UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended July ~~2, 2021~~1, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number - 001-34045

~~Colfax~~Enovis Corporation

(Exact name of registrant as specified in its charter)


Delaware		54-1887631
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

2711 Centerville Road,	Suite 400
Wilmington,	Delaware	19808
(Address of principal executive offices)		(Zip Code)


(302)			252-9160
(Registrant’s telephone number, including area code)


~~420 National Business Parkway,~~			~~5th Floor~~
~~Annapolis Junction,~~			~~Maryland, 20701~~
~~(Former name, former address and former fiscal year, if changed since last report)~~

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	~~CFX~~	~~New York Stock Exchange~~
~~5.75% Tangible Equity Units~~	~~CFXA~~ENOV	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑Accelerated filer ☐Non-accelerated filer ☐

Smaller reporting company ☐Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of July ~~2, 2021,~~28, 2022, there were ~~142,341,646~~54,129,530 shares of the registrant’s common stock, par value $.001 per share, outstanding.

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements			2
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Income (Loss)			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Equity			5
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
Note 1. General			7
Note 2. Recently Issued Accounting Pronouncements			8
Note 3. Discontinued Operations			8
Note 4. Acquisitions and Investments			89
Note 5. Revenue			910
Note 6. Net Income ~~(Loss)~~ Per Share from Continuing Operations			1112
Note 7. Income Taxes			1112
Note 8. Equity			1314
Note 9. Inventories, Net			15
Note 10. Debt			1516
Note 11. Accrued Liabilities			17
Note 12. Financial Instruments and Fair Value Measurements			1918
Note 13. Commitments and Contingencies			2019
Note 14. Segment Information			2219
Note 15. Related Party Transactions			21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2322
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3940
Item 4. Controls and Procedures			4142

PART II - OTHER INFORMATION
Item 1. Legal Proceedings			4243
Item 1A. Risk Factors			4243
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 3. Defaults Upon Senior Securities			43
Item 4. Mine Safety Disclosures			43
Item 5. Other Information			43
Item 6. Exhibits			4544

SIGNATURES			4645

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

~~COLFAX~~ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in thousands, except per share amounts

(Unaudited)

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
Net sales $ 985,928 $ 620,360 $ 1,865,139 $ 1,436,716
Cost of sales 566,944 379,274 1,075,078 847,416
Gross profit 418,984 241,086 790,061 589,300
Selling, general and administrative expense 337,563 235,727 643,287 527,924
Restructuring and other related charges 5,480 10,280 9,526 19,460
Operating income (loss) 75,941 (4,921) 137,248 41,916
Pension settlement gain (11,208) 0 (11,208) 0
Interest expense, net 17,805 28,284 43,465 53,080
Debt extinguishment charges 29,870 0 29,870 0
Income (loss) from continuing operations before income taxes 39,474 (33,205) 75,121 (11,164)
Income tax expense (benefit) 8,155 (30,063) 16,072 (16,890)
Net income (loss) from continuing operations 31,319 (3,142) 59,049 5,726
Loss from discontinued operations, net of taxes (1,617) (4,905) (9,107) (8,265)
Net income (loss) 29,702 (8,047) 49,942 (2,539)
Less: income attributable to noncontrolling interest, net of taxes 1,060 427 2,226 1,454
Net income (loss) attributable to Colfax Corporation $ 28,642 $ (8,474) $ 47,716 $ (3,993)
Net income (loss) per share - basic
Continuing operations $ 0.20 $ (0.03) $ 0.39 $ 0.03
Discontinued operations $ (0.01) $ (0.04) $ (0.06) $ (0.06)
Consolidated operations $ 0.19 $ (0.06) $ 0.33 $ (0.03)
Net income (loss) per share - diluted
Continuing operations $ 0.19 $ (0.03) $ 0.38 $ 0.03
Discontinued operations $ (0.01) $ (0.04) $ (0.06) $ (0.06)
Consolidated operations $ 0.18 $ (0.06) $ 0.32 $ (0.03)


	Three Months Ended				Six Months Ended
	July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021

Net sales	$	395,117	$	356,124	$	770,574	$	667,207
Cost of sales	179,211		155,531		348,768		295,332
Gross profit	215,906		200,593		421,806		371,875
Selling, general and administrative expense	225,481		197,913		444,747		375,992
Research and development expense	15,661		11,039		30,503		21,402
Insurance settlement gain	(33,034)		—		(33,034)		—
Restructuring and other related charges	2,245		1,992		4,664		2,963
Operating income (loss)	5,553		(10,351)		(25,074)		(28,482)

Interest expense, net	4,546		5,689		11,610		18,629
Debt extinguishment charges	20,104		29,870		20,104		29,870
Unrealized gain on investment in ESAB Corporation	(135,537)		—		(135,537)		—
Income (loss) from continuing operations before income taxes	116,440		(45,910)		78,749		(76,981)
Income tax expense (benefit)	(4,211)		(3,783)		(3,847)		(3,000)
Net income (loss) from continuing operations	120,651		(42,127)		82,596		(73,981)



Income (loss) from discontinued operations, net of taxes	(43,666)		71,829		10,690		123,923
Net income	76,985		29,702		93,286		49,942
Less: net income attributable to noncontrolling interest from continuing operations - net of taxes	130		355		397		645
Less: net income attributable to noncontrolling interest from discontinued operations - net of taxes	—		705		966		1,581
Net income attributable to Enovis Corporation	$	76,855	$	28,642	$	91,923	$	47,716
Net income (loss) per share - basic
Continuing operations	$	2.23	$	(0.83)	$	1.52	$	(1.53)
Discontinued operations	$	(0.81)	$	1.39	$	0.18	$	2.50
Consolidated operations	$	1.42	$	0.56	$	1.70	$	0.98
Net income (loss) per share - diluted
Continuing operations	$	2.21	$	(0.83)	$	1.51	$	(1.53)
Discontinued operations	$	(0.80)	$	1.39	$	0.18	$	2.50
Consolidated operations	$	1.41	$	0.56	$	1.69	$	0.98

See Notes to Condensed Consolidated Financial Statements.

~~COLFAX~~ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Dollars in thousands

(Unaudited)

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
Net income (loss) $ 29,702 $ (8,047) $ 49,942 $ (2,539)
Other comprehensive income (loss):
Foreign currency translation, net of tax expense (benefit) of $896, $(125), $3,176 and $394 8,784 71,866 (44,397) (100,926)
Unrealized gain (loss) on hedging activities, net of tax expense (benefit) of $(737), $(3,977), $3,506 and $(104) (2,150) (11,660) 10,231 (624)
Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $314, $185, $631 and $437 1,045 796 2,100 1,662
Other comprehensive income (loss) 7,679 61,002 (32,066) (99,888)
Comprehensive income (loss) 37,381 52,955 17,876 (102,427)
Less: comprehensive income (loss) attributable to noncontrolling interest (369) 772 673 (795)
Comprehensive income (loss) attributable to Colfax Corporation $ 37,750 $ 52,183 $ 17,203 $ (101,632)


	Three Months Ended			Six Months Ended
		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
Net income		$	76,985	$	29,702	$	93,286	$	49,942
Other comprehensive income (loss):
Foreign currency translation, net of tax expense of $—, $896 , $338, and $3,176		(30,876)		8,784		(84,337)		(44,397)
Unrealized gain on hedging activities, net of tax expense of $—, $(737), $2,711 , $3,506		—		(2,150)		9,028		10,231


Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $—, $314, $199 , $631		—		1,045		629		2,100


Other comprehensive income (loss)		(30,876)		7,679		(74,680)		(32,066)
Comprehensive income		46,109		37,381		18,606		17,876
Less: comprehensive income (loss) attributable to noncontrolling interest		(1,303)		(369)		(408)		673
Comprehensive loss attributable to Enovis Corporation		$	47,412	$	37,750	$	19,014	$	17,203

See Notes to Condensed Consolidated Financial Statements.

~~COLFAX~~ENOVIS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share amounts

(Unaudited)

July 2, 2021 December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 62,309 $ 97,068
Trade receivables, less allowance for credit losses of $34,211 and $37,666 599,877 517,006
Inventories, net 663,540 564,822
Prepaid expenses 77,500 69,515
Other current assets 75,746 113,418
Total current assets 1,478,972 1,361,829
Property, plant and equipment, net 480,119 486,960
Goodwill 3,399,030 3,314,541
Intangible assets, net 1,678,421 1,663,446
Lease asset - right of use 162,778 173,942
Other assets 360,176 350,831
Total assets $ 7,559,496 $ 7,351,549
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 20,480 $ 27,074
Accounts payable 453,716 330,251
Accrued liabilities 425,223 454,333
Total current liabilities 899,419 811,658
Long-term debt, less current portion 1,576,517 2,204,169
Non-current lease liability 131,541 139,230
Other liabilities 600,059 608,618
Total liabilities 3,207,536 3,763,675
Equity:
Common stock, $0.001 par value; 400,000,000 shares authorized; 142,341,646 and 118,496,687 issued and outstanding as of July 2, 2021 and December 31, 2020, respectively 142 118
Additional paid-in capital 4,225,248 3,478,008
Retained earnings 565,083 517,367
Accumulated other comprehensive loss (482,619) (452,106)
Total Colfax Corporation equity 4,307,854 3,543,387
Noncontrolling interest 44,106 44,487
Total equity 4,351,960 3,587,874
Total liabilities and equity $ 7,559,496 $ 7,351,549


	July 1, 2022		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	95,605	$	680,252

Trade receivables, less allowance for credit losses of $8,182 and $6,589	255,201		254,958
Inventories, net	400,852		356,233
Prepaid expenses	29,529		26,046
Other current assets	33,782		29,176
Investment in ESAB Corporation	263,070		—
Total current assets associated with discontinued operations	—		956,614

Total current assets	1,078,039		2,303,279
Property, plant and equipment, net	226,894		235,113
Goodwill	1,925,201		1,934,258
Intangible assets, net	1,114,325		1,154,028
Lease asset - right of use	71,032		76,485
Other assets	88,224		74,700
Total non-current assets associated with discontinued operations	—		2,738,049

Total assets	$	4,503,715	$	8,515,912

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	449,459	$	7,701
Accounts payable	159,136		155,208

Accrued liabilities	204,206		225,391
Total current liabilities associated with discontinued operations	—		635,284


Total current liabilities	812,801		1,023,584
Long-term debt, less current portion	—		2,078,625
Non-current lease liability	55,208		56,549
Other liabilities	144,243		122,159
Total non-current liabilities associated with discontinued operations	—		573,562

Total liabilities	1,012,252		3,854,479
Equity:
Common stock, $0.001 par value; 133,333,333 shares authorized; 54,111,118 and 52,083,078 shares issued and outstanding as of July 1, 2022 and December 31, 2021, respectively	54		52
Additional paid-in capital	2,897,207		4,544,315
Retained earnings	680,947		589,024
Accumulated other comprehensive loss	(88,941)		(516,013)
Total Enovis Corporation equity	3,489,267		4,617,378
Noncontrolling interest	2,196		44,055
Total equity	3,491,463		4,661,433
Total liabilities and equity	$	4,503,715	$	8,515,912

See Notes to Condensed Consolidated Financial Statements.

~~COLFAX~~ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Dollars in thousands, except share amounts ~~and as noted~~

(Unaudited)

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total
Shares Amount
Balance at December 31, 2020 118,496,687 $ 118 $ 3,478,008 $ 517,367 $ (452,106) $ 44,487 $ 3,587,874
Net income — — — 19,074 — 1,166 20,240
Distributions to noncontrolling owners — — — — — (1,054) (1,054)
Other comprehensive loss, net of tax of $6,840 — — — — (39,621) (124) (39,745)
Conversion of tangible equity units into common stock 344,412 — — — — — —
Common stock repurchases (21,082) — (971) — — — (971)
Common stock offering, net of issuance costs 16,100,000 16 711,305 — — — 711,321
Common stock-based award activity 677,314 1 13,403 — — — 13,404
Balance at April 2, 2021 135,597,331 135 4,201,745 536,441 (491,727) 44,475 4,291,069
Net income — — — 28,642 — 1,060 29,702
Other comprehensive income, net of tax of $473 — — — — 9,108 (1,429) 7,679
Conversion of tangible equity units into common stock 6,174,000 6 (6) — — — —
Common stock repurchases (710) — (32) — — — (32)
Common stock-based award activity 571,025 1 23,541 — — — 23,542
Balance at July 2, 2021 142,341,646 $ 142 $ 4,225,248 $ 565,083 $ (482,619) $ 44,106 $ 4,351,960


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
	Shares	Amount
Balance at December 31, 2021	52,083,078	$	52	$	4,544,315	$	589,024	$	(516,013)	$	44,055	$	4,661,433
Net income	—	—		—		15,068		—		1,233		16,301
Distributions to noncontrolling owners	—	—		—		—		—		(941)		(941)
Other comprehensive loss, net of tax of $3,248	—	—		—		—		(43,466)		(338)		(43,804)
Conversion of tangible equity units into common stock	1,691,845	2		(2)		—		—		—		—


Common stock-based award activity	255,957	—		11,056		—		—		—		11,056
Balance at April 1, 2022	54,030,880	54		4,555,369		604,092		(559,479)		44,009		4,644,045
Net income	—	—		—		76,855		—		130		76,985

Other comprehensive income, net of tax of $—	—	—		—		—		(29,443)		(1,433)		(30,876)
Distribution of ESAB Corporation	—	—		(1,666,732)		—		499,981		(40,510)		(1,207,261)


Common stock-based award activity	80,238	—		8,570		—		—		—		8,570
Balance at July 1, 2022	54,111,118	$	54	$	2,897,207	$	680,947	$	(88,941)	$	2,196	$	3,491,463

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total
Shares Amount
Balance at December 31, 2019 118,059,082 $ 118 $ 3,445,597 $ 479,560 $ (483,845) $ 48,198 $ 3,489,628
Cumulative effect of accounting change — — — (4,818) — — (4,818)
Net income — — — 4,481 — 1,027 5,508
Distributions to noncontrolling owners — — — — — (8) (8)
Other comprehensive loss, net of tax of $4,644 — — — — (158,297) (2,593) (160,890)
Common stock-based award activity 268,323 — 8,344 — — — 8,344
Balance at April 3, 2020 118,327,405 118 3,453,941 479,223 (642,142) 46,624 3,337,764
Net income (loss) — — — (8,474) — 427 (8,047)
Distributions to noncontrolling owners — — — — — (3,734) (3,734)
Other comprehensive income, net of tax of $(3,917) — — — — 60,658 344 61,002
Common stock-based award activity 61,608 — 8,591 — — — 8,591
Balance at July 3, 2020 118,389,013 $ 118 $ 3,462,532 $ 470,749 $ (581,484) $ 43,661 $ 3,395,576


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
	Shares	Amount
Balance at December 31, 2020	39,498,896	$	40	$	3,478,086	$	517,367	$	(452,106)	$	44,487	$	3,587,874
Net income	—	—		—		19,074		—		1,166		20,240
Distributions to noncontrolling owners	—	—		—		—		—		(1,054)		(1,054)
Other comprehensive loss, net of tax of $6,840	—	—		—		—		(39,621)		(124)		(39,745)
Conversion of tangible equity units into common stock	114,804	—		—		—		—		—		—
Common stock offering, net of issuance costs	5,366,666	5		711,316		—		—		—		711,321
Common stock-based award activity	218,744	—		12,433		—		—		—		12,433
Balance at April 2, 2021	45,199,110	45		4,201,835		536,441		(491,727)		44,475		4,291,069
Net income	—	—		—		28,642		—		1,060		29,702


Other comprehensive income (loss), net of tax of $473	—	—		—		—		9,108		(1,429)		7,679
Conversion of tangible equity units into common stock	2,058,000	2		(2)		—		—		—		—

Common stock-based award activity	190,105	—		23,510		—		—		—		23,510
Balance at July 2, 2021	47,447,215	$	47	$	4,225,343	$	565,083	$	(482,619)	$	44,106	$	4,351,960

See Notes to Condensed Consolidated Financial Statements.

~~COLFAX~~ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in thousands

(Unaudited)


		Six Months Ended					Six Months Ended
		July 2, 2021		July 3, 2020			July 1, 2022		July 2, 2021

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	49,942	$	(2,539)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income						Net income	$	93,286	$	49,942
Adjustments to reconcile net income to net cash (used in) provided by operating activities:						Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation, amortization and other impairment charges	Depreciation, amortization and other impairment charges	128,721		120,038		Depreciation, amortization and other impairment charges	117,300		128,721
Stock-based compensation expense	Stock-based compensation expense	17,262		14,685		Stock-based compensation expense	19,793		17,262
Non-cash interest expense	Non-cash interest expense	2,676		2,743		Non-cash interest expense	1,658		2,676

Deferred income tax benefit		(3,865)		(19,857)
Gain on sale of property, plant and equipment		(1,437)		(3,400)
Unrealized gain on investment in ESAB Corporation						Unrealized gain on investment in ESAB Corporation	(135,537)		—
Debt extinguishment charges						Debt extinguishment charges	20,104		29,870
Deferred income tax expense (benefit)						Deferred income tax expense (benefit)	2,174		(3,865)
(Gain)/Loss on sale of property, plant and equipment						(Gain)/Loss on sale of property, plant and equipment	352		(1,437)

Loss on debt extinguishment		29,870		0
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade receivables, net	Trade receivables, net	(83,458)		89,231		Trade receivables, net	(33,123)		(83,458)
Inventories, net	Inventories, net	(79,338)		352		Inventories, net	(92,910)		(79,338)
Accounts payable	Accounts payable	124,354		(47,436)		Accounts payable	15,919		124,354

Other operating assets and liabilities	Other operating assets and liabilities	(21,975)		(60,603)		Other operating assets and liabilities	(48,329)		(21,975)
Net cash provided by operating activities		162,752		93,214
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(39,313)		162,752
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property, plant and equipment		(44,641)		(50,426)
Purchases of property, plant and equipment and intangibles						Purchases of property, plant and equipment and intangibles	(47,796)		(44,641)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	3,191		4,996		Proceeds from sale of property, plant and equipment	2,746		3,191
Acquisitions, net of cash received, and investments	Acquisitions, net of cash received, and investments	(230,650)		(7,548)		Acquisitions, net of cash received, and investments	(35,123)		(230,650)

Net cash used in investing activities	Net cash used in investing activities	(272,100)		(52,978)		Net cash used in investing activities	(80,173)		(272,100)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from borrowings on term credit facility						Proceeds from borrowings on term credit facility	450,000		455,641
Payments under term credit facility						Payments under term credit facility	(785,000)		—

Proceeds from borrowings on revolving credit facilities and other		455,641		635,678
Repayments of borrowings on revolving credit facilities and other	Repayments of borrowings on revolving credit facilities and other	(383,384)		(698,910)		Repayments of borrowings on revolving credit facilities and other	(607,618)		(383,384)
Repayments of borrowings on senior notes		(700,000)		0

Repayments of borrowings on Senior notes						Repayments of borrowings on Senior notes	(300,000)		(700,000)
Repayments of borrowings on Euro senior notes						Repayments of borrowings on Euro senior notes	(386,278)		—
Distribution from ESAB Corporation, net						Distribution from ESAB Corporation, net	1,143,369		—
Payment of debt issuance costs						Payment of debt issuance costs	(2,938)		—

Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	730,002		2,250		Proceeds from issuance of common stock, net	1,727		730,002

Payment of debt extinguishment costs	Payment of debt extinguishment costs	(24,375)		0		Payment of debt extinguishment costs	(12,704)		(24,375)
Deferred consideration payments and other	Deferred consideration payments and other	(6,201)		(16,431)		Deferred consideration payments and other	(6,857)		(6,201)
Net cash provided by (used in) financing activities		71,683		(77,413)

Effect of foreign exchange rates on Cash and cash equivalents and Restricted cash		(1,095)		(6,059)

Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(506,299)		71,683
Effect of foreign exchange rates on Cash and cash equivalents and Restricted Cash						Effect of foreign exchange rates on Cash and cash equivalents and Restricted Cash	2,020		(1,095)
Decrease in Cash and cash equivalents and Restricted cash	Decrease in Cash and cash equivalents and Restricted cash	(38,760)		(43,236)		Decrease in Cash and cash equivalents and Restricted cash	(623,765)		(38,760)
Cash and cash equivalents and Restricted Cash, beginning of period	Cash and cash equivalents and Restricted Cash, beginning of period	101,069		109,632		Cash and cash equivalents and Restricted Cash, beginning of period	719,370		101,069
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	62,309	$	66,396	Cash and cash equivalents, end of period	$	95,605	$	62,309

See Notes to Condensed Consolidated Financial Statements.

