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What changed in Envista Holdings Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Envista Holdings Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+398 added−487 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in Envista Holdings Corp's 2023 10-K

398 paragraphs added · 487 removed · 332 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

119 edited+10 added−79 removed73 unchanged
Biggest changeSpecialty Products & Technologies Equipment & Consumables Total Year ended December 31, 2022 Geographical region: North America $ 711.1 $ 655.3 $ 1,366.4 Western Europe 388.9 121.1 510.0 Other developed markets 91.0 38.6 129.6 Emerging markets 407.6 155.5 563.1 Total $ 1,598.6 $ 970.5 $ 2,569.1 Year ended December 31, 2021 Geographical region: North America $ 668.9 $ 659.3 $ 1,328.2 Western Europe 366.6 125.9 492.5 Other developed markets 98.2 41.2 139.4 Emerging markets 374.1 174.7 548.8 Total $ 1,507.8 $ 1,001.1 $ 2,508.9 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.
Biggest changeSpecialty Products & Technologies Equipment & Consumables Total Year ended December 31, 2023 Geographical region: North America $ 702.0 $ 610.5 $ 1,312.5 Western Europe 447.7 121.7 569.4 Other developed markets 90.4 36.9 127.3 Emerging markets 402.3 155.0 557.3 Total $ 1,642.4 $ 924.1 $ 2,566.5 Year ended December 31, 2022 Geographical region: North America $ 711.1 $ 655.3 $ 1,366.4 Western Europe 388.9 121.1 510.0 Other developed markets 91.0 38.6 129.6 Emerging markets 407.6 155.5 563.1 Total $ 1,598.6 $ 970.5 $ 2,569.1 2 Acquisitions and Divestitures Our growth strategy contemplates future investments and acquisitions and we continually evaluate potential investments and acquisitions that either strategically fit with our existing portfolio or expand our portfolio into new and attractive business areas.
Any devices we manufacture and distribute are subject to pervasive and continuing regulation by the FDA and certain state agencies. These include product listing and establishment registration requirements, which help facilitate FDA inspections and other regulatory actions. As a medical device manufacturer, all of our manufacturing facilities are subject to inspection on a routine basis by the FDA.
Any medical devices we manufacture and distribute are subject to pervasive and continuing regulation by the FDA and certain state agencies. These include product listing and establishment registration requirements, which help facilitate FDA inspections and other regulatory actions. As a medical device manufacturer, all of our manufacturing facilities are subject to inspection on a routine basis by the FDA.
We have invested significant resources in the following areas which we believe will help drive long-term market leadership: • Digital Workflow : We have developed our Diagnostic and Treatment Planning Software, DTX, to meet the growing demands for digital connectivity of dental practices. 5 ▪ Specialty Products & Technologies : We have launched several new products in our Orthodontic Solutions business over the past few years, which have contributed meaningfully to our overall sales in the segment.
We have invested significant resources in the following areas which we believe will help drive long-term market leadership: • Digital Workflow : We have developed our Diagnostic and Treatment Planning Software, DTX, to meet the growing demands for digital connectivity of dental practices. ▪ Specialty Products & Technologies : We have launched several new products in our Orthodontic Solutions business over the past few years, which have contributed meaningfully to our overall sales in the segment.
Risk Factors—Risks Related to Laws and Regulations.” Legal Proceedings We are, from time to time, subject to a variety of litigation and other legal and regulatory proceedings and claims incidental to our business. Please refer to Note 15 to our audited consolidated financial statements in this Annual Report for more information. Available Information We maintain an internet website at www.envistaco.com.
Risk Factors—Risks Related to Laws and Regulations.” Legal Proceedings We are, from time to time, subject to a variety of litigation and other legal and regulatory proceedings and claims incidental to our business. Please refer to Note 15 to our Consolidated Financial Statements in this Annual Report for more information. Available Information We maintain an internet website at www.envistaco.com.
We believe future growth of the dental products industry will be driven by an aging population, the current under penetration of dental procedures, especially in emerging markets, improving access to complex procedures due to increasing technological innovation, an increasing demand for cosmetic dentistry, and growth of DSOs, which are expected to drive increasing penetration and access to care globally.
In addition, we believe future growth of the dental products industry will be driven by an aging population, the current under penetration of dental procedures - especially in emerging markets, improving access to complex procedures due to increasing technological innovation, an increasing demand for cosmetic dentistry, and growth of DSOs, which are expected to drive increasing penetration and access to care globally.
We believe strong industry fundamentals and new product solution introductions in this segment will continue to drive substantial growth for us. Implant-Based Tooth Replacements We are a world leader in the field of innovative implant-based tooth replacements offering a full portfolio of solutions that enable dentists to deliver single-tooth to full-mouth restorations.
We believe strong industry fundamentals and new product solution introductions in this segment will continue to drive substantial growth for us. 3 Implant-Based Tooth Replacements We are a world leader in the field of innovative implant-based tooth replacements offering a full portfolio of solutions that enable dentists to deliver single-tooth to full-mouth restorations.
Risk Factors—Risks Related to Laws and Regulations.” Healthcare Reform In the U.S. and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system. For example, there have been numerous political and legal efforts to expand, repeal, replace or modify the U.S.
Risk Factors—Risks Related to Laws and Regulations.” 13 Healthcare Reform In the U.S. and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system. For example, there have been numerous political and legal efforts to expand, repeal, replace or modify the U.S.
Risk Factors—Risks Related to Laws and Regulations.” 16 Medical Device Regulations Most of our products are classified as medical devices and are subject to restrictions under domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders, including, but not limited to, the U.S. Food, Drug, and Cosmetic Act (the “FDCA”).
Risk Factors—Risks Related to Laws and Regulations.” Medical Device Regulations Most of our products are classified as medical devices and are subject to restrictions under domestic and foreign laws, rules, regulations, self-regulatory codes, circulars and orders, including, but not limited to, the U.S. Food, Drug, and Cosmetic Act (the “FDCA”).
Our new product development activities are complemented by externally sourcing technologies through a broad network of partnerships, collaborations, and investments involving third-party research institutions, universities and innovative start-up companies. ◦ Experienced management team with extensive dental industry experience .
Our new product development activities are complemented by externally sourcing technologies through a broad network of partnerships, collaborations, and investments involving third-party research institutions, universities and innovative start-up companies. ◦ Experienced management team with extensive industry experience .
In addition, the Secretary of HHS is required to perform periodic audits to ensure covered entities (and their business associates, as that term is defined under HIPAA) comply with the applicable HIPAA requirements, increasing the likelihood that a HIPAA violation will result in an enforcement action. 19 In addition to the federal HIPAA regulations, most states also have laws that protect the confidentiality and security of sensitive personal information, and a minority of states explicitly include health information within the scope of the law.
In addition, the Secretary of HHS is required to perform periodic audits to ensure covered entities (and their business associates, as that term is defined under HIPAA) comply with the applicable HIPAA requirements, increasing the likelihood that a HIPAA violation will result in an enforcement action. 14 In addition to the federal HIPAA regulations, most states also have laws that protect the confidentiality and security of sensitive personal information, and a minority of states explicitly include health information within the scope of the law.
Our broad product offering positions us particularly well to serve the needs of DSOs, which have been one of the fastest growing segments of our customer base. ◦ Global commercial reach .
Our broad product offering positions us particularly well to serve the needs of DSOs, which have been one of the fastest growing segments of our customer base. 7 ◦ Global commercial reach .
We believe this will enable significant clinical workflow efficiencies and more predictable clinical outcomes. Everyday Dental Solutions Our Everyday Dental business markets a broad offering of general dental products that are used in dental offices, clinics and hospitals. The business was primarily established through the acquisition of Sybron Dental Specialties in 2006, as well as numerous other acquisitions.
We believe this will enable significant clinical workflow efficiencies and more predictable clinical outcomes. Consumables Solutions Our Consumables business markets a broad offering of general dental products that are used in dental offices, clinics and hospitals. The business was primarily established through the acquisition of Sybron Dental Specialties in 2006, as well as numerous other acquisitions.
Although in the aggregate our intellectual property is important to our operations, we do not consider any single patent, trademark, copyright, trade secret or license to be of material importance to any segment or to the business as a whole. Our products and technologies are protected by over 1,900 granted patents.
Although in the aggregate our intellectual property is important to our operations, we do not consider any single patent, trademark, copyright, trade secret or license to be of material importance to any segment or to the business as a whole. Our products and technologies are protected by over 1,700 granted patents.
Spark is a clear aligner system designed for mild to complex malocclusion that is made with TruGEN™ and TruGEN XR™, the latest generation of aligner material. It is designed to deliver higher sustained force retention for efficiency and a high level of transparency for aesthetics. Spark aligners are also designed with polished, scalloped edges to enhance patient comfort.
Our clear aligner system, Spark, is designed for mild to complex malocclusion and is made with TruGEN™ and TruGEN XR™, the latest generation of aligner material. It is designed to deliver higher sustained force retention for efficiency and a high level of transparency for aesthetics. Spark aligners are also designed with polished, scalloped edges to enhance patient comfort.
We intend to drive shareholder value by deploying capital to acquire or invest in other businesses that strategically fit into or extend our product offering into new or attractive adjacent markets - the recent Intraoral Scanner Business and Osteogenics acquisitions are examples of this strategy in action.
We intend to drive shareholder value by deploying capital to acquire or invest in other businesses that strategically fit into or extend our product offering into new or attractive adjacent markets - the Intraoral Scanner Business and Osteogenics acquisitions in 2022 are examples of this strategy in action.
We utilize a number of techniques to address potential disruption in and other risks relating to our supply chain, including in certain cases the use of safety stock, alternative materials and qualification of multiple supply sources. During 2022, we had no raw material shortages that had a material effect on our business.
We utilize a number of techniques to address potential disruption in and other risks relating to our supply chain, including in certain cases the use of safety stock, alternative materials and qualification of multiple supply sources. During 2023, we had no raw material shortages that had a material effect on our business.
We must also comply with post-market surveillance regulations, including medical device reporting, or MDR, requirements which require that we review and report to the FDA any incident in which our products may have caused or contributed to a death or serious injury.
We must also comply with post-market surveillance regulations, including medical device reporting (“MDR”), requirements which require that we review and report to the FDA any incident in which our products may have caused or contributed to a death or serious injury.
We believe enhanced connectivity amongst different types of dental imaging/diagnostic equipment and integration with downstream treatment planning and treatment delivery solutions will further improve dental workflows and lead to better treatment outcomes. We believe digitalization and connectivity will continue to drive high growth in this segment.
We believe enhanced connectivity amongst different types of dental imaging/diagnostic equipment and integration with downstream treatment planning and treatment delivery solutions will further improve dental workflows and lead to better treatment outcomes. We believe digitalization and connectivity will continue to drive high growth in this area.
We believe large multi-category manufacturers that provide a broad portfolio of equipment and consumables have more recession-resilient product portfolios and can gain meaningful competitive advantage over their peers as larger customers increasingly seek package deals and consolidate suppliers, and digital dentistry adoption creates links between different products in the dental practitioners’ offices.
We believe large multi-category manufacturers that provide a broad range of equipment and consumables have more recession-resilient portfolios and can gain meaningful competitive advantage over their peers as larger customers increasingly seek package deals and consolidate suppliers, and digital dentistry adoption creates links between different products in the dental practitioners’ offices.
We are also subject to the General Data Protection Regulation (“GDPR”), the primary data protection law in the European Union and European Economic Area (collectively, the EU), as well as associated EU member state data protection laws and the UK GDPR in the United Kingdom.
We are also subject to the General Data Protection Regulation (“GDPR”), the primary data protection law in the European Economic Area, including the European Union (collectively, the “EU”), as well as associated EU member state data protection laws and the UK GDPR in the United Kingdom.
Communication is at the core of our engagement efforts and we host monthly CEO Forums for all employees, to keep our employees informed and to provide opportunities for employees globally to ask senior management questions. Community Our employees have a long history of providing support and care in our communities, donating time, resources, and funds to local causes.
Communication is at the core of our engagement efforts and we host numerous CEO Forums for all employees, to keep our employees informed and to provide opportunities for employees globally to ask questions to senior management. 10 Community Our employees have a long history of providing support and care in our communities, donating time, resources, and funds to local causes.
Risk Factors—Risks Related to Laws and Regulations.” 20 Export/Import Compliance We are required to comply with various U.S. export/import control and economic sanctions laws, including the regulations administered by the U.S.
Risk Factors—Risks Related to Laws and Regulations.” 15 Export/Import Compliance We are required to comply with various U.S. export/import control and economic sanctions laws, including the regulations administered by the U.S.
One of our brands, Nobel Biocare is the pioneer of implant science grounded in clinical research and has introduced a number of solutions that have become widely adopted in the premium implant industry. Our comprehensive product offering includes dental implant systems, guided surgery systems, biomaterials, and prefabricated and custom-built prosthetics.
One of our brands, Nobel Biocare, is the pioneer of implant science grounded in clinical research and has introduced a number of innovations that have become widely adopted in the implant industry. Our comprehensive product offering includes dental implant systems, guided surgery systems, biomaterials, and prefabricated and custom-built prosthetics.
We have invested in our Specialty Products & Technology segment, adding manufacturing capacity and personnel to these businesses, with plans for further investment in 2023.
We have invested in our Specialty Products & Technology segment, adding manufacturing capacity and personnel to these businesses, with plans for further investment in 2024.
Our internet site and the information contained on or connected to that site are not incorporated by reference into this Form 10-K. 21
Our internet site and the information contained on or connected to that site are not incorporated by reference into this Form 10-K. 16
We believe these investments better position us to effectively meet the needs of our customers, particularly the growing DSO segment, which values a comprehensive, end-to-end product offering with the ability to roll out new technologies and procedure-focused trainings at scale. ◦ “ Maintain and Pursue Long-Term Market Leadership ”: As we seek to continue to improve our business and drive increased cash flow, we expect to strategically invest in innovation in order to better serve our customers and accelerate organic growth.
We believe these investments better position us to effectively meet the needs of our customers, particularly the growing Dental Service Organization (“DSO”) segment, which values a comprehensive, end-to-end product offering with the ability to roll out new technologies and procedure-focused trainings at scale. 5 ◦ “ Maintain and Pursue Long-Term Market Leadership ”: As we seek to continue to improve our business and drive increased cash flow, we expect to strategically invest in innovation in order to better serve our customers and accelerate organic growth.
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 products; restorative materials, rotary burs, impression materials, bonding agents and cements; and infection prevention products. In 2022, our Equipment & Consumables segment generated $1.0 billion of sales.
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 products; restorative materials, rotary burs, impression materials, bonding agents and cements; and infection prevention products. In 2023, our Equipment & Consumables segment generated $0.9 billion of sales.
The following table presents the Company’s revenues disaggregated by geographical region for the years ended December 31, 2022 and 2021 ($ in millions).
The following table presents the Company’s revenues disaggregated by geographical region for the years ended December 31, 2023 and 2022 ($ in millions).
We believe the long history and leadership of our well-known brands in the dental products industry enhances our connections with both patients and providers and supports our strong market position. ◦ Attractive portfolio with leadership in key attractive segments .
We believe the heritage and leadership of our well-known brands in the dental products industry enhances our connections with both patients and providers and supports our strong market position. ◦ Attractive portfolio with leadership in key attractive segments .
Our diversified portfolio of solutions covers a broad range of dentists' clinical needs for diagnosing, treating, and preventing dental conditions as well as improving the aesthetics of the human smile. We offer comprehensive solutions to support implant-based tooth replacements, orthodontic treatments, digital imaging and diagnostics.
Our diversified portfolio of solutions covers a broad range of dentists' clinical needs for diagnosing, treating, and preventing dental conditions as well as improving the aesthetics of the human smile. We offer comprehensive solutions to support implant-based tooth replacements, orthodontic treatments and diagnostic solutions.
Our business is operated through two segments: Specialty Products & Technologies, which is comprised of our Implant-Based Tooth Replacement and Orthodontic Solutions businesses, and Equipment & Consumables , which is comprised of our Imaging & Diagnostic Solutions and Everyday Dental businesses.
Our business is operated through two segments: Specialty Products & Technologies, which is comprised of our Implant-Based Tooth Replacement and Orthodontic Solutions businesses, and Equipment & Consumables , which is comprised of our Diagnostic Solutions and Consumables businesses.
While the U.S. represents a significant portion of the global dental products industry, we have also been focused on building significant scale in emerging markets. Prevalence and penetration of treatments is largely tied to socio-economic factors such as availability and affordability of care.
While developed markets represent a significant portion of the global dental products industry, we have also been focused on building significant scale in emerging markets. Prevalence and penetration of treatments is largely tied to socio-economic factors such as availability and affordability of care.
