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 ~~September 30, 2022~~March 31, 2023


☐			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 ~~October~~April 28, ~~2022,~~2023, was ~~163,045,022.~~163,702,043.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
		PAGE
Item 1.	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of ~~Income~~Operations	2
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity	4
	Condensed Consolidated Statements of Cash Flows	65
	Notes to Condensed Consolidated Financial Statements	86
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2924
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4235
Item 4.	Controls and Procedures	4235

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4336
Item 1A.	Risk Factors	4336
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4336
Item 3.	Defaults Upon Senior Securities	4336
Item 4.	Mine Safety Disclosures	4436
Item 5.	Other Information	4436
Item 6.	Exhibits	4437

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ENVISTA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, except share amounts)


		As of					As of
		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	568.5	$	1,073.6	Cash and cash equivalents	$	585.2	$	606.9
Trade accounts receivable, less allowance for credit losses of $16.8 and $20.7, respectively		392.2		331.9
Trade accounts receivable, less allowance for credit losses of $16.0 and $16.2, respectively						Trade accounts receivable, less allowance for credit losses of $16.0 and $16.2, respectively	401.8		393.5
Inventories, net	Inventories, net	291.3		263.8		Inventories, net	307.2		300.8
Prepaid expenses and other current assets	Prepaid expenses and other current assets	114.0		154.3		Prepaid expenses and other current assets	120.1		123.4
Assets held for sale		—		12.2
Total current assets	Total current assets	1,366.0		1,835.8		Total current assets	1,414.3		1,424.6
Property, plant and equipment, net	Property, plant and equipment, net	277.2		264.1		Property, plant and equipment, net	297.6		293.6
Operating lease right-of-use assets	Operating lease right-of-use assets	132.1		128.1		Operating lease right-of-use assets	132.9		131.8
Other long-term assets	Other long-term assets	173.2		167.8		Other long-term assets	158.3		153.7
Goodwill	Goodwill	3,399.6		3,132.0		Goodwill	3,506.4		3,496.6
Other intangible assets, net	Other intangible assets, net	1,063.8		1,046.4		Other intangible assets, net	1,065.5		1,086.7

Total assets	Total assets	$	6,411.9	$	6,574.2	Total assets	$	6,575.0	$	6,587.0
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Short-term debt	Short-term debt	$	579.3	$	432.4	Short-term debt	$	510.8	$	510.0
Trade accounts payable	Trade accounts payable	190.0		185.8		Trade accounts payable	186.8		228.3
Accrued expenses and other liabilities	Accrued expenses and other liabilities	462.5		562.3		Accrued expenses and other liabilities	423.6		471.4
Operating lease liabilities	Operating lease liabilities	26.5		23.7		Operating lease liabilities	28.4		27.0
Liabilities held for sale		—		4.0
Total current liabilities	Total current liabilities	1,258.3		1,208.2		Total current liabilities	1,149.6		1,236.7
Operating lease liabilities	Operating lease liabilities	123.4		120.4		Operating lease liabilities	121.3		121.4
Other long-term liabilities	Other long-term liabilities	220.7		304.2		Other long-term liabilities	151.3		151.3
Long-term debt	Long-term debt	851.6		883.4		Long-term debt	873.8		870.7

Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.01 par value, 15.0 million shares authorized; no shares issued or outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock - $0.01 par value, 500.0 million shares authorized; 163.6 million shares issued and 163.0 million shares outstanding at September 30, 2022; 162.0 million shares issued and 161.6 million outstanding at December 31, 2021		1.6		1.6
Preferred stock, $0.01 par value, 15.0 million shares authorized; no shares issued or outstanding at March 31, 2023 and December 31, 2022						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						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	Additional paid-in capital	3,689.6		3,732.6		Additional paid-in capital	3,712.8		3,699.0
Retained earnings	Retained earnings	657.9		466.9		Retained earnings	775.2		731.4
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(391.2)		(143.5)		Accumulated other comprehensive loss	(210.6)		(225.1)
Total Envista stockholders’ equity		3,957.9		4,057.6
Noncontrolling interests		—		0.4

Total stockholders’ equity	Total stockholders’ equity	3,957.9		4,058.0		Total stockholders’ equity	4,279.0		4,206.9
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	6,411.9	$	6,574.2	Total liabilities and stockholders’ equity	$	6,575.0	$	6,587.0

See the accompanying Notes to the Condensed Consolidated Financial Statements.

ENVISTA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS (Unaudited)

($ and shares in millions, except per share amounts)


		Three Months Ended				Nine Months Ended						Three Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021				March 31, 2023		April 1, 2022
Sales	Sales	$	631.1	$	607.3	$	1,908.3	$	1,857.1		Sales	$	627.2	$	631.4
Cost of sales	Cost of sales	266.4		251.0		799.7		773.8			Cost of sales	264.5		257.3
Gross profit	Gross profit	364.7		356.3		1,108.6		1,083.3			Gross profit	362.7		374.1
Operating expenses:	Operating expenses:										Operating expenses:
Selling, general and administrative	Selling, general and administrative	264.2		250.6		801.9		747.5			Selling, general and administrative	266.1		258.2
Research and development	Research and development	26.0		24.0		75.5		75.7			Research and development	24.5		24.4
Operating profit	Operating profit	74.5		81.7		231.2		260.1			Operating profit	72.1		91.5
Nonoperating income (expense):	Nonoperating income (expense):										Nonoperating income (expense):
Other income	Other income	0.3		0.2		0.9		0.8			Other income	0.3		0.3
Interest expense, net	Interest expense, net	(11.6)		(12.0)		(23.9)		(43.6)			Interest expense, net	(16.7)		(5.9)
Income before income taxes	Income before income taxes	63.2		69.9		208.2		217.3			Income before income taxes	55.7		85.9
Income tax expense (benefit)		13.6		(10.3)		43.7		(3.7)
Income tax expense											Income tax expense	11.9		15.5
Income from continuing operations, net of tax	Income from continuing operations, net of tax	49.6		80.2		164.5		221.0			Income from continuing operations, net of tax	43.8		70.4
(Loss) income from discontinued operations, net of tax (Note 3)		(2.0)		12.7		5.1		33.7
Income from discontinued operations, net of tax (Note 3)											Income from discontinued operations, net of tax (Note 3)	—		4.5
Net income	Net income	$	47.6	$	92.9	$	169.6	$	254.7		Net income	$	43.8	$	74.9
Earnings per share:	Earnings per share:										Earnings per share:
Earnings from continuing operations - basic	Earnings from continuing operations - basic	$	0.30	$	0.50	$	1.01	$	1.37		Earnings from continuing operations - basic	$	0.27	$	0.43
Earnings from continuing operations - diluted	Earnings from continuing operations - diluted	$	0.28	$	0.45	$	0.92	$	1.25		Earnings from continuing operations - diluted	$	0.25	$	0.39

(Loss) earnings from discontinued operations - basic		$	(0.01)	$	0.08	$	0.03	$	0.21
(Loss) earnings from discontinued operations - diluted		$	(0.01)	$	0.07	$	0.03	$	0.19
Earnings from discontinued operations - basic											Earnings from discontinued operations - basic	$	—	$	0.03
Earnings from discontinued operations - diluted											Earnings from discontinued operations - diluted	$	—	$	0.03

Earnings - basic	Earnings - basic	$	0.29	$	0.58	$	1.04	$	1.58		Earnings - basic	$	0.27	$	0.46
Earnings - diluted	Earnings - diluted	$	0.27	$	0.52	$	0.95	$	1.43	*	Earnings - diluted	$	0.25	$	0.42
Average common stock and common equivalent shares outstanding:	Average common stock and common equivalent shares outstanding:										Average common stock and common equivalent shares outstanding:
Basic	Basic	163.1		161.5		162.7		161.1			Basic	163.6		162.2
Diluted	Diluted	176.9		178.1		178.4		177.5			Diluted	177.4		179.8
* Earnings per share is computed independently for earnings per share from continuing operations and earnings per share from discontinued operations. The sum of earnings per share from continuing operations and earnings per share from discontinued operations does not equal earnings per share due to rounding.

See the accompanying Notes to the Condensed Consolidated Financial Statements.

ENVISTA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~ (Unaudited)

($ in millions)


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021			March 31, 2023		April 1, 2022
Net income	Net income	$	47.6	$	92.9	$	169.6	$	254.7	Net income	$	43.8	$	74.9
Other comprehensive (loss) income, net of income taxes:
Other comprehensive income (loss), net of income taxes:										Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments	Foreign currency translation adjustments	(116.6)		(25.0)		(249.1)		(64.3)		Foreign currency translation adjustments	14.8		(59.6)
Cash flow hedge adjustments	Cash flow hedge adjustments	(0.2)		1.1		1.7		3.6		Cash flow hedge adjustments	—		1.4
Pension plan adjustments	Pension plan adjustments	(0.1)		0.2		(0.3)		(0.1)		Pension plan adjustments	(0.3)		(0.1)
Total other comprehensive loss, net of income taxes		(116.9)		(23.7)		(247.7)		(60.8)
Comprehensive (loss) income		$	(69.3)	$	69.2	$	(78.1)	$	193.9
Total other comprehensive income (loss), net of income taxes										Total other comprehensive income (loss), net of income taxes	14.5		(58.3)
Comprehensive income										Comprehensive income	$	58.3	$	16.6

See the accompanying Notes to the Condensed Consolidated Financial Statements.

ENVISTA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

($ in millions)

Nine Months Ended September 30, 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. (Note 13) — (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 —
Common stock-based award activity — 10.5 — — 10.5 —
Net income — — 47.1 — 47.1 —
Other comprehensive loss — — — (72.5) (72.5) —
Balance, July 1, 2022 1.6 3,678.4 610.3 (274.3) 4,016.0 —
Common stock-based award activity — 11.2 — — 11.2 —
Net income — — 47.6 — 47.6 —
Other comprehensive loss — — — (116.9) (116.9) —
Balance, September 30, 2022 $ 1.6 $ 3,689.6 $ 657.9 $ (391.2) $ 3,957.9 $ —


	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	$	—

Nine Months Ended October 1, 2021
Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other
Comprehensive Loss Total
Envista
Equity Noncontrolling Interests
Balance, December 31, 2020 $ 1.6 $ 3,684.4 $ 126.4 $ (91.8) $ 3,720.6 $ 0.4
Common stock-based award activity — 6.7 — — 6.7 —
Net income — — 71.7 — 71.7 —
Other comprehensive loss — — — (52.1) (52.1) —
Balance, April 2, 2021 1.6 3,691.1 198.1 (143.9) 3,746.9 0.4
Common stock-based award activity — 16.5 — — 16.5 —
Net income — — 90.1 — 90.1 —
Other comprehensive income — — — 15.0 15.0 —
Balance, July 2, 2021 1.6 3,707.6 288.2 (128.9) 3,868.5 0.4
Common stock-based award activity — 9.0 — — 9.0 —
Net income — — 92.9 — 92.9 —
Other comprehensive loss — — — (23.7) (23.7) —
Balance, October 1, 2021 $ 1.6 $ 3,716.6 $ 381.1 $ (152.6) $ 3,946.7 $ 0.4

See the accompanying Notes to the Condensed Consolidated Financial Statements.

ENVISTA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in millions)

Nine Months Ended
September 30, 2022 October 1, 2021
Cash flows from operating activities:
Net income $ 169.6 $ 254.7
Noncash items:
Depreciation 23.9 29.4
Amortization 78.2 62.6
Allowance for credit losses 3.8 4.2
Stock-based compensation expense 23.1 21.6
Gain on sale of property, plant and equipment (1.1) (2.2)
Gain on sale of KaVo treatment unit and instrument business (8.9) —
Restructuring charges 5.5 0.3
Impairment charges 5.8 9.4
Fair value of acquisition-related inventory 7.7 —
Amortization of right-of-use assets 17.7 21.3
Amortization of debt discount and issuance costs 3.0 17.6
Change in trade accounts receivable (76.5) (15.1)
Change in inventories (35.9) (67.1)
Change in trade accounts payable 11.3 (39.9)
Change in prepaid expenses and other assets (21.7) (23.4)
Change in accrued expenses and other liabilities (109.7) (18.7)
Change in operating lease liabilities (23.4) (29.1)
Net cash provided by operating activities 72.4 225.6
Cash flows from investing activities:
Acquisition, net of cash acquired (696.2) —
Payments for additions to property, plant and equipment (58.8) (46.0)
Proceeds from sales of property, plant and equipment 1.6 11.6
Proceeds from sale of KaVo treatment unit and instrument business, net 59.8 —
Proceeds from the settlement of derivative financial instruments 55.9 8.5
All other investing activities, net (18.5) —
Net cash used in investing activities (656.2) (25.9)
Cash flows from financing activities:
Proceeds from revolving line of credit 124.0 —
Repayment of revolving line of credit (54.0) —
Proceeds from borrowing 0.3 —
Repayment of borrowing (0.5) (475.7)
Payment of debt issuance and other deferred financing costs — (2.3)
Proceeds from stock option exercises 19.9 16.0
Tax withholding payment related to net settlement of equity awards (8.9) (6.1)


All other financing activities		—		0.7
Net cash provided by (used in) financing activities		80.8		(467.4)
							Three Months Ended
							March 31, 2023		April 1, 2022
Cash flows from operating activities:						Cash flows from operating activities:
Net income						Net income	$	43.8	$	74.9
Noncash items:						Noncash items:
Depreciation						Depreciation	8.5		7.8
Amortization						Amortization	27.9		23.5
Allowance for credit losses						Allowance for credit losses	2.0		1.7
Stock-based compensation expense						Stock-based compensation expense	15.0		7.5
Gain on sale of property, plant and equipment						Gain on sale of property, plant and equipment	—		(6.0)

Restructuring charges						Restructuring charges	0.1		(1.9)
Impairment charges						Impairment charges	0.3		3.9

Amortization of right-of-use assets						Amortization of right-of-use assets	6.5		6.4

Amortization of debt discount and issuance costs						Amortization of debt discount and issuance costs	1.0		1.0

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

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

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

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

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

Proceeds from stock option exercises						Proceeds from stock option exercises	4.6		13.1

Tax withholding payment related to net settlement of equity awards						Tax withholding payment related to net settlement of equity awards	(6.1)		(7.6)

Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(1.5)		5.3
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(2.1)		17.6		Effect of exchange rate changes on cash and cash equivalents	(1.3)		(9.2)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(505.1)		(250.1)		Net change in cash and cash equivalents	(21.7)		4.7
Beginning balance of cash and cash equivalents	Beginning balance of cash and cash equivalents	1,073.6		888.9		Beginning balance of cash and cash equivalents	606.9		1,073.6
Ending balance of cash and cash equivalents	Ending balance of cash and cash equivalents	$	568.5	$	638.8	Ending balance of cash and cash equivalents	$	585.2	$	1,078.3

Supplemental data:	Supplemental data:					Supplemental data:
Cash paid for interest	Cash paid for interest	$	21.1	$	26.1	Cash paid for interest	$	14.3	$	2.8
Cash paid for taxes	Cash paid for taxes	$	80.2	$	65.6	Cash paid for taxes	$	6.6	$	14.1
ROU assets obtained in exchange for operating lease obligations	ROU assets obtained in exchange for operating lease obligations	$	29.6	$	24.9	ROU assets obtained in exchange for operating lease obligations	$	7.6	$	7.1

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, 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 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 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, and its results of operations ~~for the three and nine month periods ended September 30, 2022 and October 1, 2021~~ and cash flows for the ~~nine~~three month periods ended ~~September 30, 2022~~March 31, 2023 and ~~October~~April 1, ~~2021.~~2022. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Consolidated ~~and Combined~~ Financial Statements and accompanying notes for the three years ended December 31, ~~2021,~~2022, included in the Annual Report on Form 10-K filed by the Company with the SEC on February ~~24, 2022.~~16, 2023.

As discussed in Note 3, Discontinued Operations, on December 31, 2021, the Company ~~completed the sale~~sold substantially all of its KaVo dental treatment unit and instrument business (the "KaVo Treatment Unit and Instrument Business"), which was part of the Company’s Equipment and Consumables segment. ~~The previously~~However, the transfer of assets in certain countries was not executed and closed until 2022 (“Deferred Local Closing”). As a result, the financial results related to the Deferred Local Closing countries were reported ~~amounts for the KaVo Treatment Unit and Instrument Business have been reclassified to~~as discontinued operations ~~for~~and all ~~periods presented. All~~ segment information and descriptions exclude the ~~KaVo Treatment Unit~~activity related to those countries for the three months ended April 1, 2022. As of December 31, 2022, all Deferred Local Closings were completed and ~~Instrument Business.~~therefore there is no discontinued operations activity reported for the three months ended March 31, 2023.

Risks and Uncertainties

The Company is subject to risks and uncertainties as a result of the novel coronavirus (“COVID-19”) pandemic.