~~COLFAX~~ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. General

~~Colfax~~Enovis Corporation (the “Company” or ~~“Colfax”~~“Enovis”) iswas previously Colfax Corporation (“Colfax”) until its separation into 2 differentiated, independent, and publicly traded companies on April 4, 2022, as discussed below. Colfax was a leading diversified technology company that ~~provides~~provided fabrication technology and medical device products and services to customers around the world, principally under the ESAB and DJO brands. The Company conducts its operations through two operating segments, “Fabrication Technology”, which incorporates the operations of ESAB and its related brands, and “Medical Technology”, which incorporates the operations of DJO and its related brands.

On ~~March~~April 4, ~~2021,~~2022 (the “Distribution Date”), the Company ~~announced its intention to separate~~completed the separation of its fabrication technology business (the “Separation”) through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB Corporation (“ESAB”) to Colfax stockholders. To affect the Separation, Colfax distributed to its stockholders 1 share of ESAB common stock for every three shares of Colfax common stock held at the close of business on March 22, 2022, with the Company retaining 10% of the shares of ESAB common stock immediately following the Separation. At July 1, 2022, the Company’s investment in ESAB was measured at fair value based on ESAB’s closing stock price, and ~~specialty medical technology businesses into two differentiated, independent, and publicly traded companies.~~was valued at $263.1 million. The ~~current~~Company intends to divest its retained stake in ESAB, in a tax-efficient exchange for its outstanding debt no later than 12 months after the Distribution Date. Upon completion of the Separation, Colfax, ~~entity will retain~~which retained the Company’s specialty medical technology business, changed its name to Enovis Corporation. On April 5, 2022, the Company began trading under ~~a new name, while~~ the stock symbol “ENOV” on the New York Stock Exchange.

Since the Separation occurred in the second quarter of 2022, Enovis has classified its fabrication technology business ~~will operate independently~~as a discontinued operation in its historical financial statements for all periods presented.

Following the completion of the Separation, the Company revised its reporting structure to now conduct its business through 2 operating segments, “Prevention and Recovery”, which consists of the Company’s bracing, recovery sciences, and footcare product lines, and “Reconstructive”, which includes the Company’s surgical implant product lines.

In connection with the Separation, ESAB issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to Enovis. The distribution proceeds were used by Enovis in conjunction with $450 million of borrowings on a term loan (the “Enovis Term Loan”) under the ~~existing ESAB brand name. The separation is intended~~new Enovis credit facility (the “Enovis Credit Agreement”), and $52.3 million of cash on hand to ~~be structured in~~repay $1.4 billion of outstanding debt and accrued interest under the Company’s previous credit agreement, which was legally extinguished upon completion of the Separation, $302.8 million of outstanding debt and accrued interest on its 2026 Notes at a ~~tax-free manner~~redemption price of 103.188% of the principal amount, and ~~is targeted to be completed in the first quarter of 2022. The assets, liabilities, revenues~~other fees and expenses due at closing. Additionally, on April 7, 2022, the Company completed a full redemption of its €350 million principal 3.250% Euro Senior Notes due 2025 using cash on hand at a redemption price of 100.813% of the ~~fabrication technology businesses are included in continuing operations~~principal amount.

Immediately following the Separation, the Company effected a one-for-three reverse stock split of all issued and outstanding shares of Enovis common stock. As a result of the ~~Company~~reverse stock split, prior-period share and per share figures contained in the accompanying Condensed Consolidated Financial ~~Statements.~~Statements have been retroactively restated as if the reverse stock split occurred at the beginning of the periods presented.

The Condensed Consolidated Financial Statements included in this quarterly report have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“GAAP”) for interim financial ~~statements.~~statements and reflect, in the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations as of and for the periods indicated. Certain prior period amounts have been reclassified to conform to the current period presentation. The Condensed Consolidated Balance Sheet as of December 31, ~~2020~~2021 is derived from the Company’s audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the SEC’s rules and regulations for interim financial statements. The Condensed Consolidated Financial Statements included herein should be read in conjunction with the audited financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”), filed with the SEC on February ~~18, 2021.~~

The Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations as of and for the periods indicated. Intercompany transactions and accounts are eliminated in consolidation.22, 2022.

The Company makes certain estimates and assumptions in preparing its Condensed Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from those estimates.

~~In the normal course of business, the Company incurs research and development costs related to new product development~~ The COVID-19 outbreak, which ~~are expensed~~was characterized as incurred and included in Selling, general and administrative expense on the Company’s Condensed Consolidated Statements of Operations. Research and development costs were $21.3 million and $41.2 million during the three and six months ended July 2, 2021, respectively, and $14.1 million and $32.6 million during the three and six months ended July 3, 2020, respectively.

During the three months ended July 2, 2021, the Company used the proceeds from its March 2021 equity offering to redeem all $600 million of its 2024 senior notes and $100 million of outstanding principal on its 2026 senior notes. The Company paid an early redemption premium of $24.4 million and recorded a loss on the extinguishment of $29.9 million. Additionally, during the three months ended July 2, 2021, a pension settlement gain of $11.2 million was recognized when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

The results of operations for the three and six months ended July 2, 2021 are not necessarily indicative of the results of operations that may be achieved for the full year. Quarterly results are affectedpandemic by seasonal variations in the Company’s businesses, and European operations typically experience a slowdown during the July, August and December holiday seasons. Medical Technology sales typically peak in the fourth quarter. General economic conditions may, however, impact future seasonal variations.

~~In December 2019, a novel coronavirus disease (“COVID-19”) was first reported in China. On March 11, 2020, due to worldwide spread of the virus,~~ the World Health Organization ~~characterized COVID-19 as a pandemic. The COVID-19 global~~

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~pandemic has resulted in a widespread health crisis, and the resulting impact~~ on governments, businesses and individuals and actions taken by them in response to the situation have resulted in widespread economic disruptions, significantly affecting broader economies, financial markets, and overall demand for the Company’s products. In 2021, these impacts continue to be observed, though to a lesser extent thanMarch 11, 2020, ~~primarily as a result of broadening access to COVID-19 vaccines and gradual relaxing of some government-mandated restrictions. The COVID-19 outbreak~~ has caused increased uncertainty in estimates and assumptions affecting the reported amounts of assets and liabilities in the Condensed Consolidated Financial Statements as the extent and period of recovery from the COVID-19 outbreak and related economic disruption are difficult to

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

forecast. Furthermore, ~~the~~ historical seasonality trends have been disrupted by the commercial impacts caused by the COVID-19 pandemic.

2. Recently Issued Accounting Pronouncements

~~Accounting Guidance Implemented in 2021~~The Company has not adopted any new accounting standards during the six months ended July 1, 2022. There are no recently issued accounting pronouncements that are expected to have a material effect on the Company’s financial position, results of operations or cash flows.

~~Standard~~

~~Description~~

~~Effective Date~~

~~ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans~~

The ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

~~January 1, 2021~~

~~ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~

The ASU eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of accounting for income taxes. The Company adopted this ASU as of January 1, 2021 on a prospective basis, and the adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

~~January 1, 2021~~

3. Discontinued Operations

Separation of Fabrication Technology Business

On April 4, 2022, the Company completed the Separation of its fabrication technology business into an independent, publicly traded company: ESAB, a global organization that develops, manufactures and supplies consumable welding and cutting products and equipment, as well as gas control equipment, into diversified end markets such as medical and alternative energy. The ~~Company retained~~spin-off was effected through a pro-rata distribution of 90% of the 60,034,311 outstanding common shares of ESAB to Enovis stockholders of record at the close of business on March 22, 2022 (the “Record Date”). Enovis stockholders received 1 share of ESAB for every three shares of Enovis stock they owned on the Record Date.

The carrying value of the assets and liabilities of the Company’s former fabrication technology business’ discontinued operations, other contributed legal entities, discontinued operations containing asbestos, and certain pension assets and liabilities, as of December 31, 2021 were as follows:


	December 31, 2021
ASSETS	(in thousands)
Cash and cash equivalents	$	39,118
Trade receivables, net	383,742
Inventories, net	420,062
Prepaid expenses	52,140
Other current assets	61,552
Total current assets associated with discontinued operations	956,614
Property, plant and equipment, net	286,278

Goodwill	1,533,037
Other intangibles, net	521,434
Lease asset - right of use	107,944
Other assets	289,356
Total assets associated with discontinued operations(1)	$	3,694,663

LIABILITIES
Current portion of long-term debt	$	613
Accounts payable	348,965
Accrued liabilities	285,706
Total current liabilities associated with discontinued operations	635,284
Long-term debt, less current portion	54
Non-current lease liability	88,777
Deferred tax liabilities	116,198
Other liabilities	368,533
Total liabilities associated with discontinued operations(1)	$	1,208,846

(1)Total assets and liabilities include asbestos-related contingencies and insurance coverages ~~from divested businesses~~previously reported by Colfax as discontinued operations. See Asbestos Contingencies section below for ~~which it did not retain an interest in~~more information.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The financial results of the ~~ongoing operations subject to~~discontinued operation for the ~~contingencies. The Company has classified asbestos-related selling, general~~three and ~~administrative activity in its Condensed Consolidated Statements~~six months ended July 1, 2022 and July 2, 2021 include the fabrication technology business through the date of ~~Operations~~Separation and separation-related costs incurred and are presented as ~~part of Loss~~income from discontinued operations, net of ~~taxes. Asbestos-related~~income taxes, on the Company’s Consolidated Statements of Operations. The following table presents the financial results of the fabrication technology business:


	Three Months Ended				Six Months Ended
	July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
	(in thousands)
Net sales	$	—	$	629,803	$	647,911	$	1,197,932
Cost of sales	—		411,412		423,580		779,746
Selling, general and administrative expense(1)	35,463		130,425		174,664		257,724
Restructuring and other related charges	—		3,488		5,304		6,563
Operating loss	(35,463)		84,478		44,363		153,899
Interest expense	—		12,117		8,035		24,837
Pension settlement gain	—		(11,208)		—		(11,208)
Income from discontinued operations before income taxes	(35,463)		83,569		36,328		140,270
Income tax (benefit) expense	8,203		11,740		25,638		16,347
Income from discontinued operations, net of taxes	$	(43,666)	$	71,829	$	10,690	$	123,923

(1) Selling, general and administrative expenses for the three months ended July 1, 2022 include certain transaction costs incurred to effect the Separation.

Total income attributable to noncontrolling interest related to ESAB, net of taxes ~~were~~was $1.0 million for the six months ended July 1, 2022, and $0.7 million and $1.6 million ~~and $2.5 million during~~for the three and six months ended July 2, 2021, ~~respectively, and $1.4 million and $2.8 million during the three and six months ended July 3, 2020, respectively~~. ~~See Note 13, “Commitments and Contingencies” for further information.~~

The Company also recorded Loss from discontinued operations, net of taxes of $0.1 million and $6.6 million during the three and six months ended July 2, 2021, respectively, and $3.5 million and $5.5 million during the three and six months ended July 3, 2020, respectively, related to its divested air and gas handling business, including a settlement executed in the first quarter of 2021, as well as certain professional, legal, and consulting fees in 2020.respectively.

Cash used in operating activities related to discontinued operations for the six months ended July ~~2, 2021 and July 3, 2020~~1, 2022 was ~~$4.6 million and $7.9 million, respectively.~~

~~4. Acquisitions~~

~~The Company completed 1 acquisition in its Fabrication Technology segment and 3 acquisitions in its Medical Technology segment during~~$29.6 million. Cash provided by operating activities related to discontinued operations for the six months ended July 2, 2021 was $122.6 million. Cash used in investing activities related to discontinued operations for ~~total~~the six months ended July 1, 2022 and July 2, 2021 was $3.2 million and $14.4 million, respectively.

Asbestos Contingencies

The Company retained certain asbestos-related contingencies and insurance coverages from its previously divested businesses for which it did not retain an interest in the ongoing operations except for the contingencies. The net costs and cash flows associated with these contingencies and coverages were reported by the Company as discontinued operations. In conjunction with the Separation, all asbestos-related contingencies and insurance coverages from its divested businesses were transferred fully to ESAB. The Company has classified asbestos-related selling, general and administrative activity through the the date of Separation in its Condensed Consolidated Statements of Operations as part of Loss from discontinued operations, net of taxes. Subsequent to the Separation, the asbestos-related selling, general and administrative activity and asbestos assets and liabilities are no longer reflected in the Enovis financial statements.

4. Acquisitions and Investments

2022 Acquisitions

During the six months ended July 1, 2022, the Company completed 3 asset acquisitions, 1 business acquisition and 2 investments, which are carried at cost as they do not have a readily determinable fair value. NaN of these transactions were completed by the Company’s Reconstructive segment, and the other 4 transactions were completed by the Prevention & Recovery segment. The asset acquisitions broaden the Company’s product offering and distribution network. Aggregate purchase consideration for the 3 asset acquisitions was $18.2 million, of which $8.6 million was paid in cash and $9.6 million of deferred and contingent consideration. The investments were acquired for $12.0 million in cash consideration.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

On May 6, 2022, the Company completed a business acquisition in its Reconstructive segment of KICo Knee Innovation Company Pty Limited and subsidiaries, an Australian private company doing business as 360 Med Care, by acquiring 100% of its equity interests. The entity is an Australian medical device distributor that bundles certain computer-assisted surgery and patient experience enhancement programs to add value to its device supply arrangements with surgeons, hospitals, and insurers. The acquisition is accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the acquisition date. The Company paid $14.3 million for the acquisition, net of cash received, and recorded estimated contingent consideration at fair value of ~~$215.9~~$12.8 million related to certain future revenue targets. The Company allocated $13 million to goodwill and $18.2 million to intangible assets acquired. Purchase accounting procedures are ongoing and revisions to contingent consideration, intangible assets acquired, and adjustments for working capital true-ups may be recorded in future periods during the purchase price allocation period. The 360 Med Care acquisition broadens our customer base in Australia and adds to our overall product offerings.

Investments

As of July 1, 2022, the balance of investments held by the company without readily determinable fair values was $31.9 million. The investments are carried at cost minus impairments, if any, plus adjustments for fair value indicators from observable price changes in orderly transactions for the identical or similar investment of the same issuer. There have been no impairments or upward adjustments in the current year or since acquisition of the investments.

The Company holds equity securities in ESAB Corporation for total value of $263.1 million which are recorded at fair value. During the three and six months ended July 1, 2022, the Company recorded an unrealized gain of $135.5 million over cost basis. The company does not hold other equity securities measured at fair value.

2021 Acquisitions

During the six months ended July 2, 2021, the Company completed 3 acquisitions in its Reconstructive segment for aggregate net cash consideration of $208.1 million. The acquisitions are accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the respective acquisition date.

The ~~Condensed Consolidated Balance Sheet as~~Reconstructive segment acquired Trilliant Surgical (“Trilliant”), a provider of foot and ankle orthopedic implants, in the first quarter of 2021 for net cash consideration of $79.6 million. The Reconstructive segment’s acquisitions in the second quarter of 2021 included MedShape, Inc. (“MedShape”), a provider of innovative surgical solutions for foot and ankle surgeons, which was acquired for net cash consideration of $124.6 million. The Trilliant and MedShape acquisitions further expand the Company’s U.S. foot and ankle product lines. The purchase accounting for all acquisitions made in the six months ended July 2, 2021 ~~reflects our preliminary estimates of fair value and are subject to adjustment.~~has been completed. The Company also made 2 investments in medical technology businesses during the six months ended July 2, 2021 for a total of $14.8 million. Both investments ~~are~~were carried at cost as of July 1, 2022, as they do not have a readily determinable fair value.

During the second half of 2021, the Reconstructive segment acquired Mathys AG Bettlach for total acquisition equity consideration of $285.7 million, which included cash acquired of $14.7 million. Purchase allocation procedures for this acquisition are ongoing as of July 1, 2022. For further information on prior year acquisitions and investments, refer to Note 5. “Acquisitions” in the Notes to the Consolidated Financial Statements in the Company’s 2021 Form 10-K. There have been no material changes to purchase accounting estimates for the prior year acquisitions since the issuance of the Company’s 2021 Form 10-K.

5. Revenue

The Company provides orthopedic solutions, including products and services spanning the full continuum of patient care, from injury prevention to rehabilitation. Substantially all its revenue is recognized at a point in time. The Company disaggregates its revenue into the following segments:

~~COLFAX~~ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

In the first quarter of 2021 the Medical Technology segment acquired Trilliant Surgical (“Trilliant”), a national provider of foot and ankle orthopedic implants. The product technologies of Trilliant support the Medical Technology segment’s focused expansion into the adjacent foot and ankle market. Trilliant has a broad product portfolio that covers the full universe of foot reconstructive and fixation procedures, and includes the novel Arsenal Foot Plating System, designed for greater flexibility and speed of implant placement. In the second quarter of 2021, the Medical Technology segment acquired MedShape, Inc.

(“MedShape”), a provider of innovative surgical solutions for foot and ankle surgeons using its patented superelastic nickel titanium (NiTiNOL) and shape memory polymer technologies. This acquisition further expands the Company's foot and ankle platform. These 2 acquisitions were completed for total consideration, net of cash received, of $205.4 million, subject to certain adjustments. Net working capital and intangible assets acquired represent 9% and 47% of the total consideration paid for these 2 acquisitions, respectively, with the residual amount primarily attributable to Goodwill. The Goodwill acquired in the Trilliant acquisition is expected to be deductible for income tax purposes. The estimated proforma annual revenues, as if the Trilliant and MedShape acquisitions occurred on January 1, 2021, are approximately 1% of Colfax’s consolidated revenues.


	Three Months Ended				Six Months Ended
	July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
	(In thousands)
Prevention and Recovery	$	263,783	$	266,919	$	508,618	$	501,593
Reconstructive	131,334		89,205		261,956		165,614
Total	$	395,117	$	356,124	$	770,574	$	667,207

In addition, on June 7, 2021, the Company entered a definitive agreement to acquire Mathys AG Bettlach (“Mathys”) for total acquisition consideration of approximately $285 million, expected to be financed with Colfax common stock. Mathys, a Switzerland-based company, develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions, and sports medicine. The acquisition expands the Medical Technology segment’s reconstructive product portfolio with Mathys’ complimentary surgical solutions and international customer base. The transaction is expected to close on July 28, 2021 subsequent to the filing of this Form 10-Q, subject to the satisfaction of closing conditions.

~~5. Revenue~~

The Company’s Fabrication Technology segment formulates, develops, manufactures and supplies consumable products and equipment. Substantially all revenue from the Fabrication Technology business is recognized at a point in time. The Company disaggregates its Fabrication Technology revenue into the following product groups:

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
(In thousands)
Equipment $ 198,856 $ 129,033 $ 372,606 $ 285,833
Consumables 430,948 285,334 825,326 654,071
Total $ 629,804 $ 414,367 $ 1,197,932 $ 939,904

~~Contracts with customers in the consumables product grouping generally have a shorter fulfillment period than equipment contracts.~~

The Company’s Medical Technology segment provides products and services spanning the orthopedic continuum of patient care, from injury prevention to rehabilitation. While the Company’s Medical Technology sales are primarily derived from 3 sales channels including dealers and distributors, insurance, and direct to consumers and hospitals, substantially all its revenue is recognized at a point in time.

