about significant expenses. The ASU requires disclosures to
include significant segment expenses that are regularly provided to the chief
operating decision maker (CODM), a description of other segment items by
reportable segment, and any additional measures of a segment's profit or loss
used by the CODM when deciding how to allocate resources. Adoption of the ASU
requires retrospective application to all prior periods presented in the
financial statements. ASU 2023-07 is effective for fiscal years beginning
after December 15, 2023, and for fiscal periods after December 15, 2024 for
interim periods. Early adoption is permitted. The Company has not yet
completed its assessment of the impact of ASU 2023-07 on the Company's
Condensed Consolidated Financial Statements.
NOTE 2.
CREDIT LOSSES
The allowance for credit losses is a valuation account deducted from accounts
receivable to present the net amount expected to be collected. Accounts
receivable are charged off against the allowance when management believes the
uncollectibility of an accounts receivable balance is confirmed.
Management estimates the adequacy of the allowance by using relevant available
information, from internal and external sources, relating to past events,
current conditions and forecasts. Historical credit loss experience provides
the basis for estimation of expected credit losses and is adjusted as
necessary using the relevant information available. The allowance for credit
losses is measured on a collective basis when similar risk characteristics
exist. The Company has identified
one
portfolio segment based on the following risk characteristics: geographic
regions, product lines, default rates and customer specific factors.
The factors used by management in its credit loss analysis are inherently
subject to uncertainty. If actual results are not consistent with management's
estimates and assumptions, the allowance for credit losses may be overstated
or understated and a charge or credit to net income (loss) may be required.
The rollforward of the allowance for credit losses is summarized as follows ($
in millions):
Balance at December 31, 2023 $ 17.3
Foreign currency translation (
0.3
)
Provision for credit losses 4.5
Write-offs charged against the allowance (
0.8
)
Recoveries (
0.9
)
Balance at March 29, 2024 $ 19.8
NOTE 3.
INVENTORIES
The classes of inventory are summarized as follows ($ in millions):
March 29, 2024 December 31, 2023
Finished goods $ 206.8 $ 196.4
Work in process 18.8 17.2
Raw materials 96.6 100.3
Reserve for inventory obsolescence ( (
54.8 55.1
) )
Total $ 267.4 $ 258.8
7
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NOTE 4.
PROPERTY, PLANT AND EQUIPMENT
The classes of property, plant and equipment are summarized as follows ($ in
millions):
March 29, 2024 December 31, 2023
Land and improvements $ 10.0 $ 10.0
Buildings and improvements 164.7 157.4
Machinery, equipment and other assets 416.4 417.9
Construction in progress 59.9 65.3
Gross property, plant and equipment 651.0 650.6
Less: accumulated depreciation ( (
344.8 341.0
) )
Property, plant and equipment, net $ 306.2 $ 309.6
NOTE 5.
GOODWILL
The following is a rollforward of the Company's goodwill by segment ($ in
millions):
Specialty products & Technologies Equipment & Consumables Total
Gross Accumulated Total Gross Accumulated Total Gross Accumulated Total
Impairment Impairment Impairment
Charges Charges Charges
Balance $ 2,007.0 $ ( $ 1,872.5 $ 1,497.5 $ ( $ 1,419.7 $ 3,504.5 $ ( $ 3,292.2
at 134.5 77.8 212.3
December ) ) )
31, 2023
Foreign ( - ( ( - ( ( - (
currency 26.2 26.2 6.2 6.2 32.4 32.4
translation ) ) ) ) ) )
Balance $ 1,980.8 $ ( $ 1,846.3 $ 1,491.3 $ ( $ 1,413.5 $ 3,472.1 $ ( $ 3,259.8
at 134.5 77.8 212.3
March 29, ) ) )
2024
NOTE 6.
ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities were as follows ($ in millions):
March 29, 2024 December 31, 2023
Current Noncurrent Current Noncurrent
Compensation and benefits $ 103.0 $ 24.0 $ 120.0 $ 23.1
Sales and product allowances 63.8 1.5 72.0 1.7
Contract liabilities 115.8 8.2 106.4 8.4
Taxes, income and other 54.8 42.7 39.9 44.3
Restructuring-employee severance, benefits and other 13.0 - 16.0 -
Pension benefits 5.8 24.8 5.8 30.1
Loss contingencies 10.7 26.8 11.0 27.0
Other 91.7 8.7 84.6 7.8
Total $ 458.6 $ 136.7 $ 455.7 $ 142.4
NOTE 7.
HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses cross-currency swap derivative contracts to partially hedge
its net investments in foreign operations against adverse movements in
exchange rates between the U.S. dollar and the euro. The cross-currency swap
derivative contracts are agreements to exchange fixed-rate payments in one
currency for fixed-rate payments in another currency. On January 17, 2023, the
Company entered into a
two-year
cross-currency swap derivative contract, with a notional value of $
150.0
million. This contract effectively converts a portion of the Company's U.S.
dollar denominated senior term loan facilities to obligations denominated in
euros and partially offsets the impact of changes in currency rates on foreign
currency denominated net investments. This instrument matures on January 17,
2025.
8
-------------------------------------------------------------------------------
The Company also has foreign currency denominated long-term debt consisting of
a senior euro term loan facility. The senior euro term loan facility
represents a partial hedge of the Company's net investment in foreign
operations against adverse movements in exchange rates between the U.S. dollar
and the euro. The senior euro term loan facility is designated and qualifies
as a non-derivative hedging instrument.
Refer to Note 11 for further discussion of the Company's debt and credit
facilities.
The change in the fair value of the cross-currency swap instrument and the
foreign currency translation of the senior euro term loan facilities are
recorded in accumulated other comprehensive loss in equity in the accompanying
Condensed Consolidated Balance Sheets, partially offsetting the foreign
currency translation adjustment of the Company's related net investment that
is also recorded in accumulated other comprehensive loss as reflected in Note
12.
The Company has also historically used interest rate swap derivative contracts
to reduce its variability of cash flows related to interest payments with
respect to its senior term and senior euro term loan facilities. The interest
rate swap contracts exchanged interest payments based on variable rates for
interest payments based on fixed rates. The changes in the fair value of these
instruments were recorded in accumulated other comprehensive loss in equity
(see Note 12). The interest income or expense from the cross-currency and
interest rate swaps was recorded in interest expense, net in the Company's
Condensed Consolidated Statements of Operations consistent with the
classification of interest expense attributable to the underlying debt. The
Company did not have any outstanding interest rate swap contracts as of March
29, 2024.
The following table summarizes the notional values as of March 29, 2024 and
March 31, 2023 and pretax impact of changes in the fair values of instruments
designated as net investment hedges in accumulated other comprehensive loss
("OCI") for the three months ended March 29, 2024 and March 31, 2023 ($ in
millions):
Notional Amount Gain Recognized in OCI
Three Months Ended March 29, 2024
Foreign currency denominated debt $ 377.8 $ 8.6
Foreign currency contract 150.0 3.3
Total $ 527.8 $ 11.9
Three Months Ended March 31, 2023 Notional Amount Loss Recognized in OCI
Foreign currency denominated debt $ 225.5 $ (
2.8
)
Foreign currency contract 150.0 -
Total $ 375.5 $ (
2.8
)
The Company did
not
reclassify any deferred gains or losses related to its net investment hedge
from accumulated other comprehensive loss to income during the three months
ended March 29, 2024 and March 31, 2023. In addition, the Company did not have
any ineffectiveness related to its net investment hedge and therefore did
not
reclassify any portion of the above net investment hedge from accumulated
other comprehensive loss into income during the three months ended March 29,
2024 and March 31, 2023. The cash inflows and outflows associated with the
Company's derivative contract designated as a net investment hedge is
classified in investing activities in the accompanying Condensed Consolidated
Statements of Cash Flows.
9
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The Company's derivative instrument, as well as its non-derivative debt
instrument designated and qualifying as net investment hedges, were classified
in the Company's Condensed Consolidated Balance Sheets as follows ($ in
millions):
March 29, 2024 December 31, 2023
Derivative liabilities:
Accrued expenses and other liabilities $ - $ -
Other long-term liabilities $ - $ 3.3
Nonderivative hedging instruments:
Long-term debt $ 377.8 $ 386.4
Amounts related to the Company's derivative expected to be reclassified from
accumulated other comprehensive loss to net income during the next 12 months
is not significant.
NOTE 8.
FAIR VALUE MEASUREMENTS
Accounting standards define fair value based on an exit price model, establish
a framework for measuring fair value where the Company's assets and
liabilities are required to be carried at fair value and provide for certain
disclosures related to the valuation methods used within a valuation hierarchy
as established within the accounting standards. This hierarchy prioritizes the
inputs into three broad levels as follows: Level 1 inputs are quoted prices
(unadjusted) in active markets for identical assets or liabilities; Level 2
inputs are quoted prices for similar assets and liabilities in active markets,
quoted prices for identical or similar assets in markets that are not active,
or other observable characteristics for the asset or liability, including
interest rates, yield curves and credit risks, or inputs that are derived
principally from, or corroborated by, observable market data through
correlation; and Level 3 inputs are unobservable inputs based on the Company's
assumptions. A financial asset or liability's classification within the
hierarchy is determined based on the lowest level input that is significant to
the fair value measurement in its entirety.
A summary of financial assets and liabilities that are measured at fair value
on a recurring basis were as follows ($ in millions):
Quoted Prices in Significant Other Significant Total
Active Market Observable Inputs Unobservable
(Level 1) (Level 2) Inputs
(Level 3)
March 29, 2024:
Liabilities:
Cross-currency swap derivative contract $ - $ - $ - $ -
Deferred compensation plans $ - $ 22.9 $ - $ 22.9
Contingent consideration $ - $ - $ 3.8 $ 3.8
December 31, 2023:
Liabilities:
Cross-currency swap derivative contract $ - $ 3.3 $ - $ 3.3
Deferred compensation plans $ - $ 21.4 $ - $ 21.4
Contingent consideration $ - $ - $ 3.8 $ 3.8
Derivative Instruments
The cross-currency swap derivative contract was classified as Level 2 in the
fair value hierarchy as it is measured using the income approach with the
relevant foreign currency current exchange rates and forward curves as inputs.
Refer to Note 7 for additional information.