The extent of the impact of the COVID-19 pandemic on the Company remains uncertain and difficult to predict because of the dynamic and evolving nature of the situation. The global impact of the outbreak continues to adversely affect many industries, and different geographies continue to reflect the effects of public health restrictions in various ways. The economic recovery following the impact of the COVID-19 pandemic is only partially underway and has been gradual, uneven and characterized by meaningful dispersion across sectors and regions with uncertainty regarding its ultimate length and trajectory. During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, notwithstanding improvement in many markets in which the Company operates due to a return to more normalized business operations, certain markets ~~continue~~continued to be adversely impacted either directly attributable to COVID-19 or as a result of prior COVID-19 influenced policies. Late in the first quarter of 2022, the Chinese authorities instituted COVID-19-related lockdowns, shut-downs and restrictions in certain parts of China, specifically the Shanghai area, which impacted the Company’s operations in China. These restrictions were lifted in early June 2022, but the extent to which continuing effects from these restrictions, current localized restrictions throughout China under its zero-COVID policy, and any future restrictions may impact our operations remains uncertain.by COVID-19.

The severity of the impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, the scope and duration of the pandemic, the rise of new variants, the extent and severity of the impact on the Company's customers, the measures that have been and may be taken to contain the virus (including its various mutations) and mitigate its impact, U.S. and foreign government actions to respond to the reduction in global economic activity, the ability of the Company to continue to manufacture and source its products and to find suitable alternative products at reasonable prices, the Company’s ability to continue to ship and deliver its products in a cost-effective and timely manner, uncertain demand, staffing shortages, the impact of the pandemic and associated economic downturn on the Company’s ability to access capital if and when needed and how quickly and to what extent normal economic and operating conditions can resume, all of which are uncertain and cannot be predicted. Even after the COVID-19 pandemic has further subsided, the Company may continue to experience materially adverse impacts on the Company’s financial condition and results of operations.

In addition, Russia’s invasion of Ukraine and the global response to this invasion, including sanctions imposed by the U.S. and other countries, could have an adverse impact on the Company’s business, including impacting the Company’s ability to market and sell products in the affected regions, potentially heightening the risk of cyber security attacks, impacting its ability to enforce its intellectual property rights in Russia, creating disruptions in the global supply chain, and by potentially having an adverse impact on the global economy, financial markets, energy markets, currency rates and otherwise.

Accounting Standards Recently Adopted

In ~~March~~August 2020, the ~~FASB~~Financial Accounting Standards Board issued Accounting Standards Update 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40),” (“ASU ~~No. 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~2020-06”), which ~~provides optional expedients~~simplifies the accounting for certain financial instruments with characteristics of liabilities and ~~exceptions for applying GAAP to~~equity, including convertible instruments and contracts ~~hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The~~on an entity’s own equity. ASU is2020-06 was effective for public entities ~~through~~for fiscal years beginning after December ~~31,~~15, 2021. On January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective adoption approach. The cumulative effect of the change was recognized as an adjustment to the opening balance of retained earnings at the date of adoption and resulted in a $75.0 million increase to the ~~adoption did not have~~carrying value of the convertible notes due 2025, a decrease to additional paid-in capital of $77.8 million, a $21.4 million increase to retained earnings and an ~~impact on~~$18.6 million decrease to the ~~Company’s Condensed Consolidated Financial Statements.~~related net deferred tax liability.

NOTE 2. ACQUISITIONS

The Company continually evaluates potential acquisitions that either strategically fit with the Company’s existing portfolio or expand the Company’s portfolio into new and attractive business areas. The Company has completed a number of acquisitions that have been accounted for as business combinations and have resulted in the recognition of goodwill in the Company’s Condensed Consolidated Financial Statements. Among other things, goodwill arises because the purchase prices for these businesses reflect a number of factors including the future earnings and cash flow potential of these businesses, the multiple to earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers, the competitive nature of the processes by which the Company acquired the businesses, avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance the Company’s existing product offerings to key target markets and enter into new and profitable businesses and the complementary strategic fit and resulting synergies these businesses bring to existing operations.

The Company makes an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities. The Company obtains this information during due diligence and through other sources. For those assets and liabilities that were accounted for on a preliminary basis, the Company may up to 12 months after closing, refine the estimates of fair value and more accurately allocate the purchase price. Only items that existed as of the acquisition date are considered for subsequent adjustment. The finalization of the acquisition valuation assessment, for the acquisitions listed below, may result in a change in the valuation of deferred taxes and goodwill, which could have a material impact on the Company’s financial statements.

During the ~~nine months~~year ended ~~September 30,~~December 31, 2022, the Company completed the following ~~acquisitions:~~acquisitions which were accounted for under Accounting Standards Codification 805 Business Combinations using the acquisition method of accounting:

Osteogenics Biomedical Inc., Allotech LLC and OBI Biologics, Inc.

On July 5, 2022, the Company acquired all of the equity of Osteogenics Biomedical Inc., Allotech LLC and OBI Biologics, Inc. (together "Osteogenics") for total consideration of approximately $128.2 million, subject to certain customary adjustments as provided in the ~~definitive agreement~~Equity Purchase Agreement dated May 17, 2022. Osteogenics develops innovative regenerative solutions for periodontists, oral and maxillofacial surgeons, and clinicians involved in implant dentistry throughout the world, and is part of the Company’s Specialty Products & Technologies segment. The finalization of the acquisition valuation assessment for Osteogenics may result in a change in the valuation of deferred taxes and goodwill, which could have a material impact on the Company’s financial statements.

Carestream Dental Technology Parent Limited’s Intraoral Scanner Business

On April 20, 2022, the Company completed the acquisition of Carestream Dental Technology Parent Limited’s (“Carestream Dental”) intraoral scanner business (the “Intraoral Scanner Business”) for total consideration of $580.3 million, including contingent consideration of $7.5 million, and subject to certain customary adjustments as provided in the Stock and Asset Purchase Agreement dated December 21, 2021 and as subsequently amended by the closing agreement dated as of April 20, ~~2022.~~2022 (together, the “IOS Purchase Agreement”). The Intraoral Scanner Business manufactures, markets, sells, commercializes, distributes, services, trains, supports, and maintains operations of intraoral scanners and software, and is part of the Company’s Equipment & Consumables segment. The Company purchased the Intraoral Scanner Business through the acquisition of certain assets and the assumption of certain liabilities as well as the acquisition of all of the equity of certain subsidiaries of Carestream Dental.

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the respective acquisition dates ($ in millions):


		Osteogenics July 5, 2022		Intraoral Scanner Business April 20, 2022			Osteogenics July 5, 2022		Intraoral Scanner Business April 20, 2022
Assets acquired:	Assets acquired:					Assets acquired:
Cash	Cash	$	2.1	$	2.7	Cash	$	2.1	$	2.7
Accounts receivable	Accounts receivable	2.5		0.1		Accounts receivable	2.5		0.1
Inventories	Inventories	13.3		6.1		Inventories	13.3		6.1
Intangible assets	Intangible assets	53.0		129.8		Intangible assets	53.0		129.8
Property, plant and equipment	Property, plant and equipment	—		0.3		Property, plant and equipment	—		0.3
Prepaids and Other Current Assets	Prepaids and Other Current Assets	1.3		—		Prepaids and Other Current Assets	1.3		—
Goodwill	Goodwill	77.5		370.6		Goodwill	77.3		373.1
Non-current deferred tax asset	Non-current deferred tax asset	—		98.5		Non-current deferred tax asset	—		96.0
Operating lease right-of-use assets	Operating lease right-of-use assets	2.6		0.9		Operating lease right-of-use assets	2.6		0.9
Other long-term assets	Other long-term assets	4.9		0.2		Other long-term assets	4.9		0.2
Total assets acquired	Total assets acquired	157.2		609.2		Total assets acquired	157.0		609.2
Liabilities assumed:	Liabilities assumed:					Liabilities assumed:
Accounts payable	Accounts payable	(4.1)		(0.5)		Accounts payable	(4.1)		(0.5)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(2.6)		(27.9)		Accrued expenses and other liabilities	(2.5)		(27.9)
Non-current deferred tax liability	Non-current deferred tax liability	(14.4)		—		Non-current deferred tax liability	(14.3)		—
Other long-term liabilities	Other long-term liabilities	(5.8)		—		Other long-term liabilities	(5.8)		—
Operating lease liabilities	Operating lease liabilities	(2.1)		(0.5)		Operating lease liabilities	(2.1)		(0.5)
Total liabilities assumed	Total liabilities assumed	(29.0)		(28.9)		Total liabilities assumed	(28.8)		(28.9)
Total net assets acquired	Total net assets acquired	$	128.2	$	580.3	Total net assets acquired	$	128.2	$	580.3

The intangible assets acquired consist of trade name, developed technology, and customer relationships. The weighted average amortization period of the acquired intangible assets in the aggregate is 8 and 10 years for the Intraoral Scanner Business and Osteogenics, respectively.

The excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed represents the goodwill resulting from the acquisitions. Goodwill attributable to the acquisitions has been recorded as a non-current asset and is not amortized, but is subject to review at least on an annual basis for impairment. Goodwill recognized was primarily attributable to expected operating efficiencies and expansion opportunities in the businesses acquired. Goodwill is not deductible for income tax purposes. The pro forma impact of the acquisitions is not presented as the acquisitions were not considered material to the Company's Condensed Consolidated Financial Statements.

For the three and nine months ended September 30, 2022, legal, accounting, and other professional service costs associated with the acquisitions were $1.5 million and $13.4 million, respectively, and have been recorded as selling, general and administrative expense in the Condensed Consolidated Statements of Income.

108

NOTE 3. DISCONTINUED OPERATIONS

On December 31, 2021, the Company ~~completed the sale of~~sold substantially all of the KaVo Treatment Unit and Instrument Business (the “Divestiture”) to planmeca Verwaltungs Gmbh, Germany (“Planmeca”), pursuant to the master sale and purchase agreement (the “Purchase Agreement”) among the Company, Planmeca, and Planmeca Oy, as guarantor. InHowever, the transfer of assets for Deferred Local Closing countries was not executed and closed until 2022. As of December 31, 2022, all Deferred Local Closings were completed and the Company received total net cash consideration of $386.4 million in accordance with the terms of the Purchase Agreement, the Company received cash consideration of $317.3 million upon closing on December 31, 2021. During the nine months ended September 30, 2022, the Company has received an additional $59.8 million related to an earnout payment and certain working capital adjustments.

On December 30, 2021, the Company entered into an amendment to the Purchase Agreement (the "Amendment"), providing that the transfer of net assets in Russia, China and Brazil (the "Relevant Jurisdictions") would be deferred until the purchaser had formed entities for such transfer of assets in each such Relevant Jurisdiction and the applicable asset transfer agreement could be executed and consummated (each such asset transfer, a "Deferred Local Closing"). Except for the implementation of the Deferred Local Closings and related matters regarding the assets in the Relevant Jurisdictions, the provisions, terms and conditions of the Purchase Agreement were not materially amended by the Amendment. The Amendment did not alter the preliminary purchase price that Planmeca paid to the Company upon the closing of the Divestiture and the Company recognized the applicable gain or loss at the time of each Relevant Jurisdiction’s applicable closing. At December 31, 2021, the Company recorded a liability of $10.8 million for the proceeds related to the Relevant Jurisdictions. All three Relevant Jurisdictions have closed as of September 30, 2022 and the related liability associated with the proceeds released.

The Company recognized a loss of $1.6 million and a gain of $5.7 million on the Divestiture during the three and nine months ended September 30, 2022, respectively, primarily related to the recognition of certain purchase price adjustments and the closing of the Relevant Jurisdictions.

In conjunction with the Divestiture, the Company entered into a customary transition services agreement, which requires support transition services to Planmeca throughout the applicable transition period.Agreement.

For the three ~~and nine~~ months ended ~~September 30,~~April 1, 2022, the ~~Divestiture continued to meet the criteria to be classified~~Company recognized an earnout payment of $30.0 million. As all Deferred Local Closings were completed as ~~held for sale and to be presented as a discontinued operation. Accordingly, the Company reclassified the results~~ of ~~operations and financial position of the Divestiture to~~December 31, 2022, there are no discontinued operations ~~in its accompanying Condensed Consolidated Statements of Income and Condensed Consolidated Balance Sheets~~reported for ~~all periods presented. The Company’s Condensed Consolidated Statements of Cash Flows for all periods presented include~~ the ~~financial results of the KaVo Treatment Unit and Instrument Business.~~three months ended March 31, 2023.

For the nine months ended October 1, 2021, balances represent activity for the entire Divestiture, while balances for the nine months ended September 30, 2022, represent activity for the remaining Relevant Jurisdictions.

~~The carrying amounts of the assets and liabilities of the Divestiture held for sale are as follows ($ in millions):~~



	~~December 31, 2021~~
~~ASSETS~~
~~Current assets:~~



~~Assets for relevant jurisdictions~~	$	~~12.2~~
~~Current assets held for sale~~	$	~~12.2~~






~~LIABILITIES AND EQUITY~~
~~Current liabilities:~~



~~Liabilities for relevant jurisdictions~~	$	~~4.0~~
~~Current liabilities held for sale~~	$	~~4.0~~

The operating results of the Divestiture for the three months ended April 1, 2022 are reflected in the Condensed Consolidated Statements of ~~Income~~Operations within income from discontinued operations, net of tax as follows ($ in millions):
Three Months Ended Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
Sales $ 2.8 $ 102.5 $ 11.7 $ 302.0
Cost of sales 2.1 57.2 9.1 174.4
Gross profit 0.7 45.3 2.6 127.6
Operating expenses:
Selling, general and administrative 1.1 25.2 3.2 70.4
Research and development — 3.8 — 12.5
Operating (loss) profit (0.4) 16.3 (0.6) 44.7
Income tax expense — 3.6 — 11.0
(Loss) income from discontinued operations (0.4) 12.7 (0.6) 33.7
(Loss) gain on sale of discontinued operations, net of tax (1.6) — 5.7 —
Net (loss) income from discontinued operations $ (2.0) $ 12.7 $ 5.1 $ 33.7

~~Significant non-cash operating items and capital expenditures for the Divestiture are reflected in the cash flows from operations as follows ($ in millions):~~


	~~Nine~~Three Months Ended
	~~September 30, 2022~~		~~October 1, 2021~~
~~Cash flows from operating activities~~

	April 1, 2022
~~Depreciation and amortization~~Sales1	$	6.9
Cost of sales	5.9
Gross profit	1.0
Operating expenses:
Selling, general and administrative	1.1
Research and development	—		$		~~5.6~~


~~Cash flows from investing activities:~~Operating loss	(0.1)
~~Capital expenditures~~	$Income tax expense	—		$		~~4.2~~

1~~Depreciation and amortization were no longer recognized once the business was classified as~~Loss from discontinued operations as	(0.1)
Gain on sale of ~~August 27, 2021.~~discontinued operations, net of tax	4.6
Net income from discontinued operations	$	4.5

NOTE 4. 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.

129

The rollforward of the allowance for credit losses is summarized as follows ($ in millions):


Balance at December 31, ~~2021~~2022	$	~~20.7~~16.2
Foreign currency translation	~~(1.5)~~0.2
Provision for credit losses	~~3.8~~2.0
Write-offs charged against the allowance	~~(3.3)~~(1.8)
Recoveries	~~(2.9)~~(0.6)
Balance at ~~September 30, 2022~~March 31, 2023	$	~~16.8~~16.0

NOTE 5. INVENTORIES

The classes of inventory are summarized as follows ($ in millions):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Finished goods	Finished goods	$	234.9	$	214.3	Finished goods	$	234.6	$	229.2
Work in process	Work in process	26.7		22.0		Work in process	24.5		23.9
Raw materials	Raw materials	87.3		88.3		Raw materials	105.7		103.4
Reserve for inventory obsolescence	Reserve for inventory obsolescence	(57.6)		(60.8)		Reserve for inventory obsolescence	(57.6)		(55.7)
Total	Total	$	291.3	$	263.8	Total	$	307.2	$	300.8

NOTE 6. PROPERTY, PLANT AND EQUIPMENT

The classes of property, plant and equipment are summarized as follows ($ in millions):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Land and improvements	Land and improvements	$	10.4	$	10.7	Land and improvements	$	10.0	$	10.0
Buildings and improvements	Buildings and improvements	155.2		168.7		Buildings and improvements	158.4		154.5
Machinery, equipment and other assets	Machinery, equipment and other assets	353.2		354.5		Machinery, equipment and other assets	384.9		370.2
Construction in progress	Construction in progress	69.3		45.6		Construction in progress	63.9		71.2
Gross property, plant and equipment	Gross property, plant and equipment	588.1		579.5		Gross property, plant and equipment	617.2		605.9
Less: accumulated depreciation	Less: accumulated depreciation	(310.9)		(315.4)		Less: accumulated depreciation	(319.6)		(312.3)
Property, plant and equipment, net	Property, plant and equipment, net	$	277.2	$	264.1	Property, plant and equipment, net	$	297.6	$	293.6

NOTE 7. GOODWILL

The following is a rollforward of the Company’s goodwill by segment ($ in millions):

Specialty Products & Technologies Equipment & Consumables Total
Balance at December 31, 2021 $ 2,029.7 $ 1,102.3 $ 3,132.0
Acquisitions 77.5 370.6 448.1
Foreign currency translation (126.2) (54.3) (180.5)
Balance at September 30, 2022 $ 1,981.0 $ 1,418.6 $ 3,399.6


	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

1310

NOTE 8. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities were as follows ($ in millions):


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Current		Noncurrent		Current		Noncurrent			Current		Noncurrent		Current		Noncurrent
Compensation and benefits	Compensation and benefits	$	145.1	$	16.2	$	188.9	$	17.9	Compensation and benefits	$	107.1	$	19.7	$	148.0	$	17.5
Sales and product allowances										Sales and product allowances	58.2		1.4		85.1		1.3
Contract liabilities										Contract liabilities	94.1		8.4		78.9		8.6
Taxes, income and other										Taxes, income and other	47.4		68.2		42.1		68.6
Restructuring-related employee severance, benefits and other	Restructuring-related employee severance, benefits and other	17.6		—		21.9		—		Restructuring-related employee severance, benefits and other	7.9		—		18.9		—
Pension benefits	Pension benefits	5.6		37.3		5.6		41.7		Pension benefits	5.6		16.1		5.6		17.5
Taxes, income and other		30.4		116.6		48.1		201.4
Contract liabilities		71.4		8.9		60.1		5.1
Sales and product allowances		81.9		1.1		75.4		1.2
Loss contingencies	Loss contingencies	8.0		29.1		8.4		30.3		Loss contingencies	11.1		25.7		8.1		27.6
Derivative financial instruments		—		—		19.6		—

Other	Other	102.5		11.5		134.3		6.6		Other	92.2		11.8		84.7		10.2
Total	Total	$	462.5	$	220.7	$	562.3	$	304.2	Total	$	423.6	$	151.3	$	471.4	$	151.3

NOTE 9. HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS

The Company has foreign currency denominated long-term debt in the amount of €208.0 million. This senior unsecured 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 euro senior unsecured term loan facility is designated and qualifies as a non-derivative hedging instrument. Accordingly, the foreign currency translation of the euro senior unsecured term loan facility is recorded in accumulated other comprehensive loss in equity in the accompanying Condensed Consolidated Balance Sheets, offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in accumulated other comprehensive loss in equity (see Note 14). Any ineffective portions of net investment hedges are reclassified from accumulated other comprehensive loss into income during the period of change. The euro senior unsecured term loan facility matures in September 2024. Refer to Note 13 for a further discussion of the above loan facility.