~~The Company disaggregates its Medical Technology revenue into the following product groups:~~

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
(In thousands)
Prevention & Recovery(1)
$ 269,968 $ 159,851 $ 505,206 $ 383,636
Reconstructive 86,156 46,142 162,001 113,176
Total $ 356,124 $ 205,993 $ 667,207 $ 496,812

~~(1)~~ ~~For the periods presented, the Prevention & Recovery product group includes bone growth stimulation products, which were previously classified as part of the Reconstructive product group.~~

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

Given the nature of the ~~Fabrication Technology and Medical Technology businesses,~~Company’s business, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of July ~~2, 2021~~1, 2022 is immaterial.

The nature of the Company’s contracts gives rise to certain types of variable consideration, including rebates, implicit price concessions, and other discounts. The Company includes estimated amounts of variable consideration in the transaction price to the extent that it is probable there will not be a significant reversal of revenue.

In some circumstances, customers are billed in advance of revenue recognition, resulting in contract liabilities. As of December 31, ~~2020~~2021 and ~~2019,~~2020, total contract liabilities were ~~$36.6~~$9.2 million and ~~$14.8~~$15.0 million, respectively. During the three and six months ended July 1, 2022, revenue recognized that was included in the contract liability balance at the beginning of the year was $2.6 million and $6.2 million, respectively. During the three and six months ended July 2, 2021, revenue recognized that was included in the contract liability balance at the beginning of the year was ~~$5.1~~$2.3 million and $19.4 million, respectively. During the three and six months ended July 3, 2020, revenue recognized that was included in the contract liability balance at the beginning of the year was $3.8 million and $8.7$3.1 million, respectively. As of July ~~2, 2021~~1, 2022 and July ~~3, 2020,~~2, 2021, total contract liabilities were ~~$33.5~~$3.1 million and ~~$33.1~~$13.6 million, respectively, and were included in Accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. The contract liabilities as of ~~July 2, 2021 and~~ December 31, ~~2020 include $9.9 million and $11.8~~2021 included $4.9 million of certain one-time advance ~~payments in the Medical Technology business, respectively.~~payments.

Allowance for Credit Losses

The Company’s estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. In calculating and applying its current expected credit losses, the Company disaggregates trade receivables into business segments due to risk characteristics unique to each segment given the individual lines of business and market. The business segments are further disaggregated based on either geography or product type.

The Company uses a loss rate methodology in calculating its current expected credit losses, leveraging historical write-offs over a defined lookback period in deriving a historical loss rate. The expected credit loss model further considers current conditions and reasonable and supportable forecasts using an adjustment for current and projected macroeconomic factors. ~~Management identified appropriate macroeconomic indicators based on tangible correlation to historical losses considering the location and risks associated with the Company.~~

A summary of the activity in the Company’s allowance for credit losses included within Trade receivables in the Condensed Consolidated Balance Sheets is as follows:

Six Months Ended July 2, 2021
Balance at
Beginning
of Period Charged to Expense, net Write-Offs and Deductions Foreign
Currency
Translation Balance at
End of
Period
(In thousands)
Allowance for credit losses $ 37,666 $ 579 $ (3,440) $ (594) $ 34,211


	Six Months Ended July 1, 2022
	Balance at Beginning of Period		Charged to Expense, net		Write-Offs, Deductions and Other, net		Foreign Currency Translation		Balance at End of Period
	(In thousands)
Allowance for credit losses	$	6,589	$	343	$	1,391	$	(141)	$	8,182

1011

~~COLFAX~~ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

6. Net Income ~~(Loss)~~ Per Share from Continuing Operations

Net income per share from continuing operations was computed as follows:


		Three Months Ended				Six Months Ended					Three Months Ended			Six Months Ended
		July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020				July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
		(In thousands, except share and per share data)										(In thousands, except share and per share data)
Computation of Net income (loss) per share from continuing operations - basic:	Computation of Net income (loss) per share from continuing operations - basic:									Computation of Net income (loss) per share from continuing operations - basic:
Net income (loss) from continuing operations attributable to Colfax Corporation (1)		$	30,259	$	(3,569)	$	56,823	$	4,272
Net income (loss) from continuing operations attributable to Enovis Corporation(1)										Net income (loss) from continuing operations attributable to Enovis Corporation(1)		$	120,521	$	(42,482)	$	82,199	$	(74,626)
Weighted-average shares of Common stock outstanding – basic	Weighted-average shares of Common stock outstanding – basic	153,875,957		136,756,449		146,708,649		136,677,521		Weighted-average shares of Common stock outstanding – basic		54,080,549		51,291,986		53,969,738		48,902,883
Net income (loss) per share from continuing operations – basic	Net income (loss) per share from continuing operations – basic	$	0.20	$	(0.03)	$	0.39	$	0.03	Net income (loss) per share from continuing operations – basic		$	2.23	$	(0.83)	$	1.52	$	(1.53)

Computation of Net income (loss) per share from continuing operations - diluted:	Computation of Net income (loss) per share from continuing operations - diluted:									Computation of Net income (loss) per share from continuing operations - diluted:
Net income (loss) from continuing operations attributable to Colfax Corporation (1)		$	30,259	$	(3,569)	$	56,823	$	4,272
Net income (loss) from continuing operations attributable to Enovis Corporation(1)										Net income (loss) from continuing operations attributable to Enovis Corporation(1)		$	120,521	$	(42,482)	$	82,199	$	(74,626)
Weighted-average shares of Common stock outstanding – basic	Weighted-average shares of Common stock outstanding – basic	153,875,957		136,756,449		146,708,649		136,677,521		Weighted-average shares of Common stock outstanding – basic		54,080,549		51,291,986		53,969,738		48,902,883
Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units	Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units	1,987,368		0		2,077,643		2,880,841		Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units		441,300		—		489,134		—
Weighted-average shares of Common stock outstanding – diluted	Weighted-average shares of Common stock outstanding – diluted	155,863,325		136,756,449		148,786,292		139,558,362		Weighted-average shares of Common stock outstanding – diluted		54,521,849		51,291,986		54,458,872		48,902,883
Net income (loss) per share from continuing operations – diluted	Net income (loss) per share from continuing operations – diluted	$	0.19	$	(0.03)	$	0.38	$	0.03	Net income (loss) per share from continuing operations – diluted		$	2.21	$	(0.83)	$	1.51	$	(1.53)

(1) Net income (loss) from continuing operations attributable to ~~Colfax~~Enovis Corporation for the respective periods is calculated using Net income (loss) from continuing operations less the continuing operations component of the income attributable to noncontrolling interest, net of taxes, of ~~$1.1~~$0.1 million and ~~$2.2~~$0.4 million for the three and six months ended July 1, 2022, respectively, and $0.4 million and $0.6 million for the three and six months ended July 2, 2021, ~~respectively,~~respectively.

As a result of the reverse stock split following the Separation, prior-period share and ~~$0.4 million and $1.5 million for~~per share figures contained in the Condensed Consolidated Financial Statements have been retroactively restated as if the reverse stock split occurred at the beginning of the periods presented.

For the three and six months ended July ~~3, 2020, respectively.~~

~~For all periods presented,~~1, 2022 and the three and six months ended July 2, 2021, the weighted-average shares of Common stock outstanding - basic includes the impact of ~~18.4~~6.1 million shares, as adjusted for the reverse stock split, for the actual or potential issuance of shares from tangible equity unit purchase contracts. In January 2022, the final remaining amount of tangible equity unit purchase contracts were converted into approximately 1.7 million shares of the Company’s common stock, as adjusted for the reverse stock split. All issuances of Company common stock related to the ~~issuance of Colfax’s tangible equity units. During the three and six months ended July 2, 2021, conversions of the Company’s~~ tangible equity units ~~resulted~~were converted at the minimum settlement rate as a result of the increase in the ~~issuance of approximately 6.2 million and 6.5 million shares of Colfax common stock, respectively. The~~Company’s share price. All the issued shares are included in the Common stock issued and outstanding as of July 2, 2021. For the six months ended July 3, 2020, the weighted-average shares of Common stock outstanding - diluted includes the impact of an additional 1.9 million potentially issuable dilutive shares related to Colfax’s tangible equity units as a result of the Company’s share price in March 2020.1, 2022. See Note 8, “Equity” for details.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three and six months ended July ~~2, 2021~~1, 2022 excludes ~~1.6~~0.4 million ~~and 1.3 million, respectively,~~ of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three and six months ended July ~~3, 2020~~2, 2021 excludes ~~4.9~~0.5 million and ~~4.2~~0.4 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.

~~COLFAX~~ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

7. Income Taxes

During the three and six months ended July ~~2, 2021,~~1, 2022, Income from continuing operations before income taxes was ~~$39.5~~$116.4 million and ~~$75.1~~$78.7 million, respectively, while income tax benefit was $4.2 million and $3.8 million, respectively. The effective tax rate was (3.6)% and (4.9)% for the three and six months ended July 1, 2022, both of which differed from the 2022 federal statutory rate of 21% mainly due to non-taxable unrealized gains on the investment in ESAB offset by non-deductible costs related to the tax-free separation transaction.

During the three and six months ended July 2, 2021, Loss from continuing operations before income taxes was $45.9 million and $77.0 million, respectively, while the income tax ~~expense~~benefit was ~~$8.2~~$3.8 million and ~~$16.1~~$3.0 million, respectively. The effective tax ~~rates were 20.7%~~rate was 8.2% and ~~21.4%~~3.9% for the three and six months ended July 2, 2021, respectively, both of which ~~both~~ differed ~~slightly~~ from the 2021 U.S. federal statutory rate of 21% mainly due to ~~the effective settlements on uncertain tax positions and~~ U.S. ~~tax credits, offset by withholding taxes, U.S. tax~~taxation on international operations and other non-deductible expenses.

During the three and six months ended July 3, 2020, Loss from continuing operations before income taxes was $33.2 million and $11.2 million, respectively, while the income tax benefit was $30.1 million and $16.9 million, respectively. The effective tax rates were 90.5% and 151.3% for the three and six months ended July 3, 2020, respectively. The effective tax rate for the three months ended July 3, 2020 differed from the 2020 U.S. federal statutory rate of 21% mainly due to the net impact of U.S. tax credits and state taxes on the forecasted rate and a $6.8 million discrete tax benefit associated with the filing of timely elected changes to U.S. Federal tax returns to credit rather than to deduct foreign taxes and the realization of tax benefits associated with effective settlements on uncertain tax positions. These favorable impacts were partially offset by the impact of additional U.S. tax on international operations and taxable foreign exchange gains. The effective tax rate for the six months ended July 3, 2020 differed from the 2020 U.S. federal statutory rate of 21% mainly due to the net impact of U.S. tax credits and state taxes on the forecasted rate and the previously mentioned discrete tax benefit associated with the filing of timely elected changes to U.S. Federal tax returns to credit rather than to deduct foreign taxes, the impact of an enacted law change in India, and the realization of tax benefits associated with effective settlements on uncertain tax positions. These favorable impacts were partially offset by the impact of additional U.S. tax on international operations and taxable foreign exchange gains. Income taxes for the six months ended July 3, 2020 were calculated forecasting an estimated annual effective tax rate for the full year. Income taxes for the three months ended July 3, 2020 were calculated forecasting an estimated annual effective tax rate for the full year less the income tax expense for the period ended April 3, 2020. In conjunction with the filing of the timely elected changes to credit rather than to deduct foreign taxes, the Company obtained additional foreign tax credit carryforwards. The Company evaluated all positive and negative evidence in determining the realizability of these deferred tax assets and based on such evidence, concluded a full valuation allowance was needed.

1213

~~COLFAX~~ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

8. Equity

~~Common Stock~~Outstanding shares

~~On March 19,~~As discussed in Note 1, the Company effected a reverse stock split immediately following the Separation on April 4, 2022 and all share and per share figures contained in the accompanying Condensed Consolidated Financial Statements have been retroactively restated as if the reverse stock split occurred at the beginning of the periods presented. As of December 31, 2021, the outstanding shares for the Company ~~completed~~after the ~~underwritten public offering of 16.1 million shares of Colfax Common~~reverse stock ~~at a price to the public of $46.00 per share, resulting in net proceeds of approximately $711.3 million, after deducting offering expenses and underwriters’ discount and commissions.~~split were 52,083,078.

Share Repurchase Program

In 2018, the Company’s Board of Directors authorized the repurchase of shares of the Company’s Common stock from time-to-time on the open market or in privately negotiated transactions. No repurchases of the Company’s Common stock have been made under this plan since the third quarter of 2018. As of July ~~2, 2021,~~1, 2022, the remaining stock repurchase authorization provided by the Board of Directors was $100 million. The timing, amount and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors. There is no term associated with the remaining repurchase authorization.

Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of each component of Accumulated other comprehensive loss including reclassifications out of Accumulated other comprehensive loss for the six months ended July ~~2, 2021~~1, 2022 and July ~~3, 2020.~~2, 2021. All amounts are net of tax and noncontrolling interest, if any.

Accumulated Other Comprehensive Loss Components
Net Unrecognized Pension and Other Post-Retirement Benefit Cost Foreign Currency Translation Adjustment Unrealized Gain on Hedging Activities Total
(In thousands)
Balance at January 1, 2021 $ (112,783) $ (360,977) $ 21,654 $ (452,106)
Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustment 583 (71,276) (2,076) (72,769)
Gain on long-term intra-entity foreign currency transactions 0 29,925 0 29,925
Gain on net investment hedges 0 0 10,231 10,231
Other comprehensive income (loss) before reclassifications 583 (41,351) 8,155 (32,613)
Amounts reclassified from Accumulated other comprehensive loss 2,100 0 0 2,100
Net Other comprehensive income (loss) 2,683 (41,351) 8,155 (30,513)
Balance at July 2, 2021 $ (110,100) $ (402,328) $ 29,809 $ (482,619)


	Accumulated Other Comprehensive Loss Components
	Net Unrecognized Pension and Other Post-Retirement Benefit Cost		Foreign Currency Translation Adjustment		Unrealized Gain on Hedging Activities		Total
	(In thousands)

Balance at January 1, 2022	$	(85,559)	$	(475,125)	$	44,671	$	(516,013)

Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment	470		(61,257)		—		(60,787)
Loss on long-term intra-entity foreign currency transactions	—		(21,779)		—		(21,779)
Gain on net investment hedges	—		—		9,028		9,028


Other comprehensive income (loss) before reclassifications	470		(83,036)		9,028		(73,538)
Amounts reclassified from Accumulated other comprehensive income (loss)	629		—		—		629

Net Other comprehensive income (loss)	1,099		(83,036)		9,028		(72,909)
Distribution of ESAB Corporation	84,460		469,220		(53,699)		499,981
Balance at July 1, 2022	$	—	$	(88,941)	$	—	$	(88,941)

1314

~~COLFAX~~ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


		Accumulated Other Comprehensive Loss Components									Accumulated Other Comprehensive Loss Components
		Net Unrecognized Pension and Other Post-Retirement Benefit Cost		Foreign Currency Translation Adjustment		Unrealized Gain on Hedging Activities		Total			Net Unrecognized Pension and Other Post-Retirement Benefit Cost		Foreign Currency Translation Adjustment		Unrealized Gain on Hedging Activities		Total
		(In thousands)									(In thousands)
Balance at January 1, 2020		$	(106,500)	$	(421,889)	$	44,544	$	(483,845)
Balance at January 1, 2021										Balance at January 1, 2021	$	(112,783)	$	(360,977)	$	21,654	$	(452,106)

Other comprehensive income (loss) before reclassifications:	Other comprehensive income (loss) before reclassifications:									Other comprehensive income (loss) before reclassifications:

Foreign currency translation adjustment	Foreign currency translation adjustment	554		(68,494)		(1,276)		(69,216)		Foreign currency translation adjustment	583		(71,276)		(2,076)		(72,769)
Loss on long-term intra-entity foreign currency transactions		0		(31,841)		0		(31,841)
Gain on long-term intra-entity foreign currency transactions										Gain on long-term intra-entity foreign currency transactions	—		29,925		—		29,925
Gain on net investment hedges	Gain on net investment hedges	0		0		1,756		1,756		Gain on net investment hedges	—		—		10,231		10,231

Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	554		(100,335)		480		(99,301)		Other comprehensive income (loss) before reclassifications	583		(41,351)		8,155		(32,613)
Amounts reclassified from Accumulated other comprehensive loss	Amounts reclassified from Accumulated other comprehensive loss	1,662		0		0		1,662		Amounts reclassified from Accumulated other comprehensive loss	2,100		—		—		2,100

Net Other comprehensive income (loss)	Net Other comprehensive income (loss)	2,216		(100,335)		480		(97,639)		Net Other comprehensive income (loss)	2,683		(41,351)		8,155		(30,513)
Balance at July 3, 2020		$	(104,284)	$	(522,224)	$	45,024	$	(581,484)
Balance at July 2, 2021										Balance at July 2, 2021	$	(110,100)	$	(402,328)	$	29,809	$	(482,619)

Tangible equity unit ~~(“TEU”)~~ offering

On January 11, 2019, the Company issued 4.6 million ~~TEUs~~in Tangible Equity Units (“TEUs”) at the stated amount of $100 per unit. Net cash of $447.7 million was received upon closing. ~~A portion of the~~The gross proceeds and deferred finance costs from the issuance of the TEUs were allocated ~~initially~~84.4% to equity (the “TEU prepaid stock purchase ~~contract”~~contracts”) and 15.6% to debt (the “TEU amortizing notes”) based on the relative fair value of the respective components of each TEU. See Note 10, ~~“Debt ”~~“Debt” for ~~further~~additional information ~~regarding~~on the TEU amortizing notes.

The TEU prepaid stock purchase contracts

were mandatorily converted into shares of Company common stock

~~Unless~~on January 15, 2022, unless previously settled at the holder’s ~~option, for each purchase contract~~option. All the Company will deliver to holders on January 15, 2022 (subject to postponement in certain limited circumstances, the “mandatory settlement date”) a number of shares of common stock. The number of shares of common stock issuable upon settlement of each purchase contract (the “settlement rate”) will be determined using the arithmetic average of the volume average weighted price for the 20 consecutive trading days beginning on, and including, the 21st scheduled trading day immediately preceding January 15, 2022 (“the Applicable Market Value”) with reference to the following settlement rates:

•if the Applicable Market Value of the common stock is greater than the threshold appreciation price of $25.00, the holder will receive 4.0000 shares of common stock for each purchase contract (the ��minimum settlement rate”);

•if the Applicable Market Value of the common stock is greater than or equal to the reference price of $20.81, but less than or equal to the threshold appreciation price of $25.00, the holder will receive a number of shares of common stock for each purchase contract having a value, based on the Applicable Market Value, equal to $100; and

•if the Applicable Market Value of the common stock is less than the reference price of $20.81, the holder will receive 4.8054 shares of common stock for each purchase contract (the “maximum settlement rate”).

~~Earnings per share~~

~~Unless the~~ TEU prepaid stock purchase contracts ~~are redeemed by the Company or settled earlier~~ converted at the unit holder’s option, they are mandatorily convertible into shares of Colfax common stock at not less than 4.0 shares per purchase contract or more than 4.8054 shares per purchase contract on January 15, 2022. This corresponds to not less than 18.4 million shares and not more than 22.1 million shares at the maximum. The 18.4 million minimum shares are included in the calculation of weighted-average shares of Common stock outstanding - basic. The difference between the minimum and maximum shares represents potentially dilutive securities. The Company includes them in its calculation of weighted-average shares of Common stock outstanding - diluted on a pro rata basis to the extent the effect is not anti-dilutive and the average Applicable Market Value is higher than the reference price but is less than the threshold appreciation price. During the three and six months ended July 2,

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

settlement rate.

~~2021, 1.5~~Approximately 1.3 million and 1.6 million TEU prepaid stock purchase contracts were ~~converted~~settled into approximately ~~6.2~~1.7 million and ~~6.5~~2.2 million shares of ~~Colfax~~Company common stock ~~respectively,~~ as adjusted for the reverse split, during the six months ended July 1, 2022 and July 2, 2021, respectively. Since the 4.6 million TEU prepaid stock purchase contracts were mandatorily converted into shares of Company common stock at ~~a conversion~~the minimum settlement rate ~~of 4.0~~or greater, 6.1 million shares, as adjusted for the reverse split, are included in basic net income per ~~contract.~~share calculations for all periods presented. See Note 6, “Net Income Per Share from Continuing Operations” for additional information.