10
-------------------------------------------------------------------------------
Deferred Compensation Plans
Certain management employees of the Company participate in nonqualified
deferred compensation programs that permit such employees to defer a portion
of their compensation, on a pretax basis. All amounts deferred under this plan
are unfunded, unsecured obligations and are presented as a component of the
Company's compensation and benefits accrual included in accrued expenses in
the accompanying Condensed Consolidated Balance Sheets (refer to Note 6).
Participants may choose among alternative earnings rates for the amounts they
defer, which are primarily based on investment options within the Company's
401(k) program. Changes in the deferred compensation liability under these
programs are recognized based on changes in the fair value of the
participants' accounts, which are based on the applicable earnings rates on
investment options within the Company's 401(k) program. Amounts voluntarily
deferred by employees into the Company stock fund and amounts contributed to
participant accounts by the Company are deemed invested in the Company's
common stock and future distributions of such contributions will be made
solely in shares of Company common stock, and therefore are not reflected in
the above amounts.
Contingent Consideration
Contingent consideration represents a cash hold back intended to be used for
certain liabilities related to the Company's acquisitions. Contingent
consideration was classified as Level 3 in the fair value hierarchy as the
estimated fair value was measured using a probability weighted discounted cash
flow model.
Fair Value of Financial Instruments
The carrying amounts and fair values of the Company's financial instruments
were as follows ($ in millions):
March 29, 2024 December 31, 2023
Carrying Amount Fair Value Carrying Amount Fair Value
Liabilities:
Contingent consideration $ 3.8 $ 3.8 $ 3.8 $ 3.8
Cross-currency swap derivative contract $ - $ - $ 3.3 $ 3.3
Convertible senior notes due 2028 $ 487.6 $ 441.8 $ 486.9 $ 455.7
Convertible senior notes due 2025 $ 115.5 $ 135.8 $ 115.3 $ 145.1
Other debt $ 902.9 $ 902.9 $ 911.2 $ 911.2
The fair value of long-term debt approximates the carrying value as these
borrowings are based on variable market rates. The fair value of the
convertible senior notes due 2028 and convertible senior notes due 2025 were
determined based on the quoted bid price of the convertible senior notes in an
over-the-counter market on March 29, 2024 and December 31, 2023. The
convertible senior notes are considered as Level 2 of the fair value
hierarchy. The fair values of cash and cash equivalents, which consist
primarily of money market funds, time and demand deposits, trade accounts
receivable, net and trade accounts payable approximate their carrying amounts
due to the short-term maturities of these instruments.
NOTE 9.
WARRANTY
The Company generally accrues estimated warranty costs at the time of sale. In
general, manufactured products are warranted against defects in material and
workmanship when properly used for their intended purpose, installed correctly
and appropriately maintained. Warranty periods depend on the nature of the
product and range from
90
days up to the life of the product. The amount of the accrued warranty
liability is determined based on historical information such as past
experience, product failure rates or number of units repaired, estimated cost
of material and labor and in certain instances estimated property damage. The
accrued warranty liability is reviewed on a quarterly basis and may be
adjusted as additional information regarding expected warranty costs becomes
known. At March 29, 2024 and December 31, 2023, the warranty liability was $
8.0
million and $
9.0
million, respectively.
11
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NOTE 10.
LITIGATION AND CONTINGENCIES
The Company records accruals for loss contingencies associated with legal
matters when it is probable that a liability will be incurred, and the amount
of the loss can be reasonably estimated.
For litigation matters that the Company has determined are both probable and
can be reasonably estimated, the Company has accrued $
37.5
million and $
38.0
million as of March 29, 2024 and December 31, 2023, respectively, which are
included in accrued liabilities in the Condensed Consolidated Balance Sheets.
The Company has accrued for these matters and will continue to monitor each
related legal issue and adjust accruals as might be warranted based on new
information and further developments in accordance with Accounting Standards
Codification ("ASC") 450-20-25. Amounts accrued for legal contingencies often
result from a complex series of judgments about future events and
uncertainties that rely heavily on estimates and assumptions including timing
of related payments. The ability to make such estimates and judgments can be
affected by various factors including, among other things, whether damages
sought in the proceedings are unsubstantiated or indeterminate; legal
discovery has not commenced or is not complete; proceedings are in early
stages; matters present legal uncertainties; there are significant facts in
dispute; procedural or jurisdictional issues; the uncertainty and
unpredictability of the number of potential claims; or there are numerous
parties involved. To the extent adverse verdicts have been rendered against
the Company, the Company does not record an accrual until a loss is determined
to be probable and can be reasonably estimated. In the Company's opinion,
based on its examination of these matters, its experience to date and
discussions with counsel, the ultimate outcome of legal proceedings, net of
liabilities accrued in the Company's Condensed Consolidated Balance Sheets, is
not expected to have a material adverse effect on the Company's financial
position. However, the resolution of, or increase in accruals for one or more
of these matters in any reporting period may have a material adverse effect on
the Company's results of operations and cash flows for that period.
NOTE 11.
DEBT AND CREDIT FACILITIES
The components of the Company's debt were as follows, net of debt discount and
debt issuance costs ($ in millions):
March 29, 2024 December 31, 2023
Senior term loan facility due 2028 (the "2028 Term Loan") $ 526.0 $ 525.8
Senior euro term loan facility due 2028 (the "2028 Euro Term Loan") 376.9 385.4
Convertible senior notes due 2028 (the "2028 Convertible Notes") 487.6 486.9
Convertible senior notes due 2025 (the "2025 Convertible Notes") 115.5 115.3
Total debt 1,506.0 1,513.4
Less: current portion ( (
115.5 115.3
) )
Long-term debt $ 1,390.5 $ 1,398.1
Credit Facilities
On
August 31, 2023,
the Company entered into a second amended and restated credit agreement (the
"Second Amended Credit Agreement"), which amends and restates the Company's
credit agreement dated June 15, 2021. The amended and restated credit
agreement dated June 15, 2021, consisted of a $
650.0
million Term Loan and a
208.0
million Euro Term Loan (collectively the "2024 Term Loans"), which were due in
2024. Additionally, the amended and restated credit agreement dated June 15,
2021 included a revolving credit facility with an aggregate available
borrowing capacity of $
750.0
million and a $
20.0
million sublimit for the issuance of standby letters of credit.
Under the Second Amended Credit Agreement, the Company entered into the 2028
Term Loan for $
530.0
million and the 2028 Euro Term Loan for
350.0
million (collectively the "2028 Term Loans"). The Second Amended Credit
Agreement also includes a revolving credit facility (together with the 2028
Term Loans, the "Senior Credit Facilities") with an aggregate available
borrowing capacity of $
750.0
million and a $
30.0
million sublimit for the issuance of standby letters of credit that can be
used for working capital and other general corporate purposes. The Company may
request further increases to the revolving credit facility by an amount that
is the greater of
100
% of Consolidated EBITDA or $
525.0
million. As of March 29, 2024 and December 31, 2023 there were
no
borrowings outstanding under this revolving credit facility. The Senior Credit
Facilities mature on August 31, 2028, and are subject to an earlier maturity
date of
91
days prior to the maturity date of the 2028 Convertible Notes, if more than $
250.0
million of such notes are outstanding at that time.
12
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The proceeds from the 2028 Term Loans were used to pay outstanding balances of
the 2024 Term Loans. The Company paid fees aggregating approximately $
5.2
million in connection with the Second Amended Credit Agreement.
Under the Senior Credit Facilities, borrowings bear interest as follows: (1)
Term SOFR Loans (as defined in the Second Amended Credit Agreement) bear
interest at a variable rate on a forward-looking Secured Overnight Financing
Rate ("SOFR") term rate plus
0.10
% credit spread adjustment plus a margin of between
0.910
% and
1.625
%, depending on the Company's Consolidated Leverage Ratio (as defined in the
Second Amended Credit Agreement) as of the last day of the immediately
preceding fiscal quarter; and (2) Base Rate Loans (as defined in the Second
Amended Credit Agreement) bear interest at a variable rate equal to (a) the
highest of (i) the Federal funds rate (as published by the Federal Reserve
Bank of New York from time to time) plus
0.50
%, (ii) Bank of America's "prime rate" as publicly announced from time to
time, (iii) the Term SOFR (as defined in the Second Amended Credit Agreement)
plus
1.0
% and (iv)
1.0
%, plus a margin of between
0.0
% and
0.625
%, depending on the Company's Consolidated Leverage Ratio as of the last day
of the immediately preceding fiscal quarter. In no event will Term SOFR Loans
or Base Rate Loans bear interest at a rate lower than 0.0%. In addition, the
Company is required to pay a per annum facility fee of between
0.09
% and
0.225
% depending on the Company's Consolidated Leverage Ratio as of the last day of
the immediately preceding fiscal quarter and based on the aggregate
commitments under the revolving credit facility, whether drawn or not.
The interest rates for borrowings under the 2028 Term Loan were
6.65
% and
6.70
% as of March 29, 2024 and December 31, 2023, respectively. The interest rates
for borrowings under the 2028 Euro Term Loan were
4.98
% and
5.00
% as of March 29, 2024 and December 31, 2023, respectively. Interest is
payable monthly for the 2028 Term Loans. The Company is required to maintain a
Consolidated Leverage Ratio of
4.00
to 1.00 or less and includes a provision that the maximum Consolidated
Leverage Ratio will be increased to
4.50
to 1.00 for the three consecutive full fiscal quarters immediately following
the consummation of any acquisition by the Company or any subsidiary of the
Company in which the purchase price exceeds $
100.0
million. The Company is also required to maintain a Consolidated Interest
Coverage Ratio (as defined in the Second Amended Credit Agreement) of at least
3.00
to 1.00. The Company is subject to customary representations, warranties,
conditions precedent, events of default, indemnities and affirmative and
negative covenants, including covenants that, among other things, limit or
restrict the Company's and/or the Company's subsidiaries' ability, subject to
certain exceptions and qualifications, to incur liens or indebtedness, merge,
consolidate or sell or otherwise transfer assets, make dividends or
distributions, enter into transactions with the Company's affiliates and use
proceeds of the debt financing for other than permitted uses. Additionally,
upon the occurrence and during the continuance of an event of default, the
lenders may declare the outstanding advances and all other obligations
immediately due and payable. The Company was in compliance with all of its
debt covenants as of March 29, 2024.
