ENVISTA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

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

Three Months Ended

April 1, 2022

April 2, 2021

Sales

$          631.4

$           612.6

Cost of sales

257.3

254.2

Gross profit

374.1

358.4

Operating expenses:

     Selling, general and administrative

258.2

237.5

     Research and development

24.4

25.8

Operating profit

91.5

95.1

Nonoperating income (expense):

     Other income

0.3

0.3

     Interest expense, net

(5.9)

(18.0)

Income before income taxes

85.9

77.4

Income tax expense

15.5

15.6

     Income from continuing operations, net of tax

70.4

61.8

     Income from discontinued operations, net of tax

4.5

9.9

Net income

$            74.9

$             71.7

Earnings per share:

     Earnings from continuing operations - basic

$            0.43

$             0.39

     Earnings from continuing operations - diluted

$            0.39

$             0.35

     Earnings from discontinued operations - basic

$            0.03

$             0.06

     Earnings from discontinued operations - diluted

$            0.03

$             0.06

     Earnings - basic

$            0.46

$             0.45

     Earnings - diluted

$            0.42

$             0.41

Average common stock and common equivalent shares outstanding:

     Basic

162.2

160.5

     Diluted

179.8

175.9

ENVISTA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, except share amounts)

As of

April 1, 2022

December 31, 2021

ASSETS

Current assets:

     Cash and cash equivalents

$            1,078.3

$            1,073.6

     Trade accounts receivable, less allowance for credit losses of $20.3 and $20.7,
     respectively

342.6

331.9

     Inventories, net

280.4

263.8

     Prepaid expenses and other current assets

197.4

154.3

     Assets held for sale

10.2

12.2

Total current assets

1,908.9

1,835.8

Property, plant and equipment, net

264.2

264.1

Operating lease right-of-use assets

127.0

128.1

Other long-term assets

174.9

167.8

Goodwill

3,090.5

3,132.0

Other intangible assets, net

1,006.8

1,046.4

Total assets

$            6,572.3

$            6,574.2

LIABILITIES AND EQUITY

Current liabilities:

     Short-term debt

$                507.8

$               432.4

     Trade accounts payable

180.6

185.8

     Accrued expenses and other liabilities

541.4

562.3

     Operating lease liabilities

23.5

23.7

     Liabilities held for sale

2.4

4.0

Total current liabilities

1,255.7

1,208.2

Operating lease liabilities

120.6

120.4

Other long-term liabilities

288.2

304.2

Long-term debt

876.9

883.4

Commitments and contingencies

Stockholders' equity:

     Preferred stock, $0.01 par value, 15.0 million shares authorized; no shares issued or
     outstanding at April 1, 2022 and December 31, 2021

—

—

     Common stock - $0.01 par value, 500.0 million shares authorized; 163.2 million
     shares issued and 162.6 million shares outstanding at April 1, 2022; 162.0 million
     shares issued and 161.6 million outstanding at December 31, 2021

1.6

1.6

     Additional paid-in capital

3,667.9

3,732.6

     Retained earnings

563.2

466.9

     Accumulated other comprehensive loss

(201.8)

(143.5)

Total Envista stockholders' equity

4,030.9

4,057.6

     Noncontrolling interests

—

0.4

Total stockholders' equity

4,030.9

4,058.0

Total liabilities and stockholders' equity

$            6,572.3

$            6,574.2

ENVISTA HOLDINGS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in millions)

Three Months Ended

April 1, 2022

April 2, 2021

Cash flows from operating activities:

     Net income

$              74.9

$              71.7

     Noncash items:

          Depreciation

7.8

10.3

          Amortization

23.5

21.0

          Allowance for credit losses

1.7

2.9

          Stock-based compensation expense

7.5

6.4

          Gain on sale of Kavo treatment unit and instrument business

(6.0)

—

          Restructuring charges

(1.9)

—

          Impairment charges

3.9

1.9

          Amortization of right-of-use assets

6.4

7.2

          Amortization of debt discount and issuance costs

1.0

6.2

     Change in trade accounts receivable

(16.2)

(5.1)

     Change in inventories

(20.3)

(20.4)

     Change in trade accounts payable

(2.5)

(27.6)

     Change in prepaid expenses and other assets

(16.8)

(7.9)

     Change in accrued expenses and other liabilities

(51.5)

(37.9)

     Change in operating lease liabilities

(8.0)

(12.1)

Net cash provided by operating activities

3.5

16.6

Cash flows from investing activities:

     Payments for additions to property, plant and equipment

(19.8)

(8.3)

     Proceeds from sale of Kavo treatment unit and instrument business

30.0

—

     All other investing activities, net

(5.1)

