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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
OR
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
nvst-20220930_g1.jpg
ENVISTA HOLDINGS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware83-2206728
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
200 S. Kraemer Blvd., Building E92821-6208
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 classTrading symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueNVSTNew 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 28, 2022, was 163,045,022.




TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
($ in millions, except share amounts)
As of
September 30, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$568.5 $1,073.6 
Trade accounts receivable, less allowance for credit losses of $16.8 and $20.7, respectively
392.2 331.9 
Inventories, net291.3 263.8 
Prepaid expenses and other current assets114.0 154.3 
Assets held for sale 12.2 
Total current assets1,366.0 1,835.8 
Property, plant and equipment, net277.2 264.1 
Operating lease right-of-use assets132.1 128.1 
Other long-term assets173.2 167.8 
Goodwill3,399.6 3,132.0 
Other intangible assets, net1,063.8 1,046.4 
Total assets$6,411.9 $6,574.2 
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt$579.3 $432.4 
Trade accounts payable190.0 185.8 
Accrued expenses and other liabilities462.5 562.3 
Operating lease liabilities26.5 23.7 
Liabilities held for sale 4.0 
Total current liabilities1,258.3 1,208.2 
Operating lease liabilities123.4 120.4 
Other long-term liabilities220.7 304.2 
Long-term debt851.6 883.4 
Commitments and contingencies
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 
Additional paid-in capital3,689.6 3,732.6 
Retained earnings657.9 466.9 
Accumulated other comprehensive loss(391.2)(143.5)
Total Envista stockholders’ equity3,957.9 4,057.6 
Noncontrolling interests 0.4 
Total stockholders’ equity3,957.9 4,058.0 
Total liabilities and stockholders’ equity$6,411.9 $6,574.2 
See the accompanying Notes to the Condensed Consolidated Financial Statements.
1


ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($ and shares in millions, except per share amounts)
 Three Months EndedNine Months Ended
 September 30, 2022October 1, 2021September 30, 2022October 1, 2021
Sales$631.1 $607.3 $1,908.3 $1,857.1 
Cost of sales266.4 251.0 799.7 773.8 
Gross profit364.7 356.3 1,108.6 1,083.3 
Operating expenses:
Selling, general and administrative264.2 250.6 801.9 747.5 
Research and development26.0 24.0 75.5 75.7 
Operating profit74.5 81.7 231.2 260.1 
Nonoperating income (expense):
Other income0.3 0.2 0.9 0.8 
Interest expense, net(11.6)(12.0)(23.9)(43.6)
Income before income taxes63.2 69.9 208.2 217.3 
Income tax expense (benefit)13.6 (10.3)43.7 (3.7)
Income from continuing operations, net of tax 49.6 80.2 164.5 221.0 
(Loss) income from discontinued operations, net of tax (Note 3)(2.0)12.7 5.1 33.7 
Net income$47.6 $92.9 $169.6 $254.7 
Earnings per share:
Earnings from continuing operations - basic$0.30 $0.50 $1.01 $1.37 
Earnings from continuing operations - diluted$0.28 $0.45 $0.92 $1.25 
(Loss) earnings from discontinued operations - basic$(0.01)$0.08 $0.03 $0.21 
(Loss) earnings from discontinued operations - diluted$(0.01)$0.07 $0.03 $0.19 
Earnings - basic$0.29 $0.58 $1.04 $1.58 
Earnings - diluted$0.27 $0.52 $0.95 $1.43 *
Average common stock and common equivalent shares outstanding:
Basic163.1 161.5 162.7 161.1 
Diluted176.9 178.1 178.4 177.5 
* 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.
2


ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
($ in millions)
Three Months EndedNine Months Ended
September 30, 2022October 1, 2021September 30, 2022October 1, 2021
Net income$47.6 $92.9 $169.6 $254.7 
Other comprehensive (loss) income, net of income taxes:
Foreign currency translation adjustments(116.6)(25.0)(249.1)(64.3)
Cash flow hedge adjustments(0.2)1.1 1.7 3.6 
Pension plan adjustments(0.1)0.2 (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 
See the accompanying Notes to the Condensed Consolidated Financial Statements.
3



ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
 ($ in millions)
Nine Months Ended September 30, 2022
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated 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, 20221.6 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, 20221.6 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, 20221.6 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 $— 

4


Nine Months Ended October 1, 2021
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated 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, 20211.6 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, 20211.6 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.

