0001757073
FALSE
0001757073
2024-05-01
2024-05-01
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM
8-K
_____________________________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
May 1, 2024
_____________________________________________
ENVISTA HOLDINGS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
_____________________________________________
Delaware
(State or Other Jurisdiction of Incorporation)
001-39054 83-2206728
(Commission File Number) (IRS Employer Identification No.)
200 S. Kraemer Blvd., Building E 92821
Brea, California
(Address of Principal Executive Offices) (Zip Code)
(
714
)
817-7000
(Registrant's Telephone Number, Including Area Code)
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
_____________________________________________
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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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 is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 (17 CFR (s)230.405) or Rule
12b-2 of the Securities Exchange Act of 1934 (17 CFR (s)240.12b-2).
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.
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 1, 2024, Envista Holdings Corporation ("Envista" or the
"
Company") issued a press release announcing financial results for the quarter
ended March 29, 2024. A copy of the release is furnished herewith as Exhibit
99.1 and incorporated by reference herein.
The information contained in the accompanying Exhibit 99.1 is being furnished
pursuant to Item 2.02 of Form 8-K and shall not be deemed "filed" for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or incorporated by reference in any filing under the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act, except as shall be expressly set forth by specific reference in such a
filing.
ITEM 7.01 REGULATION FD
The Company intends to reference a slide deck (the "Presentation") during the
Company's conference call to discuss its financial results for the quarter
ended March 29, 2024. A copy of the Presentation can be accessed on the
"Investors" section of the Company's website, www.envistaco.com.
The information included or incorporated by reference in this Item 7.01 is
being furnished to the SEC and shall not be deemed "filed" for purposes of
Section 18 of the Exchange Act or otherwise subject to the liabilities of that
section, nor shall it be deemed incorporated by reference in any filing under
the Securities Act or the Exchange Act, except as shall be expressly set forth
by specific reference in such filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
Exhibit No. Description
99.1 Press Release dated May 1, 2024
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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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 hereunto duly authorized.
ENVISTA HOLDINGS CORPORATION
Date: May 1, 2024 By: /s/ Stephen Keller
Stephen Keller
Principal Financial Officer
Exhibit 99.1
Envista Reports First Quarter 2024 Results
Brea, California, May 1, 2024 - Envista Holdings Corporation (NYSE: NVST)
today announced results for the first quarter of 2024.
For the quarter ended March 29, 2024, reported sales were $623.6 million. Core
sales in the quarter increased 0.4% over the corresponding quarter in 2023.
For the first quarter of 2024, net income was $23.6 million or $0.14 per
diluted share. During the same period, adjusted net income was $45.8 million
or $0.26 per diluted share compared to adjusted net income of $67.8 million or
$0.38 per diluted share in the same period of 2023. Adjusted EBITDA for the
first quarter of 2024 was $87.2 million compared to $114.0 million in the
first quarter of 2023.
Amir Aghdaei, Chief Executive Officer, stated, "As expected, our first quarter
results proved challenging as we continue to prioritize long-term investments
to accelerate growth and drive profitability. While we have yet to reach an
inflection point, we have made meaningful progress in the quarter. Our Spark
business continues to perform growing double digits in the quarter, while
expanding margins. Our value implant business returned to growth and we saw
our consumables business stabilize. As we move through 2024, we remain focused
on improving Spark margins, accelerating our North American implant business,
and optimizing our operating structure using the Envista Business System."
Mr. Aghdaei continued, "As previously announced, Paul Keel has been appointed
as Envista's new Chief Executive Officer effective later today, May 1, 2024.
Paul is the right leader to drive the next phase of Envista's development. I
am proud of the progress we have made at Envista, creating a strategically
differentiated and operationally capable company designed to digitize,
personalize, and democratize the dental industry. I am committed to Envista's
long-term success and will remain a shareholder as well as a Senior Advisor to
Envista."
Paul Keel, incoming Chief Executive Officer, added, "I am excited to build on
Envista's strong foundation and look forward to working with the Envista team
to serve all our stakeholders - patients, customers, colleagues, communities,
and our shareholders."
