8-K
Envista Holdings Corp (NVST)
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): February 9, 2021
_____________________________________________
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)) | | --- | --- |
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 §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §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. ☐
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On February 9, 2021, Envista Holdings Corporation (the “Company”) and certain of its material subsidiaries, as guarantors, entered into Amendment No. 3 (“Amendment No. 3”) to its credit agreement dated as of September 20, 2019 (the “Original Credit Agreement”, and as amended by that certain Amendment No. 1 to Credit Agreement dated as of May 6, 2020 (“Amendment No. 1”), and Amendment No. 2 to Credit Agreement dated as of May 19, 2020, the “Amended Credit Agreement”) with a syndicate of banks, including Bank of America, N.A. as administrative agent (the “Administrative Agent”), for the purpose of accelerating the delivery of a quarterly compliance certificate showing compliance with the financial covenants under the Original Credit Agreement and the reinstatement of substantially all of the terms of the Original Credit Agreement. The Company paid customary fees in connection with Amendment No. 3.
Under Amendment No. 1, substantially all of the terms of the Amended Credit Agreement revert back to the terms of the Original Credit Agreement as soon as the Company submits a compliance certificate for any quarter ending on or after March 31, 2021 evidencing (i) compliance with the terms of the financial covenants in the Original Credit Agreement and (ii) confirmation that no Default or Event of Default (each as defined in the Amended Credit Agreement) shall have occurred and be continuing (the “Covenant Compliance Restoration Date”). Amendment No. 3 amends the Amended Credit Agreement to allow such certification for the quarter ended December 31, 2020. Amendment No. 3 has resulted in the reinstatement of substantially all of the terms of the Original Credit Agreement, including the following exceptions: (i) the cap on cash netting for the Maximum Consolidated Leverage Ratio (as defined in the Original Credit Agreement) is temporarily increased from $150 million to $250 million for the quarter ended December 31, 2020 solely for the purposes of determining the Covenant Compliance Restoration Date and (ii) the Eurocurrency Rate applicable to the Revolving Credit Facility or the USD Term Facility shall be at least 0.75% (each as defined in the Amended Credit Agreement).
The Amended Credit Agreement was secured by substantially all of the Company’s assets and those of each guarantor. In connection with reverting the terms to those of the Original Credit Agreement, all security interests granted to the lenders will be released.
The foregoing is a summary description of certain terms of Amendment No. 3 and does not purport to be complete, and it is qualified in its entirety by reference to the full text of Amendment No. 3, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and which is incorporated herein by reference.
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 10, 2021, the Company issued a press release announcing financial results for the quarter ended December 31, 2020. 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, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
The information set forth under “Item 1.01 Entry into a Material Definitive Agreement” is incorporated herein by reference.
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 December 31, 2020. 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 |
|---|---|
| 10.1 | Amendment No. 3 to Credit Agreement, dated as of February 9, 2021, by and among Envista Holdings Corporation, each Guarantor party thereto, Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender, and the other Lenders party thereto. |
| 99.1 | Press Release dated February 10, 2021 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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: February 10, 2021 | By: | /s/ Howard H. Yu |
| Howard H. Yu | ||
| Senior Vice President and Chief Financial Officer |
Document
Exhibit 10.1
AMENDMENT NO. 3 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT (this “Amendment”) is made and entered into as of February 9, 2021 by and among ENVISTA HOLDINGS CORPORATION, a Delaware corporation (the “Company”), each Guarantor (as defined in the Credit Agreement), each of the Lenders (as defined in the Credit Agreement) party hereto and BANK OF AMERICA, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender (the “Administrative Agent”).
W I T N E S S E T H:
WHEREAS, the Company, the Designated Borrowers from time to time party thereto, the Administrative Agent and the Lenders from time to time party thereto have entered into that certain Credit Agreement dated as of September 20, 2019 (as amended by that certain Amendment No. 1 to Credit Agreement dated as of May 6, 2020, Amendment No. 2 to Credit Agreement dated as of May 19, 2020, and as hereby amended and as may be further amended, restated, extended, supplemented or otherwise modified from time to time, the “Credit Agreement”; all capitalized terms not otherwise defined herein shall have the meaning given thereto in the Credit Agreement as amended by this Amendment);
NOW, THEREFORE, in consideration of the premises and the terms hereof, the parties hereto agree as follows:
1.Amendments to Credit Agreement. Subject to the terms and conditions set forth herein, the Credit Agreement is hereby amended as follows:
(a)The last paragraph of the definition of “Applicable Rate” set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
Notwithstanding the foregoing, from the Amendment No. 1 Effective Date to the first Business Day immediately following the Covenant Compliance Restoration Date, the Applicable Rate shall be (x) in the case of the Revolving Credit Facility, 0.50% per annum for the Facility Fee, 3.00% per annum for Eurocurrency Loans and the Letter of Credit Fee and 2.00% per annum for Base Rate Loans, (y) in the case of the USD Term Facility, 3.50% per annum for Eurocurrency Loans and 2.50% per annum for Base Rate Loans and (z) in the case of the EUR Term Facility, 3.325% per annum. Thereafter, (a) prior to the receipt by the Company of a Debt Rating, the Applicable Rate shall be determined and shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a) (or, in the event the Covenant Compliance Restoration Date occurs on or prior to the date a Compliance Certificate is delivered pursuant to Section 6.02(a) for the fiscal quarter ended on or about March 31, 2021, the first Business Day immediately following the date the certificate is delivered pursuant to clause (d) of the definition of Covenant Compliance Restoration Date reflecting a calculation of the Consolidated Leverage Ratio for the fiscal quarter ended on or about December 31, 2020) (but without giving effect to any adjustments to such calculation as contemplated by such definition); provided, however, that if a Compliance Certificate is not delivered when due in accordance with such Section, then, Pricing Level 5 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and in each case shall remain in effect until first Business Day immediately following the date on
which such Compliance Certificate is delivered and (b) upon receipt by the Company of the Debt Rating and notice thereof to the Administrative Agent, each change in the Applicable Rate resulting from a publicly announced change in the Debt Rating shall be effective during the period commencing on the date of the public announcement thereof and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody’s or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Company and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation.