5


ENVISTA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($ in millions)
 Nine Months Ended
 September 30, 2022October 1, 2021
Cash flows from operating activities:
Net income $169.6 $254.7 
Noncash items:
Depreciation23.9 29.4 
Amortization78.2 62.6 
Allowance for credit losses3.8 4.2 
Stock-based compensation expense23.1 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 charges5.5 0.3 
Impairment charges5.8 9.4 
Fair value of acquisition-related inventory7.7  
Amortization of right-of-use assets17.7 21.3 
Amortization of debt discount and issuance costs3.0 17.6 
Change in trade accounts receivable(76.5)(15.1)
Change in inventories(35.9)(67.1)
Change in trade accounts payable11.3 (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 activities72.4 225.6 
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 equipment1.6 11.6 
Proceeds from sale of KaVo treatment unit and instrument business, net59.8  
Proceeds from the settlement of derivative financial instruments55.9 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 credit124.0  
Repayment of revolving line of credit(54.0) 
Proceeds from borrowing0.3  
Repayment of borrowing(0.5)(475.7)
Payment of debt issuance and other deferred financing costs (2.3)
Proceeds from stock option exercises19.9 16.0 
Tax withholding payment related to net settlement of equity awards(8.9)(6.1)
6


All other financing activities 0.7 
Net cash provided by (used in) financing activities80.8 (467.4)
Effect of exchange rate changes on cash and cash equivalents(2.1)17.6 
Net change in cash and cash equivalents(505.1)(250.1)
Beginning balance of cash and cash equivalents1,073.6 888.9 
Ending balance of cash and cash equivalents$568.5 $638.8 
Supplemental data:
Cash paid for interest$21.1 $26.1 
Cash paid for taxes$80.2 $65.6 
ROU assets obtained in exchange for operating lease obligations$29.6 $24.9 
See the accompanying Notes to the Condensed Consolidated Financial Statements.
7


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 and December 31, 2021, 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 month periods ended September 30, 2022 and October 1, 2021. 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, included in the Annual Report on Form 10-K filed by the Company with the SEC on February 24, 2022.

As discussed in Note 3, Discontinued Operations, on December 31, 2021, the Company completed the sale 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 reported amounts for the KaVo Treatment Unit and Instrument Business have been reclassified to discontinued operations for all periods presented. All segment information and descriptions exclude the KaVo Treatment Unit and Instrument Business.

Risks and Uncertainties

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

During the three and nine months ended September 30, 2022, notwithstanding improvement in many markets in which the Company operates 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 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.

8


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, 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 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to 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 ASU is effective for public entities through December 31, 2022 and the adoption did not have an impact on the Company’s Condensed Consolidated Financial Statements.

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 ended September 30, 2022, the Company completed the following acquisitions:

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 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.

9


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. 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
Assets acquired:
   Cash$2.1 $2.7 
   Accounts receivable2.5 0.1 
   Inventories13.3 6.1 
   Intangible assets53.0 129.8 
   Property, plant and equipment 0.3 
   Prepaids and Other Current Assets1.3  
   Goodwill77.5 370.6 
   Non-current deferred tax asset 98.5 
   Operating lease right-of-use assets2.6 0.9 
   Other long-term assets4.9 0.2 
       Total assets acquired157.2 609.2 
Liabilities assumed:
   Accounts payable (4.1)(0.5)
   Accrued expenses and other liabilities (2.6)(27.9)
   Non-current deferred tax liability(14.4) 
   Other long-term liabilities(5.8) 
   Operating lease liabilities(2.1)(0.5)
       Total liabilities assumed(29.0)(28.9)
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.

10


NOTE 3. DISCONTINUED OPERATIONS
On December 31, 2021, the Company completed the sale of 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. 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.

For the three and nine months ended September 30, 2022, the Divestiture continued to meet the criteria to be classified 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 discontinued operations in its accompanying Condensed Consolidated Statements of Income and Condensed Consolidated Balance Sheets 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.