We conduct research and development activities for the purpose of designing and developing new products and applications that address customer needs and emerging trends, as well as enhancing the functionality, effectiveness, ease of use and reliability of our existing products.
We conduct R&D activities for the purpose of designing and developing new products and applications that address customer needs and emerging trends, as well as enhancing the functionality, effectiveness, ease of use and reliability of our existing products.
Since 2020, we have expanded capacity for our Spark clear aligners and added over 1,000 new employees to our Orthodontic Solutions business. Our R&D expenditures in our Implant-Based Tooth Replacement business accelerated the development of new implant systems such as N1.
Since 2020, we have expanded capacity for our Spark clear aligners and added over 1,000 new employees to our Orthodontic Solutions business. Our research and development (“R&D”) expenditures in our Implant-Based Tooth Replacement business accelerated the development of new implant systems such as N1.
One customer, Henry Schein, Inc. (“Henry Schein”), accounted for approximately 11% of our sales for 2022, 12% of our sales for 2021 and 11% of our sales for 2020. Other than Henry Schein, no single customer accounted for more than 10% of combined sales in 2022, 2021, or 2020.
(“Henry Schein”), accounted for approximately 10% of our sales for 2023, 11% of our sales for 2022 and 12% of our sales for 2021. Other than Henry Schein, no single customer accounted for more than 10% of combined sales in 2023, 2022, or 2021.
Most of our sales in non-U.S. markets are made by our subsidiaries located outside the U.S., though we also sell directly from the U.S. into non-U.S. markets through various representatives and distributors and, in some cases, directly.
Most of our sales in non-U.S. markets are made by our subsidiaries located outside the U.S., though we also sell directly from the U.S. into non-U.S. markets through various representatives and distributors and, in some cases, directly. In countries with low sales volumes, we generally sell through representatives and distributors.
For additional information regarding sales, operating profit and identifiable assets by segment, please refer to Note 23 in our audited consolidated financial statements included elsewhere in this Annual Report. 2022 2021 2020 Specialty Products & Technologies 62% 60% 58% Equipment & Consumables 38% 40% 42% Specialty Products & Technologies Our Specialty Products & Technologies segment, including our Nobel Biocare and Ormco brands, 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.
For additional information regarding sales, operating profit and identifiable assets by segment, please refer to Note 23 in our Consolidated Financial Statements included elsewhere in this Annual Report. 2023 2022 2021 Specialty Products & Technologies 64% 62% 60% Equipment & Consumables 36% 38% 40% 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.
We typically market these products directly to end-users through our commercial organization, and 89% of our 2022 sales for this segment were direct sales. In 2022, our Specialty Products & Technologies segment generated $1.6 billion of sales, representing year-over-year sales and core sales increase of 6.0% and 9.1%, respectively.
We typically market these products directly to end-users through our commercial organization, and 88% of our 2023 sales for this segment were direct sales. In 2023, our Specialty Products & Technologies segment generated $1.6 billion of sales, representing year-over-year sales and core sales increase of 2.7% and 2.9%, respectively.
For a discussion of the environmental laws and regulations that our operations, products and services are subject to and other environmental contingencies, please refer to Note 15 to our audited consolidated financial statements included in this Annual Report as well as the discussion above relating to dental amalgam.
For a discussion of the environmental laws and regulations that our operations, products and services are subject to and other environmental contingencies, please refer to Note 15 to our Consolidated Financial Statements included in this Annual Report.
Further, there are state laws that require medical device manufacturers to comply with the voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; state and local laws requiring the registration of sales representatives; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. 18 For a discussion of risks related to regulation by the FDA and comparable agencies of other countries, and the other regulatory regimes referenced above, please refer to “Item 1A.
Further, there are state laws that require medical device manufacturers to comply with the voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; state and local laws requiring the registration of sales representatives; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Most of our Class II and certain of our Class I devices are marketed pursuant to 510(k) pre-marketing clearances. The FDA also enforces additional regulations regarding the safety of X-ray emitting devices that we currently market.
Our products are either classified as Class I or Class II devices in the U.S. Most of our Class II and certain of our Class I devices are marketed pursuant to 510(k) pre-marketing clearances. The FDA also enforces additional regulations regarding the safety of X-ray emitting devices that we currently market.
In 2022, 45% of segment sales were derived from North America, 24% from Western Europe, 6% from other developed markets, and 25% from emerging markets. Sales of consumables, services and spare parts comprised 94% of segment sales in 2022.
In 2023, 43% of segment sales were derived from North America, 27% from Western Europe, 6% from other developed markets, and 24% from emerging markets. Sales of consumables, services and spare parts comprised 94% of segment sales in 2023.
Risk Factors—Risks Related to Our Business.” Competition Although our businesses generally operate in highly competitive markets, our competitive position cannot be determined accurately in the aggregate or by segment, since none of our competitors offer all of the same product and service lines and serve all of the same markets as we do.
Competition Although our businesses generally operate in highly competitive markets, our competitive position cannot be determined accurately in the aggregate or by segment because none of our competitors offer all of the same product and service lines and serve all of the same markets as we do.
We are one of the largest global dental products companies, with significant market positions in some of the most attractive segments of the dental products industry. We serve more than a million dentists in over 140 countries through one of the largest commercial organizations in the dental products industry and through our dealer partners.
We are one of the largest global dental products companies, with significant market positions in some of the most attractive segments of the dental products industry. We serve dental professionals in over 130 countries through one of the largest commercial organizations in the dental products industry and through our dealer partners.
The rapid adoption of digital technologies in the imaging segment has transformed dental practices and has increased access to care as well as the quality of care delivered to patients.
The rapid adoption of digital technologies within diagnostic solutions has transformed dental practices and has increased access to care as well as the quality of care delivered to patients.
Our acquisition of the Intraoral Scanner Business in April 2022 added intraoral scanners and related software to our Imaging portfolio. 11 The ‘DTX Studio Clinic’ software package is offered on many of our imaging products, allowing dental professionals to store and access a broad variety of clinical patient images (e.g., 2D/3D/IOS/pictures) in one place.
The ‘DTX Studio Clinic’ software package is offered on many of our imaging products, allowing dental professionals to store and access a broad variety of clinical patient images (e.g., 2D/3D/IOS/pictures) in one place.
In 2022, 68% of segment sales were derived from North America, 12% from Western Europe, 4% from other developed markets, and 16% from emerging markets. We distribute our Equipment & Consumables segment products primarily through our channel partners, representing approximately 89% of sales in this segment in 2022.
In 2023, 66% of segment sales were derived from North America, 13% from Western Europe, 4% from other developed markets, and 17% from emerging markets. We distribute our Equipment & Consumables segment products primarily through our channel partners, representing approximately 88% of sales in this segment in 2023.
Core Values We endeavor to embody our values in everything we do and in our various programs and initiatives: • C ustomer Centricity • I nnovation • R espect • C ontinuous Improvement • L eadership Compensation and Benefits Program Our compensation programs and practices are designed to attract employees, motivate and reward performance, drive growth and support retention.
We evaluate and manage risks relating to our human capital strategy as part of our enterprise risk management program. 9 Core Values We endeavor to embody our values in everything we do and in our various programs and initiatives: • C ustomer Centricity • I nnovation • R espect • C ontinuous Improvement • L eadership Compensation and Benefits Program Our compensation programs and practices are designed to attract employees, motivate and reward performance, drive growth and support retention.
In recent years, clear aligners have become an increasingly popular treatment option and are expected to grow at a significantly faster pace than traditional metal wires and brackets.
In recent years, clear aligners have become an increasingly popular treatment option and are expected to grow at a significantly faster pace than traditional metal wires and brackets. Clear aligners are more aesthetically pleasing and clinically proven to be effective for many cases.
Through our Metrex brand, we have a significant position within infection prevention products, which include the CaviWipes and CaviCide TM product lines and are well positioned in both the dental and general medical market segments.
We also produce curing lights and other products including impression materials, burs, and waxes under several brands. Through our Metrex brand, we have a significant position within infection prevention products, which include the CaviWipes and CaviCide TM product lines, and are well positioned in both the dental and general medical market segments.
Complying with the EU MDR required modifications 17 to our quality management systems, additional resources in certain functions, and required and will continue to require updates to technical files, among other changes. Other Healthcare Laws In addition to the U.S.
Complying with the EU MDR and the evolving regulatory regimes in the UK and Switzerland requires modifications to our quality management systems, additional resources in certain functions and updates to technical files, among other changes. 12 Other Healthcare Laws In addition to the U.S.
We also offer a comprehensive education program to fully train our broad range of clinical customers, from clinicians performing basic implant procedures to the most advanced practitioners, with the goal of enhancing patient access to high-quality dental care. Our customers include oral surgeons, prosthodontists and periodontists.
Other well-known brands in our portfolio include Alpha-Bio Tec TM , Implant Direct TM , and NobelProcera TM . We also offer a comprehensive education program to fully train our broad range of clinical customers, from clinicians performing basic implant procedures to the most advanced practitioners, with the goal of enhancing patient access to high-quality dental care.
Going forward, we believe this product segment will continue to grow at a high pace as aesthetics become increasingly important to patients. 6 ◦ Imaging & Diagnostics : Imaging (both x-ray and other visualization solutions) is considered the entry-point for many dental diagnostic exams and subsequent treatments.
Going forward, we believe orthodontic solutions will continue to grow at a fast pace as aesthetics become increasingly important to patients. ◦ Diagnostic Solutions : Imaging (both x-ray and other visualization solutions) is often the first step of many dental exams and therefore serves as the entry-point for many high-value treatments.
The FDA classifies medical devices into one of three classes (Class I, II or III) based on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device’s safety and effectiveness. Our products are either classified as Class I or Class II devices in the U.S.
The type of marketing authorization is generally linked to the classification of the device. The FDA classifies medical devices into one of three classes (Class I, II or III) based on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device’s safety and effectiveness.
In the European Union, our products are subject to the medical device laws of the various member states, which are currently based on a Directive of the European Commission.
In the European Union (“EU”), our products are subject to the medical device laws of the various member states, which for many years were based on Directives of the European Commission.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For a discussion of risks related to our non-U.S. operations and foreign currency exchange, please refer to “Item 1A.
Information about the effects of foreign currency fluctuations on our business is set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For a discussion of risks related to our non-U.S. operations and foreign currency exchange, please refer to “Item 1A.
While both equipment and consumables represent significant expenditures for dental service providers, the sales dynamics for each differ. The sale of equipment depends on technological advancements, dentists’ willingness to invest in new technologies, opening of new offices and replacement demand. On the other hand, consumables are more dependent on patient volume.
The sale of equipment depends on technological advancements, dentists’ willingness to invest in new technologies, opening of new offices and replacement demand. On the other hand, consumables are more dependent on patient volume.
We further support the dental community with leading solutions in restoratives, endodontics, rotary, infection prevention and loupes. We were formed in 2018, as a wholly-owned subsidiary of Danaher Corporation (“Danaher”), to serve as the ultimate parent company of the dental platform of Danaher.
We further support the dental community with leading solutions in restoratives, endodontics, rotary, infection prevention and loupes. We were formed in 2018, as a wholly-owned subsidiary of Danaher Corporation (“Danaher”). In 2019, we completed our initial public offering and separated from Danaher.
We support our employees through a multitude of training and development programs, including training on our EBS and EBS tools through our Envista Business System University, individual development plans (which encourages our employees to take charge of their learning and growth opportunities and provides access to hundreds of online courses), job rotations, and various management trainings.
We support our employees through a multitude of training and development programs, including training on EBS through our Envista Business System University, individual development plans (which encourages our employees to take charge of their learning and growth opportunities), job rotations, and various management trainings. This commitment to our employees’ professional development reflects both our Continuous Improvement and Leadership core values.
The Envista Smile Project’s mission is to collaborate with dental professionals and Envista employee volunteers to donate products, treatment, and oral health education to communities in need around the world.
The Envista Smile Project’s mission is to collaborate with dental professionals and Envista employee volunteers to donate products, treatment, and oral health education to communities in need around the world. The Envista Smile Project’s giving strategy focuses on three areas: mission trips, education, and monetary donations to oral health focused, non-profit organizations.
Our products are marketed under a variety of brands, including Kerr TM , Metrex TM , Total Care, Pentron TM , Optibond TM , Harmonize TM , Sonicfill TM , Sybron Endo TM and CaviWipes TM .
Our products are marketed under a variety of brands, including Kerr TM , Metrex TM , Total Care, Pentron TM , Optibond TM , Harmonize TM , Sonicfill TM , Sybron Endo TM and CaviWipes TM . Our products have strong brand and product recognition across many product categories, including restorative, endodontics, and infection control.
Key Segments Within the Dental Products Industry ◦ Implant-Based Tooth Replacements : The implant industry is significant and enjoys higher margins and growth than the overall dental products market. The U.S. and the Greater China region represent key growth drivers for this industry. In the U.S., implant penetration far lags other developed markets such as Germany, Spain and Italy.
The U.S. and the Greater China region represent key growth drivers for this industry. In the U.S., implant penetration far lags other developed markets such as Germany, Spain and Italy. In China, the prevalence of severe tooth loss is higher than in the U.S., while implant penetration is far below the U.S.
However, the EU has adopted the EU Medical Device Regulation (the “EU MDR”) which imposes stricter requirements for the marketing and sale of medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance. Manufacturers of currently approved medical devices had until May 2021 to meet the requirements of the EU MDR.
However, in May 2017, the EU adopted new, formal regulations to replace such Directives; specifically, the EU Medical Device Regulation (the “EU MDR”) which imposes stricter requirements for the marketing and sale of medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance.
We regularly review our compensation structure to ensure that we remain competitive, reward top performance, as well as to ensure internal equity. We are pleased that we maintained 99% gender pay equity in the U.S. and 99% race/ethnicity pay equity in the U.S. in 2022.
We regularly review our compensation structure to ensure that we remain competitive, reward top performance, as well as to ensure internal equity. We partner with independent third-party experts to conduct annual pay assessments. Our most recent pay equity review demonstrated that we had maintained 99% gender pay equity in the U.S. and 99% race/ethnicity pay equity in the U.S.
We will continue to invest in our global commercial footprint and product innovation to grow our strong position in the Implant and Orthodontics markets, both of which are underpenetrated. ▪ Emerging Markets : We are a leading dental product provider in emerging markets, with R&D, product management, operations, regulatory affairs, sales and marketing, and customer service resources focused on these markets.
We will continue to invest in our global commercial footprint and product innovation to grow our strong position in the Implant and Orthodontics markets, both of which are underpenetrated. ▪ Emerging Markets : We are a leading dental product provider in emerging markets (which we have historically defined as developing markets of the world experiencing 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)) with R&D, product management, operations, regulatory affairs, sales and marketing, and customer service resources focused on these markets.
We expect generally improving economic trends and increased consumer disposable income in emerging markets, as well as advancements in technological innovation that reduces complexity and cost and increases efficiency, will help drive penetration of dental care in these under-served markets.
We expect generally improving economic trends and increased consumer disposable income in emerging markets, as well as advancements in technological innovation that reduces complexity and cost and increases efficiency, will help drive penetration of dental care in these under-served markets. 6 Key Solutions Within the Dental Products Industry ◦ Implant-Based Tooth Replacements : The implant industry is significant and enjoys higher margins and growth than the overall dental products market.
We aspire to help our employees thrive both personally and professionally. As part of these efforts, we strive to embody our core values, offer a competitive compensation and benefits program, foster a community where everyone feels included, respected and engaged, and provide ample professional development opportunities.
As part of these efforts, we strive to embody our core values, offer a competitive compensation and benefits program, foster an inclusive community and provide professional development opportunities.
The table below provides a summary description of select solutions and products offered by our Implant-Based Tooth Replacement business: 9 Our Implant-Based Tooth Replacement brands have a long history of innovation, which include both the first documented case of a titanium implant placement in a human and introduction of the concept of living bone adhering to an artificial implant (known as osseointegration).
Our customers include oral surgeons, prosthodontists and periodontists, prosthodontists, and general dentists. Our Implant-Based Tooth Replacement brands have a long history of innovation, which include both the first documented case of a titanium implant being placed in a human and the introduction of the concept of living bone adhering to an artificial implant (known as osseointegration).
With the Divestiture and the two recent acquisitions, we continue to make significant progress toward our long-term goal of transforming our product portfolio towards higher growth and higher margin segments of dentistry.
With the Divestiture and our recent acquisitions, we continue to make significant progress toward our long-term goal of transforming our product portfolio towards higher growth and higher margin segments of dentistry. Restructuring Activities We implemented significant restructuring activities across our businesses to execute our strategy, streamline operations, take advantage of available capacity and resources and to adjust our cost structure.