(b)The last paragraph of the definition of “Consolidated EBITDA” set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
Notwithstanding the foregoing, for the fiscal quarter ended June 28, 2019 Consolidated EBITDA for such fiscal quarter shall be deemed to be $119,400,000.
(c)The definition of “Covenant Compliance Restoration Date” set forth in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:
“Covenant Compliance Restoration Date” means the first date to occur on or after the date on which the Company has delivered financial statements pursuant to Section 6.01(a) or (b) (or, solely in the case of the fiscal period ended on or about December 31, 2020, substantially final drafts thereof (as determined in good faith by the Company) which have been delivered to the Administrative Agent and certified by a Responsible Officer of the Company as fairly presenting in all material respects the financial condition, results of operations and cash flows of the Company and its Subsidiaries in accordance with GAAP as at such date and for such period) for the fiscal period ended on or about December 31, 2020 or any subsequent fiscal period thereafter when all of the following conditions are satisfied as of such date: (a) the Consolidated Leverage Ratio as of the end of such fiscal period was not greater than 3.75 to 1.00, (b) the Consolidated Interest Coverage Ratio as of the end of such fiscal period was not less than 3.00 to 1.00, (c) no Default or Event of Default shall have occurred and be continuing and (d) the Administrative Agent has received a duly executed certificate from a Responsible Officer of the Company certifying as to the satisfaction of the foregoing conditions in clauses (a) through (c) above, which shall be in form reasonably satisfactory to the Administrative Agent and shall include a reasonably detailed calculation of the foregoing financial covenants (and, in the case of the fiscal period ended on or about December 31, 2020, with the Consolidated Leverage Ratio also being calculated without giving effect to the immediately following proviso for purposes of determining the Applicable Rate); provided that, notwithstanding anything to the contrary herein, solely when making the calculations in the foregoing clauses (a) and (b) for purposes of determining the occurrence of the Covenant Compliance Restoration Date (and not for any other purpose, including, for the avoidance of doubt, determining the Applicable Rate) and solely in respect of such calculation for the fiscal period ended on or about December 31, 2020, (i) any voluntary prepayments of Term Loans made from January 1, 2021 through the date such calculations are being made for purposes of determining the occurrence of the Covenant Compliance Restoration Date, shall be deemed to have been
made on December 31, 2020 and, accordingly, the Company shall be permitted to adjust Consolidated Funded Indebtedness and Consolidated Interest Expense to give pro forma effect to such prepayments and (ii) the $150,000,000 cap set forth in clause (d) of the definition of Consolidated Funded Indebtedness shall be deemed to be $250,000,000.
(d)Section 7.06(a) of the Credit Agreement is hereby amended and restated in its entirety as follows:
(a) Maximum Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio as of the end of any fiscal quarter of the Company ending on or after the fiscal quarter ending on or about March 31, 2021 (or, if the Covenant Compliance Restoration Date shall not have occurred prior to March 31, 2021, June 30, 2021) to be greater than 3.75 to 1.00. Notwithstanding the foregoing, commencing with the fiscal quarter ending on or about September 30, 2021 (or, if the Covenant Compliance Restoration Date shall have occurred prior to the fiscal quarter ending on or about June 30, 2021, June 30, 2021), the Company shall be permitted, no more than two times, to increase the maximum permitted Consolidated Leverage Ratio to 4.25 to 1.00 in connection with any permitted Acquisition occurring on or after the fiscal quarter ending on or about September 30, 2021 (or, if the Covenant Compliance Restoration Date shall have occurred prior to the fiscal quarter ending on or about June 30, 2021, June 30, 2021) with aggregate consideration (including, without duplication, the assumption or incurrence of Indebtedness in connection with such Acquisition) equal to or in excess of $100,000,000, which such increase shall be applicable for the fiscal quarter in which such Acquisition is consummated and the three consecutive test periods thereafter; provided that, there shall be at least one full fiscal quarter following the cessation of each such increase during which no such increase shall then be in effect.
(e)Section 7.06(b) of the Credit Agreement is hereby amended and restated in its entirety as follows:
(b) Minimum Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio as of the end of any fiscal quarter of the Company ending on or after the fiscal quarter ending on or about December 31, 2020 to be less than 3.00 to 1.00.
(f)Exhibit D to the Credit Agreement (Form of Compliance Certificate) is amended such that, after giving effect to all such amendments, it shall read in its entirety as set forth on Exhibit D attached hereto.
2.Effectiveness; Conditions Precedent. This Amendment shall become effective upon satisfaction or waiver of the following conditions (such date, the “Effective Date”):
(a)The Administrative Agent’s receipt of executed counterparts of this Amendment signed on behalf of (i) the Company, (ii) each other Loan Party and (iii) the Lenders party hereto consisting of the Required Lenders, each of which shall be originals, facsimiles or electronic (pdf.) transmissions (followed promptly by originals) unless otherwise specified and, in the case of the Company and each other Loan Party, each properly executed by a Responsible Officer of such Person.
(b)(i) The Company shall have paid any fees (including fees to the Lenders) required to be paid on date hereof pursuant to that certain Engagement Letter dated as of February 1, 2021 by and between the Company and BofA Securities, Inc.; and (ii) all other fees and expenses payable to the Administrative Agent (including the fees and expenses of counsel to the Administrative Agent to the extent due and payable under Section 11.04 of the Credit Agreement) estimated to date and for which invoices have been presented at least two (2) Business Days prior to the date hereof shall have been paid in full (without prejudice to final settling of accounts for such fees and expenses).