2.8

Net cash provided by (used in) investing activities

5.1

(5.5)

Cash flows from financing activities:

     Payment of debt issuance and other deferred financing costs

—

(0.4)

     Proceeds from borrowings

0.3

—

     Repayment of borrowings

(0.5)

(475.5)

     Proceeds from stock option exercises

13.1

5.3

     Tax withholding payment related to net settlement of equity awards

(7.6)

(5.2)

     All other financing activities

—

6.2

Net cash provided by (used in) financing activities

5.3

(469.6)

Effect of exchange rate changes on cash and cash equivalents

(9.2)

10.8

Net change in cash and cash equivalents

4.7

(447.7)

Beginning balance of cash and cash equivalents

1,073.6

888.9

Ending balance of cash and cash equivalents

$         1,078.3

$            441.2

ENVISTA HOLDINGS CORPORATION

SUMMARY OF FINANCIAL METRICS (Unaudited)

($ in millions, except per share amounts)

GAAP

Three Months Ended

April 1, 2022

April 2, 2021

Gross Profit

$            374.1

$            358.4

Operating Profit From Continuing Operations

$              91.5

$              95.1

Net Income From Continuing Operations

$              70.4

$              61.8

Diluted EPS From Continuing Operations

$              0.39

$              0.35

Operating Cash Flow

$                3.5

$              16.6

NON-GAAP *

Three Months Ended

April 1, 2022

April 2, 2021

Adjusted Gross Profit

$            373.8

$            361.3

Adjusted Operating Profit

$            116.5

$            123.5

Adjusted Net Income

$              84.9

$              85.4

Adjusted Diluted EPS

$              0.47

$              0.49

Adjusted EBITDA

$            124.6

$            132.3

Free Cash Flow

$             (16.3)

$                8.3

* For information on non-GAAP measures see "Reconciliation of GAAP to Non-GAAP Financial Measures" below. Also see
the accompanying "Notes to Reconciliation of GAAP to Non-GAAP Financial Measures."

ENVISTA HOLDINGS CORPORATION

SEGMENT INFORMATION (Unaudited)

($ in millions)

Three Month Period Ended

April 1, 2022

April 2, 2021

Sales

Specialty Products & Technologies

$            397.1

$            366.5

Equipment & Consumables

234.3

246.1

Total

$            631.4

$            612.6

Operating Profit (Loss)

Specialty Products & Technologies

$              70.3

$              78.4

Equipment & Consumables

45.5

45.0

Other

(24.3)

(28.3)

Total

$              91.5

$              95.1

Operating Margins

Specialty Products & Technologies

17.7%

21.4%

Equipment & Consumables

19.4%

18.3%

Total

14.5%

15.5%

ENVISTA HOLDINGS CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)

($ in millions)

Adjusted Gross Profit and Adjusted Gross Margin

Three Months Ended

April 1, 2022

April 2, 2021

Gross Profit

$            374.1

$            358.4

     Restructuring costs and asset impairments ^A

(0.3)

2.9

Adjusted Gross Profit

$            373.8

$            361.3

Gross Margin (Gross Profit / Sales)

59.2%

58.5%

Adjusted Gross Margin (Adjusted Gross Profit / Sales)

59.2%

59.0%

Adjusted Operating Profit

Three Month Period Ended

April 1, 2022

April 2, 2021

Consolidated

Operating Profit

$            91.5

$            95.1

     Amortization of acquisition-related and other intangible assets

23.5

20.6

     Restructuring costs and asset impairments ^A

3.7

7.8

     Contingent loss reserves ^B

1.0

—

     International tax credit ^C

(6.5)

—

     Transaction costs ^D

3.3

—

Adjusted Operating Profit

$          116.5

$          123.5

Adjusted Operating Profit as a % of Sales

18.5%

20.2%

Specialty Products & Technologies

Operating Profit

$            70.3

$            78.4

     Amortization of acquisition-related and other intangible assets

14.7

14.9

     Restructuring costs and asset impairments ^A

4.0

3.4

     International tax credit ^C

(1.7)

—

     Contingent loss reserve ^B

1.0

—

Adjusted Operating Profit

$            88.3

$            96.7

Adjusted Operating Profit as a % of Sales

22.2%

26.4%

Equipment & Consumables

Operating Profit

$            45.5

$            45.0

     Amortization of acquisition-related and other intangible assets

8.8

5.7

     Restructuring costs and asset impairments ^A

(0.9)

1.9

     International tax credit ^C

(4.8)

