Envista Holdings Corp 10-Q for FY2023 Q1

Envista Holdings Corp (NVST)

10-Q 2023-05-03 For: 2023-03-31

Added on April 08, 2026

About this 10-Q

Envista Holdings Corp filed this 10-Q on May 3, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $627.2M; down 0.7% from $631.4M a year earlier
Net income: $43.8M; down 41.5% from net income of $74.9M a year earlier
Diluted EPS: $0.25; down 40.5% from $0.42 a year earlier

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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)


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


PART I. FINANCIAL INFORMATION
		PAGE
Item 1.	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive 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	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37


	As of
	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	585.2	$	606.9
Trade accounts receivable, less allowance for credit losses of $16.0 and $16.2, respectively	401.8		393.5
Inventories, net	307.2		300.8
Prepaid expenses and other current assets	120.1		123.4
Total current assets	1,414.3		1,424.6
Property, plant and equipment, net	297.6		293.6
Operating lease right-of-use assets	132.9		131.8
Other long-term assets	158.3		153.7
Goodwill	3,506.4		3,496.6
Other intangible assets, net	1,065.5		1,086.7
Total assets	$	6,575.0	$	6,587.0
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	510.8	$	510.0
Trade accounts payable	186.8		228.3
Accrued expenses and other liabilities	423.6		471.4
Operating lease liabilities	28.4		27.0
Total current liabilities	1,149.6		1,236.7
Operating lease liabilities	121.3		121.4
Other long-term liabilities	151.3		151.3
Long-term debt	873.8		870.7
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 15.0 million shares authorized; no shares issued or outstanding at March 31, 2023 and December 31, 2022	—		—
Common stock - $0.01 par value, 500.0 million shares authorized; 164.4 million shares issued and 163.7 million shares outstanding at March 31, 2023; 163.7 million shares issued and 163.2 million shares outstanding at December 31, 2022	1.6		1.6
Additional paid-in capital	3,712.8		3,699.0
Retained earnings	775.2		731.4
Accumulated other comprehensive loss	(210.6)		(225.1)


Total stockholders’ equity	4,279.0		4,206.9
Total liabilities and stockholders’ equity	$	6,575.0	$	6,587.0


	Three Months Ended
	March 31, 2023		April 1, 2022
Sales	$	627.2	$	631.4
Cost of sales	264.5		257.3
Gross profit	362.7		374.1
Operating expenses:
Selling, general and administrative	266.1		258.2
Research and development	24.5		24.4
Operating profit	72.1		91.5
Nonoperating income (expense):
Other income	0.3		0.3
Interest expense, net	(16.7)		(5.9)
Income before income taxes	55.7		85.9
Income tax expense	11.9		15.5
Income from continuing operations, net of tax	43.8		70.4
Income from discontinued operations, net of tax (Note 3)	—		4.5
Net income	$	43.8	$	74.9
Earnings per share:
Earnings from continuing operations - basic	$	0.27	$	0.43
Earnings from continuing operations - diluted	$	0.25	$	0.39

Earnings from discontinued operations - basic	$	—	$	0.03
Earnings from discontinued operations - diluted	$	—	$	0.03

Earnings - basic	$	0.27	$	0.46
Earnings - diluted	$	0.25	$	0.42
Average common stock and common equivalent shares outstanding:
Basic	163.6		162.2
Diluted	177.4		179.8


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			For the transition period from to


	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


	Three Months Ended April 1, 2022
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Envista Equity		Noncontrolling Interests
Balance, December 31, 2021	$	1.6	$	3,732.6	$	466.9	$	(143.5)	$	4,057.6	$	0.4
Cumulative effect of adjustment related to change in accounting principle. See Note 1	—		(77.8)		21.4		—		(56.4)		—
Balance, January 1, 2022	1.6		3,654.8		488.3		(143.5)		4,001.2		0.4
Change in noncontrolling interest	—		—		—		—		—		(0.4)
Common stock-based award activity	—		13.1		—		—		13.1		—
Net income	—		—		74.9		—		74.9		—
Other comprehensive loss	—		—		—		(58.3)		(58.3)		—
Balance, April 1, 2022	$	1.6	$	3,667.9	$	563.2	$	(201.8)	$	4,030.9	$	—


	Osteogenics July 5, 2022		Intraoral Scanner Business April 20, 2022
Assets acquired:
Cash	$	2.1	$	2.7
Accounts receivable	2.5		0.1
Inventories	13.3		6.1
Intangible assets	53.0		129.8
Property, plant and equipment	—		0.3
Prepaids and Other Current Assets	1.3		—
Goodwill	77.3		373.1
Non-current deferred tax asset	—		96.0
Operating lease right-of-use assets	2.6		0.9
Other long-term assets	4.9		0.2
Total assets acquired	157.0		609.2
Liabilities assumed:
Accounts payable	(4.1)		(0.5)
Accrued expenses and other liabilities	(2.5)		(27.9)
Non-current deferred tax liability	(14.3)		—
Other long-term liabilities	(5.8)		—
Operating lease liabilities	(2.1)		(0.5)
Total liabilities assumed	(28.8)		(28.9)
Total net assets acquired	$	128.2	$	580.3