3.Representations and Warranties. In order to induce the Administrative Agent and the Lenders to enter into this Amendment, each Loan Party represents and warrants to the Administrative Agent and the Lenders as follows:
(a)No Default or Event of Default exists as of the date hereof or would result from, or after giving effect to, the amendments contemplated hereby;
(b)the representations and warranties of (i) the Borrowers contained in Article V of the Credit Agreement and (ii) each Loan Party contained in each other Loan Document are true and correct in all material respects (provided that such materiality qualifier shall not apply to the extent that any such representation or warranty is already qualified or modified by materiality in the text thereof), on and as of the Effective Date, after giving effect to the amendments contemplated hereby, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects (provided that such materiality qualifier shall not apply to the extent that any such representation or warranty is already qualified or modified by materiality in the text thereof) as of such earlier date, and except that for purposes of this clause (b), the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Credit Agreement;
(c)it has the legal power and authority to execute and deliver this Amendment;
(d)the officer executing this Amendment on behalf of each Loan Party has been duly authorized to execute and deliver the same and bind it with respect to the provisions hereof;
(e)this Amendment constitutes a legal, valid and binding obligation of each Loan Party, enforceable against each Loan Party in accordance with its terms, except as may be limited by applicable Debtor Relief Laws and general principles of equity, regardless of whether considered in a proceeding in equity or at law; and
(f)no Subsidiaries of the Company are currently designated as “Designated Borrowers” under the Credit Agreement.
4.Entire Agreement. This Amendment is a Loan Document. This Amendment, together with all the other Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the
Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other in relation to the subject matter hereof or thereof. None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise, except in writing and in accordance with Section 11.01 of the Credit Agreement.
5.Full Force and Effect of Credit Agreement. Except as hereby specifically amended, modified or supplemented, the Credit Agreement is hereby confirmed and ratified in all respects and shall be and remain in full force and effect according to its respective terms.
6.Governing Law. This Amendment shall in all respects be governed by, and construed in accordance with, the laws of the State of New York, and shall be further subject to the provisions of Sections 11.17 and 11.18 of the Credit Agreement.
7.Enforceability. If any provision of this Amendment is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Amendment shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
8.References; Interpretation. All references in any of the Loan Documents to the “Credit Agreement” shall mean the Credit Agreement, as amended hereby. The rules of interpretation set forth in Section 1.02 of the Credit Agreement shall be applicable to this Amendment.
9.Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of each Loan Party, the Administrative Agent and each of the Lenders, and their respective successors, legal representatives, and assignees to the extent such assignees are permitted assignees as provided in Section 11.07 of the Credit Agreement.
10.No Novation; Reaffirmation. Neither the execution and delivery of this Amendment nor the consummation of any other transaction contemplated hereunder is intended to constitute a novation of the Credit Agreement or of any of the other Loan Documents or any obligations thereunder. Each Loan Party hereby (i) affirms and confirms each of the Loan Documents to which it is a party and its Obligations thereunder, (ii) affirms that it has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Amendment and (iii) agrees that, notwithstanding the effectiveness of this Amendment, each Loan Document shall continue to be in full force and effect.
11.Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by telecopy or other electronic means (including .pdf) shall be effective as delivery of a manually executed counterpart of this Amendment.
[Remainder of page is intentionally left blank; signature pages follow.]
IN WITNESS WHEREOF, the parties have duly executed this Amendment on the day and year first written above.
ENVISTA HOLDINGS CORPORATION, as the Company
By: /s/ Kari-Lyn Moore
Name: Kari-Lyn Moore
Title: Chief Accounting Officer
GUARANTORS:
ARIBEX, INC.
DCII INVESTMENT COMPANY, LLC
DCII NORTH AMERICA, LLC
DCII SURETY, LLC
DCII US HOLDINGS, LLC
DENTAL IMAGING TECHNOLOGIES CORPORATION
DH DENTAL BUSINESS SERVICES, LLC
DH DENTAL EMPLOYMENT SERVICES, LLC
HUSKY ACQUISITION LLC
IMPLANT DIRECT SYBRON ADMINISTRATION LLC
IMPLANT DIRECT SYBRON INTERNATIONAL LLC
IMPLANT DIRECT SYBRON MANUFACTURING LLC
JENERIC/PENTRON INCORPORATED
KAVO DENTAL TECHNOLOGIES, LLC
KAVO DENTAL MANUFACTURING, INC.
KERR CORPORATION
METREX RESEARCH, LLC
NOBEL BIOCARE HOLDING USA, INC.
NOBEL BIOCARE PROCERA, LLC
NOBEL BIOCARE USA, LLC
ORMCO CORPORATION
ORMCO IP, LLC
PENTRON CLINICAL TECHNOLOGIES, LLC
PENTRON CORPORATION
PENTRON LABORATORY TECHNOLOGIES, LLC
SC SUBSIDIARY, LLC
SYBRON CANADA HOLDINGS, INC.
SYBRON DENTAL SPECIALTIES, INC.