We maintain educational and consulting relationships with key experts who assist us in developing new products, new indicated uses for our products and educational programs for health care providers and consumers. We also maintain educational and consulting relationships with dental associations around the world. Research and Development We invest substantially in the development of new products.
In these programs, our employees and/or experts in the respective clinical fields demonstrate the proper use of our products. We maintain educational and consulting relationships with key experts who assist us in developing new products, new indicated uses for our products and educational programs for health care providers and consumers.
Unless an exemption applies, the FDA requires that a manufacturer introducing a new medical device or a new indication for use of an existing medical device obtain either a Section 510(k) premarket notification clearance or a premarket approval (“PMA”) before introducing it into the U.S. market. The type of marketing authorization is generally linked to the classification of the device.
Certain medical device products are also regulated by comparable agencies in non-U.S. countries in which they are produced or sold. 11 Unless an exemption applies, the FDA requires that a manufacturer introducing a new medical device or a new indication for use of an existing medical device obtain either a Section 510(k) premarket notification clearance or a premarket approval (“PMA”) before introducing it into the U.S. market.
Imaging & Diagnostic Solutions Our Imaging & Diagnostic Solutions business is focused on imaging, X-ray, and intraoral scanner solutions used in dental offices, clinics and hospitals.
Sales from consumables, services and spare parts comprised approximately 69% of segment sales in 2023. 4 Diagnostic Solutions Our Diagnostic Solutions business is focused on dental imaging, X-ray, and intraoral scanner solutions used in dental offices, clinics and hospitals.
These customers choose dental products based on the factors described under the section entitled “Business—Competition.” In 2022, we distributed approximately 41% of our products through third-party distributors. Certain highly technical products, such as dental implant systems, orthodontic appliances, dental laboratory equipment and consumables, and endodontic instruments and materials are typically sold directly to dental professionals and dental laboratories.
In 2023, we distributed approximately 40% of our products through third-party distributors. Certain highly technical products, such as dental implant systems, orthodontic appliances, dental laboratory equipment and consumables, and endodontic instruments and materials are typically sold directly to dental professionals and dental laboratories. 8 One customer, Henry Schein, Inc.
Risk Factors—Risks Related to Our Business.” Customer-sponsored research and development was not significant in 2022, 2021 or 2020. Intellectual Property We own numerous patents, trademarks, copyrights, trade secrets and licenses to intellectual property owned by others.
For a discussion of the risks related to the need to develop and commercialize new products and product enhancements, please refer to “Item 1A. Risk Factors—Risks Related to Our Business.” Customer-sponsored R&D was not significant in 2023, 2022 or 2021. Intellectual Property We own numerous patents, trademarks, copyrights, trade secrets and licenses to intellectual property owned by others.
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.
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. On April 20, 2022, we completed the acquisition of Carestream Dental Technology Parent Limited’s (“Carestream Dental”) intraoral scanner business (the “Intraoral Scanner Business”).
Over the past three years, we launched a suite of upgrades to our Spark clear aligner Approver™ software designed to improve the customer experience with flexibility and customization features.
Over the past three years, we have launched a suite of upgrades to our Spark clear aligner Approver™ software designed to improve the customer experience with flexibility and customization features. We have partnered with industry leading intra oral scanner companies, including our own DEXIS IOS scanner, as part of our commitment to making imaging integrations seamless.
For a description of risks related to the regulations that our businesses are subject to, please refer to “Item 1A.
The following sections describe certain significant regulations applicable to our operations. These are not the only regulations that our businesses must comply with. For a description of risks related to the regulations that our businesses are subject to, please refer to “Item 1A.
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 year ended December 31, 2022, we completed two acquisitions.
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. On July 5, 2022, we acquired all of the equity of Osteogenics Biomedical Inc., Allotech LLC and OBI Biologics, Inc. (together "Osteogenics").
In addition to our marketing efforts, as noted above, we conduct significant training and education programs globally for these end-users to enhance patient access to high-quality dental care. In these programs, our employees and/or experts in the respective clinical fields demonstrate the proper use of our products.
While a sizable portion of our sales are derived from distributors, most of our marketing and advertising activities are directed towards the end-users of our products. In addition to our marketing efforts, as noted above, we conduct significant training and education programs globally for these end-users to enhance patient access to high-quality dental care.
No single supplier is material, although for some components that require particular specifications or qualifications there may be a single supplier or a limited number of suppliers that can readily provide such components.
We purchase raw materials from a large number of independent sources around the world. For certain components that require particular specifications or qualifications there may be a single supplier or a limited number of suppliers that can readily provide such components.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations and financial results: • Conditions in the global economy, especially with respect to the particular markets we serve and the volatility of the financial markets may adversely affect our business and financial statements. • International economic, political, legal compliance and business factors could negatively affect our financial statements. • The COVID-19 pandemic has had and could continue to have a material adverse effect on our business and results of operations. • Significant developments or uncertainties stemming from trade policies could adversely affect our business. • Our growth could suffer if the markets into which we sell our products and services decline. • Our financial results are subject to fluctuations in the cost and availability of commodities. • If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market conditions and customer demand, our profitability may suffer. • If we suffer loss to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events, our operations could be seriously harmed. • The manufacture of many of our products is a highly exacting and complex process. • A significant disruption in, or breach in security of, our information technology systems or data or violation of data privacy laws could adversely affect our business, reputation and financial statements. • Data privacy and security laws relating to the handling of personal information (including personal health information) are evolving across the world and may be drafted, interpreted or applied in a manner that results in increased costs, legal claims, fines against us, reputational damage or impedes delivery. • Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products and services based on technological innovation. • Our ability to attract, develop and retain our key personnel is critical to our success • Any inability to consummate acquisitions at our historical rate and at appropriate prices, and to make appropriate investments that support our long-term strategy, could negatively impact our growth rate and stock price. • Our acquisition of businesses, investments, joint ventures and other strategic relationships could negatively impact our financial statements. • The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities. • We may fail to realize the anticipated benefits of the IOS Acquisition. • Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we or our predecessors have sold could adversely affect our financial statements. • Our rebranding of our Imaging Business and China Business will likely involve substantial costs and may not be favorably received by our customers. • Inventories maintained by our distributors and customers may fluctuate from time to time. • We are dependent upon a limited number of distributors for a significant portion of our sales. • If we do not or cannot adequately protect our intellectual property, or if third parties infringe our intellectual property rights, we may suffer competitive injury or expend significant resources enforcing our rights. • Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer significant litigation expenses, losses or licensing expenses or be prevented from selling products or services. • Defects and unanticipated use or inadequate disclosure with respect to our products or services (including software), or allegations thereof, could adversely affect our business, reputation and financial statements. 22 • Our restructuring actions could have long-term adverse effects on our business. • Climate related risks may have an impact on our business. • We have outstanding indebtedness of approximately $1.4 billion as of February 10, 2023, and in the future we may incur additional indebtedness. • We may not be able to generate sufficient cash to service all of our indebtedness. • We may be unable to raise the funds necessary to repurchase the convertible notes for cash following a fundamental change, or to pay any cash amounts due upon conversion. • The conditional conversion feature of the convertible notes, if triggered, may adversely affect our financial condition and operating results. • The capped call transactions may affect the value of the convertible notes and our common stock. • We are subject to counterparty risk with respect to the capped calls transactions. • Our variable rate indebtedness exposes us to interest rate volatility and we may be adversely affected by the anticipated cessation of LIBOR. • The industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs. • We face intense competition. • Changes in governmental regulations may reduce demand for our products or services or increase our expenses. • Certain of our businesses are subject to extensive regulation by the FDA and comparable agencies of other countries. • Off-label marketing or misleading advertising of our products could result in substantial penalties. • Certain modifications to our products may require new 510(k) clearances or other marketing authorizations and may require us to recall or cease marketing our products. • Our operations, products and services expose us to the risk of environmental, health and safety liabilities. • Our businesses are subject to extensive regulation. • The price of our common stock may continue to be volatile. • Certain provisions in our governing documents and of Delaware law may prevent or delay an acquisition of us, which could decrease the trading price of our common stock. • Our governing documents contain exclusive forum provisions for certain types of actions and proceedings. • Conversion of the convertible notes may dilute the ownership interest of our stockholders. • The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could depress the trading price of our common stock and the convertible notes. • We may be required to recognize impairment charges for our goodwill and other intangible assets. • Foreign currency exchange rates may adversely affect our financial statements. • Changes in tax law relating to multinational corporations could adversely affect our tax position. • We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business. • Work stoppages, union and works council campaigns and other labor disputes could adversely impact our productivity and results of operations. • Our reputation, ability to do business and financial statements may be impaired by improper conduct by any of our employees, agents or business partners. 23 Risks Related to Our Business Conditions in the global economy, especially with respect to the particular markets we serve and the volatility of the financial markets may adversely affect our business and financial statements.
Biggest changeRisk Factors Summary The following is a summary of the principal risks that could adversely affect our business, operations and financial results: • Conditions in the global economy, especially with respect to the particular markets we serve and the volatility of the financial markets may adversely affect our business and financial statements. • International economic, political, legal compliance and business factors could negatively affect our financial statements. • Significant developments or uncertainties stemming from trade policies could adversely affect our business. • Our growth could suffer if the markets into which we sell our products and services decline. • Our financial results are subject to fluctuations in the cost and availability of commodities. • If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market conditions and customer demand, our profitability may suffer. • If we suffer loss to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events, our operations could be seriously harmed. • The manufacture of many of our products is a highly exacting and complex process. • A significant disruption in, or breach in security of, our information technology systems or data or violation of data privacy laws could adversely affect our business, reputation and financial statements. • Data privacy and security laws relating to the handling of personal information (including personal health information) are evolving across the world and may be drafted, interpreted or applied in a manner that results in increased costs, legal claims, fines against us, reputational damage or impedes delivery. • Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products and services based on technological innovation. • Our ability to attract, develop and retain our key personnel is critical to our success • Any inability to consummate acquisitions at our historical rate and at appropriate prices, and to make appropriate investments that support our long-term strategy, could negatively impact our growth rate and stock price. • Our acquisition of businesses, investments, joint ventures and other strategic relationships could negatively impact our financial statements. • The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities. • Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we or our predecessors have sold could adversely affect our financial statements. • Inventories maintained by our distributors and customers may fluctuate from time to time. • We are dependent upon a limited number of distributors for a significant portion of our sales. • If we do not or cannot adequately protect our intellectual property, or if third parties infringe our intellectual property rights, we may suffer competitive injury or expend significant resources enforcing our rights. • Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer significant litigation expenses, losses or licensing expenses or be prevented from selling products or services. • Defects and unanticipated use or inadequate disclosure with respect to our products or services (including software), or allegations thereof, could adversely affect our business, reputation and financial statements. • Our restructuring and site consolidation actions could have long-term adverse effects on our business. • Climate related risks and regulations may have an impact on our business. • We have outstanding indebtedness of approximately $1.5 billion as of February 9, 2024, and in the future we may incur additional indebtedness. • We may not be able to generate sufficient cash to service all of our indebtedness. 17 • We may be unable to raise the funds necessary to repurchase the convertible notes for cash following a fundamental change, or to pay any cash amounts due upon conversion. • The conditional conversion feature of the convertible notes, if triggered, may adversely affect our financial condition and operating results. • The capped call transactions may affect the value of the convertible notes and our common stock. • We are subject to counterparty risk with respect to the capped calls transactions. • Our variable rate indebtedness exposes us to interest rate volatility. • The industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs. • We face intense competition. • Changes in governmental regulations may reduce demand for our products or services or increase our expenses. • Certain of our businesses are subject to extensive regulation by the FDA and comparable agencies of other countries. • Off-label marketing or misleading advertising of our products could result in substantial penalties. • Certain modifications to our products may require new 510(k) clearances or other marketing authorizations and may require us to recall or cease marketing our products. • Our operations, products and services expose us to the risk of environmental, health and safety liabilities. • Our businesses are subject to extensive regulation. • The price of our common stock may continue to be volatile. • Certain provisions in our governing documents and of Delaware law may prevent or delay an acquisition of us, which could decrease the trading price of our common stock. • Our governing documents contain exclusive forum provisions for certain types of actions and proceedings. • Conversion of the convertible notes may dilute the ownership interest of our stockholders. • The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could depress the trading price of our common stock and the convertible notes. • We have recognized substantial impairment charges for our goodwill and indefinite-lived intangible assets and may be required to recognize additional impairment charges for our goodwill and other intangible assets in the future. • Foreign currency exchange rates may adversely affect our financial statements. • Changes in tax law relating to multinational corporations could adversely affect our tax position. • We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business. • Work stoppages, union and works council campaigns and other labor disputes could adversely impact our productivity and results of operations.
Acquisitions, investments, joint ventures and strategic relationships involve a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following, any of which could adversely affect our business and financial statements: ◦ Any business, technology, service or product that we acquire or invest in could under-perform relative to our expectations and the price that we paid or not perform in accordance with our anticipated timetable, or we could fail to operate any such business profitably. ◦ We may incur or assume significant debt in connection with our acquisitions, investments, joint ventures or strategic relationships, which could also cause a deterioration of our credit ratings, result in increased borrowing costs and interest expense and diminish our future access to the capital markets. ◦ Acquisitions, investments, joint ventures or strategic relationships could cause our financial results to differ from our own or the investment community’s expectations in any given period, or over the long-term. ◦ Pre-closing and post-closing earnings charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period. ◦ Acquisitions, investments, joint ventures or strategic relationships could create demands on our management, operational resources and financial and internal control systems that we are unable to effectively address. ◦ We could experience difficulty in integrating personnel, operations and financial and other controls and systems and retaining key employees and customers. ◦ We may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition, investment, joint venture or strategic relationship. ◦ We may assume unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions resulting from the acquired company’s or investee’s activities and the realization of any of these liabilities or deficiencies may increase our expenses, adversely affect our financial position or cause us to fail to meet our public financial reporting obligations. ◦ In connection with acquisitions and joint ventures, we often enter into post-closing financial arrangements such as purchase price adjustments, earn-out obligations and indemnification obligations, which may have unpredictable financial results. ◦ As a result of our acquisitions and investments, we have recorded significant goodwill and other assets on our balance sheet and if we are not able to realize the value of these assets, or if the fair value of our investments declines, we may be required to incur impairment charges. ◦ We may have interests that diverge from those of our joint venture partners or other strategic partners and we may not be able to direct the management and operations of the joint venture or other strategic relationship in the manner we believe is most appropriate, exposing us to additional risk. ◦ Investing in or making loans to early-stage companies often entails a high degree of risk, and we may not achieve the strategic, technological, financial or commercial benefits we anticipate; we may lose our investment or fail to recoup our loan; or our investment may be illiquid for a greater-than-expected period of time.
Acquisitions, investments, joint ventures and strategic relationships involve a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following, any of which could adversely affect our business and financial statements: ◦ Any business, technology, service or product that we acquire or invest in could under-perform relative to our expectations and the price that we paid or not perform in accordance with our anticipated timetable, or we could fail to operate any such business profitably. ◦ We may incur or assume significant debt in connection with our acquisitions, investments, joint ventures or strategic relationships, which could also cause a deterioration of our credit ratings, result in increased borrowing costs and interest expense and diminish our future access to the capital markets. ◦ Acquisitions, investments, joint ventures or strategic relationships could cause our financial results to differ from our own or the investment community’s expectations in any given period, or over the long-term. ◦ Pre-closing and post-closing earnings charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period. ◦ Acquisitions, investments, joint ventures or strategic relationships could create demands on our management, operational resources and financial and internal control systems that we are unable to effectively address. ◦ We have in the past and could in the future experience difficulty in integrating personnel, operations and financial and other controls and systems and retaining key employees and customers. ◦ We may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition, investment, joint venture or strategic relationship. ◦ We may assume unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions resulting from the acquired company’s or investee’s activities and the realization of any of these liabilities or deficiencies may increase our expenses, adversely affect our financial position or cause us to fail to meet our public financial reporting obligations. ◦ In connection with acquisitions and joint ventures, we often enter into post-closing financial arrangements such as purchase price adjustments, earn-out obligations and indemnification obligations, which may have unpredictable financial results. ◦ As a result of our acquisitions and investments, we have recorded significant goodwill and other assets on our balance sheet and if we are not able to realize the value of these assets, or if the fair value of our investments declines, we may be required to incur impairment charges. ◦ We may have interests that diverge from those of our joint venture partners or other strategic partners and we may not be able to direct the management and operations of the joint venture or other strategic relationship in the manner we believe is most appropriate, exposing us to additional risk. 27 ◦ Investing in or making loans to early-stage companies often entails a high degree of risk, and we may not achieve the strategic, technological, financial or commercial benefits we anticipate; we may lose our investment or fail to recoup our loan; or our investment may be illiquid for a greater-than-expected period of time.