9. Inventories, Net

Inventories, net consisted of the following:


		July 2, 2021		December 31, 2020			July 1, 2022		December 31, 2021
		(In thousands)					(In thousands)
Raw materials	Raw materials	$	133,447	$	110,848	Raw materials	$	83,048	$	66,824
Work in process	Work in process	46,800		40,517		Work in process	30,183		29,506
Finished goods	Finished goods	541,800		476,297		Finished goods	338,568		298,450
		722,047		627,662			451,799		394,780
Less: allowance for excess, slow-moving and obsolete inventory						Less: allowance for excess, slow-moving and obsolete inventory	(50,947)		(38,547)
							$	400,852	$	356,233
Less: allowance for excess, slow-moving and obsolete inventory		(58,507)		(62,840)
Inventories, net		$	663,540	$	564,822

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

10. Debt

Long-term debt consisted of the following:


		July 2, 2021		December 31, 2020			July 1, 2022		December 31, 2021
		(In thousands)					(In thousands)
Term loan	Term loan	$	781,976	$	781,557	Term loan	$	448,815	$	782,435
Euro senior notes	Euro senior notes	411,659		425,045		Euro senior notes	—		395,552
2024 and 2026 notes		297,668		991,319
2026 notes						2026 notes	—		297,906
TEU amortizing notes	TEU amortizing notes	19,120		31,251		TEU amortizing notes	—		6,501

Revolving credit facilities and other	Revolving credit facilities and other	86,574		2,071		Revolving credit facilities and other	644		603,932
Total debt	Total debt	1,596,997		2,231,243		Total debt	449,459		2,086,326
Less: current portion	Less: current portion	(20,480)		(27,074)		Less: current portion	(449,459)		(7,701)
Long-term debt	Long-term debt	$	1,576,517	$	2,204,169	Long-term debt	$	—	$	2,078,625

Debt Redemptions

In conjunction with the Separation which occurred on April 4, 2022, the Company repaid all obligations under its previous credit agreement and entered into a new credit agreement (the “Enovis Credit Agreement”) with certain of its existing bank lenders. Additionally, on April 7, 2022 after the completion of the Separation, the Company completed the redemptions of its 3.25% Euro Senior Notes due 2025 and its 6.375% Senior Notes due 2026. As a result of these changes, the Company recorded Debt extinguishment charges of $20.1 million in the second quarter of 2022, comprised of $12.7 million in redemption premiums and $7.4 million in noncash write-offs of original issue discount and deferred financing fees.

Enovis Term Loan and Revolving Credit Facility

The ~~Company’s credit agreement (the “Credit Facility”) by~~new Enovis Credit Agreement became effective on April 4, 2022 and among the Company, as the borrower, certain U.S. subsidiaries of the Company, as guarantors, each of the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citizens Bank, N.A., as syndication agent, and the co-documentation agents named therein consists of a ~~$975~~$900 million revolving credit facility (the “Revolver”) with an April 4, 2027 maturity date and a ~~Term A-1~~term loan with an initial aggregate principal amount of ~~$825~~$450 million ~~(the “Term Loan”), each with a~~and an April 4, 2023 maturity date ~~of December 6, 2024.~~(the “Enovis Term Loan”). The Revolver contains a $50 million swing line loan sub-facility. Certain U.S. subsidiaries of the Company guarantee the obligations under the Credit Facility.

The Enovis Credit ~~Facility~~Agreement contains customary covenants limiting the ability of ~~Colfax~~the Company and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments or pay dividends. In addition, the Enovis Credit ~~Facility~~Agreement contains financial covenants requiring ~~Colfax~~the Company to maintain ~~(subject to certain exceptions)~~ (i) a maximum total leverage ratio ~~calculated as~~of not more than 4.50:1.00, with a step-down to, on the ~~ratio~~date on which the Company and its subsidiaries have transferred any retained shares of ~~Consolidated Net Debt (as defined in~~ESAB common stock to one or more unaffiliated third parties, 4.00:1.00, commencing with the ~~Credit Facility) to EBITDA (as defined in the Credit Facility) of 5.25:1.00 for the~~fiscal quarter ending June 30, ~~2021, 4.50:~~2023, 3.75:1.00 ~~for~~and commencing with the fiscal quarter ~~ending September 30, 2021, 4.25:1.00 for the quarters ending December 31, 2021 and March 31, 2022, 4.00:1.00 for the quarters~~ ending June 30, ~~2022 and September 30, 2022, and~~2024, 3.50:1.00, ~~as of December 31, 2022 and for each fiscal quarter ending thereafter,~~ and (ii) a minimum interest coverage ratio of ~~2.75:1.00 for each fiscal quarter until June 30, 2021, and then~~ 3.00:~~1.00 for the quarters ending September 30, 2021 and thereafter.~~1:00. The Enovis Credit Facility also includes a “springing” collateral provision (based upon the Gross Leverage Ratio as defined in the Amendment to the Credit Facility) which requires the obligations under the Amendment to the Credit Facility to be secured by substantially all personal property of Colfax and its U.S. subsidiaries and the equity of its first tier foreign subsidiaries, subject to customary exceptions, in the event Colfax’s gross leverage ratio under the Credit Facility is greater than 5.00:1.00 as of the last day of any fiscal quarter. The Credit FacilityAgreement contains various events of default (including failure to comply with the covenants under the Enovis Credit ~~Facility~~Agreement and related agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Enovis Term Loan and the Enovis Revolver. As of July 1, 2022, the Company was in compliance with the covenants under the Enovis Credit Agreement. For further descriptions of the Company’s financial covenants as of April 1, 2022, refer to Note 13, “Debt” in the Notes to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.

As of July 1, 2022, the weighted-average interest rate of borrowings under the Enovis Credit Agreement was 2.58%, excluding accretion of original issue discount and deferred financing fees, and there was$900 million available on the Revolver.

Euro Senior Notes

The Company had senior unsecured notes with an aggregate principal amount of €350 million due in May 2025, with an interest rate of 3.25%. The Euro Senior Notes were redeemed on April 7, 2022 including a 100.813% redemption premium after the completion of the Separation.

1516

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Term Loan and the Revolver. As of July 2, 2021, the Company was in compliance with the covenants under the Credit Facility.

~~As of July 2, 2021, the weighted-average interest rate of borrowings under the Credit Facility was 1.84%, excluding accretion of original issue discount and deferred financing fees, and there was$890 million available on the Revolver.~~

~~Euro Senior Notes~~

The Company has senior unsecured notes with an aggregate principal amount of €350 million (the “Euro Notes”). The Euro Notes are due in April 2025, have an interest rate of 3.25% and are guaranteed by certain of our domestic subsidiaries (the “Guarantees”). The Euro Notes and the Guarantees have not been, and will not be, registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction.

TEU Amortizing Notes

~~Each~~The Company previously had 6.50% TEU amortizing ~~note has~~notes at an initial principal amount of $15.6099 ~~bears interest at a rate of 6.50%~~ per ~~annum, and has~~note with equal quarterly cash installments of $1.4375 per ~~TEU amortizing~~ note ~~with a final installment payment date of January 15, 2022. The quarterly cash installment constitutes~~representing a payment of interest and a partial ~~repayment~~payment of principal. The Company paid ~~$12.3~~$6.5 million and ~~$11.5~~$12.3 million of principal on the TEU amortizing notes in the six months ended July 1, 2022 and July 2, 2021, ~~and July 3, 2020,~~ respectively. The TEU amortizing notes are the direct, unsecured and unsubordinated obligations of the Company and rank equally with all of the existing and future other unsecured and unsubordinated indebtedness of the Company. For more informationfinal installment payment was made on ~~the TEUs, refer to Note 8, “Equity.”~~January 15, 2022.

~~2024 Notes and~~ 2026 Notes

The Company had senior notes with ~~an initial aggregate~~a remaining principal amount of ~~$600~~$300 million, ~~(the “2024 Notes”),~~ which were due on February 15, ~~2024~~2026 and had ~~an interest rate of 6.0%. The Company has senior notes with an aggregate initial principal amount of $400 million (the “2026 Notes”), which are due on February 15, 2026 and have~~ an interest rate of 6.375%. The 2026 Notes ~~are guaranteed by certain domestic subsidiaries~~were redeemed on April 7, 2022 including a 103.188% redemption premium after the completion of the ~~Company.~~

On April 24, 2021, the Company redeemed all $600 million outstanding principal amount of its 2024 Notes and $100 million of the outstanding principal amount of its 2026 Notes for $724.4 million. The 2024 Notes were redeemed at a redemption price of 103.000% of their principal amount and the 2026 Notes were redeemed at a redemption price of 106.375% of their principal amount, plus, in each case, accrued and unpaid interest through the date of redemption. In the second quarter of 2021, a net loss on the early extinguishment of debt of $29.9 million was recorded and included $24.4 million of call premium on the retired debt.Separation.

Other Indebtedness

In addition to the debt agreements discussed above, the Company is party to ~~various~~ bilateral credit facilities with a borrowing capacity of ~~$192.6~~$30.0 million. As of July ~~2, 2021,~~1, 2022, there were no$0.9 million in outstanding borrowings under these facilities.

The Company is party to a letter of credit ~~facilities~~facility with ~~an aggregate~~a capacity of ~~$339.8~~$30.0 million. Total letters of credit of ~~$70.1~~$2.3 million were outstanding as of July ~~2, 2021.~~1, 2022.

Deferred Financing Fees

In total, the Company had deferred financing fees ~~related to the Company’s debt activities were $14.4~~of $6.2 million included in its Condensed Consolidated Balance Sheet as of July ~~2, 2021,~~1, 2022, which will be charged to Interest expense, net, primarily using the effective interest method, over the life of the applicable debt agreements. In conjunction with the Separation-related debt redemptions and extinguishment of its prior credit facility in the second quarter of 2022, the Company recorded $7.4 million of noncash write-offs of original issue discounts and deferred financing fees. Additionally, the Company deferred $2.9 million of financing costs in the second quarter of 2022 in connection with the new Enovis Credit Facility.

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

11. Accrued Liabilities

Accrued liabilities in the Condensed Consolidated Balance Sheets consisted of the following:

July 2, 2021 December 31, 2020
(In thousands)
Accrued compensation and related benefits $ 108,835 $ 98,455
Accrued taxes 38,152 57,286
Accrued asbestos-related liability 45,640 41,626
Warranty liability - current portion 17,203 15,543
Accrued restructuring liability - current portion 6,005 7,889
Accrued third-party commissions 29,574 25,480
Customer advances and billings in excess of costs incurred 33,463 36,737
Lease liability - current portion 36,236 39,695
Accrued interest 10,230 27,153
Other 99,885 104,469
Accrued liabilities $ 425,223 $ 454,333

~~Warranty Liability~~

~~The activity in the Company’s warranty liability consisted of the following:~~

Six Months Ended
July 2, 2021 July 3, 2020
(In thousands)
Warranty liability, beginning of period $ 15,543 $ 15,528
Accrued warranty expense 5,085 3,256
Changes in estimates related to pre-existing warranties 1,062 528
Cost of warranty service work performed (4,699) (4,547)
Acquisition-related liability 321 0
Foreign exchange translation effect (109) (453)
Warranty liability, end of period $ 17,203 $ 14,312


	July 1, 2022		December 31, 2021
	(In thousands)
Accrued compensation and related benefits	$	57,352	$	66,290
Accrued taxes	12,240		12,970
Accrued freight	7,957		5,299
Contingent consideration - current portion	3,975		1,816
Warranty liability	2,539		2,503
Accrued restructuring liability	2,589		2,170
Accrued third-party commissions	20,380		22,362
Customer advances and billings in excess of costs incurred	3,050		9,203
Lease liability - current portion	22,208		21,936
Accrued interest	596		11,066
Accrued rebates	11,302		12,584
Accrued professional fees	17,094		13,711
Accrued royalties	5,241		5,045
Other	37,683		38,436
	$	204,206	$	225,391

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Accrued Restructuring Liability

The Company’s restructuring programs include a series of actions to reduce the structural costs of the Company. A summary of the activity in the Company’s restructuring liability included in Accrued liabilities and Other liabilities in the Condensed Consolidated Balance Sheets is as follows:


		Six Months Ended July 2, 2021								Six Months Ended July 1, 2022
		Balance at Beginning of Period		Provisions		Payments		Foreign Currency Translation			Balance at End of Period(3)			Balance at Beginning of Period		Provisions		Payments		Balance at End of Period
		(In thousands)								(In thousands)
Restructuring and other related charges:	Restructuring and other related charges:												Restructuring and other related charges:
Fabrication Technology:
Termination benefits(1)		$	5,336	$	2,551	$	(3,502)	$	(19)		$	4,366
Facility closure costs(2)		591		2,905		(3,264)		(16)			216
		5,927		5,456		(6,766)		(35)			4,582
Non-cash charges(2)				1,108
				6,564
Medical Technology:
Termination benefits(1)	Termination benefits(1)	1,884		1,014		(1,496)		(8)			1,394		Termination benefits(1)	$	2,470	$	2,352	$	(2,233)	$	2,589
Facility closure costs and other(2)	Facility closure costs and other(2)	297		1,948		(1,948)		0			297		Facility closure costs and other(2)	358		2,564		(2,922)		—
		2,181		2,962		(3,444)		(8)			1,691
Total													Total	$	2,828	4,916		$	(5,155)	$	2,589
Non-cash charges(2)	Non-cash charges(2)			—									Non-cash charges(2)			592
				2,962

Total Colfax Corporation:
Total restructuring liability activity		$	8,108	8,418		$	(10,210)	$	(43)		$	6,273
Total Non-cash charges				1,108
				$	9,526
Total Provisions(3)													Total Provisions(3)			$	5,508

(1) Includes severance and other termination benefits, including outplacement services.

(2) Includes the cost of relocating associates, relocating equipment, ~~and~~ lease termination expense and other costs in connection with the closure and optimization of ~~facilities.~~facilities, site cost structures, and product lines.

(3) ~~As of~~For the six months ended July ~~2, 2021, $6.0~~1, 2022, $3.4 million and $2.1 million of the Company’s ~~restructuring liability was included in Accrued liabilities, whereas less than $0.3~~total provisions were related to the Prevention and Recovery and Reconstructive segments, respectively. Restructuring and other related charges includes $0.8 million of expense classified as Cost of sales on the Company’s ~~restructuring liability was included in Other liabilities.~~Condensed Consolidated Statements of Operations for the six months ended July 1, 2022.

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

12. Financial Instruments and Fair Value Measurements

The carrying values of financial instruments, including ~~Trade~~trade receivables, other receivables and ~~Accounts~~accounts payable, approximate their fair values due to their short-term maturities. The ~~$1.6 billion and $2.3 billion~~ estimated fair value of the Company’s debt, which was $0.5 billion and $2.1 billion as of July ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, respectively, was based on current interest rates for similar types of borrowings and is in Level Two of the fair value hierarchy. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future.

~~A summary~~As of July 1, 2022, the Company held $25.0 million in Level Three liabilities arising from contingent consideration related to acquisitions. The fair value of the ~~Company’s assets~~contingent consideration liabilities is determined using unobservable inputs and ~~liabilities that are measured at~~the inputs vary based on the nature of the purchase agreements. These inputs can include the estimated amount and timing of projected cash flows, the risk-adjusted discount rate used to present value the projected cash flows, and the probability of the acquired company attaining certain targets stated within the purchase agreements. A change in these unobservable inputs to a different amount might result in a significantly higher or lower fair value ~~for each fair value hierarchy level for~~measurement at the ~~periods presented is as follows:~~

July 2, 2021
Level
One Level
Two Level
Three Total
(In thousands)
Assets:
Cash equivalents $ 6,787 $ — $ — $ 6,787
Foreign currency contracts - not designated as hedges — 1,788 — 1,788
Deferred compensation plans — 12,445 — 12,445
$ 6,787 $ 14,233 $ — $ 21,020
Liabilities:
Foreign currency contracts - not designated as hedges $ — $ 4,065 $ — $ 4,065
Deferred compensation plans — 12,445 — 12,445
$ — $ 16,510 $ — $ 16,510

December 31, 2020
Level
One Level
Two Level
Three Total
(In thousands)
Assets:
Cash equivalents $ 7,420 $ — $ — $ 7,420
Foreign currency contracts - not designated as hedges — 2,194 — 2,194
Deferred compensation plans — 10,881 — 10,881
$ 7,420 $ 13,075 $ — $ 20,495
Liabilities:
Foreign currency contracts - not designated as hedges $ — $ 1,781 $ — $ 1,781
Deferred compensation plans — 10,881 — 10,881
$ — $ 12,662 $ — $ 12,662
reporting date due to the nature of uncertainty inherent to the estimates. During the six months ended July 1, 2022, the company recorded contingent consideration of $20.0 million in conjunction with current acquisitions.

There were no transfers in or out of Level One, Two or Three during the six months ended July ~~2, 2021.~~1, 2022.

Investment in ESAB

On April 4, 2022, the Company completed the Separation and retained 10% of the shares of ESAB common stock. The Company did not retain a controlling interest in ESAB and, therefore, the fair value of the retained shares is included in the assets of continuing operations on the Company’s Condensed Consolidated Balance Sheet as of July 1, 2022, and the subsequent fair value changes are included in results from continuing operations on the Company’s Condensed Consolidated Statements of Operations for the three and six months ended July 1, 2022. At July 1, 2022, the Company’s investment in ESAB was measured at fair value based on ESAB’s closing stock price, and it is classified as Level 1 in the fair value hierarchy. The fair value of the ESAB investment as of July 1, 2022 was $263.1 million, and the gain on investment for the three and six months ended July 1, 2022 was $135.5 million.

1918

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Deferred Compensation Plans

The Company maintains deferred compensation plans for the benefit of certain employees and non-executive officers. As of July 1, 2022 and December 31, 2021 the fair value of these plans were $9.7 million and $11.2 million, respectively. These plans are deemed to be Level Two within the fair value hierarchy.

Foreign Currency Contracts

As of July ~~2, 2021~~1, 2022 and December 31, ~~2020,~~2021, the Company had foreign currency contracts related to purchases and sales with notional values of ~~$322.1~~$4.6 million and ~~$250.4~~$7.6 million, respectively.

~~The~~ During the three and six months ended July 1, 2022, the Company recognized ~~the following in~~unrealized losses of $0.1 million and $0.2 million, respectively, and realized losses of $0.2 million and $0.3 million, respectively, on its Condensed Consolidated ~~Financial~~ Statements of Operations related to its derivative ~~instruments:~~

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
(In thousands)
Contracts Designated as Hedges:
Unrealized gain (loss) on net investment hedges(1)
$ (2,150) $ (10,424) $ 10,231 $ 1,756
Contracts Not Designated in a Hedge Relationship:
Foreign Currency Contracts
Unrealized gain (loss) (2,278) (44) (4,889) 2,373
Realized gain (loss) 1,368 (957) 1,419 (1,154)

~~(1)~~ ~~The unrealized gain (loss) on net investment hedges is attributable to the change in valuation of Euro denominated debt.~~instruments.

~~Restricted Cash~~

Financial instruments also include Restricted cash. Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are excluded from Cash and cash equivalents in the Condensed Consolidated Balance Sheets. The Restricted cash as of December 31, 2020 was related to an acquisition which closed in the first quarter of 2021 and was recorded as a component of Other current assets on the Condensed Consolidated Balance Sheets.

~~The following table summarizes the Company’s Cash and cash equivalents and Restricted cash:~~

July 2, 2021 December 31, 2020
(In thousands)
Cash and cash equivalents $ 62,309 $ 97,068
Restricted cash 0 4,001
Cash and cash equivalents and Restricted cash $ 62,309 $ 101,069

13. Commitments and Contingencies

For further description of the Company’s litigation and contingencies, reference is made to Note 18, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements in the Company’s 2020 Form 10-K. Since the Company did not retain an interest in the ongoing operations of its divested businesses, the retained asbestos-related activity has been classified in its Condensed Consolidated Statements of Operations as a component of Loss from discontinued operations, net of taxes.