By: /s/ Faez Kaabi
Name: Faez Kaabi
Title: Vice President or President
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A., as Administrative Agent
By: /s/ Liliana Claar
Name: Liliana Claar
Title: Vice President
BANK OF AMERICA, N.A., as a Lender, L/C Issuer and Swing Line Lender
By: /s/ Darren Merten
Name: Darren Merten
Title: Director
THE BANK OF NOVA SCOTIA, as a Lender
By: /s/ Robb Gass
Name: Robb Gass
Title: Managing Director
CITIBANK, N.A., as a Lender
By:/s/ Pranjal Gambhir
Name: Pranjal Gambhir
Title: Vice President
HSBC BANK USA, NATIONAL ASSOCIATION, as a Lender
By: /s/ Eric Seltenrich
Name: Eric Seltenrich
Title: Managing Director
HSBC BANK PLC, as a Lender
By:/s/ Jason Bianchi
Name: Jason Bianchi
Title: Senior Associate
JPMORGAN CHASE BANK, N.A., as a Lender
By: /s/ Stacey Zoland
Name: Stacey Zoland
Title: Executive Director
MIZUHO BANK, LTD., as a Lender
By:/s/ Tracy Rahn
Name: Tracy Rahn
Title: Executive Director
MUFG BANK, LTD., as a Lender
By:/s/ Kevin Wood
Name: Kevin Wood
Title: Director
PNC BANK, NATIONAL ASSOCIATION, as a Lender
By:/s/ Eric H. Williams
Name: Eric H. Williams
Title: Senior Vice President
U.S. BANK NATIONAL ASSOCIATION, as a Lender
By:/s/ Maria Massimo
Name: Maria Massimo
Title: SVP
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender
By:/s/ Darin Mullis
Name: Darin Mullis
Title: Managing Director
BNP PARIBAS, as a Lender
By: /s/ Michael Pearce
Name: Michael Pearce
Title: Managing Director
By: /s/ Reid Hill
Name: Reid Hill
Title: Managing Director
BANCO BILBAO VIZCAYA ARGENTARIA, S.A., NEW YORK BRANCH, as a Lender
By:/s/ Cara Younger
Name: Cara Younger
Title: Executive Director
By:/s/ Miriam Trautmann
Name: Miriam Trautmann
Title: Senior Vice President
SUMITOMO MITSUI BANKING CORPORATION, as a Lender
By:/s/ Michael Maguire
Name: Michael Maguire
Title: Managing Director
TORONTO-DOMINION BANK, NEW YORK BRANCH, as a Lender
By:/s/ Brian MacFarlane
Name: Brian MacFarlane
Title: Authorized Signatory
TD BANK, N.A., as a Lender
By:/s/ Uk-Sun Kim
Name: Uk-Sun Kim
Title: Senior Vice President
DEUTSCHE BANK AG, NEW YORK BRANCH, as a Lender
By:/s/ Ming K. Chu
Name: Ming K. Chu
Title: Director
By:/s/ Annie Chung
Name: Annie Chung
Title: Director
BARCLAYS BANK PLC, as a Lender
By:/s/ Edward Pan
Name: Edward Pan
Title: Associate
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as a Lender
By:/s/ Lingzi Huang
Name: Lingzi Huang
Title: Authorized Signatory
By:/s/ Jessica Gavarkovs
Name: Jessica Gavarkovs
Title: Authorized Signatory
INTESA SANPAOLO S.p.A., NEW YORK BRANCH, as a Lender
By:/s/ Alessandro Toigo
Name: Alessandro Toigo
Title: Head of Corporate Desk
By:/s/ Neil Derfler
Name: Neil Derfler
Title: Global Relationship Manager
WESTPAC BANKING CORPORATION, as a Lender
By:/s/ Richard Yarnold
Name: Richard Yarnold
Title: Director, Corporate & Institutional Banking
GOLDMAN SACHS BANK USA, as a Lender
By:/s/ Mahesh Mohan
Name: Mahesh Mohan
Title: Authorized Signatory
MORGAN STANLEY BANK, N.A., as a Lender
By:/s/ Gilroy D'Souza
Name: Gilroy D'Souza
Title: Authorized Signatory
NORDEA BANK ABP, NEW YORK BRANCH, as a Lender
By:/s/ Leena Parker
Name: Leena Parker
Title: Senior Vice President
By:/s/ Abdul Khail
Name: Abdul Khail
Title: Assistant Vice President
THE BANK OF NEW YORK MELLON, as a Lender
By:/s/ Rachael Dolinish
Name: Rachael Dolinish
Title: Vice President
Document
Exhibit 99.1
ENVISTA REPORTS FOURTH QUARTER 2020 RESULTS
Brea, California, February 10, 2021 - Envista Holdings Corporation (NYSE: NVST) today announced results for the fourth quarter 2020.
For the fourth quarter, the Company’s net income was $108.4 million, or $0.64 per diluted share. For the same period, adjusted net income was $94.6 million, or $0.56 per diluted share. Adjusted EBITDA for the three months ended December 31, 2020 was $150.8 million, a 23.1% increase compared to $122.5 million for the comparable period in 2019.
Sales for the fourth quarter of 2020 were $732.3 million, an increase of 1.6% as compared to the same period year-over-year. Core sales increased 3.4% over the same period in the prior year.
Operating cash flow for the fourth quarter of 2020 was $193.4 million, an increase of 3.4% as compared to the same period year-over-year. Free cash flow was $185.6 million, an increase of 8.5% compared to the fourth quarter of 2019. In February, Envista repaid $472 million of bank term debt and amended its credit agreement to reinstate most of the original terms.
Amir Aghdaei, Chief Executive Officer, stated, “We delivered outstanding fourth quarter results with 3.4% core sales growth, an 8.5% increase in free cash flow, and a 23% increase in adjusted EBITDA. We are proud of our team’s dedication to building a company that provides customers and partners with the products and support they need to improve the productivity and predictability of care for their patients.”
Mr. Aghdaei continued, “Our commitment to continuous improvement, powered by the Envista Business System, has been the driving force behind accelerating growth in our Specialty and Infection Prevention businesses while allowing us to significantly improve our operational capabilities and reduce our structural footprint. With the demonstrable progress on these strategic initiatives combined with an improved portfolio and balance sheet, we believe Envista is stronger than ever entering 2021 and positioned well for enhanced performance.”
Envista will discuss its results during a quarterly 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 dialing 866-648-5306 within the U.S. or by dialing +1 602-563-8479 outside the U.S. a few minutes before the 2:00 P.M. PT start and referencing conference ID # 4980251. 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.” In addition, presentation materials relating to Envista’s results have been posted to the “Investors” section of Envista’s website under the subheading “Quarterly Earnings.”