~~The Company has used~~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 ~~were~~are agreements to exchange fixed-rate payments in one currency for fixed-rate payments in another currency. ~~The~~On January 17, 2023, the Company ~~maintained~~entered into a two-year cross-currency swap derivative ~~contracts~~contract, with a notional value of $150.0 million, with respect to its $650.0 million senior ~~unsecured~~ term loan facility. ~~These contracts~~This contract effectively ~~converted~~converts a portion of the $650.0 million senior ~~unsecured~~ term loan facility to an obligation denominated in euros and partially ~~offset~~offsets the impact of changes in currency rates on foreign currency denominated net investments. ~~During~~This instrument matures on January 17, 2025.

The Company also has foreign currency denominated long-term debt in the ~~three months ended~~amount of €208.0 million. This 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. The senior euro term loan facility matures in September ~~30, 2022,~~2024. Refer to Note 13 for further discussion of the ~~Company settled all of its cross-currency swap derivative contracts and as of September 30, 2022 did not have any cross-currency swap derivative contracts outstanding.~~ senior euro term loan facility.

The ~~changes~~change in the fair value of ~~these instruments were~~the cross-currency swap instrument and the foreign currency translation of the senior euro term loan facility 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 ~~was~~is also recorded in accumulated other comprehensive loss as reflected in Note 14. Any ineffective portions of net investment hedges were reclassified from accumulated other comprehensive loss into income during the period of change. The interest income or expense from these swaps was recorded in interest expense, net in the Company’s Condensed Consolidated Statements of Income consistent with the classification of interest expense attributable to the underlying debt.

The Company has also used interest rate swap derivative contracts to reduce its variability of cash flows related to interest payments with respect to its senior ~~unsecured~~ term ~~loans.~~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. ~~During the three months ended September 30, 2022, the existing interest rate swap matured. As of September 30, 2022, the Company did not have any outstanding interest rate swap contracts.~~ The changes in the fair value of these instruments were recorded in accumulated other comprehensive loss in equity (see Note 14). The Company did not have any outstanding interest rate swap contracts as of March 31, 2023.

Any ineffective portions of the above net investment and cash flow hedges were reclassified from accumulated other comprehensive loss into income during the period of change. ~~The~~Additionally, the interest income or expense from ~~these~~the cross-currency and interest rate swaps ~~was~~were recorded in interest expense, net in the Company’s Condensed Consolidated Statements of ~~Income~~Operations consistent with the classification of interest expense attributable to the underlying debt.

The following table summarizes the notional values as of ~~September 30,~~March 31, 2023 and April 1, 2022 ~~and October 1, 2021~~ and pretax impact of changes in the fair values of instruments designated as net investment ~~hedges~~ and cash flow hedges in accumulated other comprehensive loss (“OCI”) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and April 1, 2022 ~~and October 1, 2021~~ ($ in millions):

Three Months Ended
September 30, 2022 Three Months Ended
October 1, 2021
Notional Amount Gain (Loss) Recognized in OCI Notional Amount Gain Recognized in OCI
Foreign currency denominated debt $ 203.9 $ 12.8 $ 241.2 $ 5.6
Interest rate contract — (0.3) 250.0 1.5
Foreign currency contracts — 14.4 650.0 14.1
Total $ 203.9 $ 26.9 $ 1,141.2 $ 21.2


		Nine Months Ended September 30, 2022				Nine Months Ended October 1, 2021
		Notional Amount		Gain Recognized in OCI		Notional Amount		Gain Recognized in OCI			Notional Amount		Loss Recognized in OCI
Three Months Ended March 31, 2023										Three Months Ended March 31, 2023
Foreign currency denominated debt										Foreign currency denominated debt	$	225.5	$	(2.8)
Foreign currency contracts										Foreign currency contracts	150.0		—

Foreign currency denominated debt		$	203.9	$	32.7	$	241.2	$	19.7
Interest rate contracts		—		2.2		250.0		4.8
Foreign currency contracts		—		68.5		650.0		33.1
Total	Total	$	203.9	$	103.4	$	1,141.2	$	57.6	Total	$	375.5	$	(2.8)



	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

Gains or losses related to the foreign currency contracts and foreign currency denominated debt were classified as foreign currency translation adjustments in the schedule of changes in OCI in Note 14, as these items were attributable to the Company’s hedges of its net investment in foreign operations. Gains or losses related to the interest rate contracts were classified as cash flow hedge adjustments in the schedule of changes in OCI in Note 14. The Company did not reclassify any deferred gains or losses related to net investment and cash flow hedges from accumulated other comprehensive loss to income during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~October~~April 1, ~~2021.~~2022. In addition, the Company did not have any ineffectiveness related to net investment and cash flow hedges during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~October~~April 1, ~~2021.~~2022. The cash inflows and outflows associated with the Company’s derivative contracts designated as net investment hedges are classified in investing activities in the accompanying Condensed Consolidated Statements of Cash Flows.

The Company’s derivative instruments, as well as its non-derivative debt instruments designated and qualifying as net investment hedges, were classified in the Company’s Condensed Consolidated Balance Sheets as follows ($ in millions):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

Derivative liabilities:	Derivative liabilities:					Derivative liabilities:
Accrued expenses and other liabilities	Accrued expenses and other liabilities	$	—	$	19.6	Accrued expenses and other liabilities	$	—	$	—

Nonderivative hedging instruments:	Nonderivative hedging instruments:					Nonderivative hedging instruments:

Long-term debt	Long-term debt	$	203.9	$	236.5	Long-term debt	$	225.5	$	222.7

Amounts related to the Company’s derivatives expected to be reclassified from accumulated other comprehensive loss to net income during the next 12 months are not significant.

NOTE 10. 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			Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 30, 2022:
March 31, 2023										March 31, 2023

Liabilities:	Liabilities:									Liabilities:

Cross-currency swap derivative contracts										Cross-currency swap derivative contracts	$	—	$	—	$	—	$	—
Deferred compensation plans	Deferred compensation plans	$	—	$	14.8	$	—	$	14.8	Deferred compensation plans	$	—	$	18.0	$	—	$	18.0
Contingent consideration	Contingent consideration	$	—	$	—	$	6.0	$	6.0	Contingent consideration	$	—	$	—	$	6.0	$	6.0

December 31, 2021:
December 31, 2022:										December 31, 2022:
Liabilities:	Liabilities:									Liabilities:
Interest rate swap derivative contracts		$	—	$	2.2	$	—	$	2.2
Cross-currency swap derivative contracts		$	—	$	17.4	$	—	$	17.4
Deferred compensation plans	Deferred compensation plans	$	—	$	16.5	$	—	$	16.5	Deferred compensation plans	$	—	$	15.8	$	—	$	15.8
Contingent consideration										Contingent consideration	$	—	$	—	$	6.0	$	6.0

Derivative Instruments

The cross-currency swap derivative ~~contracts were~~contract was classified as Level 2 in the fair value hierarchy as ~~they are~~it is measured using the income approach with the relevant, ~~interest rates and~~ foreign currency current exchange rates and forward curves as inputs. The interest rate swap derivative contracts were classified as Level 2 in the fair value hierarchy as they were measured using the income approach with the relevant interest rates and forward curves as inputs. Refer to Note 9 for additional information.

Deferred Compensation Plans

Certain management employees of the Company participate in nonqualified deferred compensation programs that permit such employees to defer a portion of their compensation, on a pretax basis. All amounts deferred under this plan are unfunded, unsecured obligations and are presented as a component of the Company’s compensation and benefits accrual included in accrued expenses in the accompanying Condensed Consolidated Balance Sheets (refer to Note 8). Participants may choose among alternative earnings rates for the amounts they defer, which are primarily based on investment options within the Company’s 401(k) program. Changes in the deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts, which are based on the applicable earnings rates on investment options within the Company’s 401(k) program. Amounts voluntarily deferred by employees into the Company stock fund and amounts contributed to participant accounts by the Company are deemed invested in the Company’s common stock and future distributions of such contributions will be made solely in shares of Company common stock, and therefore are not reflected in the above amounts.

Contingent Consideration

Contingent consideration represents a cash hold back intended to be used for certain liabilities related to the Company’s ~~newly acquired~~acquisition of the Intraoral Scanner Business (as further discussed in Note 2). Contingent consideration was classified as Level 3 in the fair value hierarchy as the estimated fair value was measured using a probability weighted discounted cash flow model.

Fair Value of Financial Instruments

The carrying amounts and fair values of the Company’s financial instruments were as follows ($ in millions):


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value

Liabilities:	Liabilities:									Liabilities:
Contingent consideration	Contingent consideration	$	6.0	$	6.0	$	—	$	—	Contingent consideration	$	6.0	$	6.0	$	6.0	$	6.0
Interest rate swap derivative contracts		$	—	$	—	$	2.2	$	2.2

Cross-currency swap derivative contracts	Cross-currency swap derivative contracts	$	—	$	—	$	17.4	$	17.4	Cross-currency swap derivative contracts	$	—	$	—	$	—	$	—
Convertible senior notes due 2025	Convertible senior notes due 2025	$	509.3	$	854.5	$	432.1	$	1,162.5	Convertible senior notes due 2025	$	510.8	$	1,033.5	$	510.0	$	873.0
Long-term debt	Long-term debt	$	851.6	$	851.6	$	883.4	$	883.4	Long-term debt	$	873.8	$	873.8	$	870.7	$	870.7

The fair value of long-term debt approximates the carrying value as these borrowings are based on variable market rates. The fair value of the convertible senior notes due 2025 was determined based on the quoted bid price of the convertible senior notes in an over-the-counter market on ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The convertible senior notes are considered as Level 2 of the fair value hierarchy. The fair values of cash and cash equivalents, which consist primarily of money market funds, time and demand deposits, trade accounts receivable, net and trade accounts payable approximate their carrying amounts due to the short-term maturities of these instruments.

NOTE 11. WARRANTY

The Company generally accrues estimated warranty costs at the time of sale. In general, manufactured products are warranted against defects in material and workmanship when properly used for their intended purpose, installed correctly and appropriately maintained. Warranty periods depend on the nature of the product and range from 90 days up to the life of the product. The amount of the accrued warranty liability is determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor and in certain instances estimated property damage. The accrued warranty liability is reviewed on a quarterly basis and may be adjusted as additional information regarding expected warranty costs becomes known.

The following is a rollforward of the Company’s accrued warranty liability ($ in millions):



Balance at December 31, ~~2021~~2022	$	~~9.4~~9.2
Accruals for warranties issued during the year	~~11.0~~3.6
Settlements made	~~(11.3)~~(3.0)

Effect of foreign currency translation	~~(0.8)~~0.1
Balance at ~~September 30, 2022~~March 31, 2023	$	~~8.3~~9.9

NOTE 12. LITIGATION AND CONTINGENCIES

The Company records accruals for loss contingencies associated with ~~these~~ legal matters when it is probable that a liability will be incurred, and the amount of the loss can be reasonably estimated.

The Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated and has accrued ~~$37.1~~$36.8 million and ~~$38.7~~$35.7 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, which are included in accrued liabilities in the Condensed Consolidated Balance Sheets. The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with ASC 450-20-25. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such estimates and judgments can be affected by various factors including, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate; legal discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are significant facts in dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; or there are numerous parties involved. To the extent adverse verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated. In the Company's opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company's Condensed Consolidated Balance Sheets, is not expected to have a material adverse effect on the Company's financial position. However, the resolution of, or increase in accruals for one or more of these matters in any reporting period may have a material adverse effect on the Company’s results of operations and cash flows for that period.

NOTE 13. DEBT AND CREDIT FACILITIES

The components of the Company’s debt were as follows, net of debt issuance costs ($ in millions):

September 30, 2022 December 31, 2021
Senior term loan facility due 2024 ($650.0 aggregate principal amount) (the “Term Loan Facility”), net of deferred debt issuance costs of $1.9 and $2.7, respectively $ 648.1 $ 647.3
Senior euro term loan facility due 2024 (€208.0 aggregate principal amount) (the “Euro Term Loan Facility”), net of deferred debt issuance costs of $0.3 and $0.5, respectively 203.5 236.1
Convertible senior notes due 2025 ($517.5 aggregate principal amount), net of deferred debt issuance costs of $8.2 and $8.9, respectively, and unamortized discount of $0.0 and $76.5, respectively 509.3 432.1
Revolving credit facility due 2024 ($750.0 aggregate borrowing capacity) (the Revolving Credit Facility) 70.0 —
Other — 0.3
Total debt 1,430.9 1,315.8
Less: current portion (579.3) (432.4)
Long-term debt $ 851.6 $ 883.4


	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

As of September 30, 2022 unamortized debt issuance costs totaled $10.4 million. As of December 31, 2021 unamortized debt issuance costs and discount totaled $88.6 million. Unamortized debt issuance costs and discount have been netted against their respective aggregate principal amounts of the related debt in the table above, and are being amortized to interest expense over the term of the respective debt.

Credit ~~Agreement~~Facilities

~~On September 20, 2019, the~~The Company ~~entered into~~maintains a ~~credit agreement (the “Credit Agreement”) with a syndicate of banks under which Envista borrowed approximately $1.3 billion, consisting of the three-year~~ $650.0 million Term Loan ~~Facility~~ and ~~the three-year €600.0~~a €208.0 million Euro Term ~~Loan Facility~~Loan. Additionally, the Company maintains a revolving credit facility, (together with the Term Loan ~~Facility,~~and the ~~“Term Loans”). The Credit Agreement also included the five-year, $250.0 million revolving credit facility (the “Revolving Credit Facility” and together with the~~Euro Term ~~Loans,~~Loan, the “Senior Credit Facilities”)~~. Pursuant to the Separation Agreement, all of the net proceeds of the Term Loans were paid to Danaher as partial consideration for the Dental business Danaher transferred to Envista.~~

~~On February 9, 2021, in connection~~, with ~~an amendment to the Credit Agreement, the Company repaid $472.0 million of its Euro Term Loan Facility.~~

On June 15, 2021, the Company entered into an amended and restated credit agreement (the “Amended Credit Agreement”) with a syndicate of banks including Bank of America, N.A. as administrative agent (the “Administrative Agent”). The Amended Credit Agreement amends and restates the Company’s Credit Agreement, originally dated September 20, 2019 (as amended by 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 Amendment No. 3 to Credit Agreement dated as of February 9, 2021).

Under the Amended Credit Agreement: (a) the maturity date of the Company’s existing Term Loans has been extended to September 20, 2024, (b) the Revolving Credit Facility has been increased from $250.0 million to $750.0 million, (c) the Company may request further increases to the Revolving Credit Facility in an aggregate amount not to exceed $350.0 million, (d) the amount of cash and cash equivalents permitted to be netted in the definition of “Consolidated Funded Indebtedness” has been increased to up to the greater of (i) $250.0 million and (ii) 50% of Consolidated EBITDA as of the most recent measurement period, and (e) the floor on Eurocurrency rate loans applicable to the Revolving Credit Facility and the Term Loan Facility has been reduced to zero, in each case subject to and in accordance with the terms and conditions of the Amended Credit Agreement. The Company paid fees aggregating approximately $2.1 million in connection with the Amended Credit Agreement.