2028 Convertible Notes
On August 10, 2023, the Company issued the 2028 Convertible Notes due on
August 15, 2028, unless earlier repurchased, redeemed or converted. The
aggregate principal amount, which includes the initial purchasers' exercise in
full of their option to purchase an additional $
65.2
million principal amount, was $
500.2
million. The net proceeds from the issuance, after deducting purchasers'
discounts and estimated offering expenses, were $
485.9
million.
The 2028 Convertible Notes will accrue interest at a rate of
1.75
% per annum, payable semi-annually in arrears on February 15 and August 15 of
each year. The 2028 Convertible Notes have an initial conversion rate of
21.5942 shares of the Company's common stock per $1,000 principal amount,
which is equivalent to an initial conversion price of approximately $
46.31
per share of the Company's common stock and is subject to adjustment upon the
occurrence of specified events. The 2028 Convertible Notes are governed by an
indenture dated as of August 10, 2023 (the "Indenture") between the Company
and Wilmington Trust, National Association, as trustee. The Indenture does not
contain any financial covenants or any restrictions on the payment of
dividends, the incurrence of senior debt or other indebtedness or the issuance
or repurchase of the Company's securities by the Company.
The 2028 Convertible Notes are senior, unsecured obligations and are (i) equal
in right of payment with the Company's existing and future senior, unsecured
indebtedness; (ii) senior in right of payment to the Company's existing and
future indebtedness that is expressly subordinated to the 2028 Convertible
Notes; (iii) effectively subordinated to the Company's existing and future
secured indebtedness, to the extent of the value of the collateral securing
that indebtedness; and (iv) structurally subordinated to all existing and
future indebtedness and other liabilities, including trade payables, and (to
the extent the Company is not a holder thereof) preferred equity, if any, of
the Company's subsidiaries.
13
-------------------------------------------------------------------------------
Holders of the 2028 Convertible Notes may convert at any time on or after
February 15, 2028 until the close of business on the second scheduled trading
day immediately before the maturity date. Holders will also have the right to
convert prior to February 15, 2028, but only upon the occurrence of specified
events. The Company will settle any convertible note conversions through a
combination settlement by satisfying the principal amount outstanding with
cash and any convertible note conversion value in excess of the principal
amount in cash or shares of the Company's common stock or any combination
thereof. If a fundamental change occurs prior to the maturity date, holders
may require the Company to repurchase all or a portion of their 2028
Convertible Notes for cash at a repurchase price equal to
100
% of the principal amount plus any accrued and unpaid interest. In addition,
if specific corporate events occur prior to the maturity date, the Company
would increase the conversion rate for a holder who elects to convert in
connection with such an event in certain circumstances. As of March 29, 2024,
none of the conditions permitting early conversion by holders had been met,
therefore, the 2028 Convertible Notes are classified as long-term debt.
The 2028 Convertible Notes will be redeemable, in whole or in part, at the
Company's option at any time, and from time to time, on or after August 17,
2026 and on or before the 40th scheduled trading day immediately before the
maturity date, at a cash redemption price equal to the principal amount to be
redeemed, plus accrued and unpaid interest, if any, to, but excluding the
redemption date, but only if the last reported sale price per share of the
Company's common stock exceeds
130
% of the conversion price on (i) each of at least
20
trading days, whether or not consecutive, during the
30
consecutive trading days ending on, and including, the trading day immediately
before the date the Company sends the related redemption notice; and (ii) the
trading day immediately before the date the Company sends such notice. In
addition, calling any 2028 Convertible Note for redemption will constitute a
"Make-Whole Fundamental Change" (as defined in the Indenture) with respect to
that 2028 Convertible Note, in which case the conversion rate applicable to
the conversion will be increased in certain circumstances if it is converted
after it is called for redemption.
The 2028 Convertible Notes are accounted for in accordance with ASC 470
"Debt"
and ASC 815
"Derivatives and Hedging."
The Company has evaluated all the embedded conversion options contained in the
2028 Convertible Notes to determine if there are embedded features that
require bifurcation as a derivative as required by U.S. GAAP. Based on the
Company's analysis, it accounts for the 2028 Convertible Notes as single units
of accounting, a liability, because the Company concluded that the conversion
features do not require bifurcation as a derivative.
2025 Convertible Notes
On May 21, 2020, the Company issued the 2025 Convertible Notes due on June 1,
2025, unless earlier repurchased, redeemed or converted. The aggregate
principal amount, which includes the initial purchasers' exercise in full of
their option to purchase an additional $
67.5
million principal amount was $
517.5
million. The net proceeds from the issuance, after deducting purchasers'
discounts and estimated offering expenses, were $
502.6
million. The Company used part of the net proceeds to pay for the capped call
transactions ("Capped Calls") as further described below.
On August 10, 2023, the Company entered into exchange agreements with a
limited number of holders of the 2025 Convertible Notes to exchange $
401.2
million principal amount of the 2025 Convertible Notes for aggregate
consideration which consisted of approximately $
403.0
million in cash, which included accrued interest, and approximately
8.4
million shares of the Company's common stock (the "Notes Exchanges").
The 2025 Convertible Notes accrue interest at a rate of
2.375
% per annum, payable semi-annually in arrears on June 1 and December 1 of each
year. The 2025 Convertible Notes have an initial conversion rate of 47.5862
shares of the Company's common stock per $1,000 principal amount, which is
equivalent to an initial conversion price of approximately $
21.01
per share of the Company's common stock and is subject to adjustment upon the
occurrence of specified events. The 2025 Convertible Notes are governed by an
indenture dated as of May 21, 2020 (the "2025 Convertible Note Indenture")
between the Company and Wilmington Trust, National Association, as trustee.
The 2025 Convertible Note Indenture does not contain any financial covenants
or any restrictions on the payment of dividends, the incurrence of senior debt
or other indebtedness or the issuance or repurchase of the Company's
securities by the Company.
The 2025 Convertible Notes are senior, unsecured obligations and are (i) equal
in right of payment with the Company's existing and future senior, unsecured
indebtedness; (ii) senior in right of payment to the Company's existing and
future indebtedness that is expressly subordinated to the 2025 Convertible
Notes; (iii) effectively subordinated to the Company's existing and future
secured indebtedness, to the extent of the value of the collateral securing
that indebtedness; and (iv) structurally subordinated to all existing and
future indebtedness and other liabilities, including trade payables, and (to
the extent the Company is not a holder thereof) preferred equity, if any, of
the Company's subsidiaries.
14
-------------------------------------------------------------------------------
Holders may convert at any time on or after December 2, 2024, until the close
of business on the second scheduled trading day preceding the maturity date.
Holders will also have the right to convert prior to December 2, 2024, but
only upon the occurrence of specified events. The Company will settle any
convertible note conversions through a combination settlement by satisfying
the principal amount outstanding with cash and any convertible note conversion
value in excess of the principal amount in cash or shares of the Company's
common stock or any combination thereof. If a fundamental change occurs prior
to the maturity date, holders may require the Company to repurchase all or a
portion of their 2025 Convertible Notes for cash at a repurchase price equal to
100.0
% of the principal amount plus any accrued and unpaid interest. In addition,
if specific corporate events occur prior to the maturity date, the Company
would increase the conversion rate for a holder who elects to convert in
connection with such an event in certain circumstances. The 2025 Convertible
Notes are classified as short-term debt as of March 29, 2024 and December 31,
2023, as holders may convert at any time after December 2, 2024.
The 2025 Convertible Notes are redeemable, in whole or in part, at the
Company's option at any time, on or before the 40th scheduled trading day
immediately before the maturity date, at a cash redemption price equal to the
principal amounts to be redeemed, plus accrued and unpaid interest, if any,
to, but excluding the redemption date, but only if the last reported sale
price per share of the Company's common stock exceeds
130.0
% of the conversion price on (i) each of at least
20
trading days, whether or not consecutive, during the
30
consecutive trading days ending on, and including, the trading day immediately
before the date the Company sends the related redemption notice; and (ii) the
trading day immediately before the date the Company sends such notice. In
addition, calling any 2025 Convertible Note for redemption will constitute a
"Make-Whole Fundamental Change", as defined in the 2025 Convertible Note
Indenture, in which case the conversion rate applicable to the conversion will
be increased in certain circumstances if it is converted after it is called
for redemption.
The following table sets forth total interest expense recognized related to
convertible notes ($ in millions):
Three Months Ended
March 29, 2024 March 31, 2023
Contractual interest expense:
2028 Convertible Notes $ 2.2 $ -
2025 Convertible Notes 0.7 3.1
Amortization of debt issuance costs:
2028 Convertible Notes 0.7 -
2025 Convertible Notes 0.2 0.7
Total interest expense $ 3.8 $ 3.8
For the three months ended March 29, 2024 and March 31, 2023, the debt
issuance costs were amortized using an annual effective interest rate of
2.4
% and
3.0
% for the 2028 Convertible Notes and the 2025 Convertible Notes, respectively.
As of March 29, 2024 and December 31, 2023, the if-converted value of the 2025
Convertible Notes exceeded the outstanding principal amount by $
2.0
million and $
16.9
million, respectively. As of March 29, 2024 and December 31, 2023, the
if-converted value of the 2028 Convertible Notes did not exceed the
outstanding principal.
Debt Issuance Costs
The remaining unamortized debt issuance costs for debt outstanding were as
follows ($ in millions):
March 29, 2024 December 31, 2023
2028 Convertible Notes $ 12.6 $ 13.3
2025 Convertible Notes 0.8 1.0
2028 Term Loan 4.0 4.2
2028 Euro Term Loan 0.9 1.0
$ 18.3 $ 19.5
The above unamortized debt issuance costs have been netted against their
respective aggregate principal amounts of the related debt and are being
amortized to interest expense over the term of the respective debt.
15
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Capped Call Transactions
In connection with the offering of the 2025 Convertible Notes, the Company
entered into Capped Calls with certain counterparties. The Capped Calls have
an initial strike price of approximately $
21.01
per share, subject to certain adjustments, which corresponds to the initial
conversion price of the 2025 Convertible Notes. The Capped Calls have initial
cap prices of $
23.79
per share, subject to certain adjustments. The Capped Calls are generally
intended to reduce or offset the potential dilution from shares of common
stock issued upon any conversion of the 2025 Convertible Notes with such
reduction or offset, as the case may be, subject to a cap based on the cap
price. In connection with the Notes Exchanges as discussed above, the Company
completed a partial unwind of the Capped Calls.