ABOUT ENVISTA
Envista is a global family of more than 30 trusted dental brands, 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. Our comprehensive portfolio, including dental implants and treatment options, orthodontics, and digital imaging technologies, covers an estimated 90% of dentists' clinical needs for diagnosing, treating, and preventing dental conditions as well as improving the aesthetics of the human smile. Envista companies, including KaVo Kerr, Nobel Biocare, and Ormco, partner with dental professionals to help them deliver the best possible patient care. With a foundation comprised of the proven Envista Business System (EBS) methodology, an experienced leadership team, and a strong culture grounded in customer centricity, commitment to innovation, respect, continuous improvement, and leadership, 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.
FORWARD-LOOKING STATEMENTS
Certain statements in this 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 impact of the COVID-19 pandemic, the conditions in the U.S. and global economy, 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, 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, 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, significant restrictions and/or potential liability based on tax implications of transactions with Danaher, security breaches or other disruptions of our information technology systems or violations of data privacy laws, 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, 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, the impact of regulation on demand for our products and services, labor matters, international economic, political, legal, compliance and business factors, and disruptions relating to war, terrorism, widespread protests and civil unrest, man-made and natural disasters, public health issues and other events. 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 2019 and our Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date of this 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.
CONTACT
John Bedford
Vice President, Investor Relations
Envista Holdings Corporation
200 S. Kraemer Blvd., Building E
Brea, California 92821
Telephone: (714) 817-7000
ENVISTA HOLDINGS CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (UNAUDITED)
($ and shares in millions, except per share amounts)
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||
| Sales | $ | 732.3 | $ | 720.5 | $ | 2,282.0 | $ | 2,751.6 |
| Cost of sales | 343.8 | 331.1 | 1,123.9 | 1,238.5 | ||||
| Gross profit | 388.5 | 389.4 | 1,158.1 | 1,513.1 | ||||
| Operating expenses: | ||||||||
| Selling, general and administrative | 264.6 | 276.0 | 1,024.0 | 1,080.9 | ||||
| Research and development | 27.1 | 35.4 | 100.8 | 154.7 | ||||
| Operating profit | 96.8 | 78.0 | 33.3 | 277.5 | ||||
| Nonoperating (expense) income: | ||||||||
| Other (expense) income | (1.3) | (0.1) | (0.9) | 1.5 | ||||
| Interest expense, net | (21.3) | (3.3) | (62.5) | (3.5) | ||||
| Income (loss) before income taxes | 74.2 | 74.6 | (30.1) | 275.5 | ||||
| Income tax (benefit) expense | (34.2) | 18.5 | (63.4) | 57.9 | ||||
| Net income | $ | 108.4 | $ | 56.1 | $ | 33.3 | $ | 217.6 |
| Earnings per share: | ||||||||
| Basic | $ | 0.68 | $ | 0.35 | $ | 0.21 | $ | 1.60 |
| Diluted | $ | 0.64 | $ | 0.35 | $ | 0.20 | $ | 1.60 |
| Average common stock and common equivalent shares outstanding: | ||||||||
| Basic | 160.0 | 158.7 | 159.6 | 136.2 | ||||
| Diluted | 170.0 | 159.3 | 164.1 | 136.4 |
ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
($ in millions, except per share amounts)
| As of December 31, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| ASSETS | ||||
| Current assets: | ||||
| Cash and equivalents | $ | 888.9 | $ | 211.2 |
| Trade accounts receivable, less allowance for credit losses of $37.1 and $22.8, respectively | 361.0 | 443.6 | ||
| Inventories, net | 266.9 | 277.9 | ||
| Prepaid expenses and other current assets | 73.7 | 69.2 | ||
| Total current assets | 1,590.5 | 1,001.9 | ||
| Property, plant and equipment, net | 303.0 | 290.3 | ||
| Operating lease right-of-use assets | 165.3 | 200.1 | ||
| Other long-term assets | 127.3 | 74.4 | ||
| Goodwill | 3,430.7 | 3,306.0 | ||
| Other intangible assets, net | 1,259.2 | 1,285.6 | ||
| Total assets | $ | 6,876.0 | $ | 6,158.3 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities: | ||||
| Short-term debt | $ | 886.8 | $ | 3.9 |
| Trade accounts payable | 235.1 | 208.0 | ||
| Accrued expenses and other liabilities | 530.3 | 470.6 | ||
| Operating lease liabilities | 32.5 | 26.7 | ||
| Total current liabilities | 1,684.7 | 709.2 | ||
| Operating lease liabilities | 153.8 | 186.0 | ||
| Other long-term liabilities | 408.8 | 399.3 | ||
| Long-term debt | 907.7 | 1,321.0 | ||
| Commitments and contingencies | ||||
| Stockholders’ equity: | ||||
| Preferred stock, no par value, 15.0 million shares authorized; no shares issued or outstanding at December 31, 2020 and December 31, 2019 | — | — | ||
| Common stock - $0.01 par value, 500.0 million shares authorized; 160.2 million shares issued and 160.0 million shares outstanding at December 31, 2020; 158.7 million shares issued and outstanding at December 31, 2019 | 1.6 | 1.6 | ||
| Additional paid-in capital | 3,684.4 | 3,589.7 | ||
| Retained earnings | 126.4 | 93.1 | ||