Envista will discuss its quarterly results during an investor conference call
today starting at 2:00 P.M. PT. The call and an accompanying slide
presentation will be webcast on the "Investors" section of Envista's website,
www.envistaco.com, under the subheading "Events & Presentations." A replay of
the webcast will be available in the same section of Envista's website shortly
after the conclusion of the presentation and will remain available until the
next quarterly earnings call.
The conference call can be accessed by +1 800-225-9448 within the U.S. or +1
203-518-9708 outside the U.S. a few minutes before 2:00 PM PT and referencing
conference ID #4678913. A replay of the conference call will be available
shortly after the conclusion of the call. You can access the replay dial-in
information on the "Investors" section of Envista's website under the
subheading "Events & Presentations." Presentation materials relating to
Envista's results have been posted to the "Investors" section of Envista's
website under the subheading "Quarterly Earnings."
1
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ABOUT ENVISTA
Envista is a global family of more than 30 trusted dental brands, including
Nobel Biocare, Ormco, DEXIS, and Kerr united by a shared purpose: to partner
with professionals to improve lives. Envista helps its customers deliver the
best possible patient care through industry-leading dental consumables,
solutions, technology, and services. Its comprehensive portfolio, including
dental implants and treatment options, orthodontics, and digital imaging
technologies, covers a wide range of dentists' clinical needs for diagnosing,
treating, and preventing dental conditions as well as improving the aesthetics
of the human smile. With a foundation comprised of the proven Envista Business
System (EBS) methodology, an experienced leadership team, and a strong culture
grounded in continuous improvement, commitment to innovation, and deep
customer focus, Envista is well equipped to meet the end-to-end needs of
dental professionals worldwide. Envista is one of the largest global dental
products companies, with significant market positions in some of the most
attractive segments of the dental products industry. For more information,
please visit www.envistaco.com.
NON-GAAP MEASURES
All "Adjusted" amounts including core sales growth and free cash flow are
non-GAAP items. Calculations of these measures, the reasons why we believe
these measures provide useful information to investors, a reconciliation of
these measures to the most directly comparable GAAP measures, and other
information relating to these non-GAAP measures are included in the attached
supplemental schedules. We do not reconcile forward looking non-GAAP measures
to the comparable GAAP measures because of the inherent difficulty in
predicting and estimating the future impact and timing of currency
translation, acquisitions, discontinued products, and any other potential
adjustments which would be reflected in any forecasted GAAP measure.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release are "forward-looking" statements
within the meaning of the federal securities laws. There are a number of
important factors that could cause actual results, developments and business
decisions to differ materially from those suggested or indicated by such
forward-looking statements and you should not place undue reliance on any such
forward-looking statements. These factors include, among other things, 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. Additional information regarding the factors that may cause actual
results to differ materially from these forward-looking statements is
available in our SEC filings, including our Annual Report on Form 10-K for
fiscal year 2023 and our Quarterly reports on Form 10-Q. These forward-looking
statements speak only as of the date of this press release and 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.