As the Capped Call transactions are considered indexed to the Company's own
stock and are considered equity classified, they are recorded in equity and
are not accounted for as derivatives. The cost of $
20.7
million incurred in connection with the Capped Calls was recorded as a
reduction to additional paid-in capital.
NOTE 12.
ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component are
summarized below ($ in millions).
Foreign Currency Translation Adjustments Unrealized Pension Costs Total Accumulated Other Comprehensive Lo
Three Months Ended March 29, 2024
Balance, December $ ( $ 6.5 $
31, 2023 223.7 21
)
Other comprehensive loss before reclassifications:
Decrease ( -
63.3 6
)
Income tax impact ( -
2.9
)
Other comprehensive loss before ( -
reclassifications, 66.2 6
net of income taxes )
Amounts reclassified from accumulated other comprehensive loss:
Decrease - (
0.2
)
Income tax impact - -
Amounts reclassified - (
from accumulated other 0.2
comprehensive loss, )
net of income taxes
Net current period ( (
other comprehensive 66.2 0.2 6
loss, net of income taxes ) )
Balance, March $ ( $ 6.3 $
29, 2024 289.9 28
)
ss
(
7.2
)
(
3.3
)
(
2.9
)
(
6.2
)
(
0.2
)
-
(
0.2
)
(
6.4
)
(
3.6
)
16
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Foreign Currency Translation Adjustments Unrealized Pension Costs Total Accumulated Other Comprehensive Lo
Three Months Ended March 31, 2023
Balance, December $ ( $ 15.4 $
31, 2022 240.5 22
)
Other comprehensive loss before reclassifications:
Increase 14.1 - 1
Income tax impact 0.7 -
Other comprehensive loss before 14.8 - 1
reclassifications,
net of income taxes
Amounts reclassified from accumulated other comprehensive loss:
Decrease - (
0.4
)
Income tax impact - 0.1
Amounts reclassified - (
from accumulated other 0.3
comprehensive loss, )
net of income taxes
Net current period 14.8 ( 1
other comprehensive 0.3
loss, net of income taxes )
Balance, March $ ( $ 15.1 $
31, 2023 225.7 21
)
ss
(
5.1
)
4.1
0.7
4.8
(
0.4
)
0.1
(
0.3
)
4.5
(
0.6
)
NOTE 13.
REVENUE
The following table presents the Company's revenues disaggregated by
geographical region for the three months ended March 29, 2024 and March 31,
2023 ($ in millions). Sales taxes and other usage-based taxes collected from
customers are excluded from revenues. The Company has historically defined
emerging markets as developing markets of the world experiencing extended
periods of accelerated growth in gross domestic product and infrastructure,
including Eastern Europe, the Middle East, Africa, Latin America and Asia
(with the exception of Japan and Australia).
The Company defines developed markets as all markets of the world that are not
emerging markets.
Three Months Ended March 29, 2024
Specialty Products & Technologies Equipment & Consumables Total
Geographical region:
North America $ 171.1 $ 147.6 $ 318.7
Western Europe 122.3 26.0 148.3
Other developed markets 22.1 8.2 30.3
Emerging markets 93.2 33.1 126.3
Total $ 408.7 $ 214.9 $ 623.6
Three Months Ended March 31, 2023
Specialty Products & Technologies Equipment & Consumables Total
Geographical region:
North America $ 185.3 $ 139.4 $ 324.7
Western Europe 117.0 32.1 149.1
Other developed markets 24.0 8.6 32.6
Emerging markets 83.7 37.1 120.8
Total $ 410.0 $ 217.2 $ 627.2
17
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Remaining Performance Obligations
ASC 606 requires disclosure of remaining performance obligations that
represent the aggregate transaction price allocated to performance obligations
with an original contract term greater than one year which are fully or
partially unsatisfied at the end of the period. Remaining performance
obligations include noncancelable purchase orders, extended warranty and
service agreements and do not include revenue from contracts with customers
with an original term of one year or less.
As of March 29, 2024, the aggregate amount of the transaction price allocated
to remaining performance obligations was $
87.3
million and the Company expects to recognize revenue on the majority of this
amount over the next
12
months.
Contract Liabilities
The Company often receives cash payments from customers in advance of the
Company's performance resulting in contract liabilities. These contract
liabilities are classified as either current or long-term in the Condensed
Consolidated Balance Sheets based on the timing of when the Company expects to
recognize revenue. As of March 29, 2024 and December 31, 2023, the contract
liabilities were $
124.0
million and $
114.8
million, respectively, and are included within accrued expenses and other
liabilities and other long-term liabilities in the accompanying Condensed
Consolidated Balance Sheets. Revenue recognized during the three months ended
March 29, 2024 and March 31, 2023 that was included in the contract liability
balance at December 31, 2023 and December 31, 2022 was $
38.7
million and $
32.9
million, respectively.
Significant Customers
Sales to the Company's largest customer were
10
% of sales for both the three months ended March 29, 2024 and March 31, 2023.
NOTE 14.
RESTRUCTURING ACTIVITIES AND RELATED IMPAIRMENTS
Restructuring Activities
The Company's restructuring activities are undertaken as necessary to
implement management's strategy, streamline operations, take advantage of
available capacity and resources, and ultimately achieve net cost reductions.
These activities generally relate to the realignment of existing manufacturing
capacity and closure of facilities and other exit or disposal activities, as
it relates to executing the Company's strategy, pursuant to restructuring
programs.
Restructuring related charges by segment were as follows ($ in millions):
Three Months Ended
March 29, 2024 March 31, 2023
Specialty Products & Technologies $ 3.3 $ 1.6
Equipment & Consumables 2.8 2.6
Other 0.8 0.1
Total $ 6.9 $ 4.3
Restructuring related charges were reflected in the following captions in the
accompanying Condensed Consolidated Statements of Operations ($ in millions):
Three Months Ended
March 29, 2024 March 31, 2023
Cost of sales $ 1.7 $ 1.5
Selling, general and administrative expenses 5.2 2.8
Total $ 6.9 $ 4.3
At March 29, 2024 and December 31, 2023, the restructuring liability was $
13.0
million and $
16.0
million, respectively.
18
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NOTE 15.
INCOME TAXES
The Company's effective tax rates of
33.1
% for the three months ended March 29, 2024, and
21.4
% for the three months ended March 31, 2023, differ from the U.S. federal
statutory rate of 21.0% primarily due to a valuation allowance against certain
U.S. interest carryforwards, and to the Company's geographical mix of earnings
and net discrete tax benefits, respectively.
On January 1, 2024, certain provisions of the Organisation for Economic
Co-operation and Development base Erosion and Profit Shifting 2.0 Pillar Two
global minimum tax ("GMT") became effective in various jurisdictions. Based on
currently enacted law, the impact of GMT on the Company's 2024 financial
results is not expected to be material.
NOTE 16.
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the applicable income by
the weighted average number of shares of common stock outstanding for the
applicable period. Diluted earnings per share is computed based on the
weighted average number of common shares outstanding plus the effect of
dilutive potential shares outstanding during the period using the treasury
stock method, except for the 2028 Convertible Notes and 2025 Convertible
Notes, which are calculated using the if-converted method. Dilutive potential
common shares include employee equity options, non-vested shares and similar
instruments granted by the Company and the assumed conversion impact of
convertible notes. The Company will settle any convertible note conversions
through a combination settlement by satisfying the principal amount
outstanding with cash and any convertible note conversion value in excess of
the principal amount in cash or shares of the Company's common stock or any
combination thereof. As the Company will settle the principal amount of
convertible notes in cash upon conversion, the convertible notes only have an
impact on the Company's diluted earnings per share when the average share
price of the Company's common stock exceeds the conversion price, in any
applicable period. See the computation of earnings per share below for the
dilutive impact of the convertible notes for the three months ended March 29,
2024 and March 31, 2023.
In connection with the offering of the 2025 Convertible Notes, the Company
entered into Capped Calls, which are intended to reduce or offset the
potential dilution from shares of common stock issued upon conversion. The
Company completed a partial unwind of the Capped Calls in connection with the
Notes Exchanges. Refer to Note 11 for further discussion of the Capped Calls.
The impact of the remaining Capped Calls is not included when calculating
potentially dilutive shares since their effect is anti-dilutive. The Capped
Calls will mitigate dilution for the conversion of the remaining 2025
Convertible Notes up to the Company's common stock price of $
23.79
. If the remaining 2025 Convertible Notes are converted at a price higher than $
23.79
per share, the Capped Calls will no longer mitigate dilution from the
conversion of the remaining 2025 Convertible Notes.
19
-------------------------------------------------------------------------------
The table below presents the computation of basic and diluted earnings per
share ($ and shares in millions, except per share amounts):
Three Months Ended
March 29, 2024 March 31, 2023
Numerator:
Net income $ 23.6 $ 43.8
Denominator:
Weighted-average common shares outstanding 171.9 163.6
used in basic earnings per share
Incremental common shares from:
Assumed exercise of dilutive options and vesting of 1.1 2.8
dilutive restricted stock units and performance stock units
Assumed conversion of 2025 Convertible Notes 0.4 11.0
Weighted average common shares outstanding 173.4 177.4
used in diluted earnings per share
Earnings per share:
Earnings - basic $ 0.14 $ 0.27
Earnings - diluted $ 0.14 $ 0.25
The following table presents the number of outstanding securities not included
in the computation of diluted income per share, because their effect was
anti-dilutive (in millions):
Three Months Ended
March 29, 2024 March 31, 2023
Stock-based awards 3.5 1.8
2028 Convertible Notes 11.3 -
Total 14.8 1.8
NOTE 17.
SEGMENT INFORMATION
The Company operates and reports its results in
two
separate business segments, the Specialty Products & Technologies and
Equipment & Consumables segments. When determining the reportable segments,
the Company aggregated operating segments based on their similar economic and
operating characteristics. Operating profit represents total revenues less
operating expenses, excluding nonoperating income (expense), interest expense
and income taxes. Operating profit amounts in the Other segment consist of
unallocated corporate costs and other costs not considered part of
management's evaluation of reportable segment operating performance. The
identifiable assets by segment are those used in each segment's operations.