These provisions include, among others: ◦ the inability of our stockholders to call a special meeting; ◦ the inability of our stockholders to act by written consent; 45 ◦ rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; ◦ the right of our board of directors to issue preferred stock without stockholder approval; ◦ the division of our board of directors into three classes of directors, with each class serving a staggered three-year term, subject to a phased-in declassification whereby Class III directors were elected to a one-year term at the 2022 annual meeting, Class I directors will be elected to a one-year term at the 2023 annual meeting and Class II directors will be elected to a one-year term at the 2024 annual meeting such that effective as of the 2024 annual meeting, our board of directors will be fully declassified, and until the full declassification of the Board as of the date of the 2024 annual meeting, this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; ◦ prior to our board of directors being fully declassified, stockholders may only remove directors with cause; and ◦ the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of our board of directors) on our board of directors.
These provisions include, among others: ◦ the inability of our stockholders to call a special meeting; ◦ the inability of our stockholders to act by written consent; ◦ rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; ◦ the right of our board of directors to issue preferred stock without stockholder approval; ◦ the division of our board of directors into three classes of directors, with each class serving a staggered three-year term, subject to a phased-in declassification whereby Class III directors were elected to a one-year term at the 2022 annual meeting, Class I directors were elected to a one-year term at the 2023 annual meeting and Class II directors will be elected to a one-year term at the 2024 annual meeting such that effective as of the 2024 annual meeting, our board of directors will be fully declassified, and until the full declassification of the Board as of the date of the 2024 annual meeting, this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult; ◦ prior to our board of directors being fully declassified, stockholders may only remove directors with cause; and ◦ the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of our board of directors) on our board of directors.
The above factors can have the effect of: ◦ reducing demand for our products and services (in this Annual 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 change their terms of sale, 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.
The above factors can have the effect of: ◦ reducing demand for our products and services (in this Annual 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; 18 ◦ 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 change their terms of sale, 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.
This debt could have important, adverse consequences to us and our security holders, including: ◦ increasing our vulnerability to adverse economic and industry conditions; ◦ limiting our ability to obtain additional financing; ◦ requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; ◦ limiting our flexibility to plan for, or react to, changes in our businesses and industries; ◦ diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the Notes; and ◦ placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
This debt could have important, adverse consequences to us and our security holders, including: ◦ increasing our vulnerability to adverse economic and industry conditions; ◦ limiting our ability to obtain additional financing; ◦ requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; ◦ limiting our flexibility to plan for, or react to, changes in our businesses and industry; ◦ diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the Notes; and ◦ placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
The industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs, including the following: ◦ Governmental and private health care providers and payors around the world are increasingly utilizing managed care for the delivery of health care services, centralizing purchasing, limiting the number of vendors that may participate in purchasing programs, forming group purchasing organizations and integrated health delivery networks and pursuing consolidation to improve their purchasing leverage and using competitive bid processes to procure health care products and services. ◦ Certain of our customers, and the end-users to whom our customers supply products, rely on government funding of and reimbursement for health care products and services and research activities.
The industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs, including the following: ◦ Governmental and private health care providers and payors around the world are increasingly utilizing managed care for the delivery of health care services, centralizing purchasing, limiting the number of vendors that may participate in purchasing programs, forming group purchasing organizations and integrated health delivery networks and pursuing consolidation to improve their purchasing leverage and using competitive bid processes to procure health care products and services. 33 ◦ Certain of our customers, and the end-users to whom our customers supply products, rely on government funding of and reimbursement for health care products and services and research activities.
Our second amended and restated certificate of incorporation provides that unless our board of directors otherwise determines, the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of us, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or stockholders to us or our stockholders, any action asserting a claim arising pursuant to any provision of the DGCL or our second amended and restated certificate of incorporation or bylaws, or any action asserting a claim governed by the internal affairs doctrine.
Our second amended and restated certificate of incorporation provides that unless our board of directors otherwise determines, the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of us, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or stockholders to us or our stockholders, any action asserting a claim arising pursuant to any provision of the DGCL or our second amended and restated certificate of incorporation or third amended and restated bylaws, or any action asserting a claim governed by the internal affairs doctrine.
Sustained geopolitical tensions could lead to long-term changes in global trade and supply chains, and decoupling of global trade networks, which could have a material adverse effect on our business and growth prospects. Our growth could suffer if the markets into which we sell our products and services decline, do not grow as anticipated or experience cyclicality.
Sustained geopolitical tensions could lead to long-term changes in global trade and supply chains, and decoupling of global trade networks, which could have a material adverse effect on our business and growth prospects. 20 Our growth could suffer if the markets into which we sell our products and services decline, do not grow as anticipated or experience cyclicality.
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, consumer confidence, high levels of unemployment or underemployment (and a corresponding increase in the uninsured and underinsured population), 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 have previously and may continue to adversely affect us and our distributors, customers and suppliers.
Sustained inflation, rising interest rates, slower global economic growth, threatened or actual recessions, continuing supply chain disruptions, geopolitical tensions, actual or anticipated default on sovereign debt, volatility in the currency and credit markets, consumer confidence, high levels of unemployment or underemployment (and a corresponding increase in the uninsured and underinsured population), 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 have previously and may continue to adversely affect us and our distributors, customers and suppliers.
Any of these risks could negatively affect our financial statements, business, growth rate, competitive position, results of operations and financial condition. For example, we generate approximately 10% of our annual sales from Greater China. Accordingly, our business, financial condition and results of operations may be adversely influenced by evolving political, economic and social conditions in China generally.
Any of these risks could negatively affect our financial statements, business, growth rate, competitive position, results of operations and financial condition. 19 For example, we generate approximately 10% of our annual sales from Greater China. Accordingly, our business, financial condition and results of operations may be adversely influenced by evolving political, economic and social conditions in China generally.
Governments may continue to adopt or tighten restrictions of this nature, and such restrictions could negatively impact our business and financial results. 33 The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities.
Governments may continue to adopt or tighten restrictions of this nature, and such restrictions could negatively impact our business and financial results. The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities.
In addition, competition for acquisitions and investments may result in higher purchase prices. Changes in accounting or regulatory requirements or instability in the credit markets could also adversely impact our ability to consummate acquisitions and investments. 32 Our acquisition of businesses, investments, joint ventures and other strategic relationships could negatively impact our financial statements.
In addition, competition for acquisitions and investments may result in higher purchase prices. Changes in accounting or regulatory requirements or instability in the credit markets could also adversely impact our ability to consummate acquisitions and investments. Our acquisition of businesses, investments, joint ventures and other strategic relationships could negatively impact our financial statements.
If Henry Schein or any other key distributor or channel partner significantly reduces the volume of products purchased from us, it would have an adverse effect on our consolidated financial statements. Our key distributors and other channel partners typically have valuable relationships with customers and end-users.
If Henry Schein or any other key distributor or channel partner significantly reduces the volume of products purchased from us, it would have an adverse effect on our consolidated financial statements. 28 Our key distributors and other channel partners typically have valuable relationships with customers and end-users.
We cannot assure you that our liabilities in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial statements and business. 48 Work stoppages, union and works council campaigns and other labor disputes could adversely impact our productivity and results of operations.
We cannot assure you that our liabilities in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial statements and business. Work stoppages, union and works council campaigns and other labor disputes could adversely impact our productivity and results of operations.
Our second amended and restated certificate of incorporation and second amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt an unsolicited takeover not approved by our board of directors.
Our second amended and restated certificate of incorporation and third amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt an unsolicited takeover not approved by our board of directors.
We are required to comply with various import laws and export control and economic sanctions laws, which may affect our transactions with certain customers, business partners and other persons and dealings between our employees and between our subsidiaries. In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services and technologies.
We are also required to comply with various import laws and export control and economic sanctions laws, which may affect our transactions with certain customers, business partners and other persons and dealings between our employees and between our subsidiaries. In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services and technologies.
Significant negative industry or economic trends, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of our assets, changes in the structure of our business, divestitures, market capitalization declines, or increases in associated discount rates may impair our goodwill and other intangible assets.
Significant negative industry or economic trends, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of our assets, changes in the structure of our business, divestitures, market capitalization declines, or increases in associated discount rates may further impair our goodwill and other intangible assets.
Additionally, China’s government continues to play a significant role in regulating industry development by imposing industrial policies, and it maintains control over China’s economic growth through setting monetary policy and determining treatment of particular industries or companies.
China’s government continues to play a significant role in regulating industry development by imposing industrial policies, and it maintains control over China’s economic growth through setting monetary policy and determining treatment of particular industries or companies.
Our success will depend on several factors, including our ability to: ◦ correctly identify customer needs and preferences and predict future needs and preferences; ◦ allocate our research and development funding to products and services with higher growth prospects; ◦ anticipate and respond to our competitors’ development of new products and services and technological innovations; ◦ differentiate our offerings from our competitors’ offerings and avoid commoditization; ◦ innovate and develop new technologies and applications, and acquire or obtain rights to third-party technologies that may have valuable applications in our served markets; ◦ obtain adequate intellectual property rights with respect to key technologies before our competitors do; ◦ successfully commercialize new technologies in a timely manner, price them competitively and cost-effectively manufacture and deliver sufficient volumes of new products of appropriate quality on time; ◦ obtain necessary regulatory approvals of appropriate scope (including by demonstrating satisfactory clinical results where required); and ◦ stimulate customer demand for and convince customers to adopt new technologies.
Our success will depend on several factors, including our ability to: ◦ correctly identify customer needs and preferences and predict future needs and preferences; ◦ allocate our research and development funding to products and services with higher growth prospects; ◦ anticipate and respond to our competitors’ development of new products and services and technological innovations; ◦ differentiate our offerings from our competitors’ offerings and avoid commoditization; ◦ innovate and develop new technologies and applications, and acquire or obtain rights to third-party technologies that may have valuable applications in our served markets; ◦ obtain adequate intellectual property rights with respect to key technologies before our competitors do; ◦ successfully commercialize new technologies in a timely manner, price them competitively and cost-effectively manufacture and deliver sufficient volumes of new products of appropriate quality on time; ◦ obtain necessary regulatory approvals of appropriate scope (including by demonstrating satisfactory clinical results where required); and ◦ stimulate customer demand for and convince customers to adopt new technologies, including assisted or artificial intelligence.
The effects of climate-related risks could also impair the availability and cost of certain products, commodities and energy (including utilities), which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require. 37 In addition, the increasing concern over climate change has resulted and may continue to result in more regional, federal, and/or global legal and regulatory requirements relating to climate change, including regulating greenhouse gas emissions, alternative energy policies and sustainability initiatives.
The effects of climate-related risks could also impair the availability and cost of certain products, commodities and energy (including utilities), which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require. 30 In addition, the increasing concern over climate change has resulted and may continue to result in more regional, federal, and/or global legal and regulatory requirements relating to climate change, including regulating greenhouse gas emissions, alternative energy policies and sustainability initiatives.
Further, all 50 states and the District of Columbia have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected persons and/or state regulators in the event of a data breach or compromise, including when their personal information has or may have been accessed by an unauthorized person. 30 Some state breach notification laws may also impose physical and electronic security requirements regarding the safeguarding of personal information, such as social security numbers and bank and credit card account numbers.
Further, all 50 states and the District of Columbia have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected persons and/or state regulators in the event of a data breach or compromise, including when their personal information has or may have been accessed by an unauthorized person. 24 Some state breach notification laws may also impose physical and electronic security requirements regarding the safeguarding of personal information, such as social security numbers and bank and credit card account numbers.
The Amended Credit Agreement contains restrictive covenants that limit our ability to engage in activities that may be in our long-term interest, including for example EBITDA-based leverage and interest coverage ratios.
The Second Amended Credit Agreement contains restrictive covenants that limit our ability to engage in activities that may be in our long-term interest, including for example EBITDA-based leverage and interest coverage ratios.
In addition, government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements. 31 Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products and services based on technological innovation.
In addition, government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements. 25 Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products and services based on technological innovation.
Our risk and exposure to these matters remain heightened because of the evolving nature of these threats, increased regulatory enforcement and the expansion of consumer rights under data privacy and security laws. 29 We believe that our subcontractors and vendors take precautionary measures to prevent problems that could affect our business operations as a result of failure or disruption to their information systems.
Our risk and exposure to these matters remain heightened because of the evolving nature of these threats, increased regulatory enforcement and the expansion of consumer rights under data privacy and security laws. 23 We believe that our subcontractors and vendors take precautionary measures to prevent problems that could affect our business operations as a result of failure or disruption to their information systems.
As cyber threats continue to evolve, we may be required to expend significant capital and other resources to protect against the threat of security breaches or to mitigate and alleviate problems caused by security incidents, including unauthorized access to protected health information and personal information stored in our information systems, and the introduction of computer viruses or other malicious software programs to our systems.
As cyber threats and regulatory requirements continue to evolve, we may be required to expend significant capital and other resources to protect against the threat of security breaches or to mitigate and alleviate problems caused by security incidents, including unauthorized access to protected health information and personal information stored in our information systems, and the introduction of computer viruses or other malicious software programs to our systems.
These parties may modify their hedge positions in the future by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of the Notes).
These parties may modify their hedge positions in the future by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2025 Convertible Notes (and are likely to do so during any observation period related to a conversion of the 2025 Convertible Notes).
While we believe we have substantially compliant programs and controls in place satisfying the above laws and requirements, such compliance imposes additional costs on us and the requirements are sometimes unclear. 42 To varying degrees, these regulators require us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, distribution and post-marketing surveillance of our products.
While we believe we have substantially compliant programs and controls in place satisfying the above laws and requirements, such compliance imposes additional costs on us and the requirements are sometimes unclear. 35 To varying degrees, these regulators require us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, distribution and post-marketing surveillance of our products.
Even if we successfully defend against claims of infringement or misappropriation, we may incur significant costs and diversion of management attention and resources, which could adversely affect our business and financial statements. 36 Defects and unanticipated use or inadequate disclosure with respect to our products or services (including software), or allegations thereof, could adversely affect our business, reputation and financial statements.
Even if we successfully defend against claims of infringement or misappropriation, we may incur significant costs and diversion of management attention and resources, which could adversely affect our business and financial statements. 29 Defects and unanticipated use or inadequate disclosure with respect to our products or services (including software), or allegations thereof, could adversely affect our business, reputation and financial statements.
In addition, some of our software products and services incorporate information technology that may house personal data and some products or software we sell to customers may connect to our systems for maintenance or other purposes. 28 These systems, products and services (including those we acquire through business acquisitions) may be materially impacted and/or disrupted by information security incidents.
In addition, some of our software products and services incorporate information technology that may house personal data and some products or software we sell to customers may connect to our systems for maintenance or other purposes. 22 These systems, products and services (including those we acquire through business acquisitions) may be materially impacted and/or disrupted by information security incidents.
Any such regulatory changes could have a significant effect on our operating and financial decisions, including those involving capital expenditures to reduce emissions and comply with other regulatory requirements. Risks Related to Our Indebtedness We have outstanding indebtedness of approximately $1.4 billion, and in the future we may incur additional indebtedness.
Any such regulatory changes could have a significant effect on our operating and financial decisions, including those involving capital expenditures to reduce emissions and comply with other regulatory requirements. Risks Related to Our Indebtedness We have outstanding indebtedness of approximately $1.5 billion, and in the future we may incur additional indebtedness.
In addition, our second amended and restated bylaws, as amended, provide that the federal district courts of the U.S. will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, unless we consent in writing to the selection of an alternative forum.
In addition, our third amended and restated bylaws, provide that the federal district courts of the U.S. will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, unless we consent in writing to the selection of an alternative forum.
For additional information regarding these risks, please refer to Note 15 to our audited consolidated financial statements included in this Annual Report.
For additional information regarding these risks, please refer to Note 15 to our Consolidated Financial Statements included in this Annual Report.
The Capped Calls are expected generally to reduce the potential dilution upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
The Capped Calls are expected generally to reduce the potential dilution upon any conversion of the 2025 Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2025 Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
If these competitors’ products capture significant market share or decrease market prices overall, this could have an adverse effect on our financial statements. 41 Risks Related to Laws and Regulations Changes in governmental regulations may reduce demand for our products or services or increase our expenses.
If these competitors’ products capture significant market share or decrease market prices overall, this could have an adverse effect on our financial statements. 34 Risks Related to Laws and Regulations Changes in governmental regulations may reduce demand for our products or services or increase our expenses.
Additionally, certain provisions in the Notes and the Indenture governing the Notes could make a third party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change, then holders of the Notes will have the right to require us to repurchase their Notes for cash.
Additionally, certain provisions in the Notes and the Indentures governing the Notes could make a third party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a fundamental change, then holders of the Notes will have the right to require us to repurchase their Notes for cash.