| Accumulated other comprehensive loss | (91.8) | (144.2) | ||
| Total Envista stockholders’ equity | 3,720.6 | 3,540.2 | ||
| Noncontrolling interests | 0.4 | 2.6 | ||
| Total stockholders’ equity | 3,721.0 | 3,542.8 | ||
| Total liabilities and stockholders’ equity | $ | 6,876.0 | $ | 6,158.3 |
ENVISTA HOLDINGS CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
($ in millions)
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2018 | ||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 33.3 | $ | 217.6 | $ | 230.7 |
| Noncash items: | ||||||
| Depreciation | 42.4 | 39.0 | 39.4 | |||
| Amortization | 90.2 | 89.5 | 90.6 | |||
| Allowance for credit losses | 23.0 | 9.5 | 4.7 | |||
| Stock-based compensation expense | 22.6 | 18.4 | 13.3 | |||
| Restructuring charges | 11.1 | — | — | |||
| Impairment charges | 32.6 | — | 0.4 | |||
| Amortization of right-of-use assets | 30.5 | 39.6 | — | |||
| Amortization of debt discount and issuance costs | 13.4 | — | — | |||
| Change in deferred income taxes | (91.4) | (8.9) | 1.7 | |||
| Change in trade accounts receivable | 71.9 | 3.3 | (8.5) | |||
| Change in inventories | 11.9 | (1.5) | (8.9) | |||
| Change in trade accounts payable | 21.6 | (7.9) | (3.8) | |||
| Change in prepaid expenses and other assets | (2.5) | (8.6) | 13.8 | |||
| Change in accrued expenses and other liabilities | 10.0 | 44.5 | 26.7 | |||
| Change in operating lease liabilities | (36.7) | (37.0) | — | |||
| Net cash provided by operating activities | 283.9 | 397.5 | 400.1 | |||
| Cash flows from investing activities: | ||||||
| Acquisitions, net of cash acquired | (40.7) | — | — | |||
| Payments for additions to property, plant and equipment | (47.7) | (77.8) | (72.2) | |||
| Proceeds from sales of property, plant and equipment | 5.3 | 1.6 | — | |||
| All other investing activities | 14.0 | (2.2) | (3.3) | |||
| Net cash used in investing activities | (69.1) | (78.4) | (75.5) | |||
| Cash flows from financing activities: | ||||||
| Proceeds from issuance of convertible senior notes | 517.5 | — | — | |||
| Payment of debt issuance and other deferred financing costs | (17.2) | (2.4) | — | |||
| Proceeds from revolving line of credit | 249.8 | — | — | |||
| Repayment of revolving line of credit | (250.0) | — | — | |||
| Proceeds from borrowings | — | 1,318.3 | — | |||
| Repayment of borrowings | — | (0.3) | — | |||
| Purchase of capped calls related to issuance of convertible senior notes | (20.7) | — | — | |||
| Proceeds from stock option exercises | 13.8 | — | — | |||
| Proceeds from the public offering of common stock, net of issuance costs | — | 643.4 | — | |||
| Consideration to Former Parent in connection with the Separation | — | (1,950.0) | — | |||
| Net transfers to Former Parent | — | (116.5) | (324.6) | |||
| All other financing activities | (0.7) | (0.2) | — | |||
| Net cash provided by (used in) financing activities | 492.5 | (107.7) | (324.6) | |||
| Effect of exchange rate changes on cash and equivalents | (29.6) | (0.2) | — | |||
| Net change in cash and equivalents | 677.7 | 211.2 | — | |||
| Beginning balance of cash and equivalents | 211.2 | — | — | |||
| Ending balance of cash and equivalents | $ | 888.9 | $ | 211.2 | $ | — |
ENVISTA HOLDINGS CORPORATION
SEGMENT INFORMATION (UNAUDITED)
($ in millions)
| Three Months Ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||
| Sales | ||||||||||||
| Specialty Products & Technologies | $ | 343.2 | $ | 328.8 | $ | 1,117.3 | $ | 1,342.7 | ||||
| Equipment & Consumables | 389.1 | 391.7 | 1,164.7 | 1,408.9 | ||||||||
| Total | $ | 732.3 | $ | 720.5 | $ | 2,282.0 | $ | 2,751.6 | ||||
| Operating Profit (Loss) | ||||||||||||
| Specialty Products & Technologies | $ | 40.9 | $ | 52.4 | $ | 72.7 | $ | 227.7 | ||||
| Equipment & Consumables | 66.3 | 57.7 | 38.2 | 105.8 | ||||||||
| Other | (10.4) | (32.1) | (77.6) | (56.0) | ||||||||
| Total | $ | 96.8 | $ | 78.0 | $ | 33.3 | $ | 277.5 | ||||
| Operating Margin | ||||||||||||
| Specialty Products & Technologies | 11.9 | % | 15.9 | % | 6.5 | % | 17.0 | % | ||||
| Equipment & Consumables | 17.0 | % | 14.7 | % | 3.3 | % | 7.5 | % | ||||
| Total | 13.2 | % | 10.8 | % | 1.5 | % | 10.1 | % |
ENVISTA HOLDINGS CORPORATION
SUMMARY OF FINANCIAL METRICS (UNAUDITED)
($ and shares in millions, except per share amounts)
| GAAP | NON-GAAP * | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Three Months Ended | ||||||||||||
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||||||
| Gross Profit | $ | 388.5 | $ | 389.4 | Adjusted Gross Profit | $ | 398.1 | $ | 389.4 | ||||
| Operating Profit | $ | 96.8 | $ | 78.0 | Adjusted Operating Profit | $ | 141.2 | $ | 113.4 | ||||
| Net Income | $ | 108.4 | $ | 56.1 | Adjusted Net Income | $ | 94.6 | $ | 84.8 | ||||
| Diluted EPS | $ | 0.64 | $ | 0.35 | Adjusted Diluted EPS | $ | 0.56 | $ | 0.52 | ||||
| Diluted Shares | 170.0 | 159.3 | Adjusted Diluted Shares | 170.0 | 162.3 | ||||||||
| N/A | Adjusted EBITDA | $ | 150.8 | $ | 122.5 | ||||||||
| Sales Growth | 1.6 | % | (5.0) | % | Core Sales Growth | 3.4 | % | (3.5) | % | ||||
| Operating Cash Flow | $ | 193.4 | $ | 187.0 | Free Cash Flow | $ | 185.6 | $ | 171.1 |
* For information on non-GAAP measures see "Reconciliation of GAAP to Non-GAAP Financial Measures" below. See also the accompanying "Notes to Reconciliation of GAAP to Non-GAAP Financial Measures."