~~COLFAX CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~Asbestos Contingencies~~

~~Asbestos-related claims activity since December 31 is as follows:~~

Six Months Ended
July 2, 2021 July 3, 2020
(Number of claims)
Claims unresolved, beginning of period 14,809 16,299
Claims filed(1)
2,178 1,869
Claims resolved(2)
(1,607) (1,310)
Claims unresolved, end of period 15,380 16,858

~~(1)~~ ~~Claims filed include all asbestos claims for which notification has been received or a file has been opened.~~

~~(2)~~ Claims resolved include all asbestos claims that have been settled, dismissed or that are in the process of being settled or dismissed based upon agreements or understandings in place with counsel for the claimants.

~~The Company’s Condensed Consolidated Balance Sheets included the following amounts related to asbestos-related litigation:~~

July 2, 2021 December 31, 2020
(In thousands)
Long-term asbestos insurance asset(1)
$ 230,160 $ 232,712
Long-term asbestos insurance receivable(1)
23,591 31,815
Accrued asbestos liability(2)
45,640 41,626
Long-term asbestos liability(3)
245,591 253,144

~~(1)~~ ~~Included in Other assets in the Condensed Consolidated Balance Sheets.~~

~~(2)~~ Represents current accruals for probable and reasonably estimable asbestos-related liability costs that the Company believes the subsidiaries will pay, and unpaid legal costs related to defending themselves against asbestos-related liability claims and legal action against the Company’s insurers, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets.

~~(3)~~ ~~Included in Other liabilities in the Condensed Consolidated Balance Sheets.~~

Management’s analyses are based on currently known facts and assumptions. Projecting future events, such as new claims to be filed each year, the average cost of resolving each claim, coverage issues among layers of insurers, the method in which losses will be allocated to the various insurance policies, interpretation of the effect on coverage of various policy terms and limits and their interrelationships, the continuing solvency of various insurance companies, the amount of remaining insurance available, as well as the numerous uncertainties inherent in asbestos litigation could cause the actual liabilities and insurance recoveries to be higher or lower than those projected or recorded which could materially affect the Company’s financial condition, results of operations or cash flow.

~~General Litigation~~

The Company is involved in ~~other~~various pending legal proceedings arising out of the ordinary course of the Company’s business. None of these legal proceedings are expected to have a material adverse effect on the financial condition, results of operations or cash flow of the Company. With respect to these proceedings, ~~and the litigation and claims described in the preceding paragraphs,~~ management of the Company believes that it will either prevail, has adequate insurance coverage or has established appropriate accruals to cover potential liabilities. ~~Any~~Legal costs related to proceedings or claims are recorded as incurred. Other costs that management estimates may be paid related to ~~these proceedings or~~the claims are accrued when the liability is considered probable and the amount can be reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adverse to the Company, there could be a material adverse effect on the financial condition, results of operations or cash flow of the Company.

In conjunction with the Separation, all asbestos-related contingencies and insurance coverages from the divested industrial businesses were transferred fully to ESAB. The historical asbestos-related activity and balances are presented in discontinued operations on the Condensed Consolidated Statements of Operations and in assets/liabilities associated with discontinued operations on the Condensed Consolidated Balance Sheets, respectively.

14. Segment Information

The Company conducts its continuing operations through the Prevention and Recovery and Reconstructive operating segments, which also represent the Company’s reportable segments.

▪Prevention and Recovery -a leader in orthopedic solutions and recovery sciences, providing devices, software and services across the patient care continuum from injury prevention to rehabilitation after surgery, injury, or from degenerative disease.

•Reconstructive - an innovation-driven leader offering a comprehensive suite of reconstructive joint products for the hip, knee, shoulder, elbow, foot, ankle, and finger.

In conjunction with revising its reporting structure, the Company allocated $1.1 billion and $0.8 billion of goodwill to the Prevention and Recovery and Reconstructive segments, respectively. The total segment assets as of the beginning of the quarter were $2.8 billion and $1.8 billion for the Prevention and Recovery and Reconstructive segments, respectively. There have not been any material changes to the segment assets since the start of the quarter.

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

~~14. Segment Information~~

~~The Company conducts its continuing operations through the Fabrication Technology and Medical Technology operating segments, which also represent the Company’s reportable segments.~~

▪~~Fabrication Technology~~ -a leading global supplier of consumable products and equipment for use in the cutting, joining and automated welding, as well as gas control equipment, providing a wide range of products with innovative technologies to solve challenges in a wide range of industries.

•~~Medical Technology~~ ~~- a leader in orthopedic solutions, providing devices, software and services spanning the full continuum of patient care, from injury prevention to joint replacement to rehabilitation.~~

~~Certain amounts not allocated to the 2 reportable segments and intersegment eliminations are reported under the heading “Corporate and other.”~~ The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and ~~segment operating income (loss),~~Adjusted EBITDA, which ~~represents Operating income (loss) before Restructuring~~excludes the effect of restructuring and other related charges, MDR and ~~European Union Medical Devices Regulation (“MDR”)~~related costs, strategic transaction costs, stock-based compensation, depreciation and other ~~costs.~~amortization charges, amortization of acquired intangibles, insurance settlement gains, and inventory step-up from the operating income of the Company’s operating segments. The amounts presented below have been recast for the change in operating segments for all periods presented.

The Company’s segment results were as follows:

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
(In thousands)
Net sales:
     Fabrication Technology $ 629,804 $ 414,367 $ 1,197,932 $ 939,904
Medical Technology 356,124 205,993 667,207 496,812
$ 985,928 $ 620,360 $ 1,865,139 $ 1,436,716
Segment operating income (loss)(1):
     Fabrication Technology $ 94,397 $ 43,609 $ 176,702 $ 112,645
Medical Technology 18,247 (20,796) 20,409 (16,992)
     Corporate and other (29,304) (15,573) (46,665) (29,651)
$ 83,340 $ 7,240 $ 150,446 $ 66,002


	Three Months Ended				Six Months Ended
	July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
	(In thousands)
Net sales:
Prevention and Recovery	$	263,783	$	266,919	$	508,618	$	501,593
Reconstructive	131,334		89,205		261,956		165,614
	$	395,117	$	356,124	$	770,574	$	667,207
Segment Adjusted EBITDA(1):
Prevention and Recovery	$	35,148	$	33,299	$	61,518	$	54,550
Reconstructive	21,042		17,350		42,399		33,349
	$	56,190	$	50,649	$	103,917	$	87,899

(1) ~~Following~~The following is a reconciliation of Income ~~(loss)~~ from continuing operations before income taxes to ~~segment operating income:~~Adjusted EBITDA:

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
(In thousands)
Income (loss) from continuing operations before income taxes $ 39,474 $ (33,205) $ 75,121 $ (11,164)
Pension settlement gain (11,208) 0 (11,208) 0
Interest expense, net 17,805 28,284 43,465 53,080
Debt extinguishment charges 29,870 0 29,870 0
Restructuring and other related charges(1)
5,480 11,161 9,526 22,186
MDR and other costs(2)
1,919 1,000 3,672 1,900
Segment operating income $ 83,340 $ 7,240 $ 150,446 $ 66,002


	Three Months Ended				Six Months Ended
	July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021
	(In thousands)
Operating income (loss) (GAAP)	$	5,553	$	(10,351)	$	(25,074)	$	(28,482)
Restructuring and other related charges(1)	2,555		1,992		5,508		2,963
MDR and other costs(2)	4,421		1,919		7,048		3,672
Strategic transaction costs	12,707		4,037		24,403		4,418
Stock-based compensation	7,821		6,793		14,529		12,747
Depreciation and other amortization	19,450		16,350		37,950		33,242
Amortization of acquired intangibles	31,824		29,504		62,610		57,042
Insurance settlement gain(3)	(33,034)		—		(33,034)		—
Inventory step-up	4,893		405		9,977		2,297
Adjusted EBITDA (non-GAAP)	$	56,190	$	50,649	$	103,917	$	87,899

(1) Restructuring and other related charges includes ~~$0.9~~$0.3 million and ~~$2.7~~$0.8 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three and six months ended July ~~3, 2020,~~1, 2022, respectively.

(2) Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union ~~MDR.~~Medical Devices Regulation. These costs are classified as Selling, general and administrative expense on ~~the Company’s~~our Condensed Consolidated Statements of ~~Operations for all periods presented.~~Operations.

(3) Insurance settlement gain is related to the 2019 acquisition of DJO.

2220

COLFAX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

15. Related Party Transactions

Related Party Agreements

On April 4, 2022, in connection with the Separation, the Company entered into several agreements with ESAB that govern the Separation and provide a framework for the future relationship between the parties, including a separation and distribution agreement, a transition services agreement (the “Separation Agreement”), tax matters agreement, employee matters agreements, a stockholder’s and registration rights agreement, and an intellectual property matters agreement.

The Separation and Distribution Agreement

The Company entered into the Separation Agreement with ESAB immediately prior to the distribution of ESAB’s common stock to Enovis stockholders. The Separation Agreement sets forth the Company’s agreements with ESAB regarding the principal actions to be taken in connection with the Separation. The Separation agreement contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of ESAB and Enovis as part of the Separation; (ii) the cash distribution made to Enovis in partial consideration of the transfer of ESAB Assets in connection with the Separation; and, (iii) cross-indemnities principally designed to place financial responsibility for obligations and liabilities with either Enovis or ESAB, depending on the responsible party.

Transition Services Agreement

The transition services agreement ("TSA") sets forth the terms and conditions pursuant to which the Company and its subsidiaries and ESAB’s and its subsidiaries will provide various services to each other. The services to be provided include human resources, payroll, certain information technology services, treasury services and financial reporting services. The charges for the transition services generally are expected to allow the providing company to fully recover all actual internal and external costs and expenses in connection with providing the service (including a reasonable allocation of overhead) provided in the manner and at a level substantially consistent with that provided by the respective providing company

immediately preceding the Separation.

Tax Matters Agreement

The tax matters agreement governs the Company’s and ESAB’s respective rights, responsibilities and obligations after the Separation with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes.

Employee Matters Agreement

The employee matters agreement sets forth, among other things, the allocation of assets, liabilities and responsibilities relating to employee compensation and benefit plans, and programs and other related matters in connection with the Separation, including the treatment of outstanding equity and other incentive awards and certain retirement and welfare benefit obligations.

Stockholders and Registration Rights Agreement

The stockholders and registration rights agreement sets forth the terms and conditions pursuant to which ESAB has granted Company and its affiliates certain registration rights with respect to the shares of ESAB common stock owned by the Company. Upon the request of the Company or certain subsequent transferees as further defined in the agreement, ESAB will use its reasonable best efforts to effect the registration under applicable federal and state securities laws of any shares of ESAB common stock retained by the Company. Under the agreement, the Company has agreed to vote any shares of ESAB common stock retained by it immediately after the Separation in proportion to the votes cast by ESAB’s other stockholders.

Intellectual Property Matters Agreement

The intellectual property matters agreement sets forth the terms and conditions pursuant to which, among other things, the Company and ESAB have granted each other a non-exclusive, royalty-free, fully paid-up, irrevocable, sublicenseable (subject to certain limitations) and worldwide license to use certain intellectual property rights retained by the other party. The term of the intellectual property matters agreement is perpetual.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of ~~Colfax~~Enovis Corporation (“~~Colfax,~~Enovis,” “the Company,” “we,” “our,” and “us”) should be read in conjunction with the Condensed Consolidated Financial Statements and related footnotes included in Part I. Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q for the quarterly period ended July ~~2, 2021~~1, 2022 (this “Form 10-Q”) and the Consolidated Financial Statements and related footnotes included in Part II. Item 8. “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February ~~18, 2021.~~22, 2022.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Form 10-Q that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-Q is filed with the ~~SEC.~~Securities and Exchange Commission (the “SEC”). All statements other than statements of historical fact are statements that could be deemed ~~to be~~ forward-looking statements, including statements regarding: the ~~intended~~ separation of our fabrication and medical technology businesses into two differentiated, independent publicly traded companies (the “Separation”); the ~~timing and method of the Separation; the~~ anticipated benefits of the Separation; the expected financial and operating performance of, and future opportunities for, ~~each company following the Separation; the tax treatment of the Separation; the leadership of~~ each company following the Separation; the impact of the COVID-19 global pandemic, including the rise, prevalence and severity of variants of the virus, the actions by governments, businesses and individuals in response to the situation, on the global and regional economies, financial markets, and overall demand for our products; projections of revenue, profit margins, expenses, tax provisions and tax rates, earnings or losses from operations, impact of foreign exchange rates, cash flows, ~~pension and benefit obligations and funding requirements,~~ synergies or other financial items; plans, strategies and objectives of ~~our~~ management for future operations including statements relating to potential acquisitions, compensation plans or purchase commitments; developments, performance, or industry or market rankings relating to products or services; future economic conditions or ~~performance;~~performance, including the impact of increasing inflationary pressures; the outcome of outstanding claims or legal ~~proceedings including asbestos-related liabilities and insurance coverage litigation;~~proceedings; potential gains and recoveries of costs; assumptions underlying any of the foregoing; and any other statements that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Forward-looking statements may be ~~but not always,~~ characterized by terminology such as “believe,” “anticipate,” “should,” “would,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “targets,” “aims,” “seeks,” “sees,” and similar expressions. These statements are based on assumptions and assessments made by our management as of the filing ~~date~~ of this Form 10-Q in light of their experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties and actual results could differ materially due to numerous factors, including but not limited to the following:

•risks related to the impact of the COVID-19 global pandemic, including the rise, prevalence and severity of variants of the virus, actions by governments, businesses and individuals in response to the situation, such as the scope and duration of the outbreak, the nature and effectiveness of government actions and restrictive measures implemented in response, delays and cancellations of medical procedures, supply chain disruptions, the impact on creditworthiness and financial viability of customers, and other impacts on ~~our~~the Company’s business and ability to execute business continuity plans;

•risks related to the ~~proposed~~ Separation, ~~targeted for the first quarter of 2022,~~ including the uncertainty of obtaining regulatory approvals and a favorable tax opinion and/or U.S. Internal Revenue Service (“IRS”) ruling, our ability to satisfactorily complete steps necessary for the Separation and related transactions for the Separation to be generally tax-free for U.S. federal income tax purposes, the ability to satisfy the necessary conditions to complete the Separation on a timely basis, or at all, our ability to realize the anticipated benefits of the ~~Separation, developments related~~Separation; the potential to incur significant liability if the separation and distribution of ESAB is determined to be a taxable transaction; potential indemnification liabilities to ESAB pursuant to the ~~impact of the COVID-19 pandemic on~~separation and distribution agreement and related agreements entered into in connection with the Separation and the financial and operating performance of each company following the ~~Separation, and finally the approval of the Separation by our board of directors;~~

•~~changes in the general economy, as well as the cyclical nature of the markets we serve;~~Separation;

•volatility in the commodity markets and certain commodity prices ~~including oil and steel,~~ due to economic disruptions from the COVID-19 pandemic and various geopolitical ~~events;~~events, including the ongoing conflict between Russia and Ukraine

•changes in the general economy, including as a result of inflationary pressures, a general economic slowdown or a recession, increased interest rates or changes in monetary policy, as well as the cyclical nature of the markets we serve;

•supply chain constraints and backlogs, including risks affecting raw material, part and component availability, labor shortages and inefficiencies, freight and logistical challenges, and inflation in raw material, part, component, freight and delivery costs;

•significant movements in foreign currency exchange rates;

•our ability to identify, finance, acquire and successfully integrate attractive acquisition targets;

•our exposure to unanticipated liabilities resulting from acquisitions;

•our ability and the ability of our customers to access required capital at a reasonable cost;

•our ability to accurately estimate the cost of or realize savings from our restructuring programs;

•disruptions in the ~~amount of~~global economy caused by the ongoing conflict between Russia and ~~our ability to estimate our asbestos-related liabilities;~~

•~~the solvency of our insurers~~Ukraine (including any political or economic responses and ~~the likelihood of their payment for asbestos-related costs;~~counter-responses);

•material disruptions at any of our manufacturing facilities;

•noncompliance with various laws and regulations associated with our international operations, including anti-bribery laws, export control regulations and sanctions and embargoes;

•risks associated with our international operations, including risks from trade protection measures and other changes in trade relations;

•risks associated with the representation of our employees by trade unions and work councils;

•our exposure to product liability claims;

•potential costs and liabilities associated with environmental, health and safety laws and regulations;

•failure to maintain, protect and defend our intellectual property rights;

•the loss of key members of our leadership ~~team;~~team, or the inability to attract, develop, engage, and retain qualified employees;

•restrictions in our principal credit facility that may limit our flexibility in operating our business;

•impairment in the value of intangible assets;

•~~the funding requirements or obligations of our defined benefit pension plans and other postretirement benefit plans;~~

•~~significant movements in foreign currency exchange rates;~~

•~~availability and cost of raw materials, parts and components used in our products;~~

•new regulations and customer preferences reflecting an increased focus on environmental, social and governance issues, including new regulations related to the use of conflict minerals;

•service interruptions, data corruption, cyber-based attacks or network security breaches affecting our information technology infrastructure;

•risks arising from changes in technology;

•the competitive environment in our ~~industries;~~industry;

•changes in our tax rates, realizability of deferred tax assets, or exposure to additional income tax ~~liabilities, including the effects of the COVID-19 global pandemic and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”);~~liabilities;

•our ability to manage and grow our business and execution of our business and growth strategies;

•~~the level of capital investment and expenditures by our customers in our strategic markets;~~

•our financial performance;

•difficulties and delays in integrating or fully realizing projected cost savings and benefits of our acquisitions; and

•other risks and factors, listed in Item 1A. “Risk Factors” in Part I of our ~~2020~~2021 Form 10-K and ~~this~~Part II. Item 1A. “Risk Factors” in our Form ~~10-Q.~~10-Q for the quarter ended April 1, 2022.

The effects of the COVID-19 pandemic, including the rise, prevalence and severity of variants of the virus and actions by governments, businesses and individuals in response to the situation, as well as inflationary pressures and the ongoing conflict between Russia and Ukraine, may give rise or contribute to or amplify the risks associated with many of these factors.

Any such forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ materially from those envisaged by such forward-looking statements. These forward-looking statements speak only as of the date this Form 10-Q is filed with the SEC. We do not assume any obligation and do not intend to update any forward-looking statement except as required by law. See Part I. Item 1A. “Risk Factors” in our ~~2020~~2021 Form 10-K and Part II. Item 1A. “Risk Factors” in ~~this~~our Form 10-Q for the quarter ended April 1, 2022 for a further discussion regarding some of the reasons that actual results may be materially different from those that we anticipate.

Overview

Please see Part I, Item 1. “Business” in our ~~2020~~2021 Form 10-K for a discussion of ~~Colfax’s~~the Company’s objectives and methodologies for delivering shareholder value.

~~Colfax~~We previously reported our operations through our Fabrication Technology and Medical Technology segments. These businesses operated in distinct markets, with unique business opportunities and investment requirements. Following the spin-off, the Company holds only the medical technology business reported through our Prevention and Recovery and Reconstructive segments. On April 4, 2022, the Company changed its name from “Colfax Corporation” to “Enovis Corporation”, began operating its business as “Enovis” and, as of April 5, 2022, the Company’s common stock began trading under the new ticker symbol “ENOV.” See the Results of Operations section below for further information on the Separation.

As mentioned above, beginning in the second quarter of 2022, Enovis conducts its operations through two operating segments: ~~Fabrication Technology~~Prevention and ~~Medical Technology.~~Recovery and Reconstructive. We have reflected this change in all historical periods presented.

•~~Fabrication Technology~~Prevention and Recovery - a leading global supplier of consumable products and equipment for use in the cutting, joining and automated welding, as well as gas control equipment, providing a wide range of products with innovative technologies to solve challenges in a wide range of industries.