—

Adjusted Operating Profit

$            48.6

$            52.6

Adjusted Operating Profit as a % of Sales

20.7%

21.4%

See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures

Adjusted Net Income

Three Months Ended

April 1, 2022

April 2, 2021

Net Income From Continuing Operations

$                 70.4

$                 61.8

     Amortization of acquisition-related and other intangible assets

23.5

20.6

     Restructuring costs and asset impairments ^A

3.7

7.8

     Contingent loss reserves ^B

1.0

—

     International tax credit ^C

(6.5)

—

     Transaction costs ^D

3.3

—

     Non-cash interest expense - convertible senior notes ^E

—

4.6

     Tax effect of adjustments reflected above ^F

(5.7)

(7.7)

     Discrete tax adjustments and other tax-related adjustments ^G

(4.8)

(1.7)

Adjusted Net Income

$                 84.9

$                 85.4

Adjusted Diluted Earnings Per Share

Three Months Ended

April 1, 2022

April 2, 2021

Diluted Earnings From Continuing Operations Per Share

$                 0.39

$                 0.35

     Amortization of acquisition-related and other intangible assets

0.13

0.12

     Restructuring costs and asset impairments ^A

0.02

0.04

     Contingent loss reserves ^B

0.01

—

     International tax credit ^C

(0.04)

—

     Transaction costs ^D

0.02

—

     Non-cash interest expense - convertible senior notes ^E

—

0.03

     Tax effect of adjustments reflected above ^F

(0.03)

(0.04)

     Discrete tax adjustments and other tax-related adjustments ^G

(0.03)

(0.01)

Adjusted Diluted Earnings Per Share

$                 0.47

$                 0.49

Adjusted EBITDA

Three Months Ended

April 1, 2022

April 2, 2021

Net Income From Continuing Operations

$                 70.4

$                 61.8

     Interest expense, net

5.9

18.0

     Income taxes

15.5

15.6

     Depreciation

7.8

8.5

     Amortization of acquisition-related and other intangible assets

23.5

20.6

     Restructuring costs and asset impairments ^A

3.7

7.8

     Contingent loss reserves ^B

1.0

—

     International tax credit ^C

(6.5)

—

     Transaction costs ^D

3.3

—

Adjusted EBITDA

$               124.6

$               132.3

See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures

Core Sales Growth ¹ 

Consolidated

Total sales growth

3.1%

Plus the impact of:

     Currency exchange rates

2.3%

Core sales growth

5.4%

Specialty Products & Technologies                              

Total sales growth

8.3%

Plus the impact of:

     Currency exchange rates

2.9%

Core sales growth

11.2%

Equipment & Consumables

Total sales growth

(4.8)%

Plus the impact of:

     Currency exchange rates

1.5%

Core sales growth

(3.3)%

¹

We use the term "core sales" to refer to GAAP revenue excluding (1) sales from acquired businesses recorded prior to the first anniversary of the acquisition ("acquisitions"), (2) sales from discontinued products and (3) the impact of currency translation. Sales from discontinued products includes major brands or products that Envista has made the decision to discontinue as part of a portfolio restructuring. Discontinued brands or products consist of those which Envista (1) is no longer manufacturing, (2) is no longer investing in the research or development of, and (3) expects to discontinue all significant sales within one year from the decision date to discontinue. The portion of sales attributable to discontinued brands or products is calculated as the net decline of the applicable discontinued brand or product from period-to-period. The portion of GAAP revenue attributable to currency exchange rates is calculated as the difference between (a) the period-to-period change in sales and (b) the period-to-period change in sales after applying current period foreign exchange rates to the prior year period. We use the term "core sales growth" to refer to the measure of comparing current period core sales with the corresponding period of the prior year.

Reconciliation of Operating Cash Flows to Free Cash Flow

Three Months Ended

April 1, 2022

April 2, 2021

Net Operating Cash Provided by (Used in) Investing Activities

$                   5.1

$                  (5.5)

Net Operating Cash Provided by (Used in) Financing Activities

$                   5.3

$              (469.6)

Net Operating Cash Provided by Operating Activities

$                   3.5

$                 16.6

     Less: payments for additions to property, plant and equipment (capital expenditures)

(19.8)

(8.3)

Free Cash Flow

$                (16.3)

$                   8.3

See the accompanying Notes to Reconciliation of GAAP to Non-GAAP Financial Measures

ENVISTA HOLDINGS CORPORATION
NOTES TO RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)

^A

We exclude costs incurred pursuant to discrete restructuring plans that are fundamentally different (in terms of the size, strategic nature and planning requirements, as well as the inconsistent frequency, of such plans) from the ongoing productivity improvements that result from application of the Envista Business System. These restructuring plans are incremental to the operating activities that arise in the ordinary course of our business and we believe are not indicative of Envista's ongoing operating costs in a given period.