2
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CONTACT
Stephen Keller
Principal Financial Officer
Envista Holdings Corporation
200 S. Kraemer Blvd., Building E
Brea, CA 92821
Telephone: (714) 817-7000
3
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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 income (expense):
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
4
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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 $ 948.5 $ 940.0
equivalents
Trade accounts receivable, 413.0 407.5
less allowance for
credit losses of $19.8
and $17.3, respectively
Inventories, net 267.4 258.8
Prepaid expenses and 143.0 137.4
other current assets
Total current assets 1,771.9 1,743.7
Property, plant and 306.2 309.6
equipment, net
Operating lease 125.3 125.1
right-of-use assets
Other long-term assets 174.4 180.5
Goodwill 3,259.8 3,292.2
Other intangible 918.7 954.0
assets, net
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 458.6 455.7
other liabilities
Operating lease 32.5 30.3
liabilities
Total current 781.3 780.8
liabilities
Operating lease 107.5 109.9
liabilities
Other long-term 136.7 142.4
liabilities
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, $0.01 par value,$500.0 million shares authorized; 1.7 1.7
$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 3,767.4 3,758.2
paid-in capital
Retained earnings 654.8 631.2
Accumulated other (283.6) (217.2)
comprehensive loss
Total stockholders' 4,140.3 4,173.9
equity
Total $ 6,556.3 $ 6,605.1
liabilities and
stockholders'
equity
5
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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 (0.2) 0.1
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 (3.8) 1.3
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
6
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ENVISTA HOLDINGS CORPORATION
SUMMARY OF FINANCIAL METRICS (Unaudited)
($ in millions, except per share amounts)
GAAP
Three Months Ended
March 29, 2024 March 31, 2023
Gross Profit $ 356.3 $ 362.7
Operating Profit $ 48.1 $ 72.1
Net Income $ 23.6 $ 43.8
Diluted Earnings Per Share $ 0.14 $ 0.25
Operating Cash Flow $ 40.3 $ 3.1
NON-GAAP *
Three Months Ended
March 29, 2024 March 31, 2023
Adjusted Gross Profit $ 358.0 $ 364.2
Adjusted Operating Profit $ 77.6 $ 105.2
Adjusted Net Income $ 45.8 $ 67.8
Adjusted Diluted EPS $ 0.26 $ 0.38
Adjusted EBITDA $ 87.2 $ 114.0
Free Cash Flow $ 29.3 $ (14.4)
*
For information on non-GAAP measures see "Reconciliation of GAAP to Non-GAAP
Financial Measures" below. Also see the accompanying "Notes to Reconciliation
of GAAP to Non-GAAP Financial Measures."
7
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ENVISTA HOLDINGS CORPORATION
SEGMENT INFORMATION (Unaudited)
($ 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
Specialty Products & Technologies $ 44.2 $ 71.1
Equipment & Consumables 35.6 32.5
Other (31.7) (31.5)
Total $ 48.1 $ 72.1
Operating Margins
Specialty Products & Technologies 10.8 % 17.3 %
Equipment & Consumables 16.6 % 15.0 %
Total 7.7 % 11.5 %
8
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ENVISTA HOLDINGS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)
($ in millions, except per share amounts)
Adjusted Gross Profit and Adjusted Gross Margin
Three Months Ended
March 29, 2024 March 31, 2023
Gross Profit $ 356.3 $ 362.7
Restructuring costs and asset impairments 1.7 1.5
A
Adjusted Gross Profit $ 358.0 $ 364.2
Gross Margin (Gross Profit / Sales) 57.1 % 57.8 %
Adjusted Gross Margin (Adjusted Gross Profit / Sales) 57.4 % 58.1 %
Adjusted Operating Profit
Three Months Ended
March 29, 2024 March 31, 2023
Consolidated
Operating Profit $ 48.1 $ 72.1
Amortization of acquisition-related and other intangible assets 22.6 27.9
Restructuring costs and asset impairments 6.9 4.3
A
Acquisition related expenses - 0.9
B
Adjusted Operating Profit $ 77.6 $ 105.2
Adjusted Operating Profit as a % of Sales 12.4 % 16.8 %
Specialty Products & Technologies
Operating Profit $ 44.2 $ 71.1
Amortization of acquisition-related and other intangible assets 14.4 15.7
Restructuring costs and asset impairments 3.3 1.6
A
Adjusted Operating Profit $ 61.9 $ 88.4
Adjusted Operating Profit as a % of Sales 15.1 % 21.6 %
Equipment & Consumables
Operating Profit $ 35.6 $ 32.5
Amortization of acquisition-related and other intangible assets 8.2 12.2
Restructuring costs and asset impairments 2.8 2.6
A
Adjusted Operating Profit $ 46.6 $ 47.3
Adjusted Operating Profit as a % of Sales 21.7 % 21.8 %
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial
Measures
9
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Adjusted Net Income
Three Months Ended
March 29, 2024 March 31, 2023
