Envista(US:NVST)2023-08-01 16:00PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited Condensed Consolidated Financial Statements for the period ended June 30, 2023, covering balance sheets, operations, cash flows, and notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Unaudited, $ in millions) | | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $1,488.9 | $1,424.6 | | Total assets | $6,607.2 | $6,587.0 | | Total current liabilities | $1,150.8 | $1,236.7 | | Total liabilities | $2,296.2 | $2,380.1 | | Total stockholders' equity | $4,311.0 | $4,206.9 | | Total liabilities and stockholders' equity | $6,607.2 | $6,587.0 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (Unaudited, $ in millions, except per share amounts) | | Three Months Ended June 30, 2023 | Three Months Ended July 1, 2022 | Six Months Ended June 30, 2023 | Six Months Ended July 1, 2022 | | :--- | :--- | :--- | :--- | :--- | | Sales | $662.4 | $645.8 | $1,289.6 | $1,277.2 | | Gross profit | $378.6 | $369.8 | $741.3 | $743.9 | | Operating profit | $78.9 | $65.2 | $151.0 | $156.7 | | Net income | $51.9 | $47.1 | $95.7 | $122.0 | | Earnings - diluted (per share) | $0.29 | $0.26 | $0.54 | $0.68 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Unaudited, $ in millions) | | Six Months Ended June 30, 2023 | Six Months Ended July 1, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $78.2 | $25.7 | | Net cash used in investing activities | $(24.8) | $(586.5) | | Net cash provided by financing activities | $1.1 | $7.1 | | Net change in cash and cash equivalents | $44.8 | $(550.5) | | Ending balance of cash and cash equivalents | $651.7 | $523.1 | Notes to Condensed Consolidated Financial Statements This section details the company's accounting policies and financial statement line items, covering business segments, acquisitions, divestitures, revenue recognition, debt structure, and segment performance - The company operates in two segments: Specialty Products & Technologies (dental implants, orthodontics) and Equipment & Consumables (digital imaging, restorative materials)22 - In 2022, the company acquired Osteogenics for ~$128.2 million and Carestream Dental's Intraoral Scanner Business for ~$580.3 million3334 - The sale of the KaVo Treatment Unit and Instrument Business was completed as of December 31, 2022, resulting in no discontinued operations reported for the periods ended June 30, 20233839 Total Debt Components as of June 30, 2023 ($ in millions) | Debt Component | Amount | | :--- | :--- | | Senior term loan facility due 2024 | $648.8 | | Senior euro term loan facility due 2024 | $226.8 | | Convertible senior notes due 2025 | $511.5 | | Total debt | $1,387.1 | Sales by Segment (Six Months Ended, $ in millions) | Segment | June 30, 2023 | July 1, 2022 | | :--- | :--- | :--- | | Specialty Products & Technologies | $827.0 | $804.8 | | Equipment & Consumables | $462.6 | $472.4 | | Total | $1,289.6 | $1,277.2 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for Q2 and H1 2023, focusing on sales growth, currency impacts, interest costs, segment performance, and liquidity Overview and Key Trends This section outlines the company's global dental product operations, highlighting the negative impact of foreign currency exchange rates and challenges from global economic conditions - For Q2 2023, 52.7% of sales were derived from customers outside the United States110 - Currency exchange rates negatively impacted reported sales by 1.2% for Q2 2023 and 1.4% for H1 2023 compared to the prior year periods112 - The company's growth strategy includes future acquisitions, having completed two in 2022 (Osteogenics and Carestream's Intraoral Scanner Business)118119120 Consolidated Results of Operations This section details consolidated financial performance, noting Q2 2023 sales growth and operating profit increase, H1 2023 sales growth, and the impact of product mix, inflation, and higher interest rates on margins and expenses Core Sales Growth Reconciliation (Non-GAAP) | | % Change Q2 2023 vs Q2 2022 | % Change H1 2023 vs H1 2022 | | :--- | :--- | :--- | | Total sales growth (GAAP) | 2.6% | 1.0% | | Impact of Acquisition | (1.7)% | (2.5)% | | Impact of Currency exchange rates | 1.2% | 1.4% | | Core sales growth (non-GAAP) | 2.1% | (0.1)% | - Gross profit margin for H1 2023 was 57.5%, down from 58.2% in H1 2022, primarily due to unfavorable product mix and inflation130131 - Interest expense for H1 2023 increased by 177.2% to $34.1 million, mainly due to higher interest rates on variable-rate debt127136 Results of Operations - Business Segments This section analyzes segment performance, noting sales growth in Specialty Products & Technologies with margin decline, and sales growth in Equipment & Consumables with margin improvement in Q2 2023 Specialty Products & Technologies Performance (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Sales | $417.0M | $407.7M | +2.3% | | Core Sales Growth | 1.7% | - | - | | Operating Profit Margin | 13.4% | 18.2% | -4.8 p.p. | Equipment & Consumables Performance (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Sales | $245.4M | $238.1M | +3.1% | | Core Sales Growth | 2.9% | - | - | | Operating Profit Margin | 19.7% | 12.7% | +7.0 p.p. | Liquidity and Capital Resources This section assesses the company's strong liquidity, highlighting increased operating cash flow and substantial cash and cash equivalents, deemed sufficient for future funding needs - Net cash from operating activities increased to $78.2 million in H1 2023 from $25.7 million in H1 2022157159 - Net cash used in investing activities was $24.8 million in H1 2023, compared to $586.5 million in H1 2022, which included significant acquisition payments157161 - As of June 30, 2023, the company had $651.7 million in cash and cash equivalents, with $499.3 million held outside the United States165 Quantitative and Qualitative Disclosures About Market Risk This section reports no material changes to the company's market risk disclosures from its Annual Report on Form 10-K for the year ended December 31, 2022 - There were no material changes to the company's market risk disclosures during the quarter ended June 30, 2023174 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The President and CEO, and the SVP and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period175 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting176 PART II. OTHER INFORMATION Legal Proceedings This section reports no material changes to the company's legal proceedings from its 2022 Annual Report on Form 10-K - There have been no material changes to legal proceedings from the 2022 10-K178 Risk Factors This section indicates no material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - There have been no material changes from the risk factors disclosed in the 2022 Form 10-K179 Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds were reported during the period180 Other Information This section discloses that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - During the quarter ended June 30, 2023, none of the Company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"183 Exhibits This section provides an index of exhibits filed with the Form 10-Q, including corporate governance documents, a separation agreement, and CEO/CFO certifications - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act186