Inter-segment amounts are not significant and are eliminated to arrive at
consolidated totals.
The Company's Specialty Products & Technologies products primarily include
implants, regenerative products, prosthetics, orthodontic brackets, aligners
and lab products. The Company's Equipment & Consumables products primarily
include traditional consumables such as bonding agents and cements, impression
materials, infection prevention products and restorative products, while the
Company's equipment products primarily include digital imaging systems,
software and other visualization and magnification systems.
20
-------------------------------------------------------------------------------
Segment related information is shown below ($ in millions):
Three Months Ended
March 29, 2024 March 31, 2023
Sales:
Specialty Products & Technologies $ 408.7 $ 410.0
Equipment & Consumables 214.9 217.2
Total $ 623.6 $ 627.2
Operating profit and reconciliation to income before taxes:
Specialty Products & Technologies $ 44.2 $ 71.1
Equipment & Consumables 35.6 32.5
Other ( (
31.7 31.5
) )
Operating profit 48.1 72.1
Nonoperating income (expense):
Other income, net 0.1 0.3
Interest expense, net ( (
12.9 16.7
) )
Income before taxes $ 35.3 $ 55.7
Identifiable assets: March 29, 2024 December 31, 2023
Specialty Products & Technologies $ 3,276.1 $ 3,277.7
Equipment & Consumables 2,282.2 2,338.6
Other 998.0 988.8
Total $ 6,556.3 $ 6,605.1
21
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with other information, including
our Condensed Consolidated Financial Statements and related notes included in
Part I, Item 1, Financial Information, of this Quarterly Report on Form 10-Q,
our consolidated financial statements appearing in our Annual Report on Form
10-K for the year ended December 31, 2023 (the "2023 10-K"), and Part II, Item
1A, Risk Factors, of this Quarterly Report on Form 10-Q. Unless the context
otherwise requires, all references herein to the "Company," "we," "us" or
"our," or similar terms, refer to Envista Holdings Corporation and its
consolidated subsidiaries.
Certain statements included or incorporated by reference in this Quarterly
Report are "forward-looking statements" within the meaning of the U.S. federal
securities laws. All statements other than historical factual information are
forward-looking statements, including without limitation statements regarding:
projections of revenue, expenses, profit, profit margins, tax rates, tax
provisions, cash flows, pension and benefit obligations and funding
requirements, our liquidity position or other projected financial measures;
management's plans and strategies for future operations, including statements
relating to anticipated operating performance, cost reductions, restructuring
activities, new product and service developments, competitive strengths or
market position, acquisitions and the integration thereof, divestitures,
spin-offs, split-offs or other distributions, strategic opportunities,
securities offerings, stock repurchases, dividends and executive compensation;
growth, declines and other trends in markets we sell into; future regulatory
approvals and the timing thereof; outstanding claims, legal proceedings, tax
audits and assessments and other contingent liabilities; future foreign
currency exchange rates and fluctuations in those rates; the anticipated
timing of any of the foregoing; assumptions underlying any of the foregoing;
and any other statements that address events or developments that Envista
intends or believes will or may occur in the future. Terminology such as
"believe," "anticipate," "should," "could," "intend," "will," "plan,"
"expect," "estimate," "project," "target," "may," "possible," "potential,"
"forecast" and "positioned" and similar references to future periods are
intended to identify forward-looking statements, although not all
forward-looking statements are accompanied by such words. Forward-looking
statements are based on assumptions and assessments made by our management in
light of their experience and perceptions of historical trends, current
conditions, expected future developments and other factors they believe to be
appropriate. These forward-looking statements are subject to a number of risks
and uncertainties, including but not limited to, the following: the conditions
in the U.S. and global economy, the impact of inflation and increasing
interest rates, international economic, political, legal, compliance and
business factors, the markets served by us and the financial markets, the
impact of our debt obligations on our operations and liquidity, developments
and uncertainties in trade policies and regulations, contractions or growth
rates and cyclicality of markets we serve, risks relating to product
manufacturing, commodity costs and surcharges, our ability to adjust purchases
and manufacturing capacity to reflect market conditions, reliance on sole or
limited sources of supply, disruptions relating to war, terrorism, climate
change, widespread protests and civil unrest, man-made and natural disasters,
public health issues and other events, security breaches or other disruptions
of our information technology systems or violations of data privacy laws,
fluctuations in inventory of our distributors and customers, loss of a key
distributor, our relationships with and the performance of our channel
partners, competition, our ability to develop and successfully market new
products and services, our ability to attract, develop and retain our key
personnel, the potential for improper conduct by our employees, agents or
business partners, our compliance with applicable laws and regulations
(including regulations relating to medical devices and the health care
industry), the results of our clinical trials and perceptions thereof,
penalties associated with any off-label marketing of our products,
modifications to our products that require new marketing clearances or
authorizations, our ability to effectively address cost reductions and other
changes in the health care industry, our ability to successfully identify and
consummate appropriate acquisitions and strategic investments, our ability to
integrate the businesses we acquire and achieve the anticipated benefits of
such acquisitions, contingent liabilities relating to acquisitions,
investments and divestitures, our ability to adequately protect our
intellectual property, the impact of our restructuring activities on our
ability to grow, risks relating to currency exchange rates, changes in tax
laws applicable to multinational companies, litigation and other contingent
liabilities including intellectual property and environmental, health and
safety matters, risks relating to product, service or software defects, the
impact of regulation on demand for our products and services, and labor
matters, and other risks and uncertainties set forth under "Item 1A. Risk
Factors" in the 2023 10-K and this Quarterly Report on Form 10-Q.
Forward-looking statements are not guarantees of future performance and actual
results may differ materially from the results, developments and business
decisions contemplated by our forward-looking statements. Accordingly, you
should not place undue reliance on any such forward-looking statements.
Forward-looking statements contained herein speak only as of the date of this
Quarterly Report. Except to the extent required by applicable law, we do not
assume any obligation to update or revise any forward-looking statement,
whether as a result of new information, future events and developments or
otherwise.
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BASIS OF PRESENTATION
The accompanying Condensed Consolidated Financial Statements present our
historical financial position, results of operations, changes in stockholders'
equity and cash flows in accordance with GAAP.
OVERVIEW
General
We provide products that are used to diagnose, treat and prevent disease and
ailments of the teeth, gums and supporting bone, as well as to improve the
aesthetics of the human smile. We help our customers deliver the best possible
patient care through industry-leading solutions, technologies, and services.
With leading brand names, innovative technology and significant market
positions, we are a leading worldwide provider of a broad range of solutions
to support implant-based tooth replacements, orthodontic treatments,
diagnostic solutions, as well as general dental consumables, equipment and
services, and are dedicated to driving technological innovations that help
dental professionals improve clinical outcomes and enhance productivity. Our
research and development, manufacturing, sales, distribution, service and
administrative facilities are located in more than 30 countries across North
America, Asia, Europe, the Middle East and Latin America.
We operate in two business segments: Specialty Products & Technologies and
Equipment & Consumables. Our Specialty Products & Technologies segment
develops, manufactures and markets products primarily related to dental
implant systems, including regenerative solutions, dental prosthetics and
associated treatment software and technologies, as well as orthodontic bracket
systems, aligners and lab products. Our Equipment & Consumables segment
develops, manufactures and markets products primarily related to dental
equipment and supplies used in dental offices, including digital imaging
systems, software and other visualization/magnification systems; endodontic
systems and related consumables; and restorative materials and instruments,
rotary burs, impression materials, bonding agents and cements and infection
prevention products.
For the three months ended March 29, 2024, sales derived from customers
outside of the United States were 52.8% compared to the three months ended
March 31, 2023, of 52.4%. As a global provider of dental consumables,
equipment and services, our operations are affected by worldwide, regional and
industry-specific economic and political factors. Given the broad range of
dental products, software and services provided and geographies served, we do
not use any indices other than general economic trends to predict our overall
outlook. Our individual businesses monitor key competitors and customers,
including to the extent possible their sales, to gauge relative performance
and the outlook for the future.
As a result of our geographic and product line diversity, we face a variety of
opportunities and challenges, including rapid technological development in
most of our served markets, the expansion and evolution of opportunities in
emerging markets, trends and costs associated with a global labor force,
consolidation of our competitors and increasing regulation. We operate in a
highly competitive business environment in most markets, and our long-term
growth and profitability will depend in particular on our ability to expand
our business in emerging geographies and emerging market segments, identify,
consummate and integrate appropriate acquisitions, develop innovative and
differentiated new products and services, expand and improve the effectiveness
of our sales force, continue to reduce costs and improve operating efficiency
and quality and effectively address the demands of an increasingly regulated
global environment. We are making significant investments to address the rapid
pace of technological change in our served markets and to globalize our
manufacturing, research and development and customer-facing resources
(particularly in emerging markets and our dental implant business) in order to
be responsive to our customers throughout the world and improve the efficiency
of our operations.
Key Trends and Conditions Affecting Our Results of Operations
General Economic Conditions
In addition to industry-specific factors, we, like other businesses, face
challenges related to global economic conditions, including inflation,
interest rates, fluctuating foreign currency exchange rates, slow economic
growth, and continuing supply chain disruptions. Dental costs are largely
out-of-pocket for the consumer and thus utilization rates can vary
significantly depending on economic growth. While many of our products are
considered necessary by patients regardless of the economic environment,
certain products and services that support discretionary dental procedures may
be more susceptible to changes in economic conditions.
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Foreign Currency Exchange Rates
On a period-over-period basis, currency exchange rates negatively impacted
reported sales by 1.0% for the three months ended March 29, 2024, compared to
the comparable period of 2023, primarily due to the strength of the U.S.
dollar against most major currencies. Any future strengthening of the U.S.
dollar against major currencies would negatively impact our sales and results
of operations for the remainder of the year, and any weakening of the U.S.
dollar against major currencies would positively impact our sales and results
of operations for the remainder of the year.
Pricing Controls
Certain countries, as well as some private payors, also control the price of
health care products, directly or indirectly, through reimbursement, payment,
pricing or coverage limitations, tying reimbursement to outcomes or (in the
case of governmental entities) compulsory licensing. For example, China has
implemented volume-based procurement policies, a series of centralized reforms
instituted in China on both a national and regional basis that has resulted in
significant price cuts for medical and dental consumables.