~~The Revolving Credit Facility includes~~ an aggregate available borrowing capacity of $750.0 million ~~with~~and a $20.0 million sublimit for the issuance of standby letters of ~~credit. The Revolving Credit Facility~~credit that can be used for working capital and other general corporate purposes. The Company may request further increases to the revolving credit facility in an aggregate amount not to exceed $350.0 million. As of ~~September 30, 2022, the Company had $70.0 million of outstanding borrowings~~March 31, 2023 and ~~$680.0 million of available aggregate undrawn borrowing capacity under the Revolving Credit Facility. At~~ December 31, ~~2021~~2022, there were no borrowings outstanding under the ~~Revolving~~revolving credit facility. The Senior Credit ~~Facility. The interest rate for borrowings under the Revolving Credit Facility was 3.76% as of~~Facilities mature on September ~~30, 2022.~~20, 2024.

Under the Senior Credit Facilities, borrowings bear interest as follows: (1) Eurocurrency Rate Loans (as defined in the Amended Credit Agreement) bear interest at a variable rate equal to the London inter-bank offered (“LIBOR”) rate plus a margin of between 0.785% and 1.625%, depending on the Company’s Consolidated Leverage Ratio (as defined in the Amended Credit Agreement) as of the last day of the immediately preceding fiscal quarter; and (2) Base Rate Loans (as defined in the Amended Credit Agreement) bear interest at a variable rate equal to (a) the highest of (i) the Federal funds rate (as published by the Federal Reserve Bank of New York from time to time) plus 0.50%, (ii) Bank of America’s “prime rate” as publicly announced from time to time and (iii) the Eurocurrency Rate (as defined in the Amended Credit Agreement) plus 1.0%, plus (b) a margin of between 0.00% and 0.625%, depending on the Company’s Consolidated Leverage Ratio as of the last day of the immediately preceding fiscal quarter. In no event will Eurocurrency Rate Loans or Base Rate Loans bear interest at a rate lower than 0.0%. In the event of LIBOR cessation, the Secured Overnight Financing Rate will be used as a replacement rate. In addition, the Company is required to pay a per annum facility fee of between 0.09% and 0.225% depending on the Company’s Consolidated Leverage Ratio as of the last day of the immediately preceding fiscal quarter and based on the aggregate commitments under the ~~Revolving Credit Facility,~~revolving credit facility, whether drawn or not.

The interest rates for borrowings under the Term Loan ~~Facility~~ were ~~4.77%~~6.41% and ~~1.25%~~5.98% as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The interest ~~rate~~rates for borrowings under the Euro Term Loan ~~Facility was 2.14%~~were 4.09% and ~~0.95%~~3.28% as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Interest is payable quarterly for both the Term and Euro Term Loans. The ~~Amended Credit Agreement requires the~~ Company is required to maintain a Consolidated Leverage Ratio of 3.75 to 1.00 or less and includes a provision that the maximum Consolidated Leverage Ratio will be increased to 4.25 to 1.00 for the four consecutive full fiscal quarters immediately following the consummation of any acquisition by the Company or any subsidiary of the Company in which the purchase price exceeds $100.0 million. The ~~Amended Credit Agreement~~Company is also ~~requires the Company~~required to maintain a Consolidated Interest Coverage Ratio (as defined in the Amended Credit Agreement) of at least 3.00 to 1.00. The ~~Amended Credit Agreement contains~~Company is subject to customary representations, warranties, conditions precedent, events of default, indemnities and affirmative and negative covenants, including covenants that, among other things, limit or restrict the Company’s and/or the Company’s subsidiaries ability, subject to certain exceptions and qualifications, to incur liens or indebtedness, merge, consolidate or sell or otherwise transfer assets, make dividends or distributions, enter into transactions with the Company’s affiliates and use proceeds of the debt financing for other than permitted uses. ~~The Amended Credit Agreement also contains customary events of default. Upon~~Additionally, upon the occurrence and during the continuance of an event of default, the lenders may declare the outstanding advances and all other obligations ~~under the Amended Credit Agreement~~ immediately due and payable. The Company was in compliance with all of its debt covenants as of ~~September 30, 2022.~~March 31, 2023.

1915

Convertible Senior Notes (the “Notes”)

On May 21, 2020, the Company issued the Notes due on June 1, 2025, unless earlier repurchased, redeemed or converted. The aggregate principal amount, which includes the initial purchasers’ exercise in full of their option to purchase an additional $67.5 million principal amount of the Notes, was $517.5 million. The net proceeds from the issuance, after deducting purchasers’ discounts and estimated offering expenses, were $502.6 million. The Company used part of the net proceeds to pay for the capped call transactions (“Capped Calls”) as further described below. The Notes accrue interest at a rate of 2.375% per annum, payable semi-annually in arrears on June 1 and December 1 of each ~~year, beginning on December 1, 2020.~~year. The Notes have an initial conversion rate of 47.5862 shares of the Company’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $21.01 per share of the Company’s common stock and is subject to adjustment upon the occurrence of specified events. The Notes are governed by an indenture dated as of May 21, 2020 (the “Indenture”) between the Company and Wilmington Trust, National Association, as trustee. The Indenture does not contain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness or the issuance or repurchase of the Company’s securities by the Company.

Prior to the adoption of ASU 2020-06, the Company separated the carrying amounts of the Notes and total issuance costs incurred into liability and equity components. For the Notes, the carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature, while the carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes. Total issuance costs incurred were then allocated to the liability and equity components of the Notes based on their relative values.

Due to the Company’s adoption of ASU 2020-06 on January 1, 2022, the Notes and related issuance costs incurred are no longer required to be bifurcated into separate liability and equity components. This resulted in a $75.0 million increase to the carrying value of the Notes due 2025, comprised of unamortized discount of $76.5 million and deferred debt issuance costs of $1.5 million and a decrease to additional paid-in capital of $77.8 million. Additionally, the adoption of ASU 2020-06 resulted in a $21.4 million increase to retained earnings and a $18.6 million decrease to the related net deferred tax liability associated with the reduction of unamortized debt discount and deferred debt issuance costs.

~~As of September 30, 2022, the unamortized debt issuance costs on the Notes was $8.2 million and is being amortized over the term of the Notes.~~

The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.

Holders of the Notes may convert their Notes at any time on or after December 2, 2024 until the close of business on the second scheduled trading day preceding the maturity date. Holders of the Notes will also have the right to convert the Notes prior to December 2, 2024, but only upon the occurrence of specified events. In December 2021, the Company made the irrevocable election to settle all Notes conversions through combination settlement, satisfying the principal amount outstanding with cash and any Notes conversion value in excess of the principal amount in cash, shares of the Company’s common stock or a combination of both. If a fundamental change occurs prior to the maturity date, holders of the Notes may require the Company to repurchase all or a portion of their Notes for cash at a repurchase price equal to 100.0% of the principal amount plus any accrued and unpaid interest. In addition, if specific corporate events occur prior to the maturity date, the Company would increase the conversion rate for a holder who elects to convert its Notes in connection with such an event in certain circumstances. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the stock price exceeded 130% of the conversion price of $21.01 in 20 days of the final 30 trading days ended ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, which satisfied one of the conditions permitting early conversion by holders of the Notes, therefore, the Notes are classified as short-term debt.

The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after June 1, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130.0% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

The following table sets forth total interest expense recognized related to the Notes ($ in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021			March 31, 2023		April 1, 2022
Contractual interest expense	Contractual interest expense	$	3.1	$	3.1	$	9.2	$	9.2	Contractual interest expense	$	3.1	$	3.1
Amortization of debt issuance costs	Amortization of debt issuance costs	0.7		0.5		2.2		1.4		Amortization of debt issuance costs	0.7		0.7
Amortization of debt discount		—		4.9		—		14.2

Total interest expense	Total interest expense	$	3.8	$	8.5	$	11.4	$	24.8	Total interest expense	$	3.8	$	3.8

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and April 1, 2022, the ~~debt discount and~~ debt issuance costs were amortized using an annual effective interest rate of 3.0%, to interest expense over the term of the Notes.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the if-converted value of the Notes exceeded the outstanding principal amount by ~~$290.5~~$489.2 million and ~~$592.1~~$311.7 million, respectively.

Debt Issuance Costs

The remaining unamortized debt issuance costs for the Convertible Senior Notes, Term Loan and Euro Term Loan were as follows ($ in millions):


	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

The above unamortized debt issuance costs have been netted against their respective aggregate principal amounts of the related debt and are being amortized to interest expense over the term of the respective debt.

Capped Call Transactions

In connection with the offering of the Notes, the Company entered into Capped Calls with certain counterparties. The Capped Calls each have an initial strike price of approximately $21.01 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $23.79 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, 2.9 million shares of the Company's common stock. The Capped Calls are generally intended to reduce or offset the potential dilution from shares of common stock issued upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. As the Capped Call transactions are considered indexed to the Company's own stock and are considered equity classified, they are recorded in equity and are not accounted for as derivatives. The cost of $20.7 million incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital.

NOTE 14. ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in accumulated other comprehensive loss by component are summarized below ($ in millions).


	Foreign Currency Translation Adjustments		Unrealized Pension Costs		Total Accumulated Other Comprehensive 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)

Foreign Currency Translation Adjustments Unrealized Loss on Cash Flow Hedges Unrealized Pension Costs Total Accumulated Other Comprehensive Loss
Three Months Ended September 30, 2022
Balance, July 1, 2022 $ (272.1) $ 0.2 $ (2.4) $ (274.3)
Other comprehensive loss before reclassifications:
(Decrease) increase (109.9) (0.3) — (110.2)
Income tax impact (6.7) 0.1 — (6.6)
Other comprehensive loss before reclassifications, net of income taxes (116.6) (0.2) — (116.8)
Amounts reclassified from accumulated other comprehensive loss:
Increase — — (0.1) (0.1)
Income tax impact — — — —
Amounts reclassified from accumulated other comprehensive loss, net of income taxes — — (0.1) (0.1)
Net current period other comprehensive loss, net of income taxes (116.6) (0.2) (0.1) (116.9)
Balance, September 30, 2022 $ (388.7) $ — $ (2.5) $ (391.2)

Foreign Currency Translation Adjustments Unrealized Loss on Cash Flow Hedges Unrealized Pension Costs Total Accumulated Other Comprehensive Loss
Three Months Ended October 1, 2021
Balance, July 2, 2021 $ (101.8) $ (3.8) $ (23.3) $ (128.9)
Other comprehensive income before reclassifications:
(Decrease) increase (20.2) 1.5 — (18.7)
Income tax impact (4.8) (0.4) — (5.2)
Other comprehensive (loss) income before reclassifications, net of income taxes (25.0) 1.1 — (23.9)
Amounts reclassified from accumulated other comprehensive loss:
Decrease — — 0.2 0.2
Income tax impact — — — —
Amounts reclassified from accumulated other comprehensive income, net of income taxes — — 0.2 0.2
Net current period other comprehensive (loss) income, net of income taxes (25.0) 1.1 0.2 (23.7)
Balance, October 1, 2021 $ (126.8) $ (2.7) $ (23.1) $ (152.6)

Foreign Currency Translation Adjustments Unrealized Loss on Cash Flow Hedges Unrealized Pension Costs Total Accumulated Other Comprehensive Loss
Nine Months Ended September 30, 2022
Balance, December 31, 2021 $ (139.6) $ (1.7) $ (2.2) $ (143.5)
Other comprehensive (loss) income before reclassifications:
(Decrease) increase (224.1) 2.2 — (221.9)
Income tax impact (25.0) (0.5) — (25.5)
Other comprehensive (loss) income before reclassifications, net of income taxes (249.1) 1.7 — (247.4)
Amounts reclassified from accumulated other comprehensive loss:
Increase — — (0.3) (0.3)
Income tax impact — — — —
Amounts reclassified from accumulated other comprehensive loss, net of income taxes — — (0.3) (0.3)
Net current period other comprehensive (loss) income, net of income taxes (249.1) 1.7 (0.3) (247.7)
Balance, September 30, 2022 $ (388.7) $ — $ (2.5) $ (391.2)

Foreign Currency Translation Adjustments Unrealized Loss on Cash Flow Hedges Unrealized Pension Costs Total Accumulated Other Comprehensive Loss
Nine Months Ended October 1, 2021
Balance, December 31, 2020 $ (62.5) $ (6.3) $ (23.0) $ (91.8)
Other comprehensive (loss) before reclassifications:
(Decrease) increase (51.2) 4.8 — (46.4)
Income tax impact (13.1) (1.2) — (14.3)
Other comprehensive (loss) income before reclassifications, net of income taxes (64.3) 3.6 — (60.7)
Amounts reclassified from accumulated other comprehensive loss:
Increase — — — —
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 (64.3) 3.6 (0.1) (60.8)
Balance, October 1, 2021 $ (126.8) $ (2.7) $ (23.1) $ (152.6)

2318

NOTE 15. REVENUE

The following table presents the Company’s revenues disaggregated by geographical region for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and April 1, 2022 ~~and October 1, 2021~~ ($ in millions). Sales taxes and other usage-based taxes collected from customers are excluded from revenues. The Company has historically defined emerging markets as developing markets of the world, which prior to the COVID-19 pandemic, experienced extended periods of accelerated growth in gross domestic product and infrastructure, including Eastern Europe, the Middle East, Africa, Latin America and Asia (with the exception of Japan and Australia). The Company defines developed markets as all markets of the world that are not emerging markets.


		Three Months Ended September 30, 2022						Three Months Ended October 1, 2021							Three Months Ended March 31, 2023
		Specialty Products & Technologies		Equipment & Consumables		Total		Specialty Products & Technologies		Equipment & Consumables		Total			Specialty Products & Technologies		Equipment & Consumables		Total
Geographical region:	Geographical region:													Geographical region:
North America	North America	$	176.5	$	163.5	$	340.0	$	165.4	$	164.0	$	329.4	North America	$	185.3	$	139.4	$	324.7
Western Europe	Western Europe	77.7		23.6		101.3		76.7		27.0		103.7		Western Europe	117.0		32.1		149.1
Other developed markets	Other developed markets	21.7		8.6		30.3		23.4		9.3		32.7		Other developed markets	24.0		8.6		32.6
Emerging markets	Emerging markets	119.5		40.0		159.5		97.9		43.6		141.5		Emerging markets	83.7		37.1		120.8
Total	Total	$	395.4	$	235.7	$	631.1	$	363.4	$	243.9	$	607.3	Total	$	410.0	$	217.2	$	627.2

Nine Months Ended September 30, 2022 Nine Months Ended October 1, 2021
Specialty Products & Technologies Equipment & Consumables Total Specialty Products & Technologies Equipment & Consumables Total
Geographical region:
North America $ 535.3 $ 480.1 $ 1,015.4 $ 502.8 $ 491.9 $ 994.7
Western Europe 284.5 85.0 369.5 267.8 89.3 357.1
Other developed markets 69.1 29.2 98.3 74.2 31.1 105.3
Emerging markets 311.3 113.8 425.1 271.3 128.7 400.0
Total $ 1,200.2 $ 708.1 $ 1,908.3 $ 1,116.1 $ 741.0 $ 1,857.1


	Three Months Ended April 1, 2022
	Specialty Products & Technologies		Equipment & Consumables		Total
Geographical region:
North America	$	179.3	$	156.3	$	335.6
Western Europe	106.3		32.0		138.3
Other developed markets	24.4		10.3		34.7
Emerging markets	87.1		35.7		122.8
Total	$	397.1	$	234.3	$	631.4

Sales by Major Product Group:


		Three Months Ended				Nine Months Ended				Three Months Ended
($ in millions)	($ in millions)	September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021			($ in millions)	March 31, 2023		April 1, 2022
Consumables	Consumables	$	531.0	$	493.7	$	1,605.7	$	1,541.6		Consumables	$	535.5	$	529.9
Equipment	Equipment	100.1		113.6		302.6		315.5			Equipment	91.7		101.5

Total	Total	$	631.1	$	607.3	$	1,908.3	$	1,857.1		Total	$	627.2	$	631.4

Consumable products include implants, regenerative ~~solutions,~~products, prosthetics, orthodontic brackets, aligners and lab products from our Specialty Products & Technologies business segment and traditional consumables such as bonding agents and cements, impression materials, infection prevention products and restorative products from the Company’s Equipment & Consumables business segment. The Company’s equipment products include digital imaging systems, software and other visualization and magnification systems.

Remaining Performance Obligations

Remaining performance obligations include noncancelable purchase orders, extended warranty and service agreements and do not include revenue from contracts with customers with an original term of one year or less.

As of ~~September 30, 2022,~~March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was ~~$46.8~~$62.3 million and the Company expects to recognize revenue on the majority of this amount over the next 12 months.

