Envista(NVST) - 2024 Q4 - Annual Report

Distribution and Sales - In 2024, approximately 42% of the company's products were distributed through third-party distributors[51]. - Henry Schein, Inc. accounted for about 10% of the company's sales in both 2024 and 2023, and 11% in 2022[52]. - Sales decreased by 2.2% for the year ended December 31, 2024, with core sales down 1.5% compared to 2023, impacted by foreign currency exchange rates reducing sales by 0.7%[264]. - Total sales for 2024 were $2,510.6 million, a decrease of 2.2% compared to$ 2,566.5 million in 2023[270]. - Total sales growth for the year ended December 31, 2024 decreased by 3.2% compared to 2023, with core sales growth down by 2.6%[291]. Employee Engagement and Diversity - In 2024, the company achieved a 94% participation rate in employee engagement surveys, with 72% of respondents feeling engaged at work[62]. - The company maintained 99% gender pay equity and 100% race/ethnicity pay equity in the U.S. as of February 2024[59]. - The company employs around 12,300 individuals, with approximately 3,000 in the U.S. and 9,300 outside the U.S.[57]. Research and Development - The company plans to continue significant investments in R&D to maintain its competitive position and enter new markets[55]. - The company is focusing on product development and innovation, particularly in the Implant-Based Tooth Replacement and Orthodontic Solutions businesses, to drive growth[251]. - Continued investment in the Spark clear aligner system has led to increased manufacturing capacity and market adoption, expected to provide growth opportunities[253]. Financial Performance - Gross profit margin decreased to 54.7% in 2024 from 56.1% in 2023, primarily due to unfavorable product mix and impairment of long-lived assets[273]. - SG&A expenses increased to $1,158.0 million in 2024, representing 46.1% of sales, up from 41.2% in 2023[274]. - Operating profit for the Specialty Products & Technologies segment was$ 89.9 million in 2024, down from $232.1 million in 2023, with an operating profit margin of 5.6%[284]. - Interest expense decreased to$ 46.4 million in 2024 from $63.4 million in 2023, attributed to higher returns on cash and lower variable rate borrowings[280]. - The effective tax rate for 2024 was (3.1)%, a significant change from (82.5)% in 2023, mainly due to larger nondeductible impairment charges[282]. Acquisitions and Investments - The company is evaluating potential investments and acquisitions to strategically fit or expand its portfolio into new business areas[94]. - The company acquired Osteogenics Biomedical Inc., Allotech LLC, and OBI Biologics, Inc. on July 5, 2022, enhancing its Specialty Products & Technologies segment[95]. - The acquisition of Carestream Dental's intraoral scanner business was completed on April 20, 2022, which is part of the Equipment & Consumables segment[96]. Regulatory Compliance - The company’s manufacturing operations are subject to extensive government regulations, including those from the FDA for medical devices[68]. - The company is subject to various healthcare laws, including the Federal Anti-Kickback Statute and HIPAA, which regulate fraud, abuse, and the privacy of health information[77][78]. - The company must comply with the General Data Protection Regulation (GDPR), which imposes fines of up to €20 million or 4% of total worldwide annual turnover for non-compliance[88]. - The Personal Information Protection Act (PIPL) in China carries maximum penalties of CNY 50 million or 5% of annual revenue for violations related to personal data processing[89]. Economic and Market Conditions - The company faces challenges from global economic conditions, including inflation and supply chain disruptions, which can affect dental procedure utilization rates[247]. - Third-party payors are increasingly reducing reimbursements for medical products, which could impact dentist usage and patient demand[82]. - Sales volume was negatively impacted by lower demand in Europe, China, and North America, partially offset by strong demand in Russia[272]. Cash Flow and Debt Management - Net cash provided by operating activities was$ 336.5 million in 2024, an increase from $275.7 million in 2023, attributed to improved working capital management[297]. - Net cash used in investing activities decreased to$ 54.6 million in 2024 from $62.4 million in 2023, mainly due to lower capital expenditures[299]. - Net cash used in financing activities was$ 103.7 million in 2024, compared to net cash provided of $118.9 million in 2023, primarily due to a$ 100.0 million repayment of the 2028 Term Loan[300]. - As of December 31, 2024, the company had $1,069.1 million in cash and cash equivalents, with$ 850.8 million held outside the United States[303]. - The company has the ability to incur an additional $750.0 million of indebtedness under its revolving credit facility as of December 31, 2024[302]. Impairments and Charges - Goodwill and intangible asset impairment for 2024 was$ 1,153.8 million, significantly higher than $258.3 million in 2023, driven by adverse macroeconomic factors[276]. - The company recorded a$ 960.5 million goodwill impairment charge due to the fair value of five out of eight reporting units not exceeding their carrying values[333]. - An impairment charge of $101.1 million was recorded for certain indefinite-lived trade names within the Specialty Products & Technologies segment as of June 28, 2024[334]. - An impairment of$ 92.2 million related to developed technology and customer relationships was recorded within the Equipment & Consumables segment as of June 28, 2024[338].