nvst-20240329

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


☐			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 (§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 of Changes in Stockholders' Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
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 Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33

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 $19.8 and $17.3, respectively	413.0		407.5
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, $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	1.7		1.7
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.

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.

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	(66.2)		14.8

Pension plan adjustments	(0.2)		(0.3)
Total other comprehensive (loss) income, net of income taxes	(66.4)		14.5
Comprehensive (loss) income	$	(42.8)	$	58.3

See the accompanying Notes to the Condensed Consolidated Financial Statements.

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 Comprehensive Loss		Total Envista Equity












Balance, December 31, 2023	$	1.7	$	3,758.2	$	631.2	$	(217.2)	$	4,173.9
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	$	(283.6)	$	4,140.3


	Three Months Ended March 31, 2023
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Envista Equity












Balance, December 31, 2022	$	1.6	$	3,699.0	$	731.4	$	(225.1)	$	4,206.9
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	$	(210.6)	$	4,279.0

See the accompanying Notes to the Condensed Consolidated Financial Statements.

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

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.

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/magnification 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.

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

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 Impairment Charges		Total		Gross		Accumulated Impairment Charges		Total		Gross		Accumulated Impairment Charges		Total

Balance at December 31, 2023	$	2,007.0	$	(134.5)	$	1,872.5	$	1,497.5	$	(77.8)	$	1,419.7	$	3,504.5	$	(212.3)	$	3,292.2
Foreign currency translation	(26.2)		—		(26.2)		(6.2)		—		(6.2)		(32.4)		—		(32.4)
Balance at March 29, 2024	$	1,980.8	$	(134.5)	$	1,846.3	$	1,491.3	$	(77.8)	$	1,413.5	$	3,472.1	$	(212.3)	$	3,259.8

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.

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.

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 Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
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	$	—	$

SEC Form 10-Q filed by Envista Holdings Corporation