2419

Contract Liabilities

The Company often receives cash payments from customers in advance of the Company’s performance resulting in contract liabilities. These contract liabilities are classified as either current or long-term in the Condensed Consolidated Balance Sheets based on the timing of when the Company expects to recognize revenue. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the contract liabilities were ~~$80.3~~$102.5 million and ~~$65.2~~$87.5 million, respectively, and are included within accrued expenses and other liabilities and other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets. Revenue recognized during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and April 1, 2022 ~~and October 1, 2021~~ that was included in the contract liability balance at December 31, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$48.4~~$32.9 million and ~~$34.4~~$24.8 million, respectively.

Significant Customers

Sales to the Company’s largest customer were ~~11%~~10% of sales for both the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and April 1, 2022. ~~Sales to the Company’s largest customer were 12% of sales for both the three and nine months ended October 1, 2021.~~

Seasonality

Based on historical experience, the Company generally has more sales in the second half of the calendar year than in the first half of the calendar year, with the first quarter typically having the lowest sales of the year. Based on historical customer buying patterns, the Company generally has more sales in the fourth quarter than in any other quarter of the year, driven in particular by capital spending in the Equipment & Consumables segment. As a result of this seasonality in sales, profitability in the Equipment & Consumables segment also tends to be higher in the second half of the year. There are no assurances that these historical trends will continue in the ~~future and the ongoing COVID-19 pandemic may impact these trends.~~future.

NOTE 16. RESTRUCTURING ACTIVITIES AND RELATED IMPAIRMENTS

Restructuring Activities

The Company’s restructuring activities are undertaken as necessary to implement management’s strategy, streamline operations, take advantage of available capacity and resources, and ultimately achieve net cost reductions. These activities generally relate to the realignment of existing manufacturing capacity and closure of facilities and other exit or disposal activities, as it relates to executing the Company’s strategy, ~~either in the normal course of business or~~ pursuant to significant restructuring programs.

The related liability which is included in accrued liabilities in the Condensed Consolidated Balance Sheets is summarized below ($ in millions):


		Employee Severance and Related		Facility Exit and Related		Total			Employee Severance and Related		Facility Exit and Related		Total

Balance, December 31, 2021		$	21.4	$	0.5	$	21.9
Balance, December 31, 2022								Balance, December 31, 2022	$	18.2	$	0.7	18.9
Costs incurred	Costs incurred	12.7		4.1		16.8		Costs incurred	2.4		1.5		3.9
Paid/settled	Paid/settled	(17.2)		(3.9)		(21.1)		Paid/settled	(12.9)		(2.0)		(14.9)
Balance, September 30, 2022		$	16.9	$	0.7	$	17.6
Balance, March 31, 2023								Balance, March 31, 2023	$	7.7	$	0.2	$	7.9

Restructuring related charges ~~recorded for the three and nine months ended September 30, 2022 and October 1, 2021,~~ by segment were as follows ($ in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021			March 31, 2023		April 1, 2022
Specialty Products & Technologies	Specialty Products & Technologies	$	4.5	$	8.2	$	12.7	$	15.2	Specialty Products & Technologies	$	1.6	$	4.0
Equipment & Consumables	Equipment & Consumables	4.2		0.1		12.6		4.5		Equipment & Consumables	2.6		(0.9)
Other	Other	0.9		0.3		2.8		4.1		Other	0.1		0.6
Total	Total	$	9.6	$	8.6	$	28.1	$	23.8	Total	$	4.3	$	3.7

2520

~~The restructuring~~Restructuring related charges ~~incurred during the three and nine months ended September 30, 2022 and October 1, 2021, are~~were reflected in the following captions in the accompanying Condensed Consolidated Statements of ~~Income~~Operations ($ in millions):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021			March 31, 2023		April 1, 2022
Cost of sales	Cost of sales	$	3.4	$	1.0	$	10.0	$	6.9	Cost of sales	$	1.5	$	(0.3)
Selling, general and administrative expenses	Selling, general and administrative expenses	6.2		7.6		18.1		16.9		Selling, general and administrative expenses	2.8		4.0
Total	Total	$	9.6	$	8.6	$	28.1	$	23.8	Total	$	4.3	$	3.7

NOTE 17. INCOME TAXES

The Company’s effective tax rates from continuing operations of ~~21.5%~~21.4% and ~~21.0%~~18.0% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, and April 1, 2022, respectively, are consistent with the U.S. federal statutory rate of 21.0%. The Company’s effective tax rates from continuing operations of (14.7)% and (1.7)% for the three and nine months ended October 1, 2021, respectively, differ from the U.S. federal statutory rate of 21.0%, primarily due to the Company’s geographical mix of earnings and ~~certain non-recurring Swiss~~net discrete tax benefits.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases, and several tax incentives to promote clean energy. Based on the Company’s current analysis of the provisions, ~~the Company does not believe~~ this legislation ~~will~~did not have a material impact on its Condensed Consolidated Financial ~~Statements.~~Statements as of or for the three months ended March 31, 2023.

NOTE 18. EARNINGS PER SHARE

Earnings per share is calculated by dividing the applicable income by the weighted average number of shares of common stock outstanding for the applicable period. Diluted earnings per share is computed based on the weighted average number of common shares outstanding plus the effect of dilutive potential shares outstanding during the period using the treasury stock method. Dilutive potential common shares include employee equity options, non-vested shares and similar instruments granted by the Company and the assumed conversion impact of the Notes. The Company will settle any Notes conversions through a combination settlement by satisfying the principal amount outstanding with cash and any Notes conversion value in excess of the principal amount in cash or shares inof the Company’s common stock or any combination thereof. As such, the Company uses the treasury stock method for the assumed conversion of the Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share. As the Company will settle the principal amount of the Notes in cash upon conversion, the Notes ~~do not~~only have an impact on the Company's diluted earnings per share ~~until~~when the average share price of the Company’s common stock exceeds the conversion price of $21.01 per share in any applicable period. See the computation of earnings per share below for the dilutive impact of the Notes for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~October~~April 1, ~~2021.~~2022.

In connection with the offering of the Notes, the Company entered into Capped Calls (see further discussion in Note 13), which are intended to reduce or offset the potential dilution from shares of common stock issued upon conversion of the Notes. However, this impact is not included when calculating potentially dilutive shares since their effect is anti-dilutive. The Capped Calls will mitigate dilution from the conversion of the Notes up to the Company’s common stock price of $23.79. If the Notes are converted at a price higher than $23.79 per share, the Capped Calls will no longer mitigate dilution from the conversion of the Notes.

2621

The table below presents the computation of basic and diluted earnings per share ($ and shares in millions, except per share amounts):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021					March 31, 2023		April 1, 2022
Numerator:	Numerator:											Numerator:
Income from continuing operations, net of tax	Income from continuing operations, net of tax	$	49.6	$	80.2	$	164.5	$	221.0			Income from continuing operations, net of tax	$	43.8	$	70.4
(Loss) income from discontinued operations, net of tax		$	(2.0)	$	12.7	$	5.1	$	33.7
Income from discontinued operations, net of tax												Income from discontinued operations, net of tax	$	—	$	4.5
Net income	Net income	$	47.6	$	92.9	$	169.6	$	254.7			Net income	$	43.8	$	74.9

Denominator:	Denominator:											Denominator:
Weighted-average common shares outstanding used in basic earnings (loss) per share		163.1		161.5		162.7		161.1
Weighted-average common shares outstanding used in basic earnings per share												Weighted-average common shares outstanding used in basic earnings per share	163.6		162.2
Incremental common shares from:	Incremental common shares from:											Incremental common shares from:
Assumed exercise of dilutive options and vesting of dilutive restricted stock units	Assumed exercise of dilutive options and vesting of dilutive restricted stock units	2.8		4.3		3.5		4.4				Assumed exercise of dilutive options and vesting of dilutive restricted stock units	2.8		4.2
Assumed conversion of the Notes	Assumed conversion of the Notes	11.0		12.3		12.2		12.0				Assumed conversion of the Notes	11.0		13.4
Weighted average common shares outstanding used in diluted earnings (loss) per share		176.9		178.1		178.4		177.5
Weighted average common shares outstanding used in diluted earnings per share												Weighted average common shares outstanding used in diluted earnings per share	177.4		179.8

Earnings per share:	Earnings per share:											Earnings per share:
Earnings from continuing operations - basic	Earnings from continuing operations - basic	$	0.30	$	0.50	$	1.01	$	1.37			Earnings from continuing operations - basic	$	0.27	$	0.43
Earnings from continuing operations - diluted	Earnings from continuing operations - diluted	$	0.28	$	0.45	$	0.92	$	1.25			Earnings from continuing operations - diluted	$	0.25	$	0.39

(Loss) earnings from discontinued operations - basic		$	(0.01)	$	0.08	$	0.03	$	0.21
(Loss) earnings from discontinued operations - diluted		$	(0.01)	$	0.07	$	0.03	$	0.19
Earnings from discontinued operations - basic												Earnings from discontinued operations - basic	$	—	$	0.03
Earnings from discontinued operations - diluted												Earnings from discontinued operations - diluted	$	—	$	0.03

Earnings - basic	Earnings - basic	$	0.29	$	0.58	$	1.04	$	1.58			Earnings - basic	$	0.27	$	0.46
Earnings - diluted	Earnings - diluted	$	0.27	$	0.52	$	0.95	$	1.43	*		Earnings - diluted	$	0.25	$	0.42
* Earnings per share is computed independently for earnings per share from continuing operations and earnings per share from discontinued operations. The sum of earnings per share from continuing operations and earnings per share from discontinued operations does not equal earnings per share due to rounding.

The following table presents the number of outstanding securities not included in the computation of diluted income per share, because their effect was anti-dilutive (in millions):

Three Months Ended Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
Stock-based awards 1.9 1.4 1.5 1.2
Total 1.9 1.4 1.5 1.2

Three Months Ended

March 31, 2023

April 1, 2022

Stock-based awards

1.8

0.6

NOTE 19. SEGMENT INFORMATION

The Company operates and reports its results in two separate business segments, the Specialty Products & Technologies and Equipment & Consumables segments. When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics. Operating profit represents total revenues less operating expenses, excluding nonoperating income (expense), interest expense and income taxes. Operating profit amounts in the Other segment consist of unallocated corporate costs and other costs not considered part of management’s evaluation of reportable segment operating performance. The identifiable assets by segment are those used in each segment’s operations. Inter-segment amounts are not significant and are eliminated to arrive at consolidated totals.

The Company’s Specialty Products & Technologies products include implants, regenerative products, prosthetics, orthodontic brackets, aligners and lab products. The Company’s Equipment & Consumables products include traditional consumables such as bonding agents and cements, impression materials, infection prevention products and restorative products, while the Company’s equipment products include digital imaging systems, software and other visualization and magnification systems.

On December 31, 2021, the Company ~~completed the sale~~sold substantially all of its KaVo Treatment Unit and Instrument Business, which was part of the Company’s Equipment & Consumables segment. ~~The previously reported amounts for~~As a result, the financial results of the KaVo Treatment Unit and Instrument Business ~~have been reclassified to~~for the three months ended April 1, 2022, were reported as discontinued operations ~~for~~and all ~~periods presented. All~~ segment information and descriptions exclude the KaVo Treatment Unit and Instrument Business. As of December 31, 2022, all activities related to the sale of the KaVo Treatment Unit and Instrument Business were completed and therefore there are no discontinued operations reported for the three months ended March 31, 2023. Refer to Note 3 for more information on the Company’s discontinued operations.

Segment related information is shown below ($ in millions):


		Three Months Ended				Nine Months Ended							Three Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021								March 31, 2023		April 1, 2022
Sales:	Sales:									Sales:
Specialty Products & Technologies	Specialty Products & Technologies	$	395.4	$	363.4	$	1,200.2	$	1,116.1	Specialty Products & Technologies						$	410.0	$	397.1
Equipment & Consumables	Equipment & Consumables	235.7		243.9		708.1		741.0		Equipment & Consumables						217.2		234.3
Total	Total	$	631.1	$	607.3	$	1,908.3	$	1,857.1	Total						$	627.2	$	631.4

Operating profit and reconciliation to income before taxes from continuing operations:	Operating profit and reconciliation to income before taxes from continuing operations:									Operating profit and reconciliation to income before taxes from continuing operations:
Specialty Products & Technologies	Specialty Products & Technologies	$	62.3	$	61.5	$	206.6	$	211.6	Specialty Products & Technologies						$	71.1	$	70.3
Equipment & Consumables	Equipment & Consumables	44.7		45.4		120.4		131.0		Equipment & Consumables						32.5		45.5
Other	Other	(32.5)		(25.2)		(95.8)		(82.5)		Other						(31.5)		(24.3)
Operating profit	Operating profit	74.5		81.7		231.2		260.1		Operating profit						72.1		91.5
Nonoperating income (expense):	Nonoperating income (expense):									Nonoperating income (expense):
Other income	Other income	0.3		0.2		0.9		0.8		Other income						0.3		0.3
Interest expense, net	Interest expense, net	(11.6)		(12.0)		(23.9)		(43.6)		Interest expense, net						(16.7)		(5.9)
Income before taxes from continuing operations	Income before taxes from continuing operations	$	63.2	$	69.9	$	208.2	$	217.3	Income before taxes from continuing operations						$	55.7	$	85.9

Identifiable assets:	Identifiable assets:					September 30, 2022		December 31, 2021		Identifiable assets:	March 31, 2023			December 31, 2022
Specialty Products & Technologies	Specialty Products & Technologies					$	3,395.9	$	3,498.2	Specialty Products & Technologies	$	3,486.1		$	3,475.7
Equipment & Consumables	Equipment & Consumables					2,424.1		1,946.1		Equipment & Consumables	2,458.9			2,455.3
Held for Sale						—		12.2

Other	Other					591.9		1,117.7		Other	630.0			656.0
Total	Total					$	6,411.9	$	6,574.2	Total	$	6,575.0		$	6,587.0

2823

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with other information, including our Condensed Consolidated Financial Statements and related notes included in Part I, Item 1, Financial Information, of this Quarterly Report on Form 10-Q, our consolidated ~~and combined~~ financial statements appearing in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“2022 10-K”), and Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, all references herein to the “Company,” “we,” “us” or “our,” or similar terms, refer to Envista Holdings Corporation and its consolidated subsidiaries.

Certain statements included or incorporated by reference in this Quarterly Report are “forward-looking statements” within the meaning of the U.S. federal securities laws. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: the potential impacts of the COVID-19 pandemic on our business, financial condition, and results of operations; projections of revenue, expenses, profit, profit margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or other projected financial measures; management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions and the integration thereof, divestitures, spin-offs, split-offs or other distributions, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into; future regulatory approvals and the timing thereof; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; future foreign currency exchange rates and fluctuations in those rates; the anticipated timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that Envista intends or believes will or may occur in the future. Terminology such as “believe,” “anticipate,” “should,” “could,” “intend,” “will,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,” “potential,” “forecast” and “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and perceptions of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to, the following: the ~~impact of the COVID-19 pandemic, including new variants of the virus, the pace of recovery in the markets in which we operate, global supply chain disruptions and potential staffing shortages, the~~ conditions in the U.S. and global economy, the impact of inflation and increasing interest rates, international economic, political, legal, compliance and business factors, the markets served by us and the financial markets, the impact of the COVID-19 pandemic, the impact of our debt obligations on our operations and liquidity, developments and uncertainties in trade policies and regulations, contractions or growth rates and cyclicality of markets we serve, risks relating to product manufacturing, commodity costs and surcharges, our ability to adjust purchases and manufacturing capacity to reflect market conditions, reliance on sole or limited sources of supply, disruptions relating to war, terrorism, climate change, widespread protests and civil unrest, man-made and natural disasters, public health issues and other events, security breaches or other disruptions of our information technology systems or violations of data privacy laws, fluctuations in inventory of our distributors and customers, loss of a key distributor, our relationships with and the performance of our channel partners, competition, our ability to develop and successfully market new products and services, our ability to attract, develop and retain our key personnel, the potential for improper conduct by our employees, agents or business partners, our compliance with applicable laws and regulations (including regulations relating to medical devices and the health care industry), the results of our clinical trials and perceptions thereof, penalties associated with any off-label marketing of our products, modifications to our products that require new marketing clearances or authorizations, our ability to effectively address cost reductions and other changes in the health care industry, our ability to successfully identify and consummate appropriate acquisitions and strategic investments, our ability to integrate the businesses we acquire and achieve the anticipated benefits of such acquisitions, contingent liabilities relating to acquisitions, investments and divestitures, ~~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, and labor matters, international economic, political, legal, compliance and business factors and disruptions relating to war, terrorism, climate change, widespread protests and civil unrest, man-made and natural disasters, public health issues and other events, the impact of inflation and increasing interest rates, and other risks and uncertainties set forth under “Item 1A. Risk Factors” in the ~~2021~~2022 10-K and this Quarterly Report on Form 10-Q.

Forward-looking statements are not guarantees of future performance and actual results may differ materially from the results, developments and business decisions contemplated by our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Forward-looking statements contained herein speak only as of the date of this Quarterly Report. Except to the extent required by applicable law, we do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.

2924

BASIS OF PRESENTATION

The accompanying Condensed Consolidated Financial Statements present our historical financial position, results of operations, changes in stockholders’ equity and cash flows in accordance with GAAP.