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 
11



The operating results of the Divestiture are reflected in the Condensed Consolidated Statements of Income within income from discontinued operations, net of tax as follows ($ in millions):
 Three Months EndedNine Months Ended
 September 30, 2022October 1, 2021September 30, 2022October 1, 2021
Sales$2.8 $102.5 $11.7 $302.0 
Cost of sales2.1 57.2 9.1 174.4 
Gross profit0.7 45.3 2.6 127.6 
Operating expenses:
Selling, general and administrative1.1 25.2 3.2 70.4 
Research and development 3.8  12.5 
Operating (loss) profit(0.4)16.3 (0.6)44.7 
Income tax expense 3.6  11.0 
(Loss) income from discontinued operations(0.4)12.7 (0.6)33.7 
(Loss) gain on sale of discontinued operations, net of tax(1.6) 5.7  
Net (loss) income from discontinued operations$(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 Months Ended
September 30, 2022October 1, 2021
Cash flows from operating activities
Depreciation and amortization1
$ $5.6 
Cash flows from investing activities:
Capital expenditures$ $4.2 
1 Depreciation and amortization were no longer recognized once the business was classified as discontinued operations as of August 27, 2021.

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.

12


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

Balance at December 31, 2021$20.7 
Foreign currency translation(1.5)
Provision for credit losses3.8 
Write-offs charged against the allowance(3.3)
Recoveries(2.9)
Balance at September 30, 2022$16.8 

NOTE 5. INVENTORIES
The classes of inventory are summarized as follows ($ in millions):
September 30, 2022December 31, 2021
Finished goods$234.9 $214.3 
Work in process26.7 22.0 
Raw materials87.3 88.3 
Reserve for inventory obsolescence(57.6)(60.8)
Total$291.3 $263.8 

NOTE 6. PROPERTY, PLANT AND EQUIPMENT
The classes of property, plant and equipment are summarized as follows ($ in millions):
September 30, 2022December 31, 2021
Land and improvements$10.4 $10.7 
Buildings and improvements155.2 168.7 
Machinery, equipment and other assets353.2 354.5 
Construction in progress69.3 45.6 
Gross property, plant and equipment588.1 579.5 
Less: accumulated depreciation(310.9)(315.4)
Property, plant and equipment, net$277.2 $264.1 

NOTE 7. GOODWILL
The following is a rollforward of the Company’s goodwill by segment ($ in millions):
Specialty Products & TechnologiesEquipment & ConsumablesTotal
Balance at December 31, 2021$2,029.7 $1,102.3 $3,132.0 
Acquisitions77.5 370.6 448.1 
Foreign currency translation(126.2)(54.3)(180.5)
Balance at September 30, 2022$1,981.0 $1,418.6 $3,399.6 

13


NOTE 8. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities were as follows ($ in millions):
September 30, 2022December 31, 2021
CurrentNoncurrentCurrentNoncurrent
Compensation and benefits$145.1 $16.2 $188.9 $17.9 
Restructuring-related employee severance, benefits and other17.6  21.9  
Pension benefits5.6 37.3 5.6 41.7 
Taxes, income and other30.4 116.6 48.1 201.4 
Contract liabilities71.4 8.9 60.1 5.1 
Sales and product allowances81.9 1.1 75.4 1.2 
Loss contingencies8.0 29.1 8.4 30.3 
Derivative financial instruments  19.6  
Other102.5 11.5 134.3 6.6 
Total$462.5 $220.7 $562.3 $304.2 

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 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 agreements to exchange fixed-rate payments in one currency for fixed-rate payments in another currency. The Company maintained cross-currency swap derivative contracts with respect to its $650.0 million senior unsecured term loan facility. These contracts effectively converted the $650.0 million senior unsecured term loan facility to an obligation denominated in euros and partially offset the impact of changes in currency rates on foreign currency denominated net investments. During the three months ended September 30, 2022, 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. The changes in the fair value of these instruments were 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 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. 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). Any ineffective portions of the cash flow 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 in the Company’s Condensed Consolidated Statements of Income consistent with the classification of interest expense attributable to the underlying debt.
14


The following table summarizes the notional values as of September 30, 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, 2022 and October 1, 2021 ($ in millions):

Three Months Ended
September 30, 2022
Three Months Ended
October 1, 2021
Notional AmountGain (Loss) Recognized in OCINotional AmountGain Recognized in OCI
Foreign currency denominated debt$203.9 $12.8 $241.2 $5.6 
Interest rate contract (0.3)250.01.5
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 AmountGain Recognized in OCINotional AmountGain Recognized in OCI
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