Russia-Ukraine Conflict
Russia's invasion of Ukraine and the global response to this invasion,
including sanctions imposed by the U.S. and other countries, could have an
adverse impact on our business, including our ability to market and sell
products in the affected regions, potentially heightening our risk of cyber
security attacks, impacting our ability to enforce our intellectual property
rights in Russia, creating disruptions in the global supply chain, and
potentially having an adverse impact on the global economy, financial markets,
energy markets, currency rates and otherwise. While we are experiencing
volatility in sales from this region, Russia's invasion of Ukraine did not
have a material impact on our overall financial position or results of
operations as of and for the three months ended March 29, 2024 and March 31,
2023.
Israel-Hamas War
In response to the attacks in Israel and the subsequent hostilities, we
continue to monitor the social, political, and economic environment in Israel
and in the region for any impact to our operations. Revenue generated from
Israel is approximately $12 million annually. We also maintain a production
facility in Israel related to our Alpha-Bio Tech Implant brand. While we have
experienced some volatility in the region, the Israel-Hamas War and related
hostilities have not had a material impact on our business.
Seasonal Nature of Business
General economic conditions impact our business and financial results, and
certain of our businesses experience seasonal and other trends related to the
end markets and regions that they serve. For example, sales of capital
equipment have historically been stronger in the fourth calendar quarter.
However, as a whole, we are not subject to material seasonality.
Non-GAAP Measures
In order to establish period-to-period comparability, we include the non-GAAP
measure of core sales in this report. References to the non-GAAP measure of
core sales (also referred to as core revenues or sales/revenues from existing
businesses) refer to sales calculated according to GAAP, but excluding:
.
sales from acquired businesses for one year from the acquisition date;
.
sales from discontinued products; and
.
the impact of currency translation.
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We exclude sales from acquired businesses in order to provide accurate year
over year comparisons. Sales from discontinued products includes major brands
or major products that we have made the decision to discontinue as part of a
portfolio restructuring. Discontinued brands or products consist of those
which we (1) are no longer manufacturing, (2) are no longer investing in the
research or development of, and (3) expect to discontinue all significant
sales of within one year from the decision date to discontinue. The portion of
sales attributable to discontinued brands or products is calculated as the net
decline of the applicable discontinued brand or product from period-to-period.
We exclude sales from discontinued products because discontinued products do
not have a continuing contribution to operations and management believes that
excluding such items provides investors with a means of evaluating our
on-going operations and facilitates comparisons to our peers.
The portion of sales attributable to currency translation is calculated as the
difference between:
.
the period-to-period change in sales; and
.
the period-to-period change in sales after applying current period foreign
exchange rates to the prior year period.
Core sales growth should be considered in addition to, and not as a
replacement for or superior to, sales, and may not be comparable to similarly
titled measures reported by other companies. We believe that reporting the
non-GAAP financial measure of core sales growth provides useful information to
investors by helping identify underlying growth trends in our on-going
business and facilitating comparisons of our sales performance with our
performance in prior and future periods and to our peers. We also use core
sales growth to measure our operating and financial performance. We exclude
the effect of currency translation from core sales because currency
translation is not under our control, is subject to volatility and can obscure
underlying business trends.
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RESULTS OF OPERATIONS
All comparisons, variances, increases or decreases discussed below are for the
three months ended March 29, 2024, compared to the three months ended March
31, 2023.
Three Months Ended
($ in millions) March 29, 2024 March 31, 2023 % Change
Sales $ 623.6 100.0% $ 627.2 100.0% (0.6) %
Cost of sales 267.3 42.9% 264.5 42.2% 1.1 %
Gross profit 356.3 57.1% 362.7 57.8% (1.8) %
Operating costs:
Selling, general and administrative ("SG&A") expenses 284.9 45.7% 266.1 42.4% 7.1 %
Research and development ("R&D") expenses 23.3 3.7% 24.5 3.9% (4.9) %
Operating profit 48.1 7.7% 72.1 11.5% (33.3) %
Nonoperating income (expense):
Other income, net 0.1 -% 0.3 -% (66.7) %
Interest expense, net (12.9) (2.1)% (16.7) (2.7)% (22.8) %
Income before income taxes 35.3 5.7% 55.7 8.9% (36.6) %
Income tax expense 11.7 1.9% 11.9 1.9% (1.7) %
Net income $ 23.6 3.8% $ 43.8 7.0% (46.1) %
Effective tax rate 33.1 % 21.4 %
GAAP Reconciliation
Sales and Core Sales Growth
% Change Three Month Period Ended March 29, 2024 vs. Comparable 2023 Period
Total sales growth (GAAP) (0.6) %
Plus the impact of:
Currency exchange rates 1.0 %
Core sales growth (non-GAAP) 0.4 %
Sales for the three months ended March 29, 2024 decreased 0.6% while core
sales growth increased by 0.4% for the comparable period in 2023. An increase
in sales volume positively impacted sales by 0.6% on a period-over-period
basis, partially offset by a decrease in sales price of 0.2%. Sales decreased
due to lower demand in North America, partially offset by an increase in China.
COST OF SALES AND GROSS PROFIT MARGIN
Three Months Ended
($ in millions) March 29, 2024 March 31, 2023
Cost of sales $ 267.3 $ 264.5
Gross profit margin 57.1 % 57.8 %
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The increase in cost of sales during the three months ended March 29, 2024 as
compared to the comparable period in 2023, was primarily due to unfavorable
product mix.
The decrease in gross profit margin percentage during the three months ended
March 29, 2024, as compared to the comparable period in 2023, was primarily
due to unfavorable sales price and product mix, partially offset by an
increase in sales volume.
OPERATING EXPENSES
Three Months Ended
($ in millions) March 29, 2024 March 31, 2023
Selling, general and administrative expenses $ 284.9 $ 266.1
Research and development expenses $ 23.3 $ 24.5
SG&A as a % of sales 45.7 % 42.4 %
R&D as a % of sales 3.7 % 3.9 %
The increase in SG&A expenses as a percentage of sales for the three months
ended March 29, 2024 as compared to the comparable period of 2023, was
primarily due to higher sales and marketing and compensation spend, partially
offset by decreased amortization of intangible assets.
R&D expenses as a percentage of sales for the three months ended March 29,
2024, was consistent with the comparable period in 2023.
INTEREST COSTS AND FINANCING
Interest costs were $12.9 million and $16.7 million for the three months ended
March 29, 2024 and March 31, 2023, respectively. The decrease in interest
costs for the three months ended March 29, 2024 as compared to the comparable
period of 2023 was primarily due to higher returns on cash and cash
equivalents, partially offset by higher variable rate term borrowings and
interest rates.
INCOME TAXES
Three Months Ended
March 29, 2024 March 31, 2023
Effective tax rate 33.1 % 21.4 %
Our effective tax rate for the three months ended March 29, 2024 was
33.1% compared to 21.4%
in 2023. The change in the effective rate was primarily due to the impact of a
valuation allowance against certain U.S. interest carryforwards.
RESULTS OF OPERATIONS - BUSINESS SEGMENTS
Specialty Products & Technologies
Our Specialty Products & Technologies segment primarily develops, manufactures
and markets dental implant systems, including regenerative solutions, dental
prosthetics and associated treatment software and technologies, as well as
orthodontic bracket systems, aligners and lab products.
Specialty Products & Technologies Selected Financial Data
Three Months Ended
($ in millions) March 29, 2024 March 31, 2023
Sales $ 408.7 $ 410.0
Operating profit $ 44.2 $ 71.1
Operating profit as a % of sales 10.8 % 17.3 %
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Sales and Core Sales Growth
% Change Three Month Period Ended March 29, 2024 vs. Comparable 2023 Period
Total sales growth (GAAP) (0.3) %
Plus the impact of:
Currency exchange rates 1.1 %
Core sales growth (non-GAAP) 0.8 %
Sales
Sales for the three months ended March 29, 2024 decreased 0.3% while core
sales growth increased by 0.8% compared to the comparable period in 2023. An
increase in sales volume positively impacted sales by 1.1% on a period-over-peri
od basis, partially offset by a decrease in sales price of 0.3%. The decrease
in sales is primarily due to lower demand in North America, partially offset
by growth in China and Europe.
Operating Profit
Operating profit margin was 10.8% for the three months ended March 29, 2024,
as compared to an operating profit margin of 17.3% for the comparable period
of 2023. For the three months ended March 29, 2024, the decrease was primarily
due to unfavorable product mix and sales price, and higher costs related to
our long-term growth initiatives, partially offset by an increase in sales
volume.
EQUIPMENT & CONSUMABLES
Our Equipment & Consumables segment primarily develops, manufactures and
markets dental equipment and supplies used in dental offices, including
digital imaging systems, software and other visualization/magnification
systems; endodontic systems and related consumables; restorative materials and
instruments, rotary burs, impression materials, bonding agents and cements and
infection prevention products.
Equipment & Consumables Selected Financial Data
Three Months Ended
($ in millions) March 29, 2024 March 31, 2023
Sales $ 214.9 $ 217.2
Operating profit $ 35.6 $ 32.5
Operating profit as a % of sales 16.6 % 15.0 %
Sales and Core Sales Growth
% Change Three Month Period Ended March 29, 2024 vs. Comparable 2023 Period
Total sales growth (GAAP) (1.1) %
Plus the impact of:
Currency exchange rates 0.9 %
Core sales growth (non-GAAP) (0.2) %
Sales
Sales and core sales growth for the three months ended March 29, 2024
decreased 1.1%, and 0.2%, respectively, compared to the comparable period in
2023. A decrease in sales volume negatively impacted sales by 0.1% on a
period-over-period basis, combined with a decrease in sales price of 0.1%. The
decrease in sales is primarily due to lower demand from Europe, partially
offset by higher demand in North America.
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Operating Profit
Operating profit margin was 16.6% for the three months ended March 29, 2024,
as compared to an operating profit margin of 15.0% for the comparable period
of 2023. The increase in operating profit margin for the three months ended
March 29, 2024 was primarily due to favorable product mix, period-over-period
savings associated with productivity improvements and decreased amortization
of intangible assets, partially offset by unfavorable sales volume and price.
LIQUIDITY AND CAPITAL RESOURCES
We assess our liquidity in terms of our ability to generate cash to fund our
operating and investing activities. We continue to generate substantial cash
from operating activities and believe that our operating cash flow and other
sources of liquidity are sufficient to allow us to manage our capital
structure on a short-term and long-term basis and continue investing in
existing businesses and consummating strategic acquisitions.