Sale of the KaVo Treatment Unit and Instrument Business

On December 31, 2021, we ~~completed~~sold substantially all of the ~~Divestiture~~KaVo Treatment Unit and Instrument Business (the “Divestiture”) to ~~Planmeca,~~planmeca Verwaltungs Gmbh, Germany (“Planmeca”), pursuant to the ~~Purchase Agreement~~master sale and purchase agreement (the “Purchase Agreement”) among us, Planmeca, and Planmeca Oy, as guarantor. InHowever, the transfer of assets in certain countries was not executed and closed until 2022 (“Deferred Local Closing”). As of December 31, 2022, all Deferred Local Closings were completed and we received total net cash consideration of $386.4 million in accordance with the terms of the Purchase Agreement, we received cash consideration of $317.3 million upon closing on December 31, 2021. During the nine months ended September 30, 2022, we received an additional $59.8 million related to an earnout payment and certain working capital adjustments. We recognized a loss of $1.6 million and a gain of $5.7 million on the Divestiture during the three and nine months ended September 30, 2022, respectively, due primarily to the recognition of certain purchase price adjustments.Agreement.

The Divestiture was part of our strategy to structurally improve our long-term margins and represented a strategic shift with a major effect on our operations and financial results as described in ASC 205-20. The sale met the criteria to be accounted for as a discontinued ~~operation. Accordingly,~~operation and therefore, we ~~have~~ applied discontinued operations treatment for the Divestiture as required by ASC 205-20. In accordance with ASC 205-20, we ~~reclassified the Divestiture to assets and liabilities held for sale on our Condensed Consolidated Balance Sheets as of December 31, 2021 and reclassified~~have reported the financial results of the Divestiture as discontinued operations in our Condensed Consolidated Statements of ~~Income~~Operations and have excluded the KaVo Treatment Unit and Instrument Business from all segment information and descriptions for ~~all periods presented.~~the three months ended April 1, 2022. Our Condensed Consolidated Statements of Cash Flows ~~for the nine months ended September 30, 2022 and October 1, 2021~~ include the financial results of the KaVo Treatment Unit and Instrument Business. We also revised our discussion and presentation of operating and financial results to be reflective of our continuing operations as required by ASC 205-20. All segment information and descriptions exclude the KaVo Treatment Unit and Instrument Business.

With the sale of the KaVo Treatment Unit and Instrument business, we continue to make significant progress toward our long-term goal of re-calibrating our product portfolio to higher growth and higher margin segments. The Divestiture shifts our revenue mix from approximately 50% eachBusiness for the ~~Specialty Products & Technology and Equipment & Consumables segments to approximately 60%~~three months ended April 1, 2022. As all Deferred Local Closings were completed as of December 31, 2022, there are no discontinued operations reported for the Specialty Products & Technology segment and approximately 40% for the Equipment & Consumables segment. The Specialty Products & Technology segment is a higher growth and higher margin business than the Equipment & Consumables segment. The Divestiture was a strategic shift that will allow us to focus more on higher value and higher margin consumables, imaging, and digital workflow solutions.three months ended March 31, 2023.

OVERVIEW

General

We provide products that are used to diagnose, treat and prevent disease and ailments of the teeth, gums and supporting bone, as well as to improve the aesthetics of the human smile. We help our customers deliver the best possible patient care through industry-leading solutions, technologies, and services. With leading brand names, innovative technology and significant market positions, we are a leading worldwide provider of a broad range of ~~dental implants,~~solutions to support implant-based tooth replacements, orthodontic ~~appliances,~~treatments, digital imaging and diagnostics, as well as general dental consumables, equipment and services, and are dedicated to driving technological innovations that help dental professionals improve clinical outcomes and enhance productivity. Our research and development, manufacturing, sales, distribution, service and administrative facilities are located in more than 30 countries across North America, Asia, Europe, the Middle East and Latin America.

We operate in two business segments: Specialty Products & Technologies and Equipment & Consumables. Our Specialty Products & Technologies segment develops, manufactures and markets dental implant systems, including regenerative solutions, dental prosthetics and associated treatment software and technologies, as well as orthodontic bracket systems, aligners and lab products. Our Equipment & Consumables segment develops, manufactures and markets dental equipment and supplies used in dental offices, including digital imaging systems, software and other visualization/magnification systems; endodontic systems and related consumables; and restorative materials and instruments, rotary burs, impression materials, bonding agents and cements and infection prevention products.

For ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, sales derived from customers outside of the United States were ~~49.7% and 50.8%~~52.4%, ~~respectively,~~ compared to the three ~~and nine~~ months ended ~~October~~April 1 ~~2021,~~2022, of ~~49.8% and 50.6%, respectively.~~51.2%. As a global provider of dental consumables, equipment and services, our operations are affected by worldwide, regional and industry-specific economic and political factors. Given the broad range of dental products, software and services provided and geographies served, we do not use any indices other than general economic trends to predict our overall outlook. Our individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and the outlook for the future.

As a result of our geographic and product line diversity, we face a variety of opportunities and challenges, including rapid technological development in most of our served markets, the expansion and evolution of opportunities in emerging markets, trends and costs associated with a global labor force, consolidation of our competitors and increasing regulation. We operate in a highly competitive business environment in most markets, and our long-term growth and profitability will depend in particular on our ability to expand our business in emerging geographies and market segments, identify, consummate and integrate appropriate acquisitions, develop innovative and differentiated new products and services, expand and improve the effectiveness of our sales force, continue to reduce costs and improve operating efficiency and quality and effectively address the demands of an increasingly regulated global environment. We are making significant investments to address the rapid pace of technological change in our served markets and to globalize our manufacturing, research and development and customer-facing resources (particularly in emerging markets and our dental implant business) in order to be responsive to our customers throughout the world and improve the efficiency of our operations.

Key Trends and Conditions Affecting Our Results of Operations

There have been no material changes to the key trends and conditions affecting our results of operations that were disclosed in our ~~2021~~2022 10-K, except as follows:

~~COVID-19~~

The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict because of the dynamic and evolving nature of the situation. During the three and nine months ended September 30, 2022, notwithstanding improvement in many markets in which we operate due to a return to more normalized business operations, certain markets continue to be adversely impacted either directly attributable to COVID-19 or as a result of prior COVID-19 influenced policies. Late in the first quarter of 2022, the Chinese authorities instituted COVID-19-related lockdowns, shut-downs and restrictions in certain parts of China, specifically the Shanghai area, which impacted our operations in China. These restrictions were lifted in early June 2022, but the extent to which continuing effects from these restrictions, current localized restrictions throughout China under its zero-COVID policy, and any future restrictions may impact our operations remains uncertain.

The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the scope and duration of the pandemic, the rise of new variants, the extent and severity of the impact on our customers, the measures that have been and may be taken to contain the virus (including its various mutations) and mitigate its impact, U.S. and foreign government actions to respond to the reduction in global economic activity, our ability to continue to manufacture and source our products and to find suitable alternative products at reasonable prices, our ability to continue to ship and deliver our products in a cost-effective and timely manner, uncertain demand, staffing shortages, the impact of the pandemic and associated economic downturn on our ability to access capital if and when needed and how quickly and to what extent normal economic and operating conditions can continue, all of which are uncertain and cannot be predicted. Even after the COVID-19 pandemic has further subsided, we may continue to experience materially adverse impacts on our financial condition and results of operations.

~~For additional information on the risks of COVID-19 to our business, please refer to the “Item 1A. Risk Factors—Risks Related to COVID-19” section of our 2021 10-K.~~

~~Russia-Ukraine Conflict~~

Russia’s invasion of Ukraine and the global response to this invasion, including sanctions imposed by the U.S. and other countries, could have an adverse impact on our business, including our ability to market and sell products in the affected regions, impacting our ability to enforce our intellectual property rights in Russia, creating disruptions in the global supply chain, and potentially having an adverse impact on the global economy, financial markets, energy markets, currency rates and otherwise. Russia’s invasion of Ukraine did not have a material impact on our financial position or results of operations as of and for the three and nine months ended September 30, 2022.

Foreign Currency Exchange Rates

On a period-over-period basis, currency exchange rates negatively impacted reported sales by ~~4.1% and 3.2%~~1.6% for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, compared to the comparable period of ~~2021,~~2022, primarily due to the strength of the U.S. dollar against most major currencies. Any future strengthening of the U.S. dollar against major currencies would negatively impact our sales and results of operations for the remainder of the year, and any weakening of the U.S. dollar against major currencies would positively impact our sales and results of operations for the remainder of the year.

General Economic Conditions

In addition to industry-specific factors, we, like other businesses, face challenges related to global economic conditions, including rising inflation, increasing interest rates, fluctuating foreign currency exchange rates, slowing economic growth, and continuing supply chain disruptions. Dental costs are largely out-of-pocket for the consumer and thus utilization rates can vary significantly depending on economic growth. While many of our products are considered necessary by patients regardless of the economic environment, certain products and services that support discretionary dental procedures may be more susceptible to changes in economic conditions.

Pricing Controls

Certain countries, as well as some private payors, control the price of health care products, directly or indirectly, through reimbursement, payment, pricing or coverage limitations, tying reimbursement to outcomes or (in the case of governmental entities) compulsory licensing. For example, China has implemented volume-based procurement policies, a series of centralized reforms instituted in China on both a national and regional basis that has resulted in significant price cuts for medical and dental consumables.

Russia-Ukraine Conflict

Russia’s invasion of Ukraine and the global response to this invasion, including sanctions imposed by the U.S. and other countries, could have an adverse impact on our business, including our ability to market and sell products in the affected regions, potentially heightening our risk of cyber security attacks, impacting our ability to enforce our intellectual property rights in Russia, creating disruptions in the global supply chain, and potentially having an adverse impact on the global economy, financial markets, energy markets, currency rates and otherwise. While we are experiencing some volatility in sales from this region, Russia’s invasion of Ukraine did not have a material impact on our financial position or results of operations as of and for the three months ended March 31, 2023 and April 1, 2022.

COVID-19

The extent of the impact of the COVID-19 pandemic on our business remains uncertain and difficult to predict because of the dynamic and evolving nature of the situation. The global impact of the outbreak continues to adversely affect many industries, and different geographies continue to reflect the effects of public health restrictions in various ways. The economic recovery following the impact of the COVID-19 pandemic is only partially underway and has been gradual, uneven and characterized by meaningful dispersion across sectors and regions with uncertainty regarding its ultimate length and trajectory. During the three months ended March 31, 2023, notwithstanding improvement in many markets in which we operate due to a return to more normalized business operations, certain markets continued to be adversely impacted by COVID-19.

For additional information on the risks of COVID-19 to our business, please refer to the “Item 1A. Risk Factors—Risks Related to our Business” section of our 2022 10-K.

Acquisitions

Our growth strategy contemplates future ~~acquisitions.~~acquisitions and we continually evaluate potential acquisitions that either strategically fit with our existing portfolio or expand our portfolio into new and attractive business areas. Our operations and results can be affected by the rate and extent to which appropriate acquisition opportunities are available, acquired businesses are effectively integrated and anticipated synergies or cost savings are achieved. During the ~~nine months ended September 30,~~fiscal year 2022, we completed two acquisitions.

On July 5, 2022, we ~~completed our purchase~~acquired all of the equity of Osteogenics for total consideration of approximately $128.2 million, subject to certain customary adjustments as provided in the ~~definitive agreement~~Equity Purchase Agreement dated May 17, 2022. Osteogenics develops innovative regenerative solutions for periodontists, oral and maxillofacial surgeons, and clinicians involved in implant dentistry throughout the world, and is part of our Specialty Products & Technologies segment.

On April 20, 2022, we completed our acquisition of ~~the~~Carestream Dental’s Intraoral Scanner Business for total consideration of approximately $580.3 ~~million.~~million, including contingent consideration of $7.5 million, and subject to certain customary adjustments as provided in the IOS Purchase Agreement. The Intraoral Scanner Business manufactures, markets, sells, commercializes, distributes, services, trains, supports, and maintains operations of intraoral scanners and software, and is part of our Equipment & Consumables segment.

~~For~~ We purchased the ~~three~~Intraoral Scanner Business through the acquisition of certain assets and ~~nine months ended September 30, 2022,~~ the ~~revenue and earnings~~assumption of ~~these two acquisitions were not material to~~certain liabilities as well as the ~~Condensed Consolidated Statements~~acquisition of ~~Income.~~all of the equity of certain subsidiaries of Carestream Dental.

Envista Business Systems

Throughout this discussion, references to sales volume refer to the impact of both price and unit sales and references to productivity improvements generally refer to improved cost-efficiencies resulting from the ongoing application of Envista Business Systems (“EBS”). We believe our deep-rooted commitment to EBS helps drive our market leadership and differentiates us in the dental products industry. EBS encompasses not only lean tools and processes, but also methods for driving growth, innovation and leadership. Within the EBS framework, we pursue a number of ongoing strategic initiatives relating to streamlining business operations, portfolio simplification, reduction of costs, redeployment of resources, customer insight generation, product development and commercialization, efficient sourcing, and improvement in manufacturing and back-office support, all with a focus on continually improving quality, delivery, cost, growth and innovation.

Non-GAAP Measures

In order to establish period-to-period comparability, we include the non-GAAP measure of core sales in this report. References to the non-GAAP measure of core sales (also referred to as core revenues or sales/revenues from existing businesses) refer to sales calculated according to GAAP, but excluding:

•sales from acquired businesses for one year from the acquisition date;

•sales from discontinued products; and

•the impact of currency translation.

We exclude sales from acquired businesses in order to provide accurate year over year comparisons. Sales from discontinued products includes major brands or major products that we have made the decision to discontinue as part of a portfolio restructuring. Discontinued brands or products consist of those which we (1) are no longer manufacturing, (2) are no longer investing in the research or development of, and (3) expect to discontinue all significant sales of within one year from the decision ~~date.~~date to discontinue. The portion of sales attributable to discontinued brands or products is calculated as the net decline of the applicable discontinued brand or product from period-to-period. We exclude sales from discontinued products because discontinued products do not have a continuing contribution to operations and management believes that excluding such items provides investors with a means of evaluating our on-going operations and facilitates comparisons to our peers.

The portion of sales attributable to currency translation is calculated as the difference between:

•the period-to-period change in sales; and

•the period-to-period change in sales after applying current period foreign exchange rates to the prior year period.

Core sales growth should be considered in addition to, and not as a replacement for or superior to, sales, and may not be comparable to similarly titled measures reported by other companies. We believe that reporting the non-GAAP financial measure of core sales growth provides useful information to investors by helping identify underlying growth trends in our on-going business and facilitating comparisons of our sales performance with our performance in prior and future periods and to our peers. We also use core sales growth to measure our operating and financial performance. We exclude 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. We exclude the effect of currency translation from core sales because currency translation is not under our control, is subject to volatility and can obscure underlying business trends.

3328

RESULTS OF OPERATIONS

All comparisons, variances, increases or decreases discussed below are for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, compared to the three ~~and nine~~ months ended ~~October~~April 1, ~~2021.~~2022.