Balance at December 31, 2022	$	16.2
Foreign currency translation	0.2
Provision for credit losses	2.0
Write-offs charged against the allowance	(1.8)
Recoveries	(0.6)
Balance at March 31, 2023	$	16.0


	March 31, 2023		December 31, 2022
Finished goods	$	234.6	$	229.2
Work in process	24.5		23.9
Raw materials	105.7		103.4
Reserve for inventory obsolescence	(57.6)		(55.7)
Total	$	307.2	$	300.8


	March 31, 2023		December 31, 2022
Land and improvements	$	10.0	$	10.0
Buildings and improvements	158.4		154.5
Machinery, equipment and other assets	384.9		370.2
Construction in progress	63.9		71.2
Gross property, plant and equipment	617.2		605.9
Less: accumulated depreciation	(319.6)		(312.3)
Property, plant and equipment, net	$	297.6	$	293.6


	Specialty Products & Technologies		Equipment & Consumables		Total
Balance at December 31, 2022	$	2,047.8	$	1,448.8	$	3,496.6

Foreign currency translation	4.6		5.2		9.8
Balance at March 31, 2023	$	2,052.4	$	1,454.0	$	3,506.4


	March 31, 2023				December 31, 2022
	Current		Noncurrent		Current		Noncurrent
Compensation and benefits	$	107.1	$	19.7	$	148.0	$	17.5
Sales and product allowances	58.2		1.4		85.1		1.3
Contract liabilities	94.1		8.4		78.9		8.6
Taxes, income and other	47.4		68.2		42.1		68.6
Restructuring-related employee severance, benefits and other	7.9		—		18.9		—
Pension benefits	5.6		16.1		5.6		17.5
Loss contingencies	11.1		25.7		8.1		27.6

Other	92.2		11.8		84.7		10.2
Total	$	423.6	$	151.3	$	471.4	$	151.3


	Three Months Ended
	March 31, 2023		April 1, 2022
Cash flows from operating activities:
Net income	$	43.8	$	74.9
Noncash items:
Depreciation	8.5		7.8
Amortization	27.9		23.5
Allowance for credit losses	2.0		1.7
Stock-based compensation expense	15.0		7.5
Gain on sale of property, plant and equipment	—		(6.0)

Restructuring charges	0.1		(1.9)
Impairment charges	0.3		3.9

Amortization of right-of-use assets	6.5		6.4

Amortization of debt discount and issuance costs	1.0		1.0

Change in trade accounts receivable	(8.5)		(16.2)
Change in inventories	(7.1)		(20.3)
Change in trade accounts payable	(38.1)		(2.5)
Change in prepaid expenses and other assets	1.3		(16.8)
Change in accrued expenses and other liabilities	(41.3)		(51.5)
Change in operating lease liabilities	(8.3)		(8.0)
Net cash provided by operating activities	3.1		3.5
Cash flows from investing activities:

Payments for additions to property, plant and equipment	(17.5)		(19.8)

Proceeds from sale of KaVo treatment unit and instrument business, net	—		30.0

All other investing activities, net	(4.5)		(5.1)
Net cash (used in) provided by investing activities	(22.0)		5.1
Cash flows from financing activities:


Proceeds from borrowing	—		0.3
Repayment of borrowing	—		(0.5)



	Notional Amount		Gain Recognized in OCI
Three Months Ended April 1, 2022
Foreign currency denominated debt	$	229.7	$	6.8
Foreign currency contracts	650.0		17.9
Interest rate contracts	250.0		1.8
Total	$	1,129.7	$	26.5


	Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
March 31, 2023



Liabilities:

Cross-currency swap derivative contracts	$	—	$	—	$	—	$	—
Deferred compensation plans	$	—	$	18.0	$	—	$	18.0
Contingent consideration	$	—	$	—	$	6.0	$	6.0

December 31, 2022:
Liabilities:
Deferred compensation plans	$	—	$	15.8	$	—	$	15.8
Contingent consideration	$	—	$	—	$	6.0	$	6.0


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value



Liabilities:
Contingent consideration	$	6.0	$	6.0	$	6.0	$	6.0

Cross-currency swap derivative contracts	$	—	$	—	$	—	$	—
Convertible senior notes due 2025	$	510.8	$	1,033.5	$	510.0	$	873.0
Long-term debt	$	873.8	$	873.8	$	870.7	$	870.7



	Notional Amount		Loss Recognized in OCI
Three Months Ended March 31, 2023
Foreign currency denominated debt	$	225.5	$	(2.8)
Foreign currency contracts	150.0		—

Total	$	375.5	$	(2.8)


	March 31, 2023		December 31, 2022




Derivative liabilities:
Accrued expenses and other liabilities	$	—	$	—

Nonderivative hedging instruments:

Long-term debt	$	225.5	$	222.7



Balance at December 31, 2022	$	9.2
Accruals for warranties issued during the year	3.6
Settlements made	(3.0)

Effect of foreign currency translation	0.1
Balance at March 31, 2023	$	9.9


	March 31, 2023		December 31, 2022
Senior term loan facility due 2024 (the “Term Loan”)	$	648.6	$	648.3
Senior euro term loan facility due 2024 (the “Euro Term Loan”)	225.2		222.4
Convertible senior notes due 2025	510.8		510.0


Total debt	1,384.6		1,380.7
Less: current portion	(510.8)		(510.0)
Long-term debt	$	873.8	$	870.7


	March 31, 2023		December 31, 2022
Convertible Senior Notes	$	6.7	$	7.5
Term Loan	1.4		1.7
Euro Term Loan	0.3		0.3
	$	8.4	$	9.5


	Foreign Currency Translation Adjustments		Unrealized Pension Costs		Total Accumulated Other Comprehensive Loss
Three Months Ended March 31, 2023
Balance, December 31, 2022	$	(240.5)	$	15.4	$	(225.1)
Other comprehensive loss before reclassifications:
Increase (decrease)	14.1		—		14.1
Income tax impact	0.7		—		0.7
Other comprehensive income (loss) before reclassifications, net of income taxes	14.8		—		14.8
Amounts reclassified from accumulated other comprehensive loss:
Increase	—		(0.4)		(0.4)
Income tax impact	—		0.1		0.1
Amounts reclassified from accumulated other comprehensive loss, net of income taxes	—		(0.3)		(0.3)
Net current period other comprehensive income (loss), net of income taxes	14.8		(0.3)		14.5
Balance, March 31, 2023	$	(225.7)	$	15.1	$	(210.6)


	Foreign Currency Translation Adjustments		Unrealized Loss on Cash Flow Hedges		Unrealized Pension Costs		Total Accumulated Other Comprehensive Loss
Three Months Ended April 1, 2022
Balance, December 31, 2021	$	(139.6)	$	(1.7)	$	(2.2)	$	(143.5)
Other comprehensive (loss) income before reclassifications:
(Decrease) increase	(53.8)		1.8		—		(52.0)
Income tax impact	(5.8)		(0.4)		—		(6.2)
Other comprehensive (loss) income before reclassifications, net of income taxes	(59.6)		1.4		—		(58.2)
Amounts reclassified from accumulated other comprehensive loss:
Increase	—		—		(0.2)		(0.2)
Income tax impact	—		—		0.1		0.1
Amounts reclassified from accumulated other comprehensive loss, net of income taxes	—		—		(0.1)		(0.1)
Net current period other comprehensive (loss) income, net of income taxes	(59.6)		1.4		(0.1)		(58.3)
Balance, April 1, 2022	$	(199.2)	$	(0.3)	$	(2.3)	$	(201.8)


	Three Months Ended
($ in millions)	March 31, 2023		April 1, 2022
Consumables	$	535.5	$	529.9
Equipment	91.7		101.5

Total	$	627.2	$	631.4


	Employee Severance and Related		Facility Exit and Related		Total









Balance, December 31, 2022	$	18.2	$	0.7	18.9
Costs incurred	2.4		1.5		3.9
Paid/settled	(12.9)		(2.0)		(14.9)
Balance, March 31, 2023	$	7.7	$	0.2	$	7.9


	% Change Three Month Period Ended March 31, 2023 vs. Comparable 2022 Period
Total sales growth (GAAP)	(0.7)	%
Plus the impact of:
Acquisition	(3.3)	%

Currency exchange rates	1.6	%
Core sales growth (non-GAAP)	(2.4)	%


	% Change Three Month Period Ended March 31, 2023 vs. Comparable 2022 Period
Total sales growth (GAAP)	(7.3)	%
Plus the impact of:

Acquisition	(5.2)	%
Currency exchange rates	0.8	%
Core sales growth (non-GAAP)	(11.7)	%


Exhibit Number			Description
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			Second Amended and Restated Bylaws of Envista Holdings Corporation effective as of August 23, 2021 (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed on August 27, 2021, Commission File No. 001-39054)
10.1*			Form of Envista Holdings Corporation Performance Stock Unit Agreement
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 Chief 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 Chief 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.


	ENVISTA HOLDINGS CORPORATION
Date: May 3, 2023	By:	/s/ Howard H. Yu
		Howard H. Yu
		Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)


Date of Grant:			#GrantDate#
Target PSUs:			#TargetQuantityGranted#
Core Financial Measures Performance Period:			#StartDate# through #EndDate#
TSR Performance Period:			#StartDate# through #EndDate#
Vesting Conditions:			Per this Agreement (including Addendum A)


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 3, 2023
		/s/ Amir Aghdaei
		Amir Aghdaei
		President and Chief Executive Officer