•~~Medical Technology~~ - a leader in orthopedic solutions, providing devices, software and services ~~spanning~~across the ~~full continuum of~~ patient care continuum from injury prevention to ~~joint replacement to rehabilitation.~~rehabilitation after surgery, injury, or from degenerative disease.

~~Certain amounts not allocated to~~•Reconstructive - an innovation-driven leader offering a comprehensive suite of reconstructive joint products for the ~~two reportable segments~~hip, knee, shoulder, elbow, foot, ankle, and ~~intersegment eliminations are reported under the heading “Corporate and other.”~~finger.

We have a global footprint, with production facilities in North America, Europe, North ~~America, South America, Asia, Australia~~Africa and ~~Africa.~~Asia. We serve a global customer base across multiple markets through a combination of direct sales and third-party distribution channels. Our customer base is highly diversified in the medical ~~and industrial end markets.~~market.

Integral to our operations is ~~Colfax Business System (“CBS”),~~ our business management ~~system. CBS~~system, Enovis Growth Excellence (EGX). EGX is our culture and includes our values and behaviors, a comprehensive set of tools, and repeatable, teachable processes that we use to drive continuous improvement and create superior value for our customers, shareholders and associates. We believe that our management team’s access to, and experience in, the application of the ~~CBS~~EGX methodology is one of our primary competitive strengths.

Results of Operations

The following discussion of Results of Operations addresses the comparison of the periods presented. Our management evaluates the operating results of each of its reportable segments based upon Net sales ~~Segment operating income, which represents Operating income before Restructuring and other related charges and European Union Medical Devices Regulation (“MDR”) costs,~~ and Adjusted ~~EBITA~~EBITDA, as defined in the “Non-GAAP Measures” section.

Items Affecting Comparability of Reported Results

The comparability of our operating results for the three and six months ended July ~~2, 2021~~1, 2022 to the comparable ~~periods~~period in ~~2020~~2021 is affected by the following ~~additional~~ significant items:

~~Recent Events~~

During the second quarter of 2021, we used the proceeds from our March 2021 equity offering to redeem all $600 million of our 2024 senior notes and $100 million of outstanding principal on our 2026 senior notes. We paid an early redemption premium of $24.4 million and recorded a loss on the extinguishment of $29.9 million. Additionally, we recognized a pension settlement gain of $11.2 million when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

The Separation

On April 4, 2022 (the “Distribution Date”), we completed the Separation through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to our stockholders. We ~~currently report~~retained 10% of the shares of ESAB common stock immediately following the Separation. We intend to divest the retained shares in ESAB in a tax-efficient exchange for outstanding debt no later than 12 months after the Distribution Date.

Since the disposition occurred in the second quarter of 2022, we began classifying our ~~operations through~~fabrication technology business as a discontinued operation in our ~~Fabrication Technology and Medical Technology segments. These businesses operate~~financial statements beginning in ~~distinct markets, with unique business opportunities and investment requirements. On March 4, 2021, we announced~~ the ~~intention to separate these businesses into two differentiated, independent publicly traded companies (the “Separation”). The Chairman~~second quarter of 2022. Accordingly, the results of our ~~board of directors~~fabrication technology businesses are excluded from continuing operations in the accompanying financials for the three and ~~co-founder of Colfax, Mitchell P. Rales, is expected to serve on the boards of directors of both companies.~~six months ended July 1, 2022 and July 2, 2021.

We expect that the Separation will allow each company to: (1) optimize capital allocation for internal investment, mergers and acquisitions, and return of capital to shareholders; (2) tailor investment to its specific business profile and strategic priorities in the most efficient manner possible; (3) increase operating flexibility and resources to capitalize on growth opportunities in its respective markets; and (4) improve both investor alignment with its clear value proposition and the ability for investors to value it based on its distinct strategic, operational and financial characteristics. The Separation ~~would~~ also ~~provide~~provides each company with an appropriately valued acquisition currency that could be used for larger, transformational transactions.

~~We continue~~Refer to ~~make progress on~~ the ~~Separation and are targeting its completion in~~accompanying Notes to the first quarter of 2022. Completion of the Separation is subject to, among other things, completion of financing and other transactions on satisfactory terms, other steps necessary to qualify the Separation as a tax-free transaction, receipt of regulatory approvals, a favorable tax opinion and/or IRS ruling and final approval from our board of directors. There can be no assuranceCondensed Consolidated Financial Statements for more information regarding ~~the form and timing of the Separation or its completion. Details regarding the Separation will be included in our future filings with the SEC.~~

~~Please see Part II. Items 1A. “Risk Factors” in this Form 10-Q for further discussion of the Company’s risks relating to~~ the Separation.

The COVID-19 Pandemic

In December 2019, a novel coronavirus disease (“COVID-19”) was first reported in China. On March 11, 2020, due to worldwide spread of the virus, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 ~~global~~ pandemic has ~~resulted in a widespread health crisis, and the resulting impact on governments, businesses and individuals and actions taken by them in response to the situation resulted in widespread~~cause economic disruptions since its emergence in ~~2020, significantly affecting broader economies, financial markets, and overall demand for our products~~.

In an effort to protect the health and safety of our employees, we have taken actions to adopt social distancing policies at our locations around the world, including working from home, reducing the number of people in our sites at any one time, and suspending or restricting employee travel. In an effort to contain COVID-19 or slow its spread, governments around the world

have enacted measures throughout 2020 and into 2021, including periodically closing businesses not deemed “essential,” isolating residents to their homes, limiting access to healthcare, curtailing activities including sporting events, and practicing social distancing. However,2020. Despite increased access to ~~vaccinations throughout~~vaccines, the emergence of variants and outbreaks have caused some volatility, including spikes in the second half of 2021 ~~has contributed to slowing~~and second quarter of 2022, which slowed the ~~spread~~pace of ~~COVID-19~~recovery in ~~certain jurisdictions and, consequently, some or all restrictions have been lifted in a number of jurisdictions around the world, allowing a return to more normal activity and operational levels.~~

During 2020, we implemented a broad range of temporary actions to mitigate the effects of lower sales levels including temporarily reducing salaries, furloughing and laying-off employees, significantly curtailing discretionary expenses, re-phasing of capital expenditures, reducing supplier purchase levels and / or prices, adjusting working capital practices and other measures. As sales volumes returned to more normal levels in 2021, these measures have been removed.2022.

As reflected in the discussions that follow, the pandemic and actions taken in response to it have had a variety of impacts on our results of operations during ~~2020~~2021 and 2021. In 2020, the pandemic began to impact our financial results in March, with the most severe financial impact occurring in the second quarter. Subsequently, we observed a partial recovery in the second half of 2020. The surge in COVID-19 cases in the fourth quarter of 2020 contributed to certain jurisdictions putting further restrictions into place, which slowed recovery in the fourth quarter of 2020,2022, including sales levels, inflation and ~~the impact continued into the beginning of the first quarter of 2021, after which sales volumes began to normalize.~~supply chain challenges.

We continue to monitor the evolving situation and guidance from international and domestic authorities, including national and local public health authorities, and may take additional actions based on their recommendations. In these circumstances, thereThere may be developments outside our control that require us to further adjust our operations. InGiven the first half of 2021, we observed a normalization in most countries in which we operate primarily as a result of increased access to COVID-19 vaccines and relaxing of some government-mandated restrictions. However, given the continuedpotential dynamic nature of this situation, including the rise, prevalence and severity of variants of the virus, we cannot reasonably estimate the full impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

COVID-19 and other market dynamics have caused widespread supply chain challenges due to labor, raw material, and component shortages. As a result, we continue to experience supply constraints in our businesses, which have led to cost inflation and logistics delays. We are taking actions in an effort to mitigate impacts to our supply chain, including purchasing and producing additional inventory to protect our ability to meet customer demand; however, we expect these pressures to continue.

Please see ~~“Part~~Part I. Item 1A. ~~Risk~~“Risk Factors” in our ~~2020~~2021 Form 10-K for a further discussion of some of the risks related to the COVID-19 pandemic.

Strategic Acquisitions

We complement our organic growth plans with strategic acquisitions. Acquisitions can significantly affect our reported results, and we report the change in our Net sales between periods both from existing and acquired businesses. The change in

Net sales due to acquisitions for the ~~three and~~ six months ended July ~~2, 2021~~1, 2022 presented in this filing represents the incremental sales subsequent to the beginning of the prior year periods. During this period the Reconstructive segment completed one business combination for aggregate consideration of $27.1 million and the Prevention & Recovery segment completed three asset acquisitions for aggregate consideration of $18.2 million. The acquired business, 360 Med Care, is an Australian medical device distributor that bundles certain computer assisted surgery and patient experience enhancement programs to add value to the device supply arrangements with surgeons, hospitals, and insurers.

WeDuring 2021, we completed ~~one acquisition in our Fabrication Technology segment and three~~five acquisitions in our ~~Medical Technology~~Reconstructive segment ~~during the six months ended July 2, 2021~~ for ~~total~~net cash consideration ~~net~~ of ~~cash received,~~$201.6 million and equity consideration of ~~$215.9~~$285.7 million. ~~This includes the acquisition~~The largest of ~~among another,~~these acquisitions include Trilliant Surgical, a ~~national~~ provider of foot and ankle orthopedic ~~implants, and~~implants; MedShape, Inc., a provider of innovative surgical solutions for foot and ankle ~~surgeons, for total consideration, net of cash received, of $205.4 million within our Medical Technology segment.~~

~~In addition, on June 7, 2021, we entered into a definitive agreement for the acquisition of~~surgeons; and Mathys AG Bettlach, ~~(“Mathys”),~~ a Switzerland-based company that develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions and sports medicine. We believe that the acquisition will expand our reconstructive product portfolio with Mathys’ complimentary surgical solutions and customer base. Total acquisition consideration of approximately $285 million is expected to be financed with Colfax common stock. The transaction is expected to close on July 28, 2021 subsequent to the filing of this Form 10-Q, subject to the satisfaction of closing conditions.

Foreign Currency Fluctuations

~~A significant portion~~Approximately 31% and 25% of our Net sales ~~approximately 59% and 60%~~from continuing operations for the ~~three and~~ six months ended July 1, 2022 and July 2, 2021, respectively, were derived from ~~operations outside the U.S., with the majority of those~~ sales denominated in currencies other than the U.S. dollar. ~~Because much of our manufacturing and employee costs are outside the U.S., a significant portion of our~~Our costs are also ~~denominated in~~exposed to currencies other than the U.S. dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant. For the six months ended July ~~2, 2021~~1, 2022 compared to the six months ended July ~~3, 2020,~~2, 2021, fluctuations in foreign currencies ~~had a favorable impact on the change in~~reduced Net sales ~~of approximately 3%~~ and ~~affected~~

Gross profit by approximately 2% and reduced Selling, general and administrative expenses by less than 3%. For the second quarter of 2021 compared to the second quarter of 2020, fluctuations in foreign currencies had a favorable impact on the change in Net sales of approximately 4%, and affected Gross profit and Selling, general and administrative expenses by less than 3%1%. The changes in foreign exchange rates since December 31, ~~2020~~2021 also decreased net assets by ~~less than 2%~~approximately 1% as of July ~~2, 2021.~~1, 2022.

Seasonality

~~European operations in our Fabrication Technology segment typically experience a slowdown during the July, August and December vacation seasons. Sales in our Medical Technology segment~~Our sales typically peak in the fourth ~~quarter. However,~~quarter, however, the business impact caused by the COVID-19 pandemic has distorted the effects of historical seasonality ~~patterns in 2020.~~patterns.

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Non-GAAP Measures

Adjusted ~~EBITA~~EBITDA

Adjusted ~~EBITA, a~~EBITDA and Adjusted EBITDA margin, two non-GAAP performance ~~measure, is~~measures, are included in this report because ~~it is a~~they are key ~~metric~~metrics used by our management to assess our operating performance. Adjusted ~~EBITA excludes~~EBITDA and Adjusted EBITDA margin exclude from ~~Net~~Operating income (loss) ~~from continuing operations~~ the effect of restructuring and other related charges, MDR and ~~other~~related costs, ~~acquisition-related intangible asset amortization and other non-cash charges, and~~ strategic transaction costs, ~~as well as income tax expense (benefit), pension~~stock-based compensation, depreciation and other amortization charges, amortization of acquired intangibles, insurance settlement ~~gain, debt extinguishment charges~~gains, and ~~interest expense, net.~~inventory step-up. We also present Adjusted ~~EBITA~~EBITDA and Adjusted EBITDA margin by operating segment, which isare subject to the same ~~adjustments as~~adjustments. Operating income (loss), adjusted EBITDA and adjusted EBITDA margins at the operating segment level also include allocations of certain central function expenses not directly attributable to either operating segment. Adjusted EBITA. Further, we present Adjusted EBITA (and Adjusted EBITA margin) on a segment basis, where we exclude the impact of restructuring and other related charges, MDR and other costs, acquisition-related intangible asset amortization and other non-cash charges, and strategic transaction costs from segment operating income. Adjusted EBITAEBITDA assists ~~Colfax~~Enovis management in comparing its operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans and other initiatives that are fundamentally different from our ongoing productivity improvements. ~~Colfax~~Enovis management also believes that presenting these measures allows investors to view its performance using the same ~~measure~~measures that we use in evaluating our financial and business performance and trends.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. The following tables set forth a reconciliation of ~~Net~~Operating income (loss) ~~from continuing operations,~~, the most directly comparable GAAP financial measure, to Adjusted ~~EBITA.~~EBITDA.

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
(Dollars in millions)
Net income (loss) from continuing operations (GAAP) $ 31.3 $ (3.1) $ 59.0 $ 5.7
Income tax expense (benefit) 8.2 (30.1) 16.1 (16.9)
Pension settlement gain (11.2) — (11.2) —
Interest expense, net 17.8 28.3 43.5 53.1
Debt extinguishment charges 29.9 — 29.9 —
Restructuring and other related charges(1)
5.5 11.2 9.5 22.2
MDR and other costs(2)
1.9 1.0 3.7 1.9
Strategic transaction costs(3)
8.0 1.7 9.4 2.6
Acquisition-related amortization and other non-cash charges(4)
39.0 36.1 77.5 71.9
Adjusted EBITA (non-GAAP) $ 130.3 $ 45.1 $ 237.4 $ 140.6
Net income (loss) margin from continuing operations (GAAP) 3.2 % (0.5) % 3.2 % 0.4 %
Adjusted EBITA margin (non-GAAP) 13.2 % 7.3 % 12.7 % 9.8 %


	Three Months Ended						Six Months Ended
	July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
	(Dollars in millions)
Operating income (loss) (GAAP)	$	5.6		$	(10.4)		$	(25.1)		$	(28.5)
Adjusted to add (deduct):
Restructuring and other related charges(1)	2.6			2.0			5.5			3.0
MDR and other costs(2)	4.4			1.9			7.0			3.7
Strategic transaction costs(3)	12.7			4.0			24.4			4.4
Stock-based compensation	7.8			6.8			14.5			12.7
Depreciation and other amortization	19.5			16.4			38.0			33.2
Amortization of acquired intangibles	31.8			29.5			62.6			57.0
Insurance settlement gain(4)	(33.0)			—			(33.0)			—
Inventory step-up	4.9			0.4			10.0			2.3
Adjusted EBITDA (non-GAAP)	$	56.2		$	50.6		$	103.9		$	87.9
Adjusted EBITDA margin (non-GAAP)	14.2		%	14.2		%	13.5		%	13.2		%

(1) Restructuring and other related charges includes ~~$0.9~~$0.3 million and ~~$2.7~~$0.8 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the three and six months ended July ~~3, 2020,~~1, 2022, respectively.

(2)Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union MDR. These costs are classified as Selling, general and administrative expense on our Condensed Consolidated Statements of ~~Operations for all periods presented.~~Operations.

(3) ~~For the three and six months ended July 2, 2021,~~ Strategic transaction costs includes costs related to the ~~Separation. For~~Separation and certain transaction and integration costs related to recent acquisitions.

(4) Insurance settlement gain related to the ~~three and six months ended July 3, 2020, Strategic transaction costs includes costs incurred for the~~Company’s 2019 acquisition of DJO.

~~(4)~~ ~~Includes amortization of acquired intangibles and fair value charges on acquired inventory.~~

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The following tables set forth a reconciliation of operating income (loss), the most directly comparable financial statement measure, to Adjusted ~~EBITA~~EBITDA by segment for the three and six months ended July 1, 2022 and July 2, 2021, ~~and July 3, 2020.~~

Three Months Ended July 2, 2021 Six Months Ended July 2, 2021
Fabrication Technology Medical Technology Corporate and other Total Fabrication Technology Medical Technology Corporate and other Total
(Dollars in millions)
Operating income (loss) (GAAP) $ 90.9 $ 14.3 $ (29.3) $ 75.9 $ 170.1 $ 13.8 $ (46.7) $ 137.2
Restructuring and other related charges 3.5 2.0 — 5.5 6.6 3.0 — 9.5
MDR and other costs — 1.9 — 1.9 — 3.7 — 3.7
Segment operating income (loss) (non-GAAP) 94.4 18.2 (29.3) 83.3 176.7 20.4 (46.7) 150.4
Strategic transaction costs 0.1 — 7.9 8.0 0.1 — 9.3 9.4
Acquisition-related amortization and other non-cash charges 9.1 29.9 — 39.0 18.2 59.3 — 77.5
Adjusted EBITA (non-GAAP) $ 103.6 $ 48.2 $ (21.5) $ 130.3 $ 195.0 $ 79.8 $ (37.4) $ 237.4
Segment operating income margin (non-GAAP) 15.0 % 5.1 % — % 8.5 % 14.8 % 3.1 % — % 8.1 %
Adjusted EBITA margin (non-GAAP) 16.4 % 13.5 % — % 13.2 % 16.3 % 12.0 % — % 12.7 %
respectively.

Three Months Ended July 3, 2020 Six Months Ended July 3, 2020
Fabrication Technology Medical Technology Corporate and other Total Fabrication Technology Medical Technology Corporate and other Total
(Dollars in millions)
Operating income (loss) (GAAP) $ 37.5 $ (26.9) $ (15.6) $ (4.9) $ 103.8 $ (32.2) $ (29.6) $ 41.9
Restructuring and other related charges(1)
6.1 5.1 — 11.2 8.9 13.3 — 22.2
MDR and other costs — 1.0 — 1.0 — 1.9 — 1.9
Segment operating income (loss) (non-GAAP) 43.6 (20.8) (15.6) 7.2 112.6 (17.0) (29.6) 66.0
Strategic transaction costs — — 1.7 1.7 — — 2.6 2.6
Acquisition-related amortization and other non-cash charges 8.8 27.3 — 36.1 17.7 54.2 — 71.9
Adjusted EBITA (non-GAAP) $ 52.4 $ 6.5 $ (13.8) $ 45.1 $ 130.3 $ 37.2 $ (27.0) $ 140.6
Segment operating income (loss) margin (non-GAAP) 10.5 % (10.1) % — % 1.2 % 12.0 % (3.4) % — % 4.6 %
Adjusted EBITA margin (non-GAAP) 12.6 % 3.2 % — % 7.3 % 13.9 % 7.5 % — % 9.8 %


	Three Months Ended July 1, 2022									Six Months Ended July 1, 2022
	Prevention and Recovery			Reconstructive			Total			Prevention and Recovery			Reconstructive			Total
	(Dollars in millions)
Operating income (loss) (GAAP)	$	13.4		$	(7.9)		$	5.6		$	(1.0)		$	(24.1)		$	(25.1)
Adjusted to add (deduct):
Restructuring and other related charges(1)	1.3			1.3			2.6			3.4			2.1			5.5
MDR and other costs(2)	3.0			1.5			4.4			4.7			2.4			7.0
Strategic transaction costs(2)	8.5			4.2			12.7			16.1			8.3			24.4
Stock-based compensation(2)	5.2			2.6			7.8			9.6			4.9			14.5
Depreciation and other amortization	6.3			13.1			19.5			12.2			25.8			38.0
Amortization of acquired intangibles	19.5			12.3			31.8			38.6			24.1			62.6
Insurance settlement gain(2)	(22.1)			(11.0)			(33.0)			(22.1)			(11.0)			(33.0)
Inventory step-up	—			4.9			4.9			—			10.0			10.0
Adjusted EBITDA (non-GAAP)	$	35.1		$	21.0		$	56.2		$	61.5		$	42.4		$	103.9
Adjusted EBITDA margin (non-GAAP)	13.3		%	16.0		%	14.2		%	12.1		%	16.2		%	13.5		%

(2) Amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment.