		Three Months Ended											Three Months Ended
($ in millions)	($ in millions)	September 30, 2022				October 1, 2021				% Change		($ in millions)	March 31, 2023				April 1, 2022				% Change
Sales	Sales	$	631.1		100.0%	$	607.3		100.0%	3.9	%	Sales	$	627.2		100.0%	$	631.4		100.0%	(0.7)	%
Cost of sales	Cost of sales	266.4			42.2%	251.0			41.3%	6.1	%	Cost of sales	264.5			42.2%	257.3			40.8%	2.8	%
Gross profit	Gross profit	364.7			57.8%	356.3			58.7%	2.4	%	Gross profit	362.7			57.8%	374.1			59.2%	(3.0)	%
Operating costs:	Operating costs:											Operating costs:
Selling, general and administrative (“SG&A”) expenses	Selling, general and administrative (“SG&A”) expenses	264.2			41.9%	250.6			41.3%	5.4	%	Selling, general and administrative (“SG&A”) expenses	266.1			42.4%	258.2			40.9%	3.1	%
Research and development (“R&D”) expenses	Research and development (“R&D”) expenses	26.0			4.1%	24.0			4.0%	8.3	%	Research and development (“R&D”) expenses	24.5			3.9%	24.4			3.9%	0.4	%
Operating profit	Operating profit	74.5			11.8%	81.7			13.5%	(8.8)	%	Operating profit	72.1			11.5%	91.5			14.5%	(21.2)	%
Nonoperating income (expense):	Nonoperating income (expense):											Nonoperating income (expense):
Other income	Other income	0.3			—%	0.2			—%	50.0	%	Other income	0.3			—%	0.3			—%	—	%
Interest expense, net	Interest expense, net	(11.6)			(1.8)%	(12.0)			(2.0)%	(3.3)	%	Interest expense, net	(16.7)			(2.7)%	(5.9)			(0.9)%	183.1	%
Income before income taxes	Income before income taxes	63.2			10.0%	69.9			11.5%	(9.6)	%	Income before income taxes	55.7			8.9%	85.9			13.6%	(35.2)	%
Income tax expense (benefit)		13.6			2.2%	(10.3)			(1.7)%	(232.0)	%
Income tax expense												Income tax expense	11.9			1.9%	15.5			2.5%	(23.2)	%
Income from continuing operations	Income from continuing operations	49.6			7.9%	80.2			13.2%	(38.2)	%	Income from continuing operations	43.8			7.0%	70.4			11.1%	(37.8)	%
(Loss) income from discontinued operations, net of tax		(2.0)			(0.3)%	12.7			2.1%	(115.7)	%
Income from discontinued operations, net of tax												Income from discontinued operations, net of tax	—			—%	4.5			0.7%	(100.0)	%
Net income	Net income	$	47.6		7.5%	$	92.9		15.3%	(48.8)	%	Net income	$	43.8		7.0%	$	74.9		11.9%	(41.5)	%

Effective tax rate from continuing operations	Effective tax rate from continuing operations	21.5		%		(14.7)		%				Effective tax rate from continuing operations	21.4		%		18.0		%

Nine Months Ended
($ in millions) September 30, 2022 October 1, 2021 % Change
Sales $ 1,908.3 100.0% $ 1,857.1 100.0% 2.8 %
Cost of sales 799.7 41.9% 773.8 41.7% 3.3 %
Gross profit 1,108.6 58.1% 1,083.3 58.3% 2.3 %
Operating costs:
SG&A expenses 801.9 42.0% 747.5 40.3% 7.3 %
R&D expenses 75.5 4.0% 75.7 4.1% (0.3) %
Operating profit 231.2 12.1% 260.1 14.0% (11.1) %
Nonoperating income (expense):
Other income 0.9 —% 0.8 —% 12.5 %
Interest expense, net (23.9) (1.3)% (43.6) (2.3)% (45.2) %
Income before income taxes 208.2 10.9% 217.3 11.7% (4.2) %
Income tax expense (benefit) 43.7 2.3% (3.7) (0.2)% (1,281.1) %
Income from continuing operations 164.5 8.6% 221.0 11.9% (25.6) %
Income from discontinued operations, net of tax 5.1 0.3% 33.7 1.8% (84.9) %
Net income $ 169.6 8.9% $ 254.7 13.7% (33.4) %
Effective tax rate from continuing operations 21.0 % (1.7) %

GAAP Reconciliation

Sales and Core Sales Growth

% Change Three Month Period Ended September 30, 2022 vs. Comparable 2021 Period % Change Nine Month Period Ended September 30, 2022 vs. Comparable 2021 Period
Total sales growth (GAAP) 3.9 % 2.8 %
Plus the impact of:
Acquisition (3.1) % (1.3) %
Currency exchange rates 4.1 % 3.2 %
Core sales growth (non-GAAP) 4.9 % 4.7 %


	% 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)	%

Sales and core sales growth for the three months ended ~~September 30, 2022 increased 3.9%~~March 31, 2023 decreased 0.7% and ~~4.9%~~2.4%, respectively, compared to the comparable period in ~~2021. Price positively~~2022. A decrease in sales volume negatively impacted sales growth by ~~1.6%~~2.8% on a period-over-period basis, ~~combined with~~slightly offset by an ~~overall sales~~ increase in price of ~~3.3% due primarily to higher volume.~~0.4%. Sales in developed markets ~~increased~~decreased primarily due to ~~strong~~a decrease in North America partially offset by growth in Western and Eastern Europe. Sales in emerging markets ~~increased~~decreased primarily ~~due to~~driven by China ~~and the continued recovery from the COVID-19 pandemic.~~

Sales and core sales growth for the nine months ended September 30, 2022 increased 2.8% and 4.7%, respectively, compared to the comparable period in 2021. Price positively impacted sales growth by 1.9% on a period-over-period basis, combined with an overall sales increase of 2.8% due primarily to higher volume. Sales in developed markets increased primarily due to strong growth in Western Europe combined with a modest increase in North America. Sales in emerging markets increased primarily due to continued recovery from the COVID-19 pandemic, partially offset by a decrease in China due to localized pandemic related lockdowns.sales.

COST OF SALES AND GROSS PROFIT MARGIN


		Three Months Ended						Nine Months Ended							Three Months Ended
($ in millions)	($ in millions)	September 30, 2022			October 1, 2021			September 30, 2022			October 1, 2021			($ in millions)	March 31, 2023		April 1, 2022
Sales		$	631.1		$	607.3		$	1,908.3		$	1,857.1
Cost of sales	Cost of sales	266.4			251.0			799.7			773.8			Cost of sales	264.5		257.3
Gross profit		$	364.7		$	356.3		$	1,108.6		$	1,083.3
Gross profit margin	Gross profit margin	57.8		%	58.7		%	58.1		%	58.3		%	Gross profit margin	57.8	%	59.2	%

The increase in cost of sales during the three months ended ~~September 30, 2022,~~March 31, 2023 as compared to the comparable period in ~~2021,~~2022, was primarily due to unfavorable product mix and the impact of higher sales, the unfavorable impact from foreign exchange rates, the amortization of the fair value adjustments related to acquired inventory as part of our acquisitions, and unfavorable material price variancescosts due ~~in part~~ to inflation.

The increase in cost of sales during the nine months ended September 30, 2022, as compared to the comparable period in 2021, was primarily due to higher sales, the unfavorable impact from foreign exchange rates, the amortization of the fair value adjustments related to acquired inventory as part of our acquisitions, and unfavorable material price variances due in part to inflation, partially offset by favorable incremental period-over-period savings associated with productivity improvements.

The decrease in gross profit margin percentage during the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the comparable period in ~~2021,~~2022, was primarily due to ~~the unfavorable impact from foreign exchange rates, the amortization of the fair value adjustments related to acquired inventory as part of our acquisitions, unfavorable material price variances due~~a decrease in ~~part to inflation, and~~sales volume, unfavorable product mix, and higher costs due to inflation, partially offset by ~~higher sales volume and price.~~

The decrease in gross profit margin percentage during the nine months ended September 30, 2022, as compared to the comparable period in 2021, was primarily due to the unfavorable impact from foreign exchange rates, the amortization of the fair value adjustments related to acquired inventory as part of our acquisitions, unfavorable material price variances due in part to inflation, and unfavorable product mix, partially offset by higher sales volume and price, and favorable incremental period-over-period savings associated with productivity improvements.

OPERATING EXPENSES


		Three Months Ended						Nine Months Ended							Three Months Ended
($ in millions)	($ in millions)	September 30, 2022			October 1, 2021			September 30, 2022			October 1, 2021			($ in millions)	March 31, 2023			April, 2022
Sales		$	631.1		$	607.3		$	1,908.3		$	1,857.1

Selling, general and administrative expenses	Selling, general and administrative expenses	$	264.2		$	250.6		$	801.9		$	747.5		Selling, general and administrative expenses	$	266.1		$	258.2
Research and development expenses	Research and development expenses	$	26.0		$	24.0		$	75.5		$	75.7		Research and development expenses	$	24.5		$	24.4
SG&A as a % of sales	SG&A as a % of sales	41.9		%	41.3		%	42.0		%	40.3		%	SG&A as a % of sales	42.4		%	40.9		%
R&D as a % of sales	R&D as a % of sales	4.1		%	4.0		%	4.0		%	4.1		%	R&D as a % of sales	3.9		%	3.9		%

The increase in SG&A expenses as a percentage of sales for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the comparable period of ~~2021,~~2022, was primarily due to higher ~~sales and marketing expenses and acquisition related costs, partially offset by higher sales volume.~~

The increase in SG&A expenses as a percentage of sales for the nine months ended September 30, 2022 as compared to the comparable periods of 2021, was primarily due to higher sales and marketing expenses, compensation spend and ~~acquisition related costs, partially offset by higher sales volume.~~increased amortization of intangible assets.

R&D expenses as a percentage of sales for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, were consistent with the comparable ~~periods in 2021.~~

~~OPERATING PROFIT~~

~~Operating profit margin was 11.8% for the three months ended September 30, 2022, as compared to an operating margin of 13.5% for the comparable~~ period in 2021. The decrease in operating profit margin was primarily due to higher sales and marketing expenses and acquisition related expenses, the amortization of the fair value adjustments related to acquired inventory as part of our acquisitions, unfavorable material price variances due in part to inflation and unfavorable product mix, partially offset by higher sales volume and price.2022.

Operating profit margin was 12.1% for the nine months ended September 30, 2022, as compared to an operating margin of 14.0% for the comparable period in 2021. The decrease in operating profit margin was primarily due to higher sales and marketing expenses, compensation spend, and acquisition related expenses, the amortization of the fair value adjustments related to acquired inventory as part of our acquisitions, unfavorable material price variances due in part to inflation, and unfavorable product mix, partially offset by higher sales volume, price and favorable incremental period-over-period savings associated with productivity improvements.

~~OTHER INCOME~~

Net periodic benefit costs included in other income, were $0.3 million and $0.2 million for the three months ended September 30, 2022 and October 1, 2021, respectively. Net periodic benefit costs included in other income were $0.9 million and $0.8 million for the nine months ended September 30, 2022 and October 1, 2021, respectively.

INTEREST COSTS AND FINANCING

Interest costs ~~were $11.6~~increased from $5.9 million ~~and $12.0~~during the three months ended April 1, 2022 to $16.7 million for the three months ended September 30, 2022 and October 1, 2021, respectively. For the three months ended September 30, 2022, interest costs were consistent with the comparable period of 2021 as a result of higher rates, offset by the absence of accretive interest expense relatedMarch 31, 2023 due primarily to ~~the convertible debt discount as a result of adopting ASU 2020-06.~~

Interest costs were $23.9 million and $43.6 million for the nine months ended September 30, 2022 and October 1, 2021, respectively. The decrease in interest expense for the nine months ended September 30, 2022 as compared to the comparable periods of 2021 was primarily due to overall lower debt outstanding related to the amendment to the Credit Agreement and the $472.0 million partial repayment of the Euro term loan in February 2021, and the absence of accretive interest expense related to the convertible debt discount as a result of adopting ASU 2020-06, partially offset by higher interest ~~rates.~~

~~Refer to Note 13 for a further discussion of the convertible debt instrument.~~rates on our variable rate Term Loan and Euro Term Loan borrowings.

INCOME TAXES

Three Months Ended Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
Effective tax rate from continuing operations 21.5 % (14.7) % 21.0 % (1.7) %


	Three Months Ended
	March 31, 2023		April 1, 2022
Effective tax rate from continuing operations	21.4	%	18.0	%

Our effective tax rate from continuing operations of ~~21.5% and 21.0%~~21.4% for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, was higher compared to the comparable ~~periods~~period in ~~2021~~2022 primarily due to the Company’s geographical mix of earnings and a decrease in certain ~~Swiss~~ discrete tax ~~benefits in 2021 not recurring in 2022.~~benefits.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases, and several tax incentives to promote clean energy. Based on our current analysis of the provisions, ~~we do not believe~~ this legislation ~~will~~did not have a material impact on our Condensed Consolidated Financial ~~Statements.~~

~~COMPREHENSIVE INCOME (LOSS)~~

~~For~~Statements as of or for the three months ended September 30, 2022, comprehensive loss was $69.3 million as compared to comprehensive income of $69.2 million for the comparable period of 2021. For the nine months ended September 30, 2022, comprehensive loss was $78.1 million as compared to comprehensive income of $193.9 million for the comparable period of 2021. The decrease for the three and nine months ended September 30, 2022, was primarily due to lower net income generated in the current period, combined with higher foreign currency translation losses.March 31, 2023.

RESULTS OF OPERATIONS - BUSINESS SEGMENTS

Specialty Products & Technologies

Our Specialty Products & Technologies segment develops, manufactures and markets dental implant systems, including regenerative solutions, dental prosthetics and associated treatment software and technologies, as well as orthodontic bracket systems, aligners and lab products.

Specialty Products & Technologies Selected Financial Data

Three Months Ended Nine Months Ended
($ in millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
Sales $ 395.4 $ 363.4 $ 1,200.2 $ 1,116.1
Operating profit $ 62.3 $ 61.5 $ 206.6 $ 211.6
Operating profit as a % of sales 15.8 % 16.9 % 17.2 % 19.0 %


	Three Months Ended
($ in millions)	March 31, 2023			April 1, 2022
Sales	$	410.0		$	397.1
Operating profit	$	71.1		$	70.3
Operating profit as a % of sales	17.3		%	17.7		%

Sales and Core Sales Growth

% Change Three Month Period Ended September 30, 2022 vs. Comparable 2021 Period % Change Nine Month Period Ended September 30, 2022 vs. Comparable 2021 Period
Total sales growth (GAAP) 8.8 % 7.5 %
Plus the impact of:
Acquisitions (2.3) % (0.7) %
Currency exchange rates 4.8 % 3.9 %
Core sales growth (non-GAAP) 11.3 % 10.7 %


	% Change Three Month Period Ended March 31, 2023 vs. Comparable 2022 Period
Total sales growth (GAAP)	3.2	%
Plus the impact of:
Acquisitions	(2.2)	%
Currency exchange rates	2.0	%
Core sales growth (non-GAAP)	3.0	%

Sales

Sales and core sales growth for the three months ended ~~September 30, 2022~~March 31, 2023 increased ~~8.8%~~3.2% and ~~11.3%~~3.0%, respectively, compared to the comparable period in ~~2021.~~2022. Sales growth increased by 3.6% due to higher volume, ~~and stronger demand for implant systems and orthodontic products.~~

~~Sales and core sales growth for the nine months ended September 30, 2022 increased 7.5% and 10.7%, respectively, compared to the comparable period in 2021. Sales growth increased~~partially offset by ~~9.8% due to higher volume as demand improved for implant systems and orthodontic products, combined with an increase~~a decrease in sales price which impacted sales growth by ~~0.9%~~0.6% on a period-over-period basis.

Sales in developed markets, for both the three and nine months ended September 30, 2022, increased primarily due to an increase in North America and Western Europe and well as sales in emerging markets, primarily due to reduced impact of COVID-19 measures. Additionally, sales for ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023 were also positively impacted by the acquisition of Osteogenics.

Sales in developed markets, for the three months ended March 31, 2023, increased primarily due to an increase in Western and Eastern Europe, partially offset by a slight decrease in North America.

Operating Profit

Operating profit margin was ~~15.8%~~17.3% for the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to an operating profit margin of ~~16.9%~~17.7% for the comparable period of ~~2021.~~2022. The decrease in operating profit margin for the three month period was primarily due to ~~higher sales and marketing expenses, and an~~ unfavorable product mix, ~~partially offset by higher sales volume.~~

~~Operating profit margin was 17.2% for the nine months ended September 30, 2022, as compared to an operating profit margin of 19.0% for the comparable period of 2021. The decrease~~investments in ~~operating profit margin for the nine month period was primarily due to higher sales and marketing expenses, compensation spend, unfavorable product mix,~~our long-term growth initiatives, and the ~~unfavorable price variances due in part to~~impact of inflation, partially offset by ~~higher~~an increase in sales volume and ~~price.~~by period-over-period savings associated with productivity improvements.

EQUIPMENT & CONSUMABLES

Our Equipment & Consumables segment develops, manufactures and markets dental equipment and supplies used in dental offices, including digital imaging systems, software and other visualization/magnification systems; endodontic systems and related consumables; restorative materials and instruments, rotary burs, impression materials, bonding agents and cements and infection prevention products.

Equipment & Consumables Selected Financial Data
Three Months Ended Nine Months Ended
($ in millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
Sales $ 235.7 $ 243.9 $ 708.1 $ 741.0
Operating profit $ 44.7 45.4 $ 120.4 $ 131.0
Operating profit as a % of sales 19.0 % 18.6 % 17.0 % 17.7 %


	Three Months Ended
($ in millions)	March 31, 2023			April 1, 2022
Sales	$	217.2		$	234.3
Operating profit	$	32.5		45.5
Operating profit as a % of sales	15.0		%	19.4		%

Sales and Core Sales Growth
% Change Three Month Period Ended September 30, 2022 vs. Comparable 2021 Period % Change Nine Month Period Ended September 30, 2022 vs. Comparable 2021 Period
Total sales growth (GAAP) (3.4) % (4.4) %
Plus the impact of:
Acquisition (4.2) % (2.1) %
Currency exchange rates 2.9 % 2.3 %
Core sales growth (non-GAAP) (4.7) % (4.2) %


	% 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)	%

Sales

Sales and core sales growth for the three months ended ~~September 30, 2022~~March 31, 2023 decreased ~~3.4%~~7.3% and ~~4.7%~~11.7%, respectively, compared to the comparable period in ~~2021. Price positively~~2022. A decrease in sales volume negatively impacted sales growth by ~~3.8%~~13.9%, partially offset by the positive impact of a 2.2% price increase on a period-over-period ~~basis, while sales decreased by 8.5% due to lower demand for our imaging products, offset by higher demand for our infection prevention products and restorative and endodontic solutions.~~

basis. Sales ~~and core sales growth~~ for the ~~nine~~three months ended ~~September 30, 2022 decreased 4.4% and 4.2%, respectively, compared to the comparable period in 2021. Price~~March 31, 2023, were positively impacted ~~sales growth~~ by ~~3.3% on a period-over-period basis, while sales decreased by 7.5% due to lower demand for~~the acquisition of our ~~imaging products and infection prevention products, offset by increased demand in our restorative and endodontic solutions.~~Intraoral Scanner Business.