Following is an overview of our cash flows and liquidity:
Overview of Cash Flows and Liquidity
Three Months Ended
March 29, 2024 March 31, 2023
Net cash provided by operating activities $ 40.3 $ 3.1
Payments for additions to property, plant and equipment $ (11.0) $ (17.5)
All other investing activities, net 0.3 (4.5)
Net cash used in investing activities $ (10.7) $ (22.0)
Proceeds from stock option exercises 1.3 $ 4.6
Tax withholding payment related to net settlement of equity awards (3.3) (6.1)
All other financing activities (0.6) -
Net cash used in financing activities $ (2.6) $ (1.5)
Operating Activities
Cash flows from operating activities can fluctuate significantly from
period-to-period due to working capital needs and the timing of payments for
income taxes, restructuring activities, pension funding and other items
impacting reported cash flows.
Net cash provided by operating activities was $40.3 million during the three
months ended March 29, 2024, as compared to net cash provided by operating
activities of $3.1 million for the comparable period of 2023. The increase in
cash provided by operating activities during the three months ended March 29,
2024 is primarily due to timing of vendor payments combined with lower year
end incentive compensation paid in the current period, partially offset by
lower net income as compared to 2023.
Investing Activities
Cash flows relating to investing activities consist primarily of cash used for
capital expenditures and acquisitions. Capital expenditures are made primarily
for increasing capacity, replacing equipment, supporting new product
development and improving information technology systems.
Net cash used in investing activities was $10.7 million for the three months
ended March 29, 2024, as compared to net cash used in investing activities of
$22.0 million for the comparable period in 2023, primarily due to the lower
payments for purchases of property, plant and equipment.
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Financing Activities and Indebtedness
Cash flows relating to financing activities consist primarily of cash flows
associated with debt borrowings and the issuance of common stock.
Net cash used by finance activities was $2.6 million for the three months
ended March 29, 2024 compared to net cash used by financing activities of $1.5
million for the comparable period of 2023, primarily due to lower cash
proceeds from stock option exercises.
For a description of our outstanding debt as of March 29, 2024, refer to Note
11 to our Condensed Consolidated Financial Statements in this Quarterly Report
on Form 10-Q.
We intend to satisfy any short-term liquidity needs that are not met through
operating cash flow and available cash primarily through our revolving credit
facility.
Cash and Cash Requirements
As of March 29, 2024, we held $948.5 million of cash and cash equivalents that
were held on deposit with financial institutions. Of this amount, $326.2
million was held within the United States and $622.3 million was held outside
of the United States. We will continue to have cash requirements to support
working capital needs, capital expenditures and acquisitions, pay interest and
service debt, pay taxes and any related interest or penalties, fund our
restructuring activities as required and support other business needs. We
generally intend to use available cash, internally generated funds and our
revolving credit facility to meet these cash requirements, but in the event
that additional liquidity is required, particularly in connection with
acquisitions, we may need to enter into new credit facilities or access the
capital markets. We may also access the capital markets from time to time to
take advantage of favorable interest rate environments or other market
conditions. However, there is no guarantee that we will be able to obtain
alternative sources of financing on commercially reasonable terms or at all.
See "Item 1A. Risk Factors-Risks Related to Our Business" in our 2023 10-K.
Generally, cash and cash equivalents held in these financial institutions may
be withdrawn or redeemed at face value, and therefore minimal credit risk
exists with respect to them. Nonetheless, deposits with these financial
institutions exceed the Federal Deposit Insurance Corporation (FDIC) insurance
limits or similar limits in foreign jurisdictions, to the extent such deposits
are even insured in such foreign jurisdictions. While we monitor on a
systematic basis the cash and cash equivalent balances in the operating
accounts and adjust the balances as appropriate, these balances could be
impacted if one or more of the financial institutions with which we deposit
our funds fails or is subject to other adverse conditions in the financial or
credit markets. To date, we have experienced no loss of principal or lack of
access to our invested cash or cash equivalents; however, we can provide no
assurance that access to our cash and cash equivalents will not be affected if
the financial institutions where we hold our cash and cash equivalents fail.
While repatriation of some cash held outside the United States may be
restricted by local laws, most of our foreign cash could be repatriated to the
United States. Following enactment of the Tax Cut and Jobs Act of 2017
("TCJA") and the associated transition tax, in general, repatriation of cash
to the United States can be completed with no incremental U.S. tax; however,
repatriation of cash could subject us to non-U.S. jurisdictional taxes on
distributions. The cash that our non-U.S. subsidiaries hold for indefinite
reinvestment is generally used to finance foreign operations and investments,
including acquisitions. The income taxes, if any, applicable to such earnings
including basis differences in our foreign subsidiaries are not readily
determinable.
As of March 29, 2024, we believe that we have sufficient sources of liquidity
to satisfy our cash needs over the next 12 months and beyond, including our
cash needs in the United States.
Off-Balance Sheet Arrangements
There were no material changes to the Company's off-balance sheet arrangements
described in the 2023 10-K that would have a material impact on the Company's
Condensed Consolidated Financial Statements.
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Debt Financing Transactions
For a description of our outstanding debt as of March 29, 2024, refer to Note
11 to our Condensed Consolidated Financial Statements in this Quarterly Report
on Form 10-Q.
Critical Accounting Estimates
There were no material changes to our critical accounting estimates described
in the 2023 10-K that have had a material impact on our Condensed Consolidated
Financial Statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Quantitative and qualitative disclosures about market risk appear in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Qualitative and Quantitative Disclosures About Market Risk," in our
2023 10-K. There were no material changes to this information reported in our
2023 10-K during the quarter ended March 29, 2024.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our President and Chief Executive
Officer, and Principal Financial Officer, has evaluated the effectiveness of
our disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period
covered by this report. Based on such evaluation, our President and Chief
Executive Officer, and Principal Financial Officer, have concluded that, as of
the end of such period, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during the quarter ended March 29, 2024 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
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PART II. Other Information
Item 1. Legal Proceedings
There have been no material changes to legal proceedings from our 2023 10-K.
For additional information regarding legal proceedings, refer to "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Legal
Proceedings" in our 2023 10-K.
Item 1A. Risk Factors
You should carefully consider the factors discussed in Part I, "Item 1A. Risk
Factors" in our 2023 10-K, which could materially affect our business,
financial position, or future results of operations. The risks described in
our 2023 10-K, are not the only risks we face. Additional risks and
uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our business, financial
position, or future results of operations. The risk factor set forth below
updates, and should be read together with, the risk factors described in our
2023 10-K.
The loss of members of our senior management and the resulting management
transition might have an adverse impact on our future operating results.
On April 15, 2024, we announced the appointment of Paul Keel as our President
and Chief Executive Officer, effective as of May 1, 2024. Mr. Keel was also
appointed to our Board of Directors, effective as of May 1, 2024. In
connection with this appointment and pursuant to the transition letter
agreement dated February 22, 2024 between the Company and Amir Aghdaei, Mr.
Aghdaei resigned from his position as a director of the Board effective May 1,
2024 and will transition to the role of senior advisor to support the Chief
Executive Officer transition on that date. Additionally, as previously
reported, we have experienced several executive officer departures over the
past year, including our Chief Financial Officer. These leadership transitions
along with other senior management changes may be inherently difficult to
manage. If we do not successfully manage this transition process, it could be
viewed negatively by our customers, employees or investors and could have a
negative impact on our business, results of operations and financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(c) Our directors and officers (as defined in Rule 16a-1(f) under the
Exchange Act) may from time to time enter into plans for the purchase or sale
of our common stock that are intended to satisfy the affirmative defense
conditions of Rule 10b5-1(c) under the Exchange Act. During the quarter ended
March 29, 2024, the following officer
adopted
, modified or
terminated
a "Rule 10b5-1 trading arrangement" (as defined in Item 408 under Regulation
S-K of the Exchange Act):
Amir Aghdaei
, our
President and Chief Executive Officer
,
adopted
a new trading plan on
March 2, 2024
. The plan's maximum duration is until December 31, 2024, and first trades
will not occur until June 3, 2024, at the earliest. The trading plan is
intended to permit Mr. Aghdaei to exercise and sell
2,195
stock options expiring on December 31, 2024.
The Rule 10b5-1 trading arrangement described above was adopted and precleared
in accordance with Envista Holdings Corporation's Insider Trading Policy and
actual sale transactions made pursuant to such trading arrangements will be
disclosed publicly consistent with Section 16 requirements.
32
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During the quarter ended March 29, 2024, none of the Company's directors and
officers adopted or terminated a "non-Rule 10b5-1 trading arrangement" (as
defined in Item 408 under Regulation S-K of the Exchange Act).
Item 6. Exhibits
EXHIBIT INDEX
Exhibit Description
Number
3.1 Second Amended and Restated Certificate of Incorporation of
Envista Holdings Corporation (incorporated by reference to
Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 2, 2021, Commission File No. 001-39054)
3.2 Third Amended and Restated Bylaws of Envista Holdings Corporation
effective as of May 22, 2023 (incorporated by reference
to Exhibit 3.2 to Registrant's Current Report on Form 8-K
filed on May 26, 2023, Commission File No. 001-39054)
10.1 Consulting Agreement, dated January 2, 2024, by and
between Envista Holdings Corporation and Barbara Hulit
(incorporated by reference to Exhibit 10.1 to the Registrant's
Current Report on Form 8-K filed on March 28, 2024)
10.2* Third Amendment to the Envista Holdings Corporation
2019 Omnibus Incentive Plan (incorporated by
reference to Exhibit 10.13 to the Registrant's Annual
Report on Form 10-K filed on February 15, 2024)
10.3* Separation Agreement and General Release between DH Dental
Employment Services LLC and Patrik Eriksson, dated January 4,
2024 (incorporated by reference to Exhibit 10.26 to the
Registrant's Annual Report on Form 10-K filed on February 15, 2024)
10.4* Transition Letter Agreement, by and between Envista Holdings
Corporation and Amir Aghdaei, dated as of February 22, 2024
(incorporated by reference to Exhibit 10.1 to the Registrant's
Current Report on Form 8-K filed on February 26, 2024)
10.5* Offer Letter Agreement, dated March 5, 2024, between
DH Dental Employment Services, LLC and Stephen Keller
31.1 Certification of Chief Executive Officer
pursuant to Item 601(b)(31) of Regulation
S-K, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Principal Financial
Officer pursuant to Item 601(b)(31) of
Regulation S-K, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications of Chief Executive Officer and
Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document - the instance
document does not appear in the Interactive
Data File because its XBRL tags are
embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted
as Inline XBRL and contained in Exhibit 101)
*
Indicates management contract or compensatory plan, contract or arrangement.