ENVISTA HOLDINGS CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)
($ in millions)
Adjusted Gross Profit and Adjusted Gross Margin
| Three Months Ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||
| Gross Profit | $ | 388.5 | $ | 389.4 | $ | 1,158.1 | $ | 1,513.1 | ||||
| Restructuring costs and asset impairments A | 9.6 | — | 44.9 | — | ||||||||
| Adjusted Gross Profit | $ | 398.1 | $ | 389.4 | $ | 1,203.0 | $ | 1,513.1 | ||||
| Gross Margin (Gross Profit / Sales) | 53.1 | % | 54.0 | % | 50.7 | % | 55.0 | % | ||||
| Adjusted Gross Margin (Adjusted Gross Profit / Sales) | 54.4 | % | 54.0 | % | 52.7 | % | 55.0 | % |
Adjusted Operating Profit
| Three Months Ended | Year Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||
| Consolidated | ||||||||||||
| Operating Profit | $ | 96.8 | $ | 78.0 | $ | 33.3 | $ | 277.5 | ||||
| Amortization of acquisition-related intangible assets | 22.2 | 22.2 | 90.2 | 89.5 | ||||||||
| Restructuring costs and asset impairments A | 35.5 | — | 135.4 | — | ||||||||
| Contingent loss reserve B | (13.3) | 9.0 | 2.7 | 9.0 | ||||||||
| Separation costs C | — | 4.2 | — | 4.2 | ||||||||
| Adjusted Operating Profit | $ | 141.2 | $ | 113.4 | $ | 261.6 | $ | 380.2 | ||||
| Adjusted Operating Profit as a % of Sales | 19.3 | % | 15.7 | % | 11.5 | % | 13.8 | % | ||||
| Specialty Products & Technologies | ||||||||||||
| Operating Profit | $ | 40.9 | $ | 52.4 | $ | 72.7 | $ | 227.7 | ||||
| Amortization of acquisition-related intangible assets | 15.2 | 14.3 | 60.0 | 57.7 | ||||||||
| Restructuring costs and asset impairments A | 15.8 | — | 43.8 | — | ||||||||
| Adjusted Operating Profit | $ | 71.9 | $ | 66.7 | $ | 176.5 | $ | 285.4 | ||||
| Adjusted Operating Profit as a % of Sales | 20.9 | % | 20.3 | % | 15.8 | % | 21.3 | % | ||||
| Equipment & Consumables | ||||||||||||
| Operating Profit | $ | 66.3 | $ | 57.7 | $ | 38.2 | $ | 105.8 | ||||
| Amortization of acquisition-related intangible assets | 7.0 | 7.9 | 30.2 | 31.8 | ||||||||
| Restructuring costs and asset impairments A | 19.3 | — | 85.6 | — | ||||||||
| Adjusted Operating Profit | $ | 92.6 | $ | 65.6 | $ | 154.0 | $ | 137.6 | ||||
| Adjusted Operating Profit as a % of Sales | 23.8 | % | 16.7 | % | 13.2 | % | 9.8 | % |
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures
Adjusted Net Income
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||
| Net Income | $ | 108.4 | $ | 56.1 | $ | 33.3 | $ | 217.6 |
| Pretax amortization of acquisition-related intangible assets | 22.2 | 22.2 | 90.2 | 89.5 | ||||
| Restructuring costs and asset impairments A | 35.5 | — | 135.4 | — | ||||
| Contingent loss reserve B | (13.3) | 9.0 | 2.7 | 9.0 | ||||
| Separation costs C | — | 4.2 | — | 4.2 | ||||
| Non-cash interest expense - convertible senior notes D | 4.6 | — | 11.0 | — | ||||
| Tax effect of adjustments reflected above E | (10.8) | (8.0) | (56.9) | (23.8) | ||||
| Discrete tax adjustments and other tax-related adjustments F | (52.0) | 1.3 | (54.6) | (6.5) | ||||
| Adjusted Net Income | $ | 94.6 | $ | 84.8 | $ | 161.1 | $ | 290.0 |
Adjusted Diluted Earnings Per Share
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||
| Diluted Earnings Per Share | $ | 0.64 | $ | 0.35 | $ | 0.20 | $ | 1.60 |
| Pretax amortization of acquisition-related intangible assets | 0.13 | 0.14 | 0.55 | 0.55 | ||||
| Restructuring costs and asset impairments A | 0.21 | — | 0.83 | — | ||||
| Contingent loss reserve B | (0.08) | 0.06 | 0.02 | 0.06 | ||||
| Separation costs C | — | 0.03 | — | 0.03 | ||||
| Non-cash interest expense - convertible senior notes D | 0.03 | — | 0.07 | — | ||||
| Tax effect of adjustments reflected above E | (0.06) | (0.06) | (0.35) | (0.15) | ||||
| Discrete tax adjustments and other tax-related adjustments F | (0.31) | 0.01 | (0.34) | (0.04) | ||||
| Dilutive impact of IPO and conversion shares G | — | (0.01) | — | (0.26) | ||||
| Adjusted Diluted Earnings Per Share | $ | 0.56 | $ | 0.52 | $ | 0.98 | $ | 1.79 |
Adjusted Diluted Shares Outstanding
| Three Months Ended | Year Ended | |||
|---|---|---|---|---|
| (shares in millions) | December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 |
| Average common stock shares outstanding - diluted | 170.0 | 159.3 | 164.1 | 136.4 |
| Dilutive impact of IPO and conversion shares G | — | 3.0 | — | 25.9 |
| Average common stock and common stock equivalent shares outstanding - diluted | 170.0 | 162.3 | 164.1 | 162.3 |
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures
Adjusted EBITDA
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||
| Net Income | $ | 108.4 | $ | 56.1 | $ | 33.3 | $ | 217.6 |
| Interest expense, net | 21.3 | 3.3 | 62.5 | 3.5 | ||||
| Income taxes | (34.2) | 18.5 | (63.4) | 57.9 | ||||
| Depreciation | 10.9 | 9.2 | 42.4 | 39.0 | ||||
| Amortization of acquisition-related intangible assets | 22.2 | 22.2 | 90.2 | 89.5 | ||||
| Restructuring costs and asset impairments A | 35.5 | — | 135.4 | — | ||||
| Contingent loss reserve B | (13.3) | 9.0 | 2.7 | 9.0 | ||||
| Separation costs C | — | 4.2 | — | 4.2 | ||||
| Adjusted EBITDA | $ | 150.8 | $ | 122.5 | $ | 303.1 | $ | 420.7 |
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures
Core Sales Growth 1
| Consolidated | % Change Three Month Period Ended<br>December 31, 2020 vs. Comparable 2019 Period | % Change Year Ended<br>December 31, 2020 vs. Comparable 2019 Period | ||
|---|---|---|---|---|
| Total sales growth | 1.6 | % | (17.1) | % |
| Less the impact of: | ||||
| Acquisitions | (0.1) | % | (0.2) | % |
| Discontinued products | 3.8 | % | 2.2 | % |
| Currency exchange rates | (1.9) | % | 0.3 | % |
| Core sales growth | 3.4 | % | (14.8) | % |