	Three Months Ended July 2, 2021									Six Months Ended July 2, 2021
	Prevention and Recovery			Reconstructive			Total			Prevention and Recovery			Reconstructive			Total
	(Dollars in millions)
Operating loss (GAAP)	$	(1.8)		$	(8.5)		$	(10.4)		$	(13.5)		$	(14.9)		$	(28.5)
Adjusted to add (deduct):
Restructuring and other related charges	1.3			0.7			2.0			2.0			0.9			3.0
MDR and other costs(1)	1.4			0.5			1.9			2.8			0.9			3.7
Strategic transaction costs(1)	3.0			1.0			4.0			3.3			1.1			4.4
Stock-based compensation(1)	5.1			1.7			6.8			9.6			3.2			12.7
Depreciation and other amortization	6.1			10.2			16.4			12.2			21.0			33.2
Amortization of acquired intangibles	18.7			10.8			29.5			37.5			19.6			57.0

Inventory step-up	(0.5)			0.9			0.4			0.7			1.6			2.3
Adjusted EBITDA (non-GAAP)	$	33.3		$	17.4		$	50.6		$	54.6		$	33.3		$	87.9
Adjusted EBITDA margin (non-GAAP)	12.5		%	19.4		%	14.2		%	10.9		%	20.1		%	13.2		%

(1) Amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment.

3029

Total Company

Sales

Net sales for the three and six months ended July ~~2, 2021~~1, 2022 increased ~~as compared with~~from the three and six months ended July ~~3, 2020.~~2, 2021. The following table presents the components of changes in our consolidated Net sales.


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		Net Sales		Change %		Net Sales		Change %			Net Sales		Change %		Net Sales		Change %
		(Dollars in millions)									(Dollars in millions)
For the three and six months ended July 3, 2020		$	620.4			$	1,436.7
For the three and six months ended July 2, 2021										For the three and six months ended July 2, 2021	$	356.1			$	667.2
Components of Change:	Components of Change:									Components of Change:
Existing Businesses(1)	Existing Businesses(1)	317.8		51.2	%	352.1		24.5	%	Existing Businesses(1)	10.5		2.9	%	33.7		5.1	%
Acquisitions(2)	Acquisitions(2)	23.6		3.8	%	38.0		2.6	%	Acquisitions(2)	37.4		10.5	%	83.0		12.4	%
Foreign Currency Translation(3)	Foreign Currency Translation(3)	24.1		3.9	%	38.3		2.7	%	Foreign Currency Translation(3)	(8.8)		(2.5)	%	(13.4)		(2.0)	%
		365.6		58.9	%	428.4		29.8	%		39.0		10.9	%	103.4		15.5	%
For the three and six months ended July 2, 2021		$	985.9			$	1,865.1
For the three and six months ended July 1, 2022										For the three and six months ended July 1, 2022	$	395.1			$	770.6

(1) Excludes the impact of foreign exchange rate fluctuations and acquisitions, thus providing a measure of change due to factors such as price, product mix and volume.

(2) Represents the incremental sales as a result of acquisitions closed subsequent to the beginning of the prior year ~~respective periods.~~period.

(3) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

The increase in Net sales during the three and six months ended July ~~2, 2021~~1, 2022 compared to the prior year periods was primarily attributable to ~~the strong recovery~~sales from ~~the prior year COVID-related sales downturn in the first half of 2020. During the three~~acquired businesses and ~~six months ended July 2, 2021, the~~increases from our existing businesses. Existing business sales ofin our ~~Fabrication Technology~~Reconstructive segment increased ~~$196.2~~$5.1 million and ~~$231.0~~$13.8 million, respectively, while our Medical Technology segment increased $121.6 million and $121.1 million, respectively. Our Fabrication Technology segment benefited from new product initiatives in the second quarter and first half of 2021. Net sales from acquisitions increased during the three and six months ended July ~~2, 2021 primarily~~1, 2022 respectively, due to higher surgical sales volumes compared to the prior year period despite some delays in elective surgeries in the second quarter of 2022 due to a rise in COVID-19 cases. Existing business sales in our Prevention and Recovery segment increased $5.4 million and $19.9 million during the three and six months ended July 1, 2022, respectively, and included inflation-related pricing increases and improved sales volumes. Net sales from acquisitions increased in the three and six months ended July 1, 2022 due to acquisitions in our ~~Medical Technology~~Reconstructive segment that closed insince the ~~fourth quarter~~beginning of ~~2020 and first half of~~the prior year period in 2021. The ~~weakening~~strengthening of the U.S. dollar relative to other currencies resulted in ~~$24.1~~$8.8 million and ~~$38.3~~$13.4 million ~~favorable~~unfavorable foreign currency translation impacts during the three and six months ended July ~~2, 2021,~~1, 2022, respectively.

3130

Operating Results

The following table summarizes our results of continuing operations for the comparable periods.


		Three Months Ended						Six Months Ended							Three Months Ended						Six Months Ended
		July 2, 2021			July 3, 2020			July 2, 2021			July 3, 2020				July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
		(Dollars in millions)													(Dollars in millions)
Gross profit	Gross profit	$	419.0		$	241.1		$	790.1		$	589.3		Gross profit	$	215.9		$	200.6		$	421.8		$	371.9
Gross profit margin	Gross profit margin	42.5		%	38.9		%	42.4		%	41.0		%	Gross profit margin	54.6		%	56.3		%	54.7		%	55.7		%
Selling, general and administrative expense	Selling, general and administrative expense	$	337.6		$	235.7		$	643.3		$	527.9		Selling, general and administrative expense	$	225.5		$	197.9		$	444.7		$	376.0
Research and development expense														Research and development expense	$	15.7		$	11.0		$	30.5		$	21.4
Operating income (loss)	Operating income (loss)	$	75.9		$	(4.9)		$	137.2		$	41.9		Operating income (loss)	$	5.6		$	(10.4)		$	(25.1)		$	(28.5)
Operating income (loss) margin	Operating income (loss) margin	7.7		%	(0.8)		%	7.4		%	2.9		%	Operating income (loss) margin	1.4		%	(2.9)		%	(3.3)		%	(4.3)		%
Net income (loss) from continuing operations	Net income (loss) from continuing operations	$	31.3		$	(3.1)		$	59.0		$	5.7		Net income (loss) from continuing operations	$	120.7		$	(42.1)		$	82.6		$	(74.0)
Net income (loss) margin from continuing operations		3.2		%	(0.5)		%	3.2		%	0.4		%
Adjusted EBITA (non-GAAP)		$	130.3		$	45.1		$	237.4		$	140.6
Adjusted EBITA margin (non-GAAP)		13.2		%	7.3		%	12.7		%	9.8		%
Items excluded from Adjusted EBITA:
Net income (loss) margin from continuing operations (GAAP)														Net income (loss) margin from continuing operations (GAAP)	30.5		%	(11.8)		%	10.7		%	(11.1)		%
Adjusted EBITDA (non-GAAP)														Adjusted EBITDA (non-GAAP)	$	56.2		$	50.6		$	103.9		$	87.9
Adjusted EBITDA margin (non-GAAP)														Adjusted EBITDA margin (non-GAAP)	14.2		%	14.2		%	13.5		%	13.2		%
Items excluded from Adjusted EBITDA:														Items excluded from Adjusted EBITDA:
Restructuring and other related charges(1)	Restructuring and other related charges(1)	$	5.5		$	11.2		$	9.5		$	22.2		Restructuring and other related charges(1)	$	2.6		$	2.0		$	5.5		$	3.0
MDR and other costs	MDR and other costs	$	1.9		$	1.0		$	3.7		$	1.9		MDR and other costs	$	4.4		$	1.9		$	7.0		$	3.7
Strategic transaction costs	Strategic transaction costs	$	8.0		$	1.7		$	9.4		$	2.6		Strategic transaction costs	$	12.7		$	4.0		$	24.4		$	4.4
Acquisition-related amortization and other non-cash charges		$	39.0		$	36.1		$	77.5		$	71.9
Pension settlement gain		$	(11.2)		$	—		$	(11.2)		$	—
Stock-based compensation														Stock-based compensation	$	7.8		$	6.8		$	14.5		$	12.7
Depreciation and other amortization														Depreciation and other amortization	$	19.5		$	16.4		$	38.0		$	33.2
Amortization of acquired intangibles														Amortization of acquired intangibles	$	31.8		$	29.5		$	62.6		$	57.0
Insurance settlement gain														Insurance settlement gain	$	(33.0)		$	—		$	(33.0)		$	—
Inventory step-up														Inventory step-up	$	4.9		$	0.4		$	10.0		$	2.3
Unrealized gain on investment in ESAB Corporation														Unrealized gain on investment in ESAB Corporation	$	(135.5)		$	—		$	(135.5)		$	—
Interest expense, net	Interest expense, net	$	17.8		$	28.3		$	43.5		$	53.1		Interest expense, net	$	4.5		$	5.7		$	11.6		$	18.6
Debt extinguishment charges	Debt extinguishment charges	$	29.9		$	—		$	29.9		$	—		Debt extinguishment charges	$	20.1		$	29.9		$	20.1		$	29.9
Income tax expense (benefit)	Income tax expense (benefit)	$	8.2		$	(30.1)		$	16.1		$	(16.9)		Income tax expense (benefit)	$	(4.2)		$	(3.8)		$	(3.8)		$	(3.0)

Second Quarter of ~~2021~~2022 Compared to Second Quarter of ~~2020~~2021

Gross profit increased ~~$177.9 million~~ in the second quarter of ~~2021~~2022 compared with the prior year period due to a ~~$78.5~~$19.9 million increase in our ~~Fabrication Technology~~Reconstructive segment, ~~and~~partially offset by a ~~$99.4~~$4.7 million ~~increase~~decrease in our ~~Medical Technology~~Prevention and Recovery segment. The Gross profit increase was primarily attributable to ~~the significant rebound~~acquisitions and increased sales from lower sales volumes in the second quarter of 2020 caused by the COVID-19 impact, which created more favorable operating leverage and production efficiencies. These factors also contributed to the increase in Gross profit margin, which wasexisting businesses, partially offset by increased supply chain and logistic costs and ~~inflation-related~~$4.5 million of higher inventory step-up charges related to recent acquisitions. Gross profit margin decreased slightly due to supply chain, logistics and other cost inflation that exceeded pricing and ~~cost increases in our Fabrication Technology segment during the second quarter of 2021.~~other benefits.

Selling, general and administrative expense increased ~~$101.9~~$27.6 million in the second quarter of ~~2021~~2022 compared to the prior year period due to $17.4 million from acquired businesses and $8.7 million increase in strategic transaction costs driven by higher Separation-related costs. Research and development costs also increased ~~sales commissions from increased sales levels,~~compared to the ~~cessation of~~ prior year ~~temporary cost reduction measures that were taken in response to COVID-19, and $17.9 million related to acquired businesses. Strategic transaction costs increased~~period primarily due to ~~costs incurred related~~recent acquisitions. Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the ~~Separation. Restructuring and other related charges decreased~~prior year period due to ~~the completion of certain restructuring programs.~~acquisition-related increases.

~~Additionally, during~~

During the second quarter of ~~2021, a pension~~2022, we recorded an insurance settlement gain of ~~$11.2~~$33.0 million ~~was recognized when~~related to the ~~independent trustees~~2019 acquisition of DJO.

Following the Separation, the Company retained 10% of the shares of ESAB common stock, which is recorded at fair value. During the second quarter of 2022, we recorded a ~~company pension plan agreed~~$135.5 million gain related to ~~merge that plan with another company pension plan and contribute its surplus assets.~~this investment.

Debt extinguishment charges of $20.1 million were recorded in the second quarter of 2022 due to debt redemptions in conjunction with the Separation and recapitalization, while charges of $29.9 million were recorded in the second quarter of 2021 due to an early redemption of certain senior notes.

Interest expense, net decreased in the second quarter of ~~2021 compared to the same period in the prior year,~~

2022 due to a reduction in debt balances indue to the Separation-related debt redemptions at the beginning of the second quarter of ~~2021, primarily as a result of the aforementioned redemption of senior notes.~~2022.

The effective tax rate for Net income ~~(loss)~~ from continuing operations during the second quarter of ~~2021~~2022 was ~~20.7%~~(3.6)%, which was ~~slightly~~lower than the 2022 U.S. federal statutory tax rate of 21%, mainly due to non-taxable unrealized gains on the investment in ESAB offset by non-deductible costs related to the tax-free separation transaction. The effective tax rate for the second quarter of 2021 was 8.2%, which was lower than the 2021 U.S. federal statutory tax rate of 21%, mainly due to ~~the net impact of international tax rates, effective settlements on uncertain tax positions and~~ U.S. ~~tax credits, offset by withholding taxes, U.S. tax~~taxation on international operations and other non-deductible expenses. The effective tax rate for the second quarter of 2020 was 90.5%, which was higher than the 2020 U.S. federal statutory tax rate of 21% mainly due to the impact of additional U.S. tax on international operations and taxable foreign exchange gains, offset in part by a discrete tax benefit associated with the enactment of a tax law change in India.

Net income from continuing operations increased in the second quarter of ~~2021~~2022 compared with the prior year period primarily due to the ~~strong recovery from~~gain on the ~~prior year COVID-related~~retained ESAB common stock, as well as the insurance settlement gain and acquisition-related sales, ~~downturn and related cost impacts. The sales-related benefits from this recovery in the second quarter of 2021 were partially~~ offset by ~~increases in expenses attributable to~~costs associated with the temporary cost reductions implemented in the second quarter of 2020 in reaction to COVID-driven sales reductions. In the second quarter of 2021 we incurred higher sales commissions related to higher sales, increased Strategic transaction costs related to the Separation, ~~and~~ debt extinguishment charges ~~in the current year period.~~and acquisition-related costs. Net income margin from continuing operations increased ~~by 370 basis points~~ due to the aforementioned factors. Adjusted ~~EBITA and related margins~~EBITDA increased primarily due to ~~the improved~~increased sales ~~volumes,~~and lower operating expenses in existing businesses, partially offset by higher ~~sales commissions~~supply chain and logistic costs. Adjusted EBITDA margin stayed even period-over-period, and positive impacts were partially offset by recent acquisitions in our Reconstructive segment which were dilutive to the ~~cessation of second quarter 2020 temporary cost reductions.~~margin by approximately 70 basis points and are expected to be accretive to margins in future years.

Six months ended July ~~2, 2021~~1, 2022 Compared to Six months ended July ~~3, 2020~~2, 2021

Gross profit increased ~~$200.8 million~~ in the six months ended July ~~2, 2021~~1, 2022 compared with the prior year period due to a ~~$89.5~~$49.6 million increase in our ~~Fabrication Technology~~Reconstructive segment and a ~~$111.3~~$0.2 million increase in our ~~Medical Technology~~Prevention and Recovery segment. The Gross profit increase was ~~primarily~~ attributable to the benefit from business acquisitions and growth in our existing businesses, partially offset by higher ~~sales volumes~~inventory step-up charges of $7.7 million and the related improved production variances compared to the six months ended July 3, 2020, during which sales volumes were negatively impacted by the COVID-19 pandemic. During the six months ended July 2, 2021, Gross profit also improved due to acquisition growth, new product initiativesincreased supply chain and ~~favorable foreign currency impacts.~~logistic costs. Gross profit margin ~~increased for the same reasons Gross profit increased, partially offset by inflation-related~~decreased slightly due to supply chain, logistics and other cost inflation that exceeded pricing and ~~cost increases in our Fabrication Technology segment.~~other benefits.

Selling, general and administrative expense increased ~~$115.4~~$68.7 million in the six months ended July ~~2, 2021~~1, 2022 compared to the prior year period due to $39.7 million of costs included in acquired businesses and a $20.0 million increase in strategic transaction costs driven by higher Separation-related costs. Research and development costs also increased compared to the prior year period primarily due to increased ~~sales commissions from~~spend within recently acquired businesses in our Reconstructive segment. Amortization of acquired intangibles and Depreciation and other amortization also increased ~~sales levels, and~~compared to the ~~cessation of~~ prior year ~~temporary cost reduction measures that were taken~~period due to business acquisition-related increases.

As discussed above, during the second quarter of 2022, we recorded an insurance settlement gain of $33.0 million and a $135.5 million gain on our retained investment in ~~response to COVID-19. To a lesser extent, acquisition-related expenses and strategic transaction costs related to the Separation also increased Selling, general and administrative expense during~~ESAB, which significantly impacted our results for the six months ended July ~~2, 2021. Restructuring and other related charges decreased due to the completion of certain restructuring programs in our Medical Technology segment.~~1, 2022.

Additionally, during the six months ended July 2, 2021, a pension settlement gain of $11.2 million was recognized when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

~~Debt extinguishment charges of $29.9 million were recorded in the second quarter of 2021 due to an early redemption of certain senior notes.~~ Interest expense, net decreased in the six months ended July ~~2, 2021~~1, 2022 compared to the ~~same period in the~~ prior year ~~primarily~~period due to ~~an overall~~a reduction in debt balances ~~during the current year period~~ as a result of the ~~aforementioned redemption~~Separation-related debt redemptions at the beginning of ~~senior notes.~~the second quarter of 2022.

The effective tax rate for Net income ~~(loss)~~ from continuing operations during the six months ended July ~~2, 2021~~1, 2022 was ~~21.4%~~(4.9)%, which was ~~slightly higher~~lower than the ~~2021~~2022 U.S. federal statutory tax rate of 21%, mainly due to ~~withholding taxes, U.S. tax~~non-taxable unrealized gains on ~~international operations, and other non-deductible expenses,~~the investment in ESAB offset by non-deductible costs related to the ~~net impact of international tax rates, the realization of tax benefits associated with effective settlements on uncertain tax positions, and U.S. tax credits.~~tax-free separation transaction. The effective tax rate for the six months ended July ~~3, 2020~~2, 2021 was ~~151.3%~~3.9%, which was ~~higher~~lower than the ~~2020~~2021 U.S. federal statutory tax rate of 21% mainly due to ~~the impact of~~ U.S. tax credits and state taxes on the forecasted rate and discrete tax benefits associated with the filing of timely elected changes to U.S. Federal tax returns to credit rather than to deduct foreign taxes, the impact of an enacted law change in India, and the realization of tax benefits associated with effective settlements on uncertain tax. These favorable impacts were offset by the impact of additional U.S. taxtaxation on international operations and ~~taxable foreign exchange gains.~~other non-deductible expenses.

3332

Net income from continuing operations increased in the six months ended July ~~2, 2021~~1, 2022 compared with the prior year period, primarily due to the ~~strong recovery from~~gain on the ~~prior year COVID-related~~retained ESAB common stock, as well as the insurance settlement gain and acquisition-related sales, ~~downturn and related cost impacts. The sales-related benefits from this recovery in the six months ended July 2, 2021 were partially~~ offset by ~~increases in expenses attributable to~~costs associated with the temporary cost reductions implemented during the six months ended July 3, 2020 in reaction to COVID-driven sales reductions. In the six months ended July 2, 2021, we incurred higher sales commissions related to higher sales, andSeparation, debt extinguishment ~~charges.~~charges and acquisition-related costs. Net income margin from continuing operations increased by ~~280 basis~~over 20 points due to the aforementioned factors. Adjusted ~~EBITA~~EBITDA increased ~~primarily~~ due to ~~the improved sales volumes, new product initiatives,~~organic growth and ~~benefits from previously-completed restructuring programs,~~lower operating expenses in existing businesses, partially offset by ~~the aforementioned sales commission increases,~~higher supply chain and ~~the cessation of the aforementioned temporary cost reductions.~~logistic costs. Adjusted ~~EBITA~~EBITDA margin increased 30 basis points for the same ~~reasons Adjusted EBITA~~reasons; excluding acquisitions, margins increased ~~partially offset~~ by ~~inflation-related pricing and cost increases in our Fabrication Technology segment during the six months ended July 2, 2021.~~70 basis points.