33
-------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENVISTA HOLDINGS CORPORATION
Date: May 1, 2024 By: /s/ Faez Kaabi
Faez Kaabi
Vice President and Chief Accounting Officer
34
Exhibit 10.5
March 5, 2024
Stephen Keller
[***]
[***]
Dear Stephen,
I am delighted to inform you about your compensation adjustment with DH Dental
Employment Services, LLC (the "
Company
"). As we discussed, you will continue in your interim capacity as Principal
Financial Officer until such time that a Chief Financial Officer is formally
appointed. At such time, you will be appointed to an accountable leadership
role that is mutually agreeable.
Please allow this letter to serve as documentation of the offer extended to you.
Compensation Adjustment Date:
Your Compensation Adjustment with the Company will be on: 03/04/2024.
Work Location:
Your work location will remain at our company site based in Brea, CA. You are
required to commute to the company site at your own cost.
Base Salary:
Your base salary will be paid at the annual rate of $460,000.00, subject to
periodic review, and payable in accordance with the Company's usual payroll
practices.
Incentive Compensation:
You are eligible to participate in the incentive Compensation Plan ("ICP")
with a target bonus of 50% of your annual base salary, subject to periodic
review. Participating in the ICP is subject to the terms and conditions set
forth in the Plan document and applicable administrative guidelines. Normally,
ICP payments are made during the first quarter of the calendar year following
the end of the performance period. The actual ICP bonus payout is based on a
Company Financial Factor and a Personal Performance Factor, which are
determined each year. The ICP bonus payment will be pro-rated for any initial
partial year of eligibility as applicable.
Stock Options and RSUs (Annual Equity):
A recommendation will be made to the Compensation Committee of Envista's Board
of Directors to grant you an equity award as part of its annual equity
compensation program at its next regularly scheduled meeting after your
Compensation Adjustment Date at which equity awards are considered. The target
award value of this grant will be $300,000.00. You will be considered for an
annual equity award under Envista Holdings Corporation 2019 Omnibus Incentive
Plan ("The Plan") depending on factors such as, but not limited to, your job
level and performance and the Company's eligibility criteria, which may change
from time to time.
The target award value of any grant(s) is currently split between 50% in the
form of Stock options and 50% in the form of restricted stock units ("RSUs").
This annual equity award would vest 1/3rd on each of the first three
anniversaries of the grant date and will be solely governed by the terms and
conditions set forth in The Plan and required to be signed with respect to
each award.
Envista cannot guarantee that any RSUs or stock options granted to you will
ultimately have any value.
-------------------------------------------------------------------------------
RSUs (One-Time Equity): A recommendation will be made to the Compensation
Committee of Envista regularly scheduled meeting after your Compensation
Adjustment Date at which equity awards are considered. The target award value
of this retention grant would be $500,000.00.
The target award value of this grant will be solely restricted stock units
("RSUs") and is in addition to the $100,000.00 special grant provided to you
on February 25, 2024. This retention equity award would vest 1/3rd on each of
the first three anniversaries of the grant date and will be solely governed by
the terms and conditions set forth in Envista's applicable stock plan. This
form of award agreement is required to be signed with respect to each award.
Envista cannot guarantee that any RSUs or stock options granted to you will
ultimately have any value.
Cash Retention: The Company will provide you a retention bonus equal to
$400,000.00 in total. The cash retention bonus will be split into two
installments: $200,000 is to be paid in the first normal payroll date in April
2024. The remaining $200,000 is payable on the first available payroll in
January 2025, subject to your continued active employment with the Company. If
you voluntarily terminate your employment, or you are terminated by the
Company for cause (as defined in the Retention Bonus Repayment Agreement),
prior to October 1, 2025, in the case of the first installment or January 1,
2026, in the case of the second installment, you will be required to repay the
Company the respective installments ($200,000) in full. Termination for any
reason other than voluntary separation or cause will accelerate the payment of
the second installment. Payment of this bonus is conditioned on your execution
of the enclosed Retention Bonus Repayment Agreement.
Severance Eligibility: In the event of separation from employment for any
reason other than cause, performance, or voluntary separation, you will be
eligible for twelve (12) months
severance.
At-Will Employment: Nothing in this offer letter shall be construed as any
agreement, express or implied, to employ you for any stated term. Your
employment with the Company will be on an at -will basis, which means that
either you or the Company can terminate the employment relationship at any
time and for any reason (or no reason), with or without notice.
Conditions of Employment Offer: This offer of compensation adjustment is
expressly conditioned upon your execution and return of the following
documents no later than the date stated in the acknowledgement below:
-
Retention Bonus Repayment Agreement
Thank you for considering this compensation adjustment and retention proposal.
We greatly value your contributions and I personally look forward to
continuing to work with you as, together, we pursue our very aggressive goals.
I realize that a career decision such as this has a major impact on you and
your family. If there is anything we can do, please do not hesitate to contact
me.
Sincerely yours,
/s/ Suraj Satpathy
Suraj Satpathy
Chief Human Resources Officer
-------------------------------------------------------------------------------
Acknowledgement
Please acknowledge that you have read, understood , and accept this of fer of
at will employment by signing and returning it to me, along with the
above-referenced signed documents no later than 3/15/2024.
/s/ Stephen Keller 03/7/2024
Signature Date
Stephen Keller
Printed Name
-------------------------------------------------------------------------------
Retention Bonus Repayment Agreement
This Retention Bonus Repayment Agreement ("Agreement") must be signed by
Employee and received by the Human Resources Department of DH Dental
Employment Services, LLC; (the "Company") as a condition of paying Employee
any retention bonus.
The Company will provide you a retention bonus equal to $400,000.00 in total.
The cash retention bonus will be split into two installments: $200,000 is to
be paid in the first normal payroll date in April 2024. The remaining $200,000
is payable on the first available payroll in January 2025, subject to your
continued active employment with the Company. If you voluntarily terminate
your employment, or you are terminated by the Company for cause (as defined in
the Retention Bonus Repayment Agreement), prior to October 1, 2025, in the
case of the first installment or January 1, 2026, in the case of the second
installment, you will be required to repay the Company the respective
installment ($200,000) in full.
If Employee resigns or is terminated for cause (as defined below) within 12
months of receiving the retention bonus, Employee shall repay the Company for
the entire gross amount of the retention bonus paid to the Employee. Employee
agrees and authorizes the Company to withhold any amount owed by Employee per
the above, from any salary, wages, vacation pay, bonuses, expense
reimbursements or other form of compensation the Company owes Employee, to the
extent permitted by applicable law. Additionally, Employee agrees that any
unpaid amount still owed to the Company and not collected from such
withholding will be repaid by the Employee to the Company within 30 days of
the separation date. Termination by the company for any reason other than
cause prior to January 1,2025 will trigger immediate payment of the second
installment.
Where feasible, the Company may be able to reverse a portion of the taxes paid
if the repayment is made during the same calendar year the bonus was paid.
Employee understands, however, that the Company has no obligation to do so and
that Employee is responsible for repaying the Company the full amount of the
Retention Bonus payment made by the Company consistent with the terms above.
In any action to enforce this Agreement, the prevailing party will be entitled
to its costs and reasonable attorney's fees. Nothing in this Agreement is
intended to create a contract of employment between the Employee and the
Company, or to modify the at- will basis of Employee's employment.
For purposes of this Agreement, termination for "cause" shall mean termination
for a violation of Company policy or Code of Conduct, excessive absences,
failure, or refusal to perform the job in a satisfactory manner, dishonesty,
misconduct, or other intentional conduct that is detrimental to the business
interests of the Company or has an adverse effect on the name or public image
of the Company, as determined at the Company's sole discretion.
In the event that Employee receives payment(s) in excess of the bonus amount
that they are eligible to receive, Employee shall promptly repay all such
amounts to the Company, unless expressly authorized in writing by the Company
as an exception. In addition, in the event of an overpayment, Employee
authorizes the Company to withhold such amounts from any payment(s) owed to
Employee, as described above.
By signing below, Employee acknowledges and accepts the terms in this
Retention Bonus Repayment Agreement.
Envista Company/Employer: DH Dental Employment Services LLC For
For Employer:
/s/ Suraj Satpathy 03/7/2024
Suraj Satpathy Date
Employee:
/s/ Stephen Keller 03/7/2024
Stephen Keller Date
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Amir Aghdaei, certify that:
1. I have reviewed this Quarterly Report on
Form 10-Q of Envista Holdings Corporation;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability
to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that
involves management or other employees who
have a significant role in the registrant's
internal control over financial reporting.
Date: May 1, 2024
/s/ Amir Aghdaei
Amir Aghdaei
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen Keller, certify that:
1. I have reviewed this Quarterly Report on
Form 10-Q of Envista Holdings Corporation;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability
to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that
involves management or other employees who
have a significant role in the registrant's
internal control over financial reporting.
Date: May 1, 2024
/s/ Stephen Keller
Stephen Keller
Principal Financial Officer
Exhibit 32.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Amir Aghdaei, certify pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report on Form 10-Q of Envista Holdings Corporation for the period ended March
29, 2024, fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 and that information contained in such
Quarterly Report on Form 10-Q fairly presents, in all material respects, the
financial condition and results of operations of Envista Holdings Corporation
as of and for the periods presented in the Report.
Date: May 1, 2024
/s/ Amir Aghdaei
Amir Aghdaei
President and Chief Executive Officer
I, Stephen Keller, certify pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report on Form 10-Q of Envista Holdings Corporation for the period ended March
29, 2024, fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 and that information contained in such
Quarterly Report on Form 10-Q fairly presents, in all material respects, the
financial condition and results of operations of Envista Holdings Corporation
as of and for the periods presented in the Report.
Date: May 1, 2024
/s/ Stephen Keller
Stephen Keller
Principal Financial Officer
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