^B

Represents accruals for certain legal matters.

^C

The international tax credit relates to a ruling from the Brazilian Supreme Court.

^D

These transaction costs are primarily related to the acquisition of Carestream Dental's intraoral scanner business.

^E

Non-cash interest expense represents accretion of the debt discount associated with the convertible senior notes due 2025. We adopted Accounting Standards Update 2020-06 on January 1, 2022 and as a result there is no longer a debt discount that requires amortization.

^F

This line item reflects the aggregate tax effect of all pretax adjustments reflected in the preceding line items of the table using each adjustment's applicable tax rate, including the effect of interim tax accounting requirements of Accounting Standards Codification Topic 740 Income Taxes.

^G

The discrete tax matters relate primarily to excess tax benefits from stock-based compensation, changes in estimates associated with prior period uncertain tax positions and audit settlements, tax benefits resulting from a change in law, and changes in determination of realization of certain deferred tax assets.

Statement Regarding Non-GAAP Measures

Each of the non-GAAP measures set forth above should be considered in addition to, and not as a replacement for or superior to, the comparable GAAP measure, and may not be comparable to similarly titled measures reported by other companies. Management believes that these measures provide useful information to investors by offering additional ways of viewing Envista Holdings Corporation's ("Envista" or the "Company") results that, when reconciled to the corresponding GAAP measure, help our investors to:

• with respect to Adjusted Gross Profit, Adjusted Operating Profit, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted EBITDA, understand the long-term profitability trends of Envista's business and compare Envista's profitability to prior and future periods and to Envista's peers;
   
• with respect to Core Sales, identify underlying growth trends in Envista's business and compare Envista's revenue performance with prior and future periods and to Envista's peers;
   
• with respect to Adjusted EBITDA, help investors understand operational factors associated with a company's financial performance because it excludes the following from consideration:  interest, taxes, depreciation, amortization, and infrequent or unusual losses or gains such as goodwill impairment charges or nonrecurring and restructuring charges. Management uses Adjusted EBITDA, as a supplemental measure for assessing operating performance in conjunction with related GAAP amounts.  In addition, Adjusted EBITDA is used in connection with operating decisions, strategic planning, annual budgeting, evaluating Company performance and comparing operating results with historical periods and with industry peer companies; and
   
• with respect to Free Cash Flow (the "FCF Measure"), understand Envista's ability to generate cash without external financings, strengthen its balance sheet, invest in its business and grow its business through acquisitions and other strategic opportunities (although a limitation of free cash flow is that it does not take into account the Company's debt service requirements and other non-discretionary expenditures, and as a result the entire Free Cash Flow amount is not necessarily available for discretionary expenditures).

Management uses these non-GAAP measures to measure the Company's operating and financial performance.

The items excluded from the non-GAAP measures set forth above have been excluded for the following reasons:

• With respect to Adjusted Gross Profit, Adjusted Operating Profit, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted EBITDA:
   
  • We exclude the amortization of acquisition-related and other intangible assets because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions we consummate. While we have a history of significant acquisition activity, we do not acquire businesses on a predictable cycle, and the amount of an acquisition's purchase price allocated to intangible assets and related amortization term are unique to each acquisition and can vary significantly from acquisition to acquisition.  Exclusion of this amortization expense facilitates more consistent comparisons of operating results over time between our newly-acquired and long-held businesses, and with both acquisitive and non-acquisitive peer companies.  We believe, however, that it is important for investors to understand that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized.
     
  • With respect to the other items excluded from Adjusted Gross Profit, Adjusted Net Income, Adjusted Operating Profit, Adjusted Diluted Earnings Per Share and Adjusted EBITDA, we exclude these items because they are of a nature and/or size that occur with inconsistent frequency, occur for reasons that may be unrelated to Envista's commercial performance during the period and/or we believe that such items may obscure underlying business trends and make comparisons of long-term performance difficult.
• With respect to core sales, we exclude (1) the effect of acquisitions and divested product lines because the timing, size, number and nature of such transactions can vary significantly from period-to-period and between us and our peers, which we believe may obscure underlying business trends and make comparisons of long-term performance difficult, (2) sales from discontinued products because discontinued products do not have a continuing contribution to operations and management believes that excluding such items provides investors with a means of evaluating our on-going operations and facilitates comparisons to our peers, and (3) the impact of currency translation because it is not under management's control, is subject to volatility and can obscure underlying business trends.
   
• With respect to the FCF Measure, we adjust for payments for additions to property, plant and equipment (net of the proceeds from capital disposals) to demonstrate the amount of operating cash flow for the period that remains after accounting for the Company's capital expenditure requirements.