| Specialty Products & Technologies | ||||
| Total sales growth | 4.4 | % | (16.8) | % |
| Less the impact of: | ||||
| Acquisitions | (0.2) | % | (0.3) | % |
| Discontinued products | 0.3 | % | 0.6 | % |
| Currency exchange rates | (2.3) | % | (0.1) | % |
| Core sales growth | 2.2 | % | (16.6) | % |
| Equipment & Consumables | ||||
| Total sales growth | (0.7) | % | (17.3) | % |
| Less the impact of: | ||||
| Discontinued products | 6.7 | % | 3.8 | % |
| Currency exchange rates | (1.7) | % | 0.3 | % |
| Core sales growth | 4.3 | % | (13.2) | % |
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.
Reconciliation of Operating Cash Flows to Free Cash Flow
| Three Months Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||
| Net Operating Cash Used in Investing Activities | $ | (5.1) | $ | (15.8) | $ | (69.1) | $ | (78.4) |
| Net Operating Cash Provided by (Used in) Financing Activities | $ | 3.8 | $ | (148.1) | $ | 492.5 | $ | (107.7) |
| Net Operating Cash Provided by Operating Activities | $ | 193.4 | $ | 187.0 | $ | 283.9 | $ | 397.5 |
| Less: payments for additions to property, plant and equipment (capital expenditures) | (13.1) | (15.9) | (47.7) | (77.8) | ||||
| Plus: proceeds from sales of property, plant and equipment (capital disposals) | 5.3 | — | 5.3 | 1.6 | ||||
| Free Cash Flow | $ | 185.6 | $ | 171.1 | $ | 241.5 | $ | 321.3 |
| Net Income | $ | 108.4 | $ | 56.1 | $ | 33.0 | $ | 217.6 |
| Free Cash Flow to Net Income Conversion Ratio | 1.71 | 3.05 | 7.32 | 1.48 |
See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures
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, as well as the inconsistent frequency, of such plans) 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 Represents an accrual adjustment for a significant legal matter.
C On December 18, 2019, Danaher Corporation ("Danaher") completed the split-off exchange offer of all the common shares of Envista Holdings Corporation ("Envista" or (the "Company") held by Danaher in exchange for shares of Danaher common stock. This line item primarily reflects legal and professional services costs incurred in connection with this transaction.
D Non-cash interest expense represents accretion of the debt discount associated with the convertible senior notes due 2025.
E 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.
F 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. During 2020 we recorded a one-time income tax benefit of approximately $59.0 million related primarily to the recognition of a deferred tax asset associated with the estimated amortizable value of a tax basis step-up of the Company's Switzerland assets.
G In connection with the initial public offering ("IPO"), an additional 30.8 million shares were issued on September 20, 2019. This line item reflects the dilutive impact of these IPO shares as if outstanding as of the beginning of each period presented. In addition, certain Envista employees were previously granted Danaher equity awards. On December 18, 2019, Danaher completed the split-off exchange offer of all the common shares of Envista held by Danaher in exchange for shares of Danaher common stock. As a result, the equity awards held by certain Envista employees to purchase Danaher shares have been converted into equity awards to purchase Envista's shares. The dilutive impact of these equity awards are included in this line item to reflect the potential dilution as if outstanding as of the beginning of each period presented.
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's results that, when reconciled to the corresponding GAAP measure, help our investors to:
•with respect to Adjusted Gross Profit, Adjusted Gross Margin, 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 Adjusted Diluted Earnings Per Share, provide investors with improved comparability for Adjusted Diluted EPS as share counts under GAAP are calculated using a weighted average approach;
•with respect to Adjusted Diluted Shares Outstanding, allows for the impact of the IPO shares and dilution related to the conversion of Danaher equity awards into Envista equity awards to be presented as if they were outstanding for all prior periods presented and for the dilutive impact of stock options and restricted stock units;
•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 a company’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, strengthen its balance sheet, invest in its business and grow its business through acquisitions and other strategic opportunities (although 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).
Management uses these non-GAAP measures to measure 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 Gross Margin, Adjusted Operating Profit, Adjusted Diluted Earnings Per Share and Adjusted EBITDA:
◦We exclude the amortization of acquisition-related 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. 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.
◦We exclude costs incurred pursuant to discrete restructuring plans that are fundamentally different (in terms of the size, strategic nature and planning requirements, as well as the inconsistent frequency, of such plans) 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.
◦With respect to the other items excluded from 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 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 exclude payments for additions to property, plant and equipment (net of the proceeds from capital disposals) to demonstrate the amount of operating cash flow for the period that remains after accounting for the Company’s capital expenditure requirements.
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