Sales in developed markets, for ~~both~~the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, decreased primarily due to a decrease in North America, ~~and~~ Western Europe, ~~combined with the decrease in sales in~~and emerging markets. ~~Sales for both the three and nine months ended September 30, 2022, were positively impacted by the acquisition of our new Intraoral Scanner Business.~~

Operating Profit

Operating profit margin was ~~19.0%~~15.0% for the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to an operating profit margin of ~~18.6%~~19.4% for the comparable period of 2021. The increase in operating profit margin was primarily due to higher sales price, favorable product mix and favorable incremental period-over-period savings associated with productivity improvements, partially offset by lower sales volumes, higher restructuring spend, amortization of intangibles, and the unfavorable incremental material price variances due in part to inflation.

~~Operating profit margin was 17.0% for the nine months ended September 30, 2022, as compared to an operating profit margin of 17.7% for the comparable period of 2021.~~2022. The decrease in operating profit margin was primarily due to lower sales volume, ~~higher compensation and restructuring spend,~~increased amortization of ~~intangibles,~~intangible assets, and the ~~unfavorable~~impact of incremental material price ~~variances~~cost due in part to inflation, partially offset by ~~favorable product mix,~~ higher ~~prices and favorable incremental period-over-period savings associated with productivity improvements.~~sales price.

LIQUIDITY AND CAPITAL RESOURCES

We assess our liquidity in terms of our ability to generate cash to fund our operating and investing activities. We continue to generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity are sufficient to allow us to manage our capital structure on a short-term and long-term basis and continue investing in existing businesses and consummating strategic acquisitions.

Following is an overview of our cash flows and ~~liquidity:~~liquidity, which includes the cash flows of the KaVo Treatment Unit and Instrument Business for the three months ended April 1, 2022.

3932

Overview of Cash Flows and Liquidity

Nine Months Ended
September 30, 2022 October 1, 2021
Net cash provided by operating activities $ 72.4 $ 225.6
Acquisitions, net of cash acquired $ (696.2) $ —
Payments for additions to property, plant and equipment (58.8) (46.0)
Proceeds from sales of property, plant and equipment 1.6 11.6
Proceeds from sale of KaVo treatment unit and instrument business 59.8 —
Proceeds from the settlement of derivative financial instruments 55.9 8.5
All other investing activities, net (18.5) —
Net cash used in investing activities $ (656.2) $ (25.9)
Proceeds from revolving line of credit 124.0 —
Repayment of revolving line of credit (54.0) —
Proceeds from borrowings 0.3 —
Repayment of borrowings (0.5) (475.7)
Payment of debt issuance and other deferred financing costs — (2.3)
Proceeds from stock option exercises 19.9 16.0
Tax withholding payment related to net settlement of equity awards (8.9) (6.1)
All other financing activities — 0.7
Net cash provided by (used in) financing activities $ 80.8 $ (467.4)


	Three Months Ended
	March 31, 2023		April 1, 2022


















Net cash provided by operating activities	$	3.1	$	3.5


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

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

All other investing activities, net	(4.5)		(5.1)
Net cash (used in) provided by investing activities	$	(22.0)	$	5.1




Proceeds from borrowings	$	—	$	0.3
Repayment of borrowings	—		(0.5)

Proceeds from stock option exercises	4.6		13.1
Tax withholding payment related to net settlement of equity awards	(6.1)		(7.6)

Net cash (used in) provided by financing activities	$	(1.5)	$	5.3

Operating Activities

Cash flows from operating activities can fluctuate significantly from period-to-period due to working capital needs and the timing of payments for income taxes, restructuring activities, pension funding and other items impacting reported cash flows.

Net cash provided by operating activities was ~~$72.4~~$3.1 million during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to net cash provided by operating activities of ~~$225.6~~$3.5 million for the comparable period of ~~2021,~~2022, primarily due to lower net income, ~~and higher~~offset by lower overall net cash payments during ~~2022, including higher incentive compensation payout and transaction costs associated with acquisitions.~~the three months ended March 31, 2023.

Investing Activities

Cash flows relating to investing activities consist primarily of cash used for capital expenditures and acquisitions. Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development and improving information technology systems.

Net cash used in investing activities was ~~$656.2~~$22.0 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to net cash ~~used in~~provided by investing activities of ~~$25.9~~$5.1 million for the comparable period in ~~2021,~~2022, primarily due to the ~~acquisitions of Osteogenics and the Intraoral Scanner Business, and higher purchases of property, plant and equipment, partially offset by proceeds from~~prior year period containing the earnout ~~and~~from the sale of the KaVo Treatment Unit and ~~Instrument~~Instruments Business ~~and~~for the ~~settlement of derivative financial instruments.~~three months ended March 31, 2023.

Financing Activities and Indebtedness

Cash flows relating to financing activities consist primarily of cash flows associated with debt borrowings and the issuance of common stock.

Net cash provided by financing activities was $80.8 million during the nine months ended September 30, 2022 and consists of $124.0 million of proceeds from borrowings under the Revolving Credit Facility, offset by repayments of $54.0 million, and other net proceeds from equity awards. Net cash used in financing activities was ~~$467.4~~$1.5 million during the ~~nine~~three months ended ~~October 1, 2021 and is~~March 31, 2023 as compared to net cash provided by financing activities of $5.3 million for the comparable period of 2022 primarily ~~related~~due to a reduction in cash flows associated with the ~~February 2021 repayment~~issuance of ~~$472.0 million of the Euro Term Loan Facility in connection with an amendment to the Credit Agreement.~~common stock.

For a description of our outstanding debt as of ~~September 30, 2022,~~March 31, 2023, refer to Note 13 to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

We intend to satisfy any short-term liquidity needs that are not met through operating cash flow and available cash primarily through our ~~Revolving Credit Facility.~~revolving credit facility.

Cash and Cash Requirements

As of ~~September 30, 2022,~~March 31, 2023, we held ~~$568.5~~$585.2 million of cash and cash equivalents that were held on deposit with financial institutions. Of this amount, ~~$91.6~~$91.3 million was held within the United States and ~~$476.9~~$493.9 million was held outside of the United States. We will continue to have cash requirements to support working capital needs, capital expenditures and acquisitions, pay interest and service debt, pay taxes and any related interest or penalties, fund our restructuring activities ~~and pension plans~~ as required and support other business needs. We generally intend to use available cash, internally generated funds and our revolving credit facility ~~available cash and internally generated funds~~ to meet these cash requirements, but in the event that additional liquidity is required, particularly in connection with acquisitions, we may need to enter into new credit facilities or access the capital markets. We may also access the capital markets from time to time to take advantage of favorable interest rate environments or other market conditions. However, there is no guarantee that we will be able to obtain alternative sources of financing on commercially reasonable terms or at all. See “Item 1A. Risk Factors—Risks Related to Our Business” in our ~~2021~~2022 10-K.

Generally, cash and cash equivalents held in these financial institutions may be withdrawn or redeemed at face value, and therefore minimal credit risk exists with respect to them. Nonetheless, deposits with these financial institutions exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits or similar limits in foreign jurisdictions, to the extent such deposits are even insured in such foreign jurisdictions. While we monitor on a systematic basis the cash and cash equivalent balances in the operating accounts and adjust the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit our funds fails or is subject to other adverse conditions in the financial or credit markets. To date, we have experienced no loss of principal or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our cash and cash equivalents will not be affected if the financial institutions where we hold our cash and cash equivalents fail.

While repatriation of some cash held outside the United States may be restricted by local laws, most of our foreign cash could be repatriated to the United States. Following enactment of the Tax Cut and Jobs Act of 2017 (“TCJA”) and the associated transition tax, in general, repatriation of cash to the United States can be completed with no incremental U.S. tax; however, repatriation of cash could subject us to non-U.S. jurisdictional taxes on distributions. The cash that our non-U.S. subsidiaries hold for indefinite reinvestment is generally used to finance foreign operations and investments, including acquisitions. The income taxes, if any, applicable to such earnings including basis differences in our foreign subsidiaries are not readily determinable.

As of ~~September 30, 2022,~~March 31, 2023, we believe that we have sufficient sources of liquidity to satisfy our cash needs over the next 12 months and beyond, including our cash needs in the United States.

There were no material changes to our contractual obligations during the three ~~and nine~~ months ended September 30, 2022. For a description of our remaining contractual obligations, such as leases see “Item 8. Financial Statements and Supplementary Data - Notes to Condensed Consolidated Financial Statements - “Note 8. Leases” in the 2021 10-K.March 31, 2023.

Off-Balance Sheet Arrangements

There were no material changes to the Company’s off-balance sheet arrangements described in the ~~2021~~2022 10-K that would have a material impact on the Company’s Condensed Consolidated Financial Statements.

Debt Financing Transactions

For a description of our outstanding debt as of ~~September 30, 2022,~~March 31, 2023, refer to Note 13 to our Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

~~Sale of the KaVo Treatment Unit and Instrument Business~~

~~The proceeds from the Divestiture will allow us to continue our product portfolio transformation with a disciplined approach to capital deployment.~~

CRITICAL ACCOUNTING ESTIMATES

There were no material changes to our critical accounting estimates described in the ~~2021~~2022 10-K that have had a material impact on our Condensed Consolidated Financial Statements.

The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict. If actual results are not consistent with management’s estimates and assumptions used for valuation allowances, contingencies, potential impairments, revenue recognition and income taxes, the related account balances may be overstated or understated and a charge or credit to net income may be required.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Quantitative and qualitative disclosures about market risk appear in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Qualitative and Quantitative Disclosures About Market Risk,” in our ~~2021~~2022 10-K. There were no material changes to this information reported in our ~~2021~~2022 10-K during the quarter ended ~~September 30, 2022.~~March 31, 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer, and Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our President and Chief Executive Officer, and Senior Vice President and Chief Financial Officer, have concluded that, as of the end of such period, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~September 30, 2022~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4235

PART II. Other Information

Item 1. Legal Proceedings

There have been no material changes to legal proceedings from our ~~2021~~2022 10-K. For additional information regarding legal proceedings, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Legal Proceedings” in our ~~2021~~2022 10-K.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Part I, “Item 1A. Risk Factors,” of our 2022 Form 10-

K. You should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our ~~2021~~2022 10-K, ~~and in Part II, “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended April 1, 2022 (“Q1 10-Q”),~~ which could materially affect our business, financial position, or future results of operations. The risks described in our ~~2021~~2022 10-K, ~~and Q1 10-Q,~~ are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial position, or future results of operations.

~~The risk factor set forth below updates, and should be read together with, the risk factors described in our 2021 10-K and Q1 10-Q.~~

~~Conditions in the global economy, the particular markets we serve and the financial markets may adversely affect our business and financial statements.~~

Our business is sensitive to general economic conditions. Sustained inflation, rising interest rates, slower global economic growth, continuing supply chain disruptions, geopolitical tensions, actual or anticipated default on sovereign debt, volatility in the currency and credit markets, high levels of unemployment or underemployment, reduced levels of capital expenditures, changes or anticipation of potential changes in government trade, fiscal, tax and monetary policies, changes in capital requirements for financial institutions, government deficit reduction and budget negotiation dynamics, sequestration, austerity measures, social or political unrest, the impact of the COVID-19 pandemic and other challenges that affect the global economy may adversely affect us and our distributors, customers and suppliers. Our success also depends upon the continued strength of the markets we serve. In many markets, dental reimbursement is largely out of pocket for the consumer and thus utilization rates can vary significantly depending on economic growth. While many of our products are considered necessary by patients regardless of the economic environment, certain products and services that support discretionary dental procedures may be susceptible to changes in economic conditions. The above factors can have the effect of:

•reducing demand for our products and services (in this Quarterly Report, references to products and services also includes software), limiting the financing available to our customers and suppliers, increasing order cancellations and resulting in longer sales cycles and slower adoption of new technologies;

•~~increasing the difficulty in collecting accounts receivable and the risk of excess and obsolete inventories;~~

•~~increasing price competition in our served markets;~~

•~~supply interruptions, which could disrupt our ability to produce our products;~~

•~~increasing the risk of impairment of goodwill and other long-lived assets, and the risk that we may not be able to fully recover the value of other assets such as real estate and tax assets;~~

•increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations which, in addition to increasing the risks identified above, could result in preference actions against us; and

•~~adversely impacting market sizes.~~

There can be no assurance that the capital markets will be available to us or that the lenders participating in our credit facilities will be able to provide financing in accordance with their contractual obligations. If growth in the global economy or in any of the markets we serve slows for a significant period, if there is significant deterioration in the global economy or such markets or if improvements in the global economy do not benefit the markets we serve, our business and financial statements could be adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

EXHIBIT INDEX


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)
~~10.3~~10.1*			~~Third Amendment Agreement to the Master Sale and Purchase Agreement, dated as~~Form of ~~July 28, 2022, by and among~~ Envista Holdings Corporation ~~planmeca Verwaltungs GmbH, Germany, and Planmeca Oy.~~
~~10.4~~			~~Fourth Amendment~~Performance Stock Unit Agreement ~~to the Master Sale and Purchase Agreement, dated as of September 30, 2022, by and among Envista Holdings Corporation, planmeca Verwaltungs GmbH, Germany, and Planmeca Oy.~~
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.

4437

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ENVISTA HOLDINGS CORPORATION
Date: ~~November~~May 3, ~~2022~~2023	By:	/s/ Howard H. Yu
		Howard H. Yu
		Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

4538


	Nine Months Ended September 30, 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. (Note 13)	—		(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		—
Common stock-based award activity	—		10.5		—		—		10.5		—
Net income	—		—		47.1		—		47.1		—
Other comprehensive loss	—		—		—		(72.5)		(72.5)		—
Balance, July 1, 2022	1.6		3,678.4		610.3		(274.3)		4,016.0		—
Common stock-based award activity	—		11.2		—		—		11.2		—
Net income	—		—		47.6		—		47.6		—
Other comprehensive loss	—		—		—		(116.9)		(116.9)		—
Balance, September 30, 2022	$	1.6	$	3,689.6	$	657.9	$	(391.2)	$	3,957.9	$	—


	Nine Months Ended October 1, 2021
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Envista Equity		Noncontrolling Interests
Balance, December 31, 2020	$	1.6	$	3,684.4	$	126.4	$	(91.8)	$	3,720.6	$	0.4
Common stock-based award activity	—		6.7		—		—		6.7		—
Net income	—		—		71.7		—		71.7		—
Other comprehensive loss	—		—		—		(52.1)		(52.1)		—
Balance, April 2, 2021	1.6		3,691.1		198.1		(143.9)		3,746.9		0.4
Common stock-based award activity	—		16.5		—		—		16.5		—
Net income	—		—		90.1		—		90.1		—
Other comprehensive income	—		—		—		15.0		15.0		—
Balance, July 2, 2021	1.6		3,707.6		288.2		(128.9)		3,868.5		0.4
Common stock-based award activity	—		9.0		—		—		9.0		—
Net income	—		—		92.9		—		92.9		—
Other comprehensive loss	—		—		—		(23.7)		(23.7)		—
Balance, October 1, 2021	$	1.6	$	3,716.6	$	381.1	$	(152.6)	$	3,946.7	$	0.4


	Three Months Ended September 30, 2022				Three Months Ended October 1, 2021
	Notional Amount		Gain (Loss) Recognized in OCI		Notional Amount		Gain Recognized in OCI

Foreign currency denominated debt	$	203.9	$	12.8	$	241.2	$	5.6
Interest rate contract	—		(0.3)		250.0		1.5
Foreign currency contracts	—		14.4		650.0		14.1
Total	$	203.9	$	26.9	$	1,141.2	$	21.2


	September 30, 2022		December 31, 2021
Senior term loan facility due 2024 ($650.0 aggregate principal amount) (the “Term Loan Facility”), net of deferred debt issuance costs of $1.9 and $2.7, respectively	$	648.1	$	647.3
Senior euro term loan facility due 2024 (€208.0 aggregate principal amount) (the “Euro Term Loan Facility”), net of deferred debt issuance costs of $0.3 and $0.5, respectively	203.5		236.1
Convertible senior notes due 2025 ($517.5 aggregate principal amount), net of deferred debt issuance costs of $8.2 and $8.9, respectively, and unamortized discount of $0.0 and $76.5, respectively	509.3		432.1
Revolving credit facility due 2024 ($750.0 aggregate borrowing capacity) (the Revolving Credit Facility)	70.0		—
Other	—		0.3
Total debt	1,430.9		1,315.8
Less: current portion	(579.3)		(432.4)
Long-term debt	$	851.6	$	883.4


	% Change Three Month Period Ended September 30, 2022 vs. Comparable 2021 Period		% Change Nine Month Period Ended September 30, 2022 vs. Comparable 2021 Period
Total sales growth (GAAP)	3.9	%	2.8	%
Plus the impact of:
Acquisition	(3.1)	%	(1.3)	%

Currency exchange rates	4.1	%	3.2	%
Core sales growth (non-GAAP)	4.9	%	4.7	%