In addition, Russia’s invasion of Ukraine and the global response to this invasion, including sanctions imposed by the U.S. and other countries, has had and may continue to have an adverse impact on our business, including by impacting our ability to market and sell products in Russia, by potentially heightening our risk of cyber-attacks, by impacting our ability to enforce our intellectual property rights in Russia, by 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.
In addition, Russia’s invasion of Ukraine and the global response to this invasion, including sanctions imposed by the U.S. and other countries, has had and may continue to have an adverse impact on our business, including by impacting our ability to market and sell products in Russia, by potentially heightening our risk of cyberattacks, by impacting our ability to enforce our intellectual property rights in Russia, by 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.
Although these export controls and sanctions did not have a material impact on our financial position or results of operations as of and for the year ended December 31, 2022, the outcome and future impacts of the conflict and governmental responses thereto remain highly uncertain.
Although these export controls and sanctions did not have a material impact on our financial position or results of operations as of and for the year ended December 31, 2023, the outcome and future impacts of the conflict and governmental responses thereto remain highly uncertain.
Any of these events could significantly harm our business and results of operations and cause our stock price to decline. 43 Certain modifications to our products may require new 510(k) clearances or other marketing authorizations and may require us to recall or cease marketing our products.
Any of these events could significantly harm our business and results of operations and cause our stock price to decline. 36 Certain modifications to our products may require new 510(k) clearances or other marketing authorizations and may require us to recall or cease marketing our products.
This provision would not apply to claims brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any other claim for which the federal courts have exclusive jurisdiction.
This provision would not apply to claims brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended or any other claim for which the federal courts have exclusive jurisdiction.
Business—Materials,” our manufacturing and other operations employ a wide variety of components, raw materials and other commodities, including metallic-based components, electronic components, chemicals, plastics and other petroleum-based products. Prices for and availability of these components, raw materials and other commodities have fluctuated significantly in the past.
Business—Materials,” our manufacturing and other operations employ a wide variety of components, raw materials and other commodities, including metallic-based components, electronic components, chemicals, and plastics. Prices for and availability of these components, raw materials and other commodities have fluctuated significantly in the past.
Medical devices that have been assessed and/or certified under the EU Medical Device Directive may continue to be placed on the market until 2024 (or until the expiry of their certificates, if applicable and earlier); however, requirements regarding the distribution, marketing and sale including quality systems and post-market surveillance have to be observed by manufacturers, importers and distributors as of the application date.
Medical devices that have been assessed and/or certified under the EU Medical Device Directive may continue to be placed on the market until 2027/2028 (or until the expiry of their certificates, if applicable and earlier); however, requirements regarding the distribution, marketing and sale including quality systems and post-market surveillance have to be observed by manufacturers, importers and distributors as of the application date.
We are also subject to the General Data Protection Regulation (“GDPR”), the primary data protection law in the European Union and European Economic Area (collectively, the EU), as well as associated EU member state data protection laws and the UK GDPR in the United Kingdom.
We are also subject to the General Data Protection Regulation (“GDPR”), the primary data protection law in the European Economic Area, including the European Union (collectively, the “EU”), as well as associated EU member state data protection laws and the UK GDPR in the United Kingdom.
We purchase materials, components and equipment from third parties for use in our manufacturing operations, including metallic-based components, electronic components, chemicals, plastics and other petroleum-based products. Our profitability could be adversely impacted if we are unable to adjust our purchases to reflect changes in customer demand and market fluctuations, including those caused by seasonality or cyclicality.
We purchase materials, components and equipment from third parties for use in our manufacturing operations, including metallic-based components, electronic components, chemicals, and plastics. Our profitability could be adversely impacted if we are unable to adjust our purchases to reflect changes in customer demand and market fluctuations, including those caused by seasonality or cyclicality.
We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness. 38 If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures, or to dispose of material assets or operations, alter our dividend policy (if we pay dividends), seek additional debt or equity capital or restructure or refinance our indebtedness.
We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness. 31 If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures, or to dispose of material assets or operations, alter our dividend policy (if we pay dividends in the future), seek additional debt or equity capital or restructure or refinance our indebtedness.
Please refer to Note 16 to our audited consolidated financial statements included in this Annual Report.
Please refer to Note 16 to our Consolidated Financial Statements included in this Annual Report.
In connection with the sale of the Notes, we entered into capped call transactions (the “Capped Calls”) with the initial purchasers of the Notes, their respective affiliates and other financial institutions (the “option counterparties”).
In connection with the sale of the 2025 Convertible Notes, we entered into capped call transactions (the “Capped Calls”) with the initial purchasers of the 2025 Convertible Notes, their respective affiliates and other financial institutions (the “option counterparties”).
Borrowings under certain of our facilities, including our Amended Credit Agreement, are made at variable rates of interest and expose us to interest rate volatility. Interest rates increased during 2022.
Borrowings under certain of our facilities, including our Second Amended Credit Agreement, are made at variable rates of interest and expose us to interest rate volatility. Interest rates increased during 2022 and 2023.
As a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business.
As a global healthcare organization, we are subject to relatively stringent data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business.
Factors that may cause the market price of our common stock to fluctuate, some of which may be beyond our control, include: ◦ our quarterly or annual earnings, or those of other companies in our industry; ◦ actual or anticipated fluctuations in our operating results; ◦ changes in earnings estimated by securities analysts or our ability to meet those estimates; ◦ the operating and stock price performance of other comparable companies; ◦ changes to the regulatory and legal environment in which we operate; ◦ macroeconomic conditions and the economic impact of the COVID-19 pandemic, inflation and rising interest rates and global conflicts, including the Russia-Ukraine war; ◦ unusual events such as significant acquisitions by us and our competitors, divestitures, litigation, regulatory actions and other factors, including factors unrelated to our operating performance; ◦ overall market fluctuations and domestic and worldwide economic conditions; and ◦ other factors described in these “Risk Factors” and elsewhere in this Annual Report.
Factors that may cause the market price of our common stock to fluctuate, some of which may be beyond our control, include: ◦ our quarterly or annual earnings, or those of other companies in our industry; ◦ actual or anticipated fluctuations in our operating results; ◦ changes in earnings estimated by securities analysts or our ability to meet those estimates; ◦ the operating and stock price performance of other comparable companies; ◦ changes to the regulatory and legal environment in which we operate; ◦ macroeconomic conditions and the economic impact of the COVID-19 pandemic, inflation and rising interest rates and global conflicts, including the Russia-Ukraine war and the Israel-Hamas war; ◦ unusual events such as significant acquisitions by us and our competitors, divestitures, litigation, regulatory actions and other factors, including factors unrelated to our operating performance; ◦ announcements by us or our competitors of new products or technological innovation; ◦ overall market fluctuations and domestic and worldwide economic conditions; and 38 ◦ other factors described in these “Risk Factors” and elsewhere in this Annual Report.
From our IPO through February 10, 2023, the sales price of our common stock as reported by the NYSE has ranged from a low sales price of $10.08 on March 19, 2020 to a high sales price of $52.03 on March 29, 2022.
From our IPO through February 9, 2024, the sales price of our common stock as reported by the NYSE has ranged from a low sales price of $10.08 on March 19, 2020 to a high sales price of $52.03 on March 29, 2022.
Certain provisions in our second amended and restated certificate of incorporation, our second amended and restated bylaws, the Indenture governing the Notes, and of Delaware law, may prevent or delay an acquisition of us, which could decrease the trading price of our common stock.
Certain provisions in our second amended and restated certificate of incorporation, our third amended and restated bylaws, the Indentures governing the Notes, and of Delaware law, may prevent or delay an acquisition of us, which could decrease the trading price of our common stock.
Historically, a substantial portion of our sales had come from a limited number of distributors, particularly Henry Schein, which accounted for approximately 11% of our sales in 2022 and 12% of our sales in 2021. It is anticipated that Henry Schein will continue to be the largest contributor to our sales for the foreseeable future.
Historically, a substantial portion of our sales had come from a limited number of distributors, particularly Henry Schein, which accounted for approximately 10% of our sales in 2023 and 11% of our sales in 2022. It is anticipated that Henry Schein will continue to be the largest contributor to our sales for the foreseeable future.
International economic, political, legal, compliance and business factors could negatively affect our financial statements. In 2022, 51% of our sales were derived from customers outside the U.S. In addition, many of our manufacturing operations, suppliers and employees are located outside the U.S.
International economic, political, legal, compliance and business factors could negatively affect our financial statements. In 2023, 53% of our sales were derived from customers outside the U.S. In addition, many of our manufacturing operations, suppliers and employees are located outside the U.S.
It also created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. In addition, as federal, state and local governments consider adopting new privacy and security legislation, our operations may be subject to different standards in different geographical regions.
It also created a new California privacy protection agency authorized to issue substantive regulations and enforce the CCPA, which could result in increased privacy and information security enforcement. In addition, as federal, state and local governments consider adopting new privacy and security legislation, our operations may be subject to different standards in different geographical regions.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful and may adversely affect our ability to pay dividends.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful and may adversely affect our ability to pay dividends (if we pay dividends in the future).
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our business, financial condition and results of operations and our ability to satisfy our obligations under our indebtedness or pay dividends on our common stock.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our business, financial condition and results of operations and our ability to satisfy our obligations under our indebtedness or pay dividends on our common stock if we pay dividends in the future.
The supply chains for our businesses could also be disrupted by supplier capacity constraints, bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities and external events such as natural disasters, pandemic health issues, including COVID-19 and related lockdowns and restrictions, war, terrorist actions, cyber-attacks, widespread protests and civil unrest, governmental actions and legislative or regulatory changes.
The supply chains for our businesses could also be disrupted by supplier capacity constraints, bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities and external events such as natural disasters, pandemic health issues and restrictions, war, terrorist actions, cyberattacks, widespread protests and civil unrest, governmental actions and legislative or regulatory changes.
Our facilities, supply chains, distribution systems and information technology systems are subject to catastrophic loss due to fire, flood, earthquake, hurricane, public health crises (including the COVID-19 pandemic), war, terrorism, widespread protests and civil unrest, or other natural or man-made disasters.
Our facilities, supply chains, distribution systems and information technology systems are subject to catastrophic loss due to fire, flood, earthquake, hurricane, public health crises and pandemics, war, terrorism, widespread protests and civil unrest, or other natural or man-made disasters.
Any of the cyber-attacks, breaches or other disruptions or damage described above could interrupt our operations or the operations of our customers and partners; delay production and shipments; result in theft of our and our customers’ intellectual property and trade secrets; damage customer, patient, business partner and employee relationships; harm our reputation; result in defective products or services; or lead to legal or regulatory claims, proceedings, liability and/or penalties.
Any of the cyberattacks, breaches or other disruptions or damage described above could interrupt our operations or the operations of our customers, suppliers, partners or distributors; prevent order placement and fulfillment; delay production and shipments; result in theft of our and our customers’ intellectual property and trade secrets; damage customer, patient, business partner and employee relationships; harm our reputation; result in defective products or services; or lead to legal or regulatory claims, proceedings, liability and/or penalties.
Based on the annual revisions for 2022, penalties for HIPAA violations can range from $127 to $1.919 million dollars per violation, with a maximum fine of $1.919 million for identical violations during a calendar year. In 2018, a nation-wide health benefit company paid $16 million to HHS following a data breach.
Based on the annual revisions for 2023, penalties for HIPAA violations can range from $137 to $2.067 million dollars per violation, with a maximum fine of $2.067 million for identical violations during a calendar year. In 2018, a nation-wide health benefit company paid $16 million to HHS following a data breach.
However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is in the best interests of us and our stockholders.
However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is in the best interests of us and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
These provisions may also prevent or discourage attempts to remove and replace incumbent directors. 46 Our second amended and restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us and our directors, officers, employees and stockholders.
Our second amended and restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us and our directors, officers, employees and stockholders.
In addition, we are exposed to the risk that our competitors or our customers may introduce private label, generic, or low-cost products that compete with our products at lower price points.
In addition, we are exposed to the risk that our competitors or our customers may introduce private label, generic, or low-cost products that compete with our products at lower price points. New disruptive technologies may emerge that displace our existing technologies.
Certain of our U.S. and non-U.S. employees are subject to collective labor arrangements. We are subject to potential work stoppages, union and works council campaigns and other labor disputes, any of which could adversely impact our financial statements and business, including our productivity and reputation.
Certain of our U.S. and non-U.S. employees are subject to collective labor arrangements. We are subject to potential work stoppages, union and works council campaigns and other labor disputes, any of which could adversely impact our financial statements and business, including our productivity and reputation. 42 ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
In particular, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced governmental corruption to some degree.
Foreign Corrupt Practices Act, the UK Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in countries that have experienced corruption.
Significant developments or uncertainties stemming from trade policies and regulations could have an adverse effect on our business Trade policies and disputes at times result in increased tariffs, trade barriers, and other protectionist measures, which can increase our manufacturing costs, make our products less competitive, reduce demand for our products, limit our ability to sell to certain customers, limit our ability to procure components or raw materials, or impede or slow the movement of our goods across borders.
Trade policies and disputes at times result in increased tariffs, trade barriers, and other protectionist measures, which can increase our manufacturing costs, make our products less competitive, reduce demand for our products, limit our ability to sell to certain customers, limit our ability to procure components or raw materials, or impede or slow the movement of our goods across borders.
Our international business (and particularly our business in emerging markets) is subject to risks that are customarily encountered in non-U.S. operations, including: ◦ interruption in the transportation of materials to us and finished goods to our customers; ◦ differences in terms of sale, including payment terms; ◦ local product preferences and product requirements; ◦ changes in a country’s or region’s political or economic conditions, such as the devaluation of particular currencies; ◦ trade protection measures, embargoes and import or export restrictions and requirements; ◦ unexpected changes in laws or regulatory requirements, including changes in tax laws; 24 ◦ capital controls and limitations on ownership and on repatriation of earnings and cash; ◦ the potential for nationalization of enterprises; ◦ changes in medical reimbursement policies and programs; ◦ limitations on legal rights and our ability to enforce such rights; ◦ difficulty in staffing and managing widespread operations; ◦ differing labor regulations; ◦ difficulties in implementing restructuring actions on a timely or comprehensive basis; ◦ differing protection of intellectual property; ◦ greater uncertainty, risk, expense and delay in commercializing products in certain foreign jurisdictions, including with respect to product and other regulatory approvals; and ◦ other factors beyond our control, such has terrorism, war, natural disasters and pandemics, including fluctuations in the severity and duration of the COVID-19 pandemic and resulting restrictions on business activity which may vary significantly by region.
Our international business (and particularly our business in emerging markets) is subject to risks that are customarily encountered in non-U.S. operations, including: ◦ interruption in the transportation of materials to us and finished goods to our customers; ◦ differences in terms of sale, including payment terms; ◦ local product preferences and product requirements; ◦ changes in a country’s or region’s political or economic conditions, such as the devaluation of particular currencies; ◦ trade protection measures, sanctions, increased trade barriers, imposition of significant tariffs on imports or exports, embargoes and import or export restrictions and requirements; ◦ regulatory requirements, including, without limitation, anti-bribery, anti-corruption and laws pertaining to the accuracy of our internal books and records; ◦ unexpected changes in laws or regulatory requirements, including changes in tax laws; ◦ capital controls and limitations on ownership and on repatriation of earnings and cash; ◦ the potential for nationalization of enterprises; ◦ changes in medical reimbursement policies and programs; ◦ limitations on legal rights and our ability to enforce such rights; ◦ difficulty in staffing and managing widespread operations; ◦ differing labor regulations; ◦ difficulties in implementing restructuring actions on a timely or comprehensive basis; ◦ differing protection of intellectual property; ◦ greater uncertainty, risk, expense and delay in commercializing products in certain foreign jurisdictions, including with respect to product and other regulatory approvals; and ◦ other factors beyond our control, such as terrorism, war, natural disasters and pandemics.
Our failure to repurchase Notes or to pay the cash amounts due upon conversion when required will constitute a default under the indenture governing the Notes between us and Wilmington Trust, National Association, as trustee, dated as of May 21, 2020 (the “Indenture”).
Our failure to repurchase the Notes or to pay the cash amounts due upon conversion when required will constitute a default under the indentures governing the 2028 Convertible Notes and the 2025 Convertible Notes between us and Wilmington Trust, National Association, as trustee, dated as of August 10, 2023 and May 21, 2020, respectively.
The Indenture for the Notes does not restrict our ability to issue additional equity securities in the future.
The Indentures for the Notes do not restrict our ability to issue additional equity securities in the future.
We can provide no assurances as to the financial stability or viability of the option counterparties. Our variable rate indebtedness exposes us to interest rate volatility, which could cause our debt service obligations to increase significantly, and we may be adversely affected by the anticipated cessation of LIBOR.