Net Income $ 23.6 $ 43.8
Amortization of acquisition-related and other intangible assets 22.6 27.9
Restructuring costs and asset impairments 6.9 4.3
A
Acquisition related expenses - 0.9
B
Tax effect of adjustments reflected above (7.6) (7.8)
C
Discrete tax adjustments and other tax-related adjustments 0.3 (1.3)
D
Adjusted Net Income $ 45.8 $ 67.8
Adjusted Diluted Earnings Per Share
Three Months Ended
March 29, 2024 March 31, 2023
Diluted Earnings $ 0.14 $ 0.25
Amortization of acquisition-related and other intangible assets 0.13 0.16
Restructuring costs and asset impairments 0.04 0.02
A
Acquisition related expenses - 0.01
B
Tax effect of adjustments reflected above (0.05) (0.05)
C
Discrete tax adjustments and other tax-related adjustments - (0.01)
D
Adjusted Diluted Earnings Per Share $ 0.26 $ 0.38
Adjusted EBITDA
Three Months Ended
March 29, 2024 March 31, 2023
Net Income $ 23.6 $ 43.8
Interest expense, net 12.9 16.7
Income tax expense 11.7 11.9
Depreciation 9.5 8.5
Amortization of acquisition-related and other intangible assets 22.6 27.9
Restructuring costs and asset impairments 6.9 4.3
A
Acquisition related expenses - 0.9
B
Adjusted EBITDA $ 87.2 $ 114.0
Adjusted EBITDA as a % of Sales 14.0 % 18.2 %
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial
Measures
10
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Core Sales Growth
1
Consolidated % Change Three Month Period Ended
March 29, 2024 vs. Comparable 2023 Period
Total sales growth (0.6) %
Plus the impact of:
Currency exchange rates 1.0 %
Core sales growth 0.4 %
Specialty Products & Technologies
Total sales growth (0.3) %
Plus the impact of:
Currency exchange rates 1.1 %
Core sales growth 0.8 %
Equipment & Consumables
Total sales growth (1.1) %
Plus the impact of:
Currency exchange rates 0.9 %
Core sales growth (0.2) %
1
We use the term "core sales" to refer to GAAP revenue excluding (1) sales from
acquired businesses recorded prior to the first anniversary of the acquisition
("acquisitions"), (2) sales from discontinued products and (3) the impact of
currency translation. Sales from discontinued products includes major brands
or products that Envista has made the decision to discontinue as part of a
portfolio restructuring. Discontinued brands or products consist of those
which Envista (1) is no longer manufacturing, (2) is no longer investing in
the research or development of, and (3) expects to discontinue all significant
sales 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.
The portion of GAAP revenue attributable to currency exchange rates is
calculated as the difference between (a) the period-to-period change in sales
and (b) the period-to-period change in sales after applying current period
foreign exchange rates to the prior year period. We use the term "core sales
growth" to refer to the measure of comparing current period core sales with
the corresponding period of the prior year.
11
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Reconciliation of Operating Cash Flows to Free Cash Flow
Three Months Ended
March 29, 2024 March 31, 2023
Net Operating Cash Provided $ 40.3 $ 3.1
by Operating Activities
Less: payments for additions to property, (11.0) (17.5)
plant and equipment (capital expenditures)
Free Cash $ 29.3 $ (14.4)
Flow
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial
Measures
12
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ENVISTA HOLDINGS CORPORATION
NOTES TO RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)
A
We exclude costs incurred pursuant to discrete restructuring plans that are
fundamentally different (in terms of the size, strategic nature and planning
requirements) from the ongoing productivity improvements that result from
application of the Envista Business System. These restructuring plans are
incremental to the operating activities that arise in the ordinary course of
our business and we believe are not indicative of Envista's ongoing operating
costs in a given period.
B
These represent acquisition related transactions expenses and integration
costs with respect to business combinations.
C
This line item reflects the aggregate tax effect of all pretax adjustments
reflected in the preceding line items of the table using each adjustment's
applicable tax rate, including the effect of interim tax accounting
requirements of Accounting Standards Codification Topic 740
Income Taxes.
D
The discrete tax matters relate primarily to excess tax benefits from
stock-based compensation, changes in estimates associated with prior period
uncertain tax positions and audit settlements, tax benefits resulting from a
change in law, and changes in determination of realization of certain deferred
tax assets.
