Discontinued Operations

9 Months Ended

Sep. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

On December 31, 2021, the Company completed the sale of substantially all of the KaVo Treatment Unit and Instrument Business (the “Divestiture”) to planmeca Verwaltungs Gmbh, Germany (“Planmeca”), pursuant to the master sale and purchase agreement (the “Purchase Agreement”) among the Company, Planmeca, and Planmeca Oy, as guarantor. In accordance with the terms of the Purchase Agreement, the Company received cash consideration of $317.3 million upon closing on December 31, 2021. During the nine months ended September 30, 2022, the Company has received an additional $59.8 million related to an earnout payment and certain working capital adjustments.

On December 30, 2021, the Company entered into an amendment to the Purchase Agreement (the "Amendment"), providing that the transfer of net assets in Russia, China and Brazil (the "Relevant Jurisdictions") would be deferred until the purchaser had formed entities for such transfer of assets in each such Relevant Jurisdiction and the applicable asset transfer agreement could be executed and consummated (each such asset transfer, a "Deferred Local Closing"). Except for the implementation of the Deferred Local Closings and related matters regarding the assets in the Relevant Jurisdictions, the provisions, terms and conditions of the Purchase Agreement were not materially amended by the Amendment. The Amendment did not alter the preliminary purchase price that Planmeca paid to the Company upon the closing of the Divestiture and the Company recognized the applicable gain or loss at the time of each Relevant Jurisdiction’s applicable closing. At December 31, 2021, the Company recorded a liability of $10.8 million for the proceeds related to the Relevant Jurisdictions. All three Relevant Jurisdictions have closed as of September 30, 2022 and the related liability associated with the proceeds released.

The Company recognized a loss of $1.6 million and a gain of $5.7 million on the Divestiture during the three and nine months ended September 30, 2022, respectively, primarily related to the recognition of certain purchase price adjustments and the closing of the Relevant Jurisdictions.

In conjunction with the Divestiture, the Company entered into a customary transition services agreement, which requires support transition services to Planmeca throughout the applicable transition period.

For the three and nine months ended September 30, 2022, the Divestiture continued to meet the criteria to be classified as held for sale and to be presented as a discontinued operation. Accordingly, the Company reclassified the results of operations and financial position of the Divestiture to discontinued operations in its accompanying Condensed Consolidated Statements of Income and Condensed Consolidated Balance Sheets for all periods presented. The Company’s Condensed Consolidated Statements of Cash Flows for all periods presented include the financial results of the KaVo Treatment Unit and Instrument Business.

For the nine months ended October 1, 2021, balances represent activity for the entire Divestiture, while balances for the nine months ended September 30, 2022, represent activity for the remaining Relevant Jurisdictions.

The carrying amounts of the assets and liabilities of the Divestiture held for sale are as follows ($ in millions):

	December 31, 2021
ASSETS
Current assets:
Assets for relevant jurisdictions	$	12.2
Current assets held for sale	$	12.2
LIABILITIES AND EQUITY
Current liabilities:
Liabilities for relevant jurisdictions	$	4.0
Current liabilities held for sale	$	4.0

The operating results of the Divestiture are reflected in the Condensed Consolidated Statements of Income within income from discontinued operations, net of tax as follows ($ in millions):

	Three Months Ended				Nine Months Ended
	September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021
Sales	$	2.8	$	102.5	$	11.7	$	302.0
Cost of sales	2.1		57.2		9.1		174.4
Gross profit	0.7		45.3		2.6		127.6
Operating expenses:
Selling, general and administrative	1.1		25.2		3.2		70.4
Research and development	—		3.8		—		12.5
Operating (loss) profit	(0.4)		16.3		(0.6)		44.7
Income tax expense	—		3.6		—		11.0
(Loss) income from discontinued operations	(0.4)		12.7		(0.6)		33.7
(Loss) gain on sale of discontinued operations, net of tax	(1.6)		—		5.7		—
Net (loss) income from discontinued operations	$	(2.0)	$	12.7	$	5.1	$	33.7

Significant non-cash operating items and capital expenditures for the Divestiture are reflected in the cash flows from operations as follows ($ in millions):

	Nine Months Ended
	September 30, 2022		October 1, 2021
Cash flows from operating activities
Depreciation and amortization1	$	—	$	5.6
Cash flows from investing activities:
Capital expenditures	$	—	$	4.2
1 Depreciation and amortization were no longer recognized once the business was classified as discontinued operations as of August 27, 2021.