We can provide no assurances as to the financial stability or viability of the option counterparties. Our variable rate indebtedness exposes us to interest rate volatility, which could cause our debt service obligations to increase significantly.
Certain of our businesses operate in industries that may also experience periodic, cyclical downturns. 26 In addition, in certain of our businesses, demand depends on customers’ capital spending budgets, government funding policies, and matters of public policy and government budget dynamics, as well as product and economic cycles, which can affect the spending decisions of these entities.
In addition, in certain of our businesses, demand depends on customers’ capital spending budgets, government funding policies, and matters of public policy and government budget dynamics, as well as product and economic cycles, which can affect the spending decisions of these entities.
We made an irrevocable election to satisfy the principal amounts of Notes outstanding upon conversion with cash. If one or more holders elect to convert their Notes, we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
If one or more holders elect to convert their Notes, we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
The global regulatory environment has become increasingly stringent and unpredictable. Several countries that did not have regulatory requirements for medical devices have established such requirements in recent years, and other countries have expanded, or plan to expand, their existing regulations.
The FDA and these other regulatory authorities enforce additional regulations regarding the safety of X-ray emitting devices. The global regulatory environment has become increasingly stringent and unpredictable. Several countries that did not have regulatory requirements for medical devices have established such requirements in recent years, and other countries have expanded, or plan to expand, their existing regulations.
These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors, officers, employees and stockholders.
These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors, officers, employees and stockholders. 40 Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the prices of our common stock.
As of December 31, 2022, one of the conditions allowing the Note holders to convert the Notes was satisfied. As a result, as of December 31, 2022, the Notes are classified as a current liability.
As of December 31, 2023, none of the conditions allowing the Note holders to convert the 2028 Convertible Notes was satisfied. As a result, as of December 31, 2023, the 2028 Convertible Notes are classified as a non-current liability. As of December 31, 2023, one of the conditions allowing the Note holders to convert the 2025 Convertible Notes was satisfied.
Our failure to compete effectively and/or pricing pressures resulting from competition may adversely impact our financial statements, and our expansion into new markets may result in greater-than-expected risks, liabilities and expenses.
Our failure to compete effectively and/or pricing pressures resulting from competition may adversely impact our financial statements, and our expansion into new markets may result in greater-than-expected risks, liabilities and expenses. Some of our competitors have a broader product portfolio than we do.
This decision has created uncertainty in how businesses may transfer data out of the EU and may result in increased costs and complexity and hinder our transfer of data out of the EU and corresponding business operations. Other countries (for example Brazil and China) have or are in the process of passing laws that contain similar requirements to the GDPR.
This decision may transfer data out of the EU and may result in increased costs and complexity for external transfers of data out of the EU. Other countries (for example Brazil and China) have or are in the process of passing laws that contain similar requirements to the GDPR.
Any of these factors could result in production interruptions, delays, extended lead times and inefficiencies. The supply chains for our businesses have also been impacted by the recent COVID-19 related lockdowns in China and the Russia-Ukraine conflict.
Any of these factors could result in production interruptions, delays, extended lead times and inefficiencies. The supply chains for our businesses have also been impacted by the COVID-19 related lockdowns in China and the Russia-Ukraine conflict. Failure to obtain the needed supply of these products or to offset the increased costs could adversely impact our operating results.
Even if we are not held liable, any resulting negative publicity could harm our business and divide the attention of management.
Even if we are not held liable, any resulting negative publicity could harm our business, impact operations, and divert the attention of management while addressing the incident, at the expense of our business.
Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the prices of our common stock. The conversion of some or all of the Notes may dilute the ownership interests of our stockholders.
The conversion of some or all of the Notes may dilute the ownership interests of our stockholders.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThese facilities cover approximately 2.6 million square feet, of which approximately 0.6 million square feet are owned and approximately 2.0 million square feet are leased. Particularly outside the U.S., facilities often serve more than one business segment and may be used for multiple purposes, such as administration, sales, manufacturing, warehousing and/or distribution.
Biggest changeParticularly outside the U.S., facilities often serve more than one business segment and may be used for multiple purposes, such as administration, sales, manufacturing, warehousing and/or distribution. 43 We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.
ITEM 2. PROPERTIES Our corporate headquarters are located in Brea, California in a facility that we lease. As of December 31, 2022, our facilities included approximately 34 significant office, research and development, manufacturing and distribution facilities.
ITEM 2. PROPERTIES Our corporate headquarters are located in Brea, California in a facility that we lease. As of December 31, 2023, our facilities included approximately 33 significant office, research and development, manufacturing and distribution facilities.
Thirteen of these facilities are located in the U.S. in six states and 21 are located outside the U.S. in 13 other countries, primarily in Europe and to a lesser extent in Asia, the rest of North America, Latin America and the Middle East.
Thirteen of these facilities are located in the U.S. in six states and 20 are located outside the U.S. in 12 other countries, primarily in Europe and to a lesser extent in Asia, the rest of North America, Latin America and the Middle East.
Please refer to Note 8 to our audited consolidated financial statements for additional information with respect to our lease commitments.
We believe our properties and equipment have been well-maintained. Please refer to Note 8 to our Consolidated Financial Statements for additional information with respect to our lease commitments.
Removed
We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities. We believe our properties and equipment have been well-maintained.
Added
These facilities cover approximately 2.6 million square feet, of which approximately 0.6 million square feet are owned and approximately 2.0 million square feet are leased.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to our financial position, results of operations or cash flows. For additional information, please see Note 15 to our audited consolidated financial statements. ITEM 4.
Biggest changeHowever, in the event of unexpected further developments, it is possible that the ultimate resolution of these matters, or other similar matters, if unfavorable, may be materially adverse to our financial position, results of operations or cash flows. For additional information, please see Note 15 to our Consolidated Financial Statements. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 44 PART II
Removed
MINE SAFETY DISCLOSURES Not applicable. 50 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance Graph Table September 18, 2019 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 Envista Holdings Corporation $ 100 $ 106 $ 121 $ 161 $ 120 S&P 500 Index $ 100 $ 108 $ 128 $ 165 $ 135 S&P 500 Health Care Index $ 100 $ 113 $ 126 $ 156 $ 150 51 Dividend Policy We have no present intention to pay cash dividends on our common stock.
Biggest changePerformance Graph Table September 18, 2019 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Envista Holdings Corporation $ 100 $ 106 $ 121 $ 161 $ 120 $ 86 S&P 500 Index $ 100 $ 108 $ 128 $ 165 $ 135 $ 170 S&P 500 Health Care Index $ 100 $ 113 $ 126 $ 156 $ 150 $ 151 45 Dividend Policy We have no present intention to pay cash dividends on our common stock.
The following graph shows a comparison of cumulative total stockholder return, calculated on a dividend-reinvested basis, for the Company, the S&P 500 Index and the S&P Health Care Index from September 18, 2019, the first day our stock traded on the NYSE, through December 31, 2022.
The following graph shows a comparison of cumulative total stockholder return, calculated on a dividend-reinvested basis, for the Company, the S&P 500 Index and the S&P Health Care Index from September 18, 2019, the first day our stock traded on the NYSE, through December 31, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Information with Respect to our Common Stock Our common stock is listed on the New York Stock Exchange, or NYSE, and trades under the symbol “NVST.” The number of holders of record of our common stock as of February 10, 2023 was 21.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Information with Respect to our Common Stock Our common stock is listed on the New York Stock Exchange, or NYSE, and trades under the symbol “NVST.” The number of holders of record of our common stock as of February 9, 2024 was 18.
Removed
Recent Sales of Unregistered Securities On January 21, 2022, we completed the issuance of 273,522 restricted stock units (“RSUs”) to Pacific Dental Services, LLC (“PDS”) pursuant to a development agreement by and between the Company and PDS dated as of December 23, 2021 (the “Development Agreement”) and a share issuance agreement entered into by the parties on the same date.
Removed
The RSUs will vest upon achievement of certain milestones pursuant to the Development Agreement and will convert on a 1-for-1 basis into shares of our common stock upon vesting. The issuance of these securities was effected without registration in reliance on Section 4(a)(2) of the Securities Act as a sale by the Company not involving a public offering.
Removed
No underwriters were involved with the issuance of such securities. ITEM 6. [Reserved] 52

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

87 edited+43 added−37 removed51 unchanged
Biggest changeYears Ended December 31, % Change % Change ($ in millions) 2022 2021 2020 2022/2021 2021/2020 Sales $ 2,569.1 100.0% $ 2,508.9 100.0% $ 1,929.1 100.0% 2.4 % 30.1 % Cost of sales 1,094.3 42.6% 1,082.4 43.1% 874.3 45.3% 1.1 % 23.8 % Gross profit 1,474.8 57.4% 1,426.5 56.9% 1,054.8 54.7% 3.4 % 35.2 % Operating costs: SG&A expenses 1,055.5 41.1% 1,019.8 40.6% 924.6 47.9% 3.5 % 10.3 % R&D expenses 100.1 3.9% 100.5 4.0% 86.7 4.5% (0.4) % 15.9 % Operating profit 319.2 12.4% 306.2 12.2% 43.5 2.3% 4.2 % 603.9 % Nonoperating income (expense): Other income (expense) 3.1 0.1% 2.4 0.1% (1.0) (0.1)% 29.2 % NM Interest expense, net (38.4) (1.5)% (54.1) (2.2)% (62.5) (3.2)% (29.0) % (13.4) % Income (loss) before income taxes 283.9 11.1% 254.5 10.1% (20.0) (1.0)% 11.6 % NM Income tax (benefit) expense 45.9 1.8% (9.0) (0.4)% (62.5) (3.2)% NM (85.6) % Income from continuing operations 238.0 9.3% 263.5 10.5% 42.5 2.2% (9.7) % 520.0 % Income (loss) from discontinued operations, net of tax 5.1 0.2% 77.0 3.1% (9.2) (0.5)% (93.4) % NM Net income $ 243.1 9.5% $ 340.5 13.6% $ 33.3 1.7% (28.6) % 922.5 % Effective tax rate 16.2 % (3.5) % 312.5 % 58 Non-meaningful percentage change related to year-to-year comparisons are designated as NM.
Biggest changeYears Ended December 31, % Change % Change ($ in millions) 2023 2022 2021 2023/2022 2022/2021 Sales $ 2,566.5 100.0% $ 2,569.1 100.0% $ 2,508.9 100.0% (0.1) % 2.4 % Cost of sales 1,126.0 43.9% 1,094.3 42.6% 1,082.4 43.1% 2.9 % 1.1 % Gross profit 1,440.5 56.1% 1,474.8 57.4% 1,426.5 56.9% (2.3) % 3.4 % Operating costs: SG&A expenses 1,056.9 41.2% 1,055.5 41.1% 1,019.8 40.6% 0.1 % 3.5 % R&D expenses 93.8 3.7% 100.1 3.9% 100.5 4.0% (6.3) % (0.4) % Goodwill and intangible asset impairment 258.3 10.1% — —% — —% NM — % Operating profit 31.5 1.2% 319.2 12.4% 306.2 12.2% (90.1) % 4.2 % Nonoperating (expense) income: Other (expense) income, net (23.0) (0.9)% 3.1 0.1% 2.4 0.1% NM 29.2 % Interest expense, net (63.4) (2.5)% (38.4) (1.5)% (54.1) (2.2)% 65.1 % (29.0) % (Loss) income before income taxes (54.9) (2.1)% 283.9 11.1% 254.5 10.1% (119.3) % 11.6 % Income tax expense (benefit) 45.3 1.8% 45.9 1.8% (9.0) (0.4)% (1.3) % NM (Loss) income from continuing operations (100.2) (3.9)% 238.0 9.3% 263.5 10.5% (142.1) % (9.7) % Income from discontinued operations, net of tax — —% 5.1 0.2% 77.0 3.1% (100.0) % (93.4) % Net (loss) income $ (100.2) (3.9)% $ 243.1 9.5% $ 340.5 13.6% (141.2) % (28.6) % Effective tax rate (82.5) % 16.2 % (3.5) % NM - Non-meaningful percentage change related to year-to-year comparisons Business Segments Sales by business segment were as follows ($ in millions): For the Years Ended December 31, 2023 2022 2021 Specialty Products & Technologies $ 1,642.4 $ 1,598.6 $ 1,507.8 Equipment & Consumables 924.1 970.5 1,001.1 Total $ 2,566.5 $ 2,569.1 $ 2,508.9 52 GAAP Reconciliation Sales and Core Sales Growth 2023 vs. 2022 2022 vs. 2021 Total sales growth (GAAP) (0.1) % 2.4 % Less the impact of: Acquisitions (1.2) % (1.8) % Currency exchange rates 0.9 % 3.5 % Core sales growth (non-GAAP) (0.4) % 4.1 % Sales and core sales growth for the year ended December 31, 2023 decreased 0.1% and 0.4%, respectively, compared to the comparable period in 2022.
We believe growth in the global dental industry will be driven by: ◦ an aging population; ◦ the current under penetration of dental procedures, especially in emerging markets; ◦ improving access to complex procedures due to increasing technological innovation; ◦ an increasing demand for cosmetic dentistry; and ◦ growth of DSOs, which are expected to drive increasing penetration of, and access to, dental care globally.
We believe growth in the global dental industry will be driven by: ◦ an aging population; ◦ the current under penetration of dental procedures, especially in emerging markets; ◦ improving access to complex procedures due to increasing technological innovation; ◦ an increasing demand for cosmetic dentistry; and ◦ the growth of DSOs, which are expected to drive increasing penetration of, and access to, dental care globally.
These analyses require us to make judgments and estimates about future sales, expenses, market conditions and discount rates related to these assets. If actual results are not consistent with our estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net income which would adversely affect our consolidated financial statements.
These analyses require us to make judgments and estimates about future sales, expenses, market conditions and discount rates related to these assets. If actual results are not consistent with our estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken to net income which would adversely affect our consolidated financial statements.
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.
The Capped Calls are generally intended to reduce or offset the potential dilution from shares of common stock issued upon any conversion with such reduction or offset, as the case may be, subject to a cap based on the cap price.
We believe that Spark will provide growth opportunities for our Orthodontic Solutions business over the next several years. 54 Foreign Exchange Rates Significant portions of our sales and costs are exposed to changes in foreign exchange rates.
We believe that Spark will provide growth opportunities for our Orthodontic Solutions business over the next several years. Foreign Exchange Rates Significant portions of our sales and costs are exposed to changes in foreign exchange rates.
Legal Proceedings Please refer to Note 15 to our audited consolidated financial statements included in this Annual Report for information regarding legal proceedings and contingencies, and for a discussion of risks related to legal proceedings and contingencies, please refer to “Item 1A.
Legal Proceedings Please refer to Note 15 to our Consolidated Financial Statements included in this Annual Report for information regarding legal proceedings and contingencies, and for a discussion of risks related to legal proceedings and contingencies, please refer to “Item 1A.
Actual results may differ materially from these estimates and judgments. We believe the following accounting estimates are most critical to an understanding of our financial statements.
Actual results may differ materially from these estimates and judgments. 61 We believe the following accounting estimates are most critical to an understanding of our financial statements.
For a discussion of our outstanding indebtedness, refer to Note 16 to our audited consolidated financial statements elsewhere in this Annual Report on Form 10-K.
For a discussion of our outstanding indebtedness, refer to Note 16 to our Consolidated Financial Statements elsewhere in this Annual Report on Form 10-K.
Please refer to Note 2 to our audited consolidated financial statements included in this Annual Report for information regarding derivative financial instruments and discussion of exposures to foreign currency and foreign currency-denominated debt. Interest Rate Risk Certain of our borrowings are at variable rates of interest, which may expose us to interest rate risk.
Please refer to Note 2 to our Consolidated Financial Statements included in this Annual Report for information regarding derivative financial instruments and discussion of exposures to foreign currency and foreign currency-denominated debt. 60 Interest Rate Risk Certain of our borrowings are at variable rates of interest, which may expose us to interest rate risk.
Discussion of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Discussion of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
You should read the following discussion in conjunction with the sections entitled “Envista Holdings Corporation Audited Consolidated Financial Statements” included in this Annual Report on Form 10-K. This section of the Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
You should read the following discussion in conjunction with the sections entitled “Envista Holdings Corporation Audited Consolidated Financial Statements” included in this Annual Report on Form 10-K. This section of the Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
For additional information regarding our products, including descriptions of our products, refer to “Item 1. Business—Business Segments.” 55 Costs and Expenses and Other Cost of sales consists primarily of cost of materials, facilities and other infrastructure used to manufacture our products and shipping and handling costs attributable to delivering our products to our customers.
For additional information regarding our products, including descriptions of our products, refer to “Item 1. Business—Business Segments.” 49 Costs and Expenses and Other Cost of sales consists primarily of cost of materials, facilities and other infrastructure used to manufacture our products and shipping and handling costs attributable to delivering our products to our customers.
Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 16 - Debt and Credit Facilities” and “-Note 8 - Leases.” 64 Off-Balance Sheet Arrangements Guarantees and Related Instruments The following table sets forth, by period due or year of expected expiration, as applicable, a summary of our off-balance sheet commitments as of December 31, 2022.
Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 16 - Debt and Credit Facilities” and “-Note 8 - Leases.” Off-Balance Sheet Arrangements Guarantees and Related Instruments The following table sets forth, by period due or year of expected expiration, as applicable, a summary of our off-balance sheet commitments as of December 31, 2023.
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.
Risk Factors—Risks Related to Our Business.” 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.
With leading brand names, innovative technology and significant market positions, we are a leading worldwide provider of a broad range of solutions to support implant-based tooth replacements, orthodontic 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.
With leading brand names, innovative technology and significant market positions, we are a leading worldwide provider of a broad range of solutions to support implant-based tooth replacements, orthodontic treatments, and diagnostic solutions, 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.
A 10% depreciation in major currencies relative to the U.S. dollar as of December 31, 2022 would have reduced equity by approximately $248 million. Credit Risk We are exposed to potential credit losses in the event of nonperformance by counterparties to our financial instruments. Financial instruments that potentially subject us to credit risk primarily consist of receivables from customers.
A 10% depreciation in major currencies relative to the U.S. dollar as of December 31, 2023 would have reduced equity by approximately $253 million. Credit Risk We are exposed to potential credit losses in the event of nonperformance by counterparties to our financial instruments. Financial instruments that potentially subject us to credit risk primarily consist of receivables from customers.
Other countries, as well as some private payors, also 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.
Pricing Controls Certain countries, as well as some private payors, also 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.
As of December 31, 2022, we had no borrowings outstanding under the revolving credit facility and we had the ability to incur an additional $750 million of indebtedness in direct borrowings under the revolving credit facility. As of December 31, 2022, we were in compliance with all of our debt covenants.
As of December 31, 2023, we had no borrowings outstanding under the revolving credit facility and we had the ability to incur an additional $750.0 million of indebtedness in direct borrowings under the revolving credit facility. As of December 31, 2023, we were in compliance with all of our debt covenants.
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. During 2022, 51% of our sales were derived from customers outside the United States.
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. During 2023, 53% of our sales were derived from customers outside the United States.
During the year ended December 31, 2022, our products were sold in more than 140 countries and 51% of our sales were to customers outside of the United States. We seek to manage our foreign exchange risk, in part, through our operations, including managing same-currency sales in relation to same-currency costs and same-currency assets in relation to same-currency liabilities.
During the year ended December 31, 2023, our products were sold in more than 130 countries and 53% of our sales were to customers outside of the United States. We seek to manage our foreign exchange risk, in part, through our operations, including managing same-currency sales in relation to same-currency costs and same-currency assets in relation to same-currency liabilities.
On April 20, 2022, we completed our acquisition of Carestream Dental’s Intraoral Scanner Business for total consideration of approximately $580.3 million, including contingent consideration of $7.5 million, and subject to certain customary adjustments as provided in the Purchase Agreement.
On April 20, 2022, we completed our acquisition of Carestream Dental’s Intraoral Scanner Business for total consideration of approximately $580.3 million, subject to certain customary adjustments as provided in the Purchase Agreement.
With the sale of the KaVo Treatment Unit and Instrument business and our two recent acquisitions, we continue to make significant progress toward our long-term goal of re-calibrating our product portfolio to higher growth and higher margin segments.
All segment information and descriptions exclude the KaVo Treatment Unit and Instrument Business. With the sale of the KaVo Treatment Unit and Instrument Business and our two recent acquisitions, we continue to make significant progress toward our long-term goal of re-calibrating our product portfolio to higher growth and higher margin segments.
INCOME TAXES For the Years Ended December 31, 2022 2021 2020 Effective tax rate 16.2 % (3.5) % 312.5 % Our effective tax rate for the year ended December 31, 2022 was 16.2% compared to (3.5)% in 2021.
INCOME TAXES For the Years Ended December 31, 2023 2022 2021 Effective tax rate (82.5) % 16.2 % (3.5) % Our effective tax rate for the year ended December 31, 2023 was (82.5)% compared to 16.2% in 2022.
On a year-over-year basis, currency exchange rates negatively impacted reported sales by 3.5% for the year ended December 31, 2022 compared to the comparable period of 2021, primarily due to the strengthening of the U.S. dollar against most major currencies.
On a year-over-year basis, currency exchange rates negatively impacted reported sales by 0.9% for the year ended December 31, 2023 compared to the comparable period of 2022, primarily due to the strengthening of the U.S. dollar against most major currencies.
Amount of Commitment Expiration per Period ($ in millions) Total Less Than One Year 1-3 Years 4-5 Years More Than 5 Years Guarantees and related instruments $19.0 $14.5 $3.4 $0.4 $0.7 Guarantees consist primarily of outstanding standby letters of credit and bank guarantees.
Amount of Commitment Expiration per Period ($ in millions) Total Less Than One Year 1-3 Years 4-5 Years More Than 5 Years Guarantees and related instruments $ 12.8 $ 6.6 $ 5.3 $ 0.2 $ 0.7 Guarantees consist primarily of outstanding standby letters of credit and bank guarantees.
The Divestiture and the acquisitions shifted our revenue mix from approximately 50% each for the Specialty Products & Technology and Equipment & Consumables segments to 62% for the Specialty Products & Technology segment and 38% for the Equipment & Consumables segment.
The Divestiture and the acquisitions shifted our revenue mix from approximately 50% each for the Specialty Products & Technology and Equipment & Consumables segments to 64% for the Specialty Products & Technology segment and 36% for the Equipment & Consumables segment.
A 100 basis point increase in the interest rate related to the senior term loan and the senior euro term loan would have increased our interest expense by $7.0 million for 2022. Currency Exchange Rate Risk We face transactional exchange rate risk from transactions with customers in countries outside the United States and from intercompany transactions between affiliates.
A 100 basis point increase in the interest rate related to our 2028 Term Loan and our 2028 Euro Term Loan would have increased interest expense by $6.2 million for 2023. Currency Exchange Rate Risk We face transactional exchange rate risk from transactions with customers in countries outside the United States and from intercompany transactions between affiliates.
For a detailed discussion on the application of these and other accounting estimates, refer to Note 2 to our audited consolidated financial statements. Business Combinations – Purchase-Price Allocation Our growth strategy contemplates future acquisitions that either strategically fit with our existing portfolio or expand our portfolio.
For a detailed discussion on the application of these and other accounting estimates, refer to Note 2 to our Consolidated Financial Statements in this Annual Report on Form 10-K. Business Combinations – Purchase-Price Allocation Our growth strategy contemplates future acquisitions that either strategically fit with our existing portfolio or expand our portfolio.
We also test intangible assets with indefinite lives at least annually for impairment. Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of discounted cash flows expected to be generated by the asset.
We also test goodwill and intangible assets with indefinite lives at least annually for impairment. Determining whether an impairment loss occurred requires various valuation approaches, including making a comparison of the carrying amount to the sum of discounted cash flows expected to be generated by the asset.
We believe we are a leader in dental research and development (“R&D”), with approximately $287.3 million of R&D expenditures since 2020 and a track record of product innovation, business development and commercialization. We continue transforming our portfolio by investing in our Implant-Based Tooth Replacement and Orthodontic Solutions businesses and also making investments in emerging markets, critical to our growth strategy.
We believe we are a leader in dental R&D, with $294.4 million of R&D expenditures since 2021 and a track record of product innovation, business development and commercialization. We continue transforming our portfolio by investing in our Implant-Based Tooth Replacement and Orthodontic Solutions businesses and also making investments in emerging markets, critical to our growth strategy.
The Notes have an initial conversion rate of 47.5862 shares of our common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $21.01 per share of our common stock and is subject to adjustment upon the occurrence of specified events.
The 2028 Convertible Notes have an initial conversion rate of 21.5942 shares of our common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $46.31 per share of our common stock and is subject to adjustment upon the occurrence of specified events.
We continue to generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity are sufficient to allow us to manage our capital structure on a short-term and long-term basis and continue investing in existing businesses and consummating strategic acquisitions. 62 Following is an overview of our cash flows and liquidity, which includes the cash flows of the KaVo Treatment Unit and Instrument Business for all periods presented: Overview of Cash Flows and Liquidity Year Ended December 31, ($ in millions) 2022 2021 2020 Net cash provided by operating activities $ 182.7 $ 361.6 $ 283.9 Acquisitions, net of cash acquired $ (696.2) $ (2.1) $ (40.7) Payments for additions to property, plant and equipment (75.7) (54.7) (47.7) Proceeds from sales of property, plant and equipment 3.3 11.6 5.3 Proceeds from sale of KaVo Treatment Unit and Instrument Business 73.9 312.5 — Proceeds from the settlement of derivative financial instruments 56.0 11.4 14.0 All other investing activities (18.6) (16.0) — Net cash (used in) provided by investing activities $ (657.3) $ 262.7 $ (69.1) Proceeds from revolving line of credit $ 124.0 $ — $ 249.8 Repayment of revolving line of credit (124.0) — (250.0) Proceeds from borrowing 0.3 — — Repayments of borrowing (0.5) (475.7) — Proceeds from issuance of convertible senior notes — — 517.5 Payment of debt issuance and other deferred financing costs — (2.3) (17.2) Purchase of capped calls related to issuance of convertible senior notes — — (20.7) Proceeds from stock option exercises 21.8 19.5 13.8 Tax withholding payment related to net settlement of equity awards (9.1) (7.2) (5.0) All other financing activities — 0.1 4.3 Net cash provided by (used in) financing activities $ 12.5 $ (465.6) $ 492.5 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 cash flows.
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. 56 Following is an overview of our cash flows and liquidity, which includes the cash flows of the KaVo Treatment Unit and Instrument Business for the years ended December 31, 2022 and 2021: Overview of Cash Flows and Liquidity Year Ended December 31, ($ in millions) 2023 2022 2021 Net cash provided by operating activities $ 275.7 $ 182.7 $ 361.6 Payments for additions to property, plant and equipment (58.2) (75.7) (54.7) Proceeds from sales of property, plant and equipment 6.1 3.3 11.6 Proceeds from sale of equity investment 10.7 — — Acquisitions, net of cash acquired — (696.2) (2.1) Proceeds from sale of KaVo Treatment Unit and Instrument Business — 73.9 312.5 Proceeds from the settlement of derivative financial instruments 1.6 56.0 11.4 All other investing activities (22.6) (18.6) (16.0) Net cash (used in) provided by investing activities $ (62.4) $ (657.3) $ 262.7 Proceeds from issuance of convertible notes due 2028 $ 500.2 $ — $ — Debt issuance costs related to issuance of convertible notes due 2028 (13.8) — — Principal paid related to exchange of convertible notes due 2025 (401.2) — — Proceeds from borrowing 323.5 0.3 — Repayments of borrowing (288.8) (0.5) (475.7) Debt issuance costs related to other borrowings (4.5) — (2.3) Proceeds from revolving line of credit — 124.0 — Repayment of revolving line of credit — (124.0) — Proceeds from stock option exercises 11.3 21.8 19.5 Tax withholding payment related to net settlement of equity awards (7.9) (9.1) (7.2) All other financing activities 0.1 — 0.1 Net cash provided by (used in) financing activities $ 118.9 $ 12.5 $ (465.6) 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 cash flows.
Risk Factors—Risks Related to Our Business.” 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.
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.
Nonoperating income (expense) consists of the non-service cost components of net periodic benefit costs (which include interest costs, expected return on plan assets, amortization of prior service cost or credits and actuarial gains and losses) and interest expense, net.
Nonoperating income (expense) consists of the non-service cost components of net periodic benefit costs (which include interest costs, expected return on plan assets, amortization of prior service cost or credits and actuarial gains and losses), net gains or losses on equity investments, inducement charges related to convertible debt exchanges, and interest expense, net.
Business Performance During the year ended December 31, 2022, our sales increased 2.4%, while core sales increased 4.1% as compared to the comparable period of 2021. The impact of foreign currency exchange rates reduced sales in the year ended December 31, 2022, by 3.5% compared to the comparable period of 2021.
Business Performance During the year ended December 31, 2023, our sales decreased 0.1%, while core sales decreased 0.4% as compared to the comparable period of 2022. The impact of foreign currency exchange rates reduced sales in the year ended December 31, 2023, by 0.9% compared to the comparable period of 2022.
The aggregate principal amount, which includes the initial purchasers’ exercise in full of their option to purchase an additional $68 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 aggregate principal amount, which includes the initial purchasers’ exercise in full of their option to purchase an additional $65.2 million principal amount of the 2028 Convertible Notes, was $500.2 million. The net proceeds from the issuance, after deducting purchasers’ discounts and estimated offering expenses, were $485.9 million.
Our Consolidated Statements of Cash Flows include the financial results of the KaVo Treatment Unit and Instrument Business for all periods presented. 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.
Our Consolidated Statements of Cash Flows include the financial results of the KaVo Treatment Unit and Instrument Business for the years ended December 31, 2022 and 2021. 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.
For more information on the consolidated basis of preparation, see Note 1 to our audited consolidated financial statements elsewhere in this Annual Report on Form 10-K.
Unless otherwise indicated, all financial data in this Annual Report on Form 10-K refer to continuing operations only. For more information on the consolidated basis of preparation, see Note 1 to our Consolidated Financial Statements elsewhere in this Annual Report on Form 10-K.
INTEREST COSTS AND FINANCING Interest costs were $38.4 million and $54.1 million for the years ended December 31, 2022 and 2021, respectively.
INTEREST COSTS AND FINANCING Interest costs were $ 63.4 mil lion and $38.4 million for the years ended December 31, 2023 and 2022, respectively.
Many of our products involve complex manufacturing processes and are produced at one or a limited number of manufacturing sites. Minor deviations in our manufacturing or logistical processes, unpredictability of a product’s regulatory or commercial success or failure, the lead time necessary to construct highly technical and complex manufacturing sites and shifting customer demand increase the potential for capacity imbalances.
Minor deviations in our manufacturing or logistical processes, unpredictability of a product’s regulatory or commercial success or failure, the lead time necessary to construct highly technical and complex manufacturing sites and shifting customer demand increase the potential for capacity imbalances. For a discussion of risks relating to our manufacturing process, refer to “Item 1A.
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 have an initial strike price of approximately $21.01 per share, subject to certain adjustments, which corresponds to the initial conversion price of the 2025 Convertible Notes. The Capped Calls have initial cap prices of $23.79 per share, subject to certain adjustments.
The following table sets forth, by period due or year of expected expiration, as applicable, a summary of purchase obligations as of December 31, 2022, Amount of Commitment Expiration per Period ($ in millions) Total Less Than One Year 1-3 Years 4-5 Years More Than 5 Years Purchase Obligations $84.6 $77.9 $3.2 $2.4 $1.1 For a description of our remaining contractual obligations, such as debt and leases see “Item 8.
Amount of Commitment Expiration per Period ($ in millions) Total Less Than One Year 1-3 Years 4-5 Years More Than 5 Years Purchase Obligations $ 63.9 $ 60.0 $ 3.2 $ 0.7 $ — For a description of our remaining contractual obligations, such as debt and leases see “Item 8.
Cash and Cash Requirements As of December 31, 2022, $606.9 million of cash and cash equivalents were held on deposit with financial institutions. Of this amount, $92.7 million was held within the United States and $514.2 million was held outside of the United States.
Cash and Cash Requirements As of December 31, 2023, $940.0 million of cash and cash equivalents were held on deposit with financial institutions. Of this amount, $261.6 million was held within the United States and $678.4 million was held outside of the United States.
Operating Profit Operating profit margin was 16.8% for the year ended December 31, 2022, as compared to an operating profit margin of 18.1% for the comparable period of 2021.
Additionally, sales for the year ended December 31, 2023 were also positively impacted by the acquisition of Osteogenics. Operating Profit Operating profit margin was 14.1% for the year ended December 31, 2023, as compared to an operating profit margin of 16.8% for the comparable period of 2022.
Net cash provided by operating activities was $182.7 million during the year ended December 31, 2022 and $361.6 million in 2021. The decrease was primarily due to lower net income, higher incentive compensation payout, transaction costs associated with acquisitions and timing of tax payments.
Net cash provided by operating activities was $275.7 million during the year ended December 31, 2023, as compared to net cash provided by operating activities of $182.7 million in 2022, primarily due to lower transaction related costs along with lower incentive compensation payments during the year ended December 31, 2023.