Statement Regarding Non-GAAP Measures
Each of the non-GAAP measures set forth above should be considered in addition
to, and not as a replacement for or superior to, the comparable GAAP measure,
and may not be comparable to similarly titled measures reported by other
companies. Management believes that these measures provide useful information
to investors by offering additional ways of viewing Envista Holdings
Corporation's ("Envista" or the "Company") results that, when reconciled to
the corresponding GAAP measure, help our investors to:
.
with respect to Adjusted Gross Profit, Adjusted Operating Profit, Adjusted Net
Income, Adjusted Diluted Earnings Per Share and Adjusted EBITDA, understand
the long-term profitability trends of Envista's business and compare Envista's
profitability to prior and future periods and to Envista's peers;
.
with respect to Core Sales, identify underlying growth trends in Envista's
business and compare Envista's revenue performance with prior and future
periods and to Envista's peers;
.
with respect to Adjusted EBITDA, help investors understand operational factors
associated with Envista's financial performance because it excludes the
following from consideration: interest, taxes, depreciation, amortization, and
infrequent or unusual losses or gains such as goodwill impairment charges or
nonrecurring and restructuring charges. Management uses Adjusted EBITDA, as a
supplemental measure for assessing operating performance in conjunction with
related GAAP amounts. In addition, Adjusted EBITDA is used in connection with
operating decisions, strategic planning, annual budgeting, evaluating Company
performance and comparing operating results with historical periods and with
industry peer companies; and
.
with respect to Free Cash Flow (the "FCF Measure"), understand Envista's
ability to generate cash without external financings, invest in its business
and grow its business through acquisitions and other strategic opportunities.
A limitation of free cash flow is that it does not take into account the
Company's debt service requirements and other non-discretionary expenditures,
and as a result the entire Free Cash Flow amount is not necessarily available
for discretionary expenditures.
13
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Management uses these non-GAAP measures to evaluate the Company's operating
and financial performance.
The items excluded from the non-GAAP measures set forth above have been
excluded for the following reasons:
.
With respect to Adjusted Gross Profit, Adjusted Operating Profit, Adjusted Net
Income, Adjusted Diluted Earnings Per Share and Adjusted EBITDA:
We exclude the amortization of acquisition-related and other intangible assets
because the amount and timing of such charges are significantly impacted by
the timing, size, number and nature of the acquisitions we consummate. While
we have a history of significant acquisition activity, we do not acquire
businesses on a predictable cycle, and the amount of an acquisition's purchase
price allocated to intangible assets and related amortization term are unique
to each acquisition and can vary significantly from acquisition to
acquisition. Exclusion of this amortization expense facilitates more
consistent comparisons of operating results over time between our newly
acquired and long-held businesses, and with both acquisitive and non-acquisitive
peer companies. We believe, however, that it is important for investors to
understand that such intangible assets contribute to revenue generation and
that intangible asset amortization related to past acquisitions will recur in
future periods until such intangible assets have been fully amortized.
With respect to the other items excluded from Adjusted Gross Profit, Adjusted
Net Income, Adjusted Operating Profit, Adjusted Diluted Earnings Per Share and
Adjusted EBITDA, we exclude these items because they are of a nature and/or
size that occur with inconsistent frequency, occur for reasons that may be
unrelated to Envista's commercial performance during the period and/or we
believe that such items may obscure underlying business trends and make
comparisons of long-term performance difficult.
.
With respect to core sales, we exclude (1) the effect of acquisitions and
divested product lines because the timing, size, number and nature of such
transactions can vary significantly from period-to-period and between us and
our peers, which we believe may obscure underlying business trends and make
comparisons of long-term performance difficult, (2) 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, and (3) the impact of currency translation because
it is not under management's control, is subject to volatility and can obscure
underlying business trends.
.
With respect to the FCF Measure, we adjust for payments for additions to
property, plant and equipment (net of the proceeds from capital disposals) to
arrive at the amount of operating cash flow for the period that remains after
accounting for the Company's capital expenditure requirements.
14
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