We exclude sales from discontinued products because discontinued products do not have a continuing contribution to operations and management believes that excluding such items provides investors with a means of evaluating our on-going operations and facilitates comparisons to our peers. 57 The portion of sales attributable to currency translation is calculated as the difference between: • the period-to-period change in sales; and • the period-to-period change in sales after applying current period foreign exchange rates to the prior year period.
We exclude sales from discontinued products because discontinued products do not have a continuing contribution to operations and management believes that excluding such items provides investors with a means of evaluating our on-going operations and facilitates comparisons to our peers.
SPECIALTY PRODUCTS & TECHNOLOGIES Our Specialty Products & Technologies segment develops, manufactures and markets dental implant systems, including regenerative products, dental prosthetics and associated treatment software and technologies, as well as orthodontic bracket systems, aligners and lab products. 60 Specialty Products & Technologies Selected Financial Data For the Years Ended December 31, ($ in millions) 2022 2021 2020 Sales $ 1,598.6 $ 1,507.8 $ 1,117.3 Operating profit 268.6 272.3 65.8 Depreciation 20.5 24.0 20.6 Amortization 60.2 60.0 60.0 Operating profit as a % of sales 16.8 % 18.1 % 5.9 % Depreciation as a % of sales 1.3 % 1.6 % 1.8 % Amortization as a % of sales 3.8 % 4.0 % 5.4 % GAAP Reconciliation Sales and Core Sales Growth 2022 vs. 2021 2021 vs. 2020 Total sales growth (GAAP) 6.0 % 34.9 % Less the impact of: Acquisitions (1.1) % — % Discontinued products — % (0.1) % Currency exchange rates 4.2 % (1.8) % Core sales growth (non-GAAP) 9.1 % 33.0 % Sales Sales and core sales growth for the year ended December 31, 2022 increased 6.0% and 9.1%%, respectively, compared to the comparable period in 2021.
Specialty Products & Technologies Selected Financial Data For the Years Ended December 31, ($ in millions) 2023 2022 2021 Sales $ 1,642.4 $ 1,598.6 $ 1,507.8 Operating profit 232.1 268.6 272.3 Operating profit as a % of sales 14.1 % 16.8 % 18.1 % 54 GAAP Reconciliation Sales and Core Sales Growth 2023 vs. 2022 2022 vs. 2021 Total sales growth (GAAP) 2.7 % 6.0 % Less the impact of: Acquisitions (1.1) % (1.1) % Currency exchange rates 1.3 % 4.2 % Core sales growth (non-GAAP) 2.9 % 9.1 % Sales Sales and core sales growth for the year ended December 31, 2023 increased 2.7% and 2.9%%, respectively, compared to the comparable period in 2022.
We first assessed qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount or performed a quantitative impairment test. When tested quantitatively, the estimated fair value of reporting units was determined using a combination of techniques, including an income approach and a market-based approach.
For goodwill, we used a combination of techniques, including an income approach and a market-based approach in performing our annual goodwill impairment test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value amount.
Purchase Obligations The Company’s purchase obligations primarily consist of agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction.
As of February 9, 2024, 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. 58 Purchase Obligations The Company’s purchase obligations primarily consist of agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction.
An increase of 1.0% in our 2022 nominal tax rate would have resulted in additional income tax expense for the year ended December 31, 2022 of $2.8 million. 68 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.
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. This legislation did not have a material impact on our Consolidated Financial Statements.
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. 56 On December 31, 2021, we 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.
On December 31, 2021, we 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.
We paid fees aggregating approximately $2.1 million in connection with the Amended Credit Agreement. 65 Convertible Senior Notes (the “Notes”) On May 21, 2020, we issued the Notes due on June 1, 2025, unless earlier repurchased, redeemed or converted.
Additionally, we paid fees aggregating approximately $5.2 million in connection with the Second Amended Credit Agreement. 59 2028 Convertible Notes On August 10, 2023, we issued the 2028 Convertible Notes due on August 15, 2028, unless earlier repurchased, redeemed or converted.
The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the accumulated other comprehensive loss component of equity. 66 We have generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this risk.
The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the accumulated other comprehensive loss component of equity.
Russia’s invasion of Ukraine did not have a material impact on our financial position or results of operations as of and for the year ended December 31, 2022. Industry Trends We operate in the large and growing global dental products industry.
While we are experiencing volatility in sales from this region, Russia’s invasion of Ukraine did not have a material impact on our overall financial position or results of operations as of and for the years ended December 31, 2023 and 2022.
The cost of $20.7 million incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital.
The cost of $20.7 million incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital. Simultaneously with the Notes Exchanges, we also completed a partial unwind of the Capped Calls resulting in a repurchase of 1.0 million shares of our common stock.
Our continued investment in Spark, our clear aligner system, has led to increased manufacturing capacity and continues to gain market adoption as orthodontists and their patients see the benefits of the clear, stain resistant and comfortable design.
The cost reduction initiatives we have taken and will continue to undertake in the future allow us to further invest in this growth strategy, which in turn we believe should improve our margins. 48 Our continued investment in Spark, our clear aligner system, has led to increased manufacturing capacity and continues to gain market adoption as orthodontists and their patients see the benefits of the clear, stain resistant and comfortable design.
COST OF SALES AND GROSS PROFIT MARGIN For the Years Ended December 31, ($ in millions) 2022 2021 2020 Cost of sales $ 1,094.3 $ 1,082.4 $ 874.3 Gross profit margin 57.4 % 56.9 % 54.7 % The increase in cost of sales during the year ended December 31, 2022, as compared to the comparable period in 2021, was primarily due to higher sales and the unfavorable impact of higher costs due to inflation, partially offset by lower restructuring spend.
COST OF SALES AND GROSS PROFIT MARGIN For the Years Ended December 31, ($ in millions) 2023 2022 2021 Cost of sales $ 1,126.0 $ 1,094.3 $ 1,082.4 Gross profit margin 56.1 % 57.4 % 56.9 % The increase in cost of sales during the year ended December 31, 2023, as compared to the comparable period in 2022, was primarily due to unfavorable product mix and higher costs due to the impact of foreign currency exchange rates, partially offset by the absence of the amortization of the fair value adjustments related to acquired inventory as part of our acquisitions, and by period-over-period savings associated with productivity improvements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this item is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
NEW ACCOUNTING STANDARDS For a discussion of the new accounting standards impacting us, refer to Note 2 to our Consolidated Financial Statements in this Annual Report on Form 10-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this item is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Accordingly, 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 Consolidated Balance Sheets and reclassified the financial results of the Divestiture in our Consolidated Statements of Operations for all periods presented.
The sale met the criteria to be accounted for as a discontinued operation. Accordingly, we have applied discontinued operations treatment for the Divestiture as required by ASC 205-20 and reclassified the financial results in our Consolidated Statements of Operations for the years ended December 31, 2022 and 2021.
Sales in developed markets, for the year ended December 31, 2022, decreased primarily due to a decrease in North America and Western Europe combined with the decrease in sales in China and other emerging markets. Sales for the year ended December 31, 2022 were positively impacted by the acquisition of the Intraoral Scanner Business.
A decrease in sales volume negatively impacted sales growth by 5.3% on a period-over-period basis combined with a decrease in sales price of 0.6%. The decrease in sales is primarily due to lower demand from North America, Europe and China. Sales for the year ended December 31, 2023, were positively impacted by the acquisition of our Intraoral Scanner Business.
The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture governing the Notes). Capped Call Transactions In connection with the offering of the Notes, we entered into the Capped Calls with certain counterparties.
The 2028 Convertible Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture governing the 2028 Convertible Notes).
Business Segments Sales by business segment were as follows ($ in millions): For the Years Ended December 31, 2022 2021 2020 Specialty Products & Technologies $ 1,598.6 $ 1,507.8 $ 1,117.3 Equipment & Consumables 970.5 1,001.1 811.8 Total $ 2,569.1 $ 2,508.9 $ 1,929.1 GAAP Reconciliation Sales and Core Sales Growth 2022 vs. 2021 2021 vs. 2020 Total sales growth (GAAP) 2.4 % 30.1 % Less the impact of: Acquisitions (1.8) % — % Discontinued products — % 0.4 % Currency exchange rates 3.5 % (1.5) % Core sales growth (non-GAAP) 4.1 % 29.0 % Sales and core sales growth for the year ended December 31, 2022 increased 2.4% and 4.1%, respectively, compared to the comparable period in 2021.
Equipment & Consumables Selected Financial Data For the Year Ended December 31, ($ in millions) 2023 2022 2021 Sales $ 924.1 $ 970.5 $ 1,001.1 Operating profit 156.3 172.4 153.8 Operating profit as a % of sales 16.9 % 17.8 % 15.4 % GAAP Reconciliation Sales and Core Sales Growth 2023 vs. 2022 2022 vs. 2021 Total sales growth (GAAP) (4.8) % (3.1) % Less the impact of: Acquisitions (1.5) % (2.8) % Currency exchange rates 0.4 % 2.5 % Core sales growth (non-GAAP) (5.9) % (3.4) % 55 Sales Sales and core sales growth for the year ended December 31, 2023 decreased 4.8% and 5.9%, respectively, compared to the comparable period in 2022.
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. Manufacturing and Supply To date, COVID-19 has had, and may continue to have, an adverse impact on our supply chains and distribution systems.
For example, China has implemented volume-based procurement (“VBP”) 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. Industry Trends We operate in the large and growing global dental products industry.
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 Accounting Standards Codification (“ASC“) 205-20. The sale met the criteria to be accounted for as a discontinued operation.
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. 50 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 Accounting Standards Codification (“ASC“) 205-20.
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.
Investing Activities Cash flows relating to investing activities consist primarily of cash used for capital expenditures and acquisitions.
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.
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. 51 RESULTS OF OPERATIONS The following discussion and analysis of our consolidated statements of earnings should be read along with our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
The decrease in operating profit margin for the year ended December 31, 2022, was primarily due to unfavorable product mix as well as investments in our long-term growth initiatives, including higher sales and marketing expenses and the impact of inflation. The costs were partially offset by higher sales volume and price.
The decrease was primarily due to unfavorable product mix and a decrease in sales price, higher costs due to the impact of foreign currencies and investments in our long-term growth initiatives, partially offset by an increase in sales volume and by period-over-period savings associated with productivity improvements.
The increase in gross profit margin during the year ended December 31, 2022, as compared to the comparable period in 2021, was primarily due to an increase in sales volume and price, combined with lower restructuring spend, partially offset by the unfavorable impact from foreign exchange rates and higher costs due to inflation. 59 OPERATING EXPENSES For the Years Ended December 31, ($ in millions) 2022 2021 2020 Selling, general and administrative expenses $ 1,055.5 $ 1,019.8 $ 924.6 Research and development expenses $ 100.1 $ 100.5 $ 86.7 SG&A as a % of sales 41.1 % 40.6 % 47.9 % R&D as a % of sales 3.9 % 4.0 % 4.5 % The increase in SG&A expenses as a percentage of sales for the year ended December 31, 2022 as compared to the comparable period of 2021, was primarily due to higher sales and marketing expenses, increased amortization of intangible assets and acquisition related costs, partially offset by higher sales volume.
OPERATING EXPENSES For the Years Ended December 31, ($ in millions) 2023 2022 2021 Selling, general and administrative expenses $ 1,056.9 $ 1,055.5 $ 1,019.8 Research and development expenses $ 93.8 $ 100.1 $ 100.5 Goodwill and intangible asset impairment $ 258.3 $ — $ — SG&A as a % of sales 41.2 % 41.1 % 40.6 % R&D as a % of sales 3.7 % 3.9 % 4.0 % SG&A expenses as a percentage of sales for the year ended December 31, 2023, was consistent with the comparable period in 2022.
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.
We used a portion of the net proceeds to partially exchange the 2025 Convertible Notes. The 2028 Convertible Notes will accrue interest at a rate of 1.75% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2024.
For a description of our outstanding debt as of December 31, 2022 and the senior credit facilities, refer to Note 16 to our audited consolidated financial statements in this Annual Report on Form 10-K. 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.
For a description of our outstanding debt as of December 31, 2023, refer to Note 16 to our Consolidated Financial Statements in this Annual Report on Form 10-K.
R&D expenses as a percentage of sales for the year ended December 31, 2022, was consistent with the comparable period in 2021. OTHER INCOME (EXPENSE), NET Included in other income (expense) for the years ended December 31, 2022 and 2021 were $3.1 million and $2.6 million, respectively of other income (expense) components of net periodic benefit costs.
R&D expenses as a percentage of sales for the year ended December 31, 2023, was consistent with the comparable period in 2022. 53 Goodwill and intangible asset impairment for the year ended December 31, 2023 consisted of a $212.3 million goodwill charge and a $46.0 million intangible asset charge.
This increase in cash used in investing activities during 2022 was primarily due to the acquisitions of Osteogenics and the Intraoral Scanner Business, and higher purchase of property, plant and equipment, partially offset by proceeds from the sale of the Kavo Treatment Unit and Instruments Business and the settlement of derivative financial instruments. 63 Financing Activities and Indebtedness Net cash provided by financing activities was $12.5 million during the year ended December 31, 2022, compared to $465.6 million used in financing activities for the comparable period of 2021.
Financing Activities and Indebtedness Net cash provided by financing activities was $118.9 million during the year ended December 31, 2023, compared to $12.5 million for the comparable period of 2022, primarily due to higher net borrowings during 2023 partially offset by lower proceeds from stock option exercises as compared to the prior year.
Our analysis indicated that the fair values of our reporting units exceeded their carrying values and consequently did not result in an impairment charge. 67 We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.
Refer to Notes 2, 3 and 9 to our Consolidated Financial Statements for a description of our policies relating to acquisitions, goodwill and acquired intangibles. We review goodwill and identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.
For a discussion of risks relating to our manufacturing process, refer to “Item 1A. Risk Factors—Risks Related to Our Business.” Components of Sales and Costs and Expenses Sales Our sales are primarily derived from the sale of dental consumables, equipment and services to third-party distributors and end-users.
While we have experienced some volatility in the region, the Israel-Hamas War has not had a material impact on our business. Components of Sales and Costs and Expenses Sales Our sales are primarily derived from the sale of dental consumables, equipment and services to third-party distributors and end-users.
The discounted cash flow model (i.e., an income approach) requires judgments and assumptions about projected sales growth, future operating margins, discount rates and terminal values.
Our significant assumptions in the discounted cash flow models vary amongst, and are specific to, each reporting unit which include, but are not limited to, discount rates, revenue growth rates, and operating margin assumptions. The discounted cash flow model requires judgments and assumptions about projected sales growth, future operating margins, discount rates and terminal values.
There are inherent uncertainties related to these assumptions and our judgment in applying them to the analysis of goodwill impairment.
There are inherent uncertainties related to these assumptions and our judgment in applying them to the analysis of goodwill impairment. Our annual goodwill impairment analysis in 2023 indicated that the fair value of three of our eight reporting units did not exceed their carrying values and consequently resulted in a $212.3 million impairment charge.
An increase in sales volume positively impacted sales growth by 2.5% on a period-over-period basis, combined with a price increase of 1.6%. Sales in developed markets increased primarily due to strong growth in Western Europe combined with a modest increase in North America.
An increase in sales volume positively impacted sales growth by 0.7% on a period-over-period basis, offset by a decrease in sales price of 1.1%. The decrease in sales is driven by lower demand from North America, partially offset by higher demand in Europe.
Operating Profit Operating profit margin was 17.8% for the year ended December 31, 2022, as compared to an operating profit margin of 15.4% for the comparable period of 2021.
Operating Profit Operating profit margin was 16.9% for the year ended December 31, 2023, as compared to an operating profit margin of 17.8% for the comparable period of 2022. The decrease in operating profit margin was primarily due to lower sales, and unfavorable sales price, offset by period-over-period savings associated with productivity improvements and decreased amortization of intangible assets.
The decrease in interest expense for the year ended December 31, 2022 as compared to the comparable period of 2021 was primarily due to the absence of accretive interest expense related to the convertible debt discount as a result of adopting ASU 2020-06 and overall lower debt outstanding, partially offset by higher interest rates.
The increase in interest expense for the year ended December 31, 2023 as compared to the comparable period of 2022 was primarily due to higher interest rates on our variable rate term borrowings and increased borrowing during the year ended December 31, 2023.
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. 53 Key Trends and Conditions Affecting Our Results of Operations 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.
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. 47 Key Trends and Conditions Affecting Our Results of Operations Debt Financing Transactions During the year ended December 31, 2023, we issued $500.2 million of 2028 Convertible Notes, entered into the Second Amended Credit Agreement, and executed exchanges with a limited number of holders of the 2025 Convertible Notes consisting of approximately $403.0 million in cash, which includes accrued interest, and approximately 8.4 million shares of our common stock (the “Notes Exchanges”).

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