Business Segments

~~As discussed above,~~Following the completion of the Separation, we ~~report results in~~revised our reporting structure and conduct our business through two ~~reportable segments: Fabrication Technology~~operating segments, “Prevention and ~~Medical Technology.~~Recovery”, which consists of our orthopedic and rehabilitation business, and “Reconstructive”, which includes our surgical business.

~~Fabrication Technology~~Prevention and Recovery

We ~~formulate,~~ develop, manufacture, and ~~supply consumable~~distribute rigid bracing products, orthopedic soft goods, vascular systems and compression garments, and hot and cold therapy products, and ~~equipment, including cutting, joining,~~offer robust recovery sciences products in the clinical rehabilitation and ~~automated welding products,~~sports medicine markets such as ~~well as gas control equipment.~~bone growth stimulators and electrical stimulators used for pain management. Our ~~fabrication technology~~Prevention and Recovery products are marketed under several brand names, most notably ~~ESAB, providing a wide range of products with innovative technologies~~DJO and Don-Joy, to solve challenges in virtually any industry. ESAB’s comprehensive range of welding consumables includes electrodes, cored and solid wires, and fluxes using a wide range of specialty and other materials, and cutting consumables including electrodes, nozzles, shields and tips. ESAB’s fabrication technology equipment ranges from portable welding machines to large customized automated cutting and welding systems. ESAB also offers a range of digital software and solutions to help its customers increase their productivity, remotely monitor their welding operations and digitize their documentation. Products are sold into a wide range of end markets, including infrastructure, wind power, marine, medical / life sciences, pipelines, mobile/off-highway equipment, oil, gas, and mining.

~~The following table summarizes selected financial results for our Fabrication Technology segment:~~

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
(Dollars in millions)
Net sales $ 629.8 $ 414.4 $ 1,197.9 $ 939.9
Gross profit $ 218.4 $ 139.9 $ 418.2 $ 328.7
Gross profit margin 34.7 % 33.8 % 34.9 % 35.0 %
Selling, general and administrative expense $ 124.0 $ 96.3 $ 241.5 $ 216.1
Segment operating income (non-GAAP) $ 94.4 $ 43.6 $ 176.7 $ 112.6
Segment operating income margin (non-GAAP) 15.0 % 10.5 % 14.8 % 12.0 %
Adjusted EBITA (non-GAAP) $ 103.6 $ 52.4 $ 195.0 $ 130.3
Adjusted EBITA margin (non-GAAP) 16.4 % 12.6 % 16.3 % 13.9 %
Items excluded from Adjusted EBITA:
Restructuring and other related charges $ 3.5 $ 6.1 $ 6.6 $ 8.9
Strategic transaction costs $ 0.1 $ — $ 0.1 $ —
Acquisition-related amortization and other non-cash charges $ 9.1 $ 8.8 $ 18.2 $ 17.7

~~Second Quarter of 2021 Compared to Second Quarter of 2020~~

Net sales in our Fabrication Technology segment increased $215.4 million in the second quarter of 2021 compared with the prior year period primarily due to the strong recovery from the COVID effects in the second quarter of 2020. Sales also increased due to new product initiatives, inflation-related pricing impacts of approximately 11% of the sales increase, and an $18.5 million favorable foreign currency impact during the second quarter of 2021. Gross profit and Gross profit margin increased $78.5 million and 90 basis points, respectively, due to the higher sales volumes and the related improved production efficiencies compared to the prior year period. The increase in Gross profit margin was partially offset by inflation-related

pricing and cost increases, which compressed the margin. Selling, general and administrative expense increased primarily due to the cessation of temporary cost reductions implemented during the second quarter of 2020, partially offset by benefits from ongoing restructuring initiatives to structurally reduce costs. Segment operating income and Adjusted EBITA improved due to increased sales volumes, partially offset by increased Selling, general and administrative expenses. The related margins increased for the same reasons, partially offset by inflation-related pricing and cost increases during the second quarter of 2021.

~~Six months ended July 2, 2021 Compared to Six months ended July 3, 2020~~

Net sales increased $258.0 million in the six months ended July 2, 2021 compared with the prior year period, due to the strong recovery from the COVID effects in the six months ended July 3, 2020, as well as new product initiatives, inflation-related pricing impacts, and a $25.9 million favorable foreign currency translation impact in the current year period. Gross profit increased $89.5 million during the six months ended July 2, 2021 as a result of improved sales volumes, while Gross profit margin decreased 10 basis points due to inflation-related pricing and cost increases, which compressed the margin. Selling, general and administrative expense increased in the period primarily due to the cessation of temporary cost reductions implemented in the second quarter of 2020, partially offset by benefits from restructuring initiatives. Segment operating income and Adjusted EBITA increased in the six months ended July 2, 2021 compared to the prior year period due to the improved sales volumes, partially offset by increased Selling, general and administrative costs. The related margins increased for the same reasons, partially offset by inflation-related pricing and cost increases over the same period.

~~Medical Technology~~

We develop, manufacture and distribute high-quality medical devices and services across the continuum of patient care from injury prevention to joint replacement to rehabilitation after surgery, injury or from degenerative disease, enabling people to regain or maintain their natural motion. Our products are used by orthopedic specialists, ~~spine surgeons,~~ primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers, and other healthcare ~~professionals. Our products primarily include orthopedic braces, rehabilitation~~professionals who treat patients with a variety of treatment needs including musculoskeletal conditions resulting from degenerative diseases, deformities, traumatic events and sports-related injuries. Many of our medical devices ~~footwear, surgical implants,~~ and ~~bone growth stimulators.~~related accessories are used by athletes and other patients for injury prevention and at-home physical therapy treatments. We reach a diverse customer base through multiple distribution channels, including independent distributors, direct salespeople, and directly to patients.

The following table summarizes ~~the~~ selected financial results for our ~~Medical Technology~~Prevention and Recovery segment:

Three Months Ended Six Months Ended
July 2, 2021 July 3, 2020 July 2, 2021 July 3, 2020
(Dollars in millions)
Net sales $ 356.1 $ 206.0 $ 667.2 $ 496.8
Gross profit $ 200.6 $ 101.2 $ 371.9 $ 260.6
Gross profit margin 56.3 % 49.1 % 55.7 % 52.5 %
Selling, general and administrative expense $ 184.3 $ 123.9 $ 355.1 $ 282.2
Segment operating income (loss) (non-GAAP) $ 18.2 $ (20.8) $ 20.4 $ (17.0)
Segment operating income (loss) margin (non-GAAP) 5.1 % (10.1) % 3.1 % (3.4) %
Adjusted EBITA (non-GAAP) $ 48.2 $ 6.5 $ 79.8 $ 37.2
Adjusted EBITA margin (non-GAAP) 13.5 % 3.2 % 12.0 % 7.5 %
Items excluded from Adjusted EBITA:
Restructuring and other related charges(1)
$ 2.0 $ 5.1 $ 3.0 $ 13.3
MDR and other costs $ 1.9 $ 1.0 $ 3.7 $ 1.9
Acquisition-related amortization and other non-cash charges $ 29.9 $ 27.3 $ 59.3 $ 54.2


	Three Months Ended						Six Months Ended
	July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
	(Dollars in millions)
Net sales	$	263.8		$	266.9		$	508.6		$	501.6
Gross profit	$	133.7		$	138.4		$	256.2		$	256.0
Gross profit margin	50.7		%	51.9		%	50.4		%	51.0		%
Selling, general and administrative expenses	$	124.0		$	128.8		$	243.4		$	250.0
Research and development expense	$	8.8		$	7.2		$	17.1		$	14.2
Operating income (loss) (GAAP)	$	13.4		$	(1.8)		$	(1.0)		$	(13.5)
Adjusted EBITDA (non-GAAP)	$	35.1		$	33.3		$	61.5		$	54.6
Adjusted EBITDA margin (non-GAAP)	13.3		%	12.5		%	12.1		%	10.9		%
Items excluded from Adjusted EBITDA:
Restructuring and other related charges	$	1.3		$	1.3		$	3.4		$	2.0
MDR and other costs	$	3.0		$	1.4		$	4.7		$	2.8
Strategic transaction costs	$	8.5		$	3.0		$	16.1		$	3.3
Stock-based compensation	$	5.2		$	5.1		$	9.6		$	9.6
Depreciation and other amortization	$	6.3		$	6.1		$	12.2		$	12.2
Amortization of acquired intangibles	$	19.5		$	18.7		$	38.6		$	37.5
Insurance settlement gain	$	(22.1)		$	—		$	(22.1)		$	—
Inventory step up	$	—		$	(0.5)		$	—		$	0.7

Second Quarter of 2022 Compared to Second Quarter of 2021

Net sales in our Prevention and Recovery segment decreased $3.1 million, or 1%, in the second quarter of 2022 compared with the prior year period driven primarily by $8.5 million foreign currency translation headwinds and fewer selling days, partially offset by inflation-related pricing increases. Gross profit decreased $4.7 million, and Gross profit margin decreased 120 basis points, due to inflation-driven supply chain and logistics cost increases, partially offset by pricing increases. Selling, general and administrative expense decreased primarily due to decreased central cost allocations, partially offset by costs incurred related to the Separation. Operating income (loss) improved due to an insurance settlement gain recorded in the second quarter of 2022 and lower Selling, general and administrative expenses, partially offset by increases in supply chain costs and strategic transaction costs related to the Separation. Adjusted EBITDA and Adjusted EBITDA margin increased primarily due to the reduced Selling, general and administrative expenses compared to the prior period, partially offset by increased inflation and supply chain costs.

Six months ended July 1, 2022 Compared to Six months ended July 2, 2021

Net sales in our Prevention and Recovery segment increased $7.0 million, or 1%, in the six months ended July 1, 2022 compared with the prior year period driven primarily by organic growth in existing businesses which was aided by pricing increases to mitigate inflation, partially offset by unfavorable foreign currency translation of $12.9 million. Gross profit increased $0.2 million due to the improved sales, offset by inflation-driven supply chain cost increases. Gross profit margin decreased 60 basis points due to inflation-related customer pricing and cost increases, which compressed the margin. Selling, general and administrative expense decreased primarily due to a decreased central cost allocation, partially offset by increased costs related to the Separation. Operating income (loss) improved due to an insurance settlement gain recorded in the second quarter of 2022 and lower Selling, general and administrative expenses, partially offset by increases in supply chain costs and strategic transaction costs related to the Separation. Adjusted EBITDA and Adjusted EBITDA margin increased due to the reduction in central cost allocations, partially offset by increased inflation and supply chain costs during the six months ended July 1, 2022 compared to the prior year period.

Reconstructive

We develop, manufacture, and market a wide variety of knee, hip, shoulder, elbow, foot, ankle, and finger implant products that serve the orthopedic reconstructive joint implant market. Our products are primarily used by surgeons for surgical procedures, including in hospitals and ambulatory surgery centers.

The following table summarizes the selected financial results for our Reconstructive segment:


	Three Months Ended						Six Months Ended
	July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021
	(Dollars in millions)
Net sales	$	131.3		$	89.2		$	262.0		$	165.6
Gross profit	$	82.1		$	62.2		$	165.5		$	115.9
Gross profit margin	62.5		%	69.8		%	63.2		%	70.0		%
Selling, general and administrative expenses	$	88.7		$	65.2		$	176.8		$	121.6
Research and development expense	$	6.9		$	3.8		$	13.5		$	7.2
Operating loss (GAAP)	$	(7.9)		$	(8.5)		$	(24.1)		$	(14.9)
Adjusted EBITDA (non-GAAP)	$	21.0		$	17.4		$	42.4		$	33.3
Adjusted EBITDA margin (non-GAAP)	16.0		%	19.5		%	16.2		%	20.1		%
Items excluded from Adjusted EBITDA:
Restructuring and other related charges	$	1.3		$	0.7		$	2.1		$	0.9
MDR and other costs	$	1.5		$	0.5		$	2.4		$	0.9
Strategic transaction costs	$	4.2		$	1.0		$	8.3		$	1.1
Stock-based compensation	$	2.6		$	1.7		$	4.9		$	3.2
Depreciation and other amortization	$	13.1		$	10.2		$	25.8		$	21.0
Amortization of acquired intangibles	$	12.3		$	10.8		$	24.1		$	19.6
Insurance settlement gain	$	(11.0)		$	—		$	(11.0)		$	—
Inventory step up	$	4.9		$	0.9		$	10.0		$	1.6

Second Quarter of ~~2021~~2022 Compared to Second Quarter of ~~2020~~2021

Net sales increased ~~for~~in our ~~Medical Technology~~Reconstructive segment in the second quarter of ~~2021~~2022 compared with the prior year period primarily due to ~~the strong recovery from COVID-driven lower sales in the second quarter of 2020, as well as~~ acquisition-related sales growth of ~~$22.9~~$37.4 million and ~~a favorable foreign currency translation effect of $5.6 million~~organic growth in existing businesses in the current year

~~period.~~ period, partially offset by fewer selling days in comparison to the prior year. Gross profit ~~and gross profit margins~~ increased ~~in the second quarter of 2021 compared to the second quarter of 2020 primarily~~ due to ~~improved sales volumes~~acquisitions and ~~acquisition-related~~existing business-related growth, partially offset by increased supply chain and logistic costs. Gross profit margin decreased due to increased supply chain and logistics costs. Selling, general and administrative expense increased over the same period primarily due to ~~the cessation of temporary employee cost reductions implemented during the second quarter of 2020, as well as higher sales commissions and acquisition-related expenses,~~$17.4 million from acquired businesses including integration costs ~~from~~for the newly-acquired businesses and, to a lesser extent, costs associated with the Separation. Adjusted EBITDA increased primarily due to existing business-related growth. Recent acquisitions drove a reduction in the ~~current year period. Segment operating income,~~ Adjusted ~~EBITA and~~EBITDA margin, as the ~~related margins all increased as a result of the aforementioned factors. Restructuring and other related charges decreased by $3.1 million due~~recent acquisitions were dilutive to the ~~completion of certain projects~~margin by approximately 320 basis points and are expected to be accretive to margins in ~~earlier periods.~~future years.

Six months ended July ~~2, 2021~~1, 2022 Compared to Six months ended July ~~3, 2020~~2, 2021

Net sales increased ~~for~~in our ~~Medical Technology~~Reconstructive segment in the six months ended July ~~2, 2021~~1, 2022 compared with the prior year period primarily due to ~~a recovery~~acquisition-related sales growth of $83.0 million and organic growth in ~~sales volumes from the decline related to COVID-19 during~~existing businesses of $13.8 million. Gross profit increased in the six months ended July 3, 2020, as well as continued expansion in the reconstructive product group from key products launched in 2020, acquisition-related sales growth of $36.9 million and a favorable foreign currency translation effect of $12.4 million during the current year period. While sales volumes early in the first quarter of 2021 were negatively impacted by certain jurisdictions putting further COVID-19-related restrictions in place in response1, 2022 compared to ~~the surge in COVID-19 cases late in 2020, sales volumes have since normalized. Gross profit and Gross profit margins increased during~~ the six months ended July 2, 2021 ~~compared to the prior year period~~primarily due to ~~improved sales volumes~~acquisition and ~~acquisition-related~~existing business growth, partially offset by increased supply chain ~~costs.~~and logistic costs and acquisition-related inventory valuation step-up charges of $8.4 million, which also led to a decrease in Gross profit margin. Selling, general and administrative expense ~~also~~ increased over the same period primarily due to $39.7 million of costs from acquisitions including integration costs for the ~~cessation of temporary employee cost reductions implemented during the second quarter of 2020 and higher sales commissions in the current year period,~~newly-acquired businesses, as well as increased central cost allocations and costs associated with ~~acquisitions and~~ the ~~related integration costs from~~Separation. Operating income decreased in the ~~newly acquired businesses during~~six months ended July 1, 2022 compared to the six months ended July 2, ~~2021. Segment operating income, Adjusted EBITA, and related margins all increased as a result of the aforementioned factors. Restructuring and other related charges decreased by $10.3 million~~2021 primarily due to ~~completing certain projects.~~the increases in Selling, general and administrative expenses from acquisitions. Adjusted EBITDA increased primarily due to growth in existing businesses, partially offset by increased supply chain and logistic costs.

Recent acquisitions drove a reduction in the Adjusted EBITDA margin, as they were dilutive to the margin by approximately 250 basis points and are expected to be accretive to margins in future years.

Liquidity and Capital Resources

Overview

We finance our long-term capital and working capital requirements through a combination of cash flows from operating activities, various borrowings and the issuances of equity. We expect that our primary ongoing requirements for cash after the Separation will be for working capital, funding of acquisitions, near-term Separation costs, capital expenditures, restructuring, ~~asbestos-related cash outflows,~~ and debt service and ~~required amortization of principal.~~principal repayments. We believe we could raise additional funds in the form of debt or equity if it ~~was~~were determined to be appropriate for strategic acquisitions or other corporate purposes.

ESAB Separation

As discussed in Note 1, “General”, the Company completed the separation of its fabrication technology business on April 4, 2022 through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to the Company’s stockholders. We retained 10% of the shares of ESAB common stock immediately following the Separation. We intend to divest the retained ESAB shares in a tax-efficient exchange for our outstanding debt no later than 12 months after the Separation date.

In connection with the Separation, ESAB issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to us upon Separation. We used the distribution proceeds in conjunction with $450 million of borrowings on a term loan under the new credit facility, and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest on our existing credit facility, $302.8 million of outstanding debt and accrued interest on our senior notes due February 15, 2026 (“2026 Notes”), as well as a redemption premium at 103.188% of the principal amount of our 2026 Notes, and other fees and expenses due at closing. Additionally, on April 7, 2022, we completed the redemption of our senior unsecured notes due April 2025 (“Euro Senior Notes”) representing all of our outstanding €350 million principal 3.250% Senior Notes due 2025 at a redemption price of 100.813% of the principal amount and accrued interest for $391.2 million. See section Enovis Term Loan and Revolving Credit Facility for more detail on the new Enovis Credit Agreement.

In the second quarter of 2022, the Company recorded Debt extinguishment charges of $20.1 million, including $12.7 million of redemption premiums on the retired debt instruments and $7.4 million in noncash write-offs of original issue discount and deferred financing fees.

Equity Capital

On March 19, 2021, we completed ~~the~~an underwritten public offering of ~~16.1~~5.4 million shares of our Common stock, ~~at a price to~~as adjusted for the ~~public of $46.00 per share,~~reverse split, resulting in net proceeds of $711.3 million, after deducting offering expenses and underwriters’ discount and commissions. We used ~~these~~the proceeds to pay down certain of our senior ~~notes, as discussed further below.~~ notes.

On July 28, 2021, the Company issued 2.2 million shares of Common stock, as adjusted for the reverse split, to the former shareholders of Mathys for acquisition consideration of $285.7 million.

In 2018, our Board of Directors authorized the repurchase of our Common stock from time-to-time on the open market or in privately negotiated transactions. No stock repurchases have been made under this plan since the third quarter of 2018. As of July ~~2, 2021,~~1, 2022, the remaining stock repurchase authorization provided by our Board of Directors was $100.0 million. The timing, amount, and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors. There is no term associated with the remaining repurchase authorization.

Term Loan and Revolving Credit Facility

Our previous credit agreement dated December 17, 2018, as amended (the ~~“Credit~~“Colfax Credit Facility”) by and among the Company, as the borrower, certain U.S. subsidiaries of the Company, as guarantors, each of the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citizens Bank, N.A., as syndication agent, and the co-documentation agents named therein consistsconsisted of a $975 million revolving credit facility (the “Revolver”) and a Term A-1 loan in an initial aggregate principal amount of $825 million, each with a maturity date of December 6, 2024. The Revolver ~~contains~~contained a $50 million swing line loan sub-facility. ~~Refer to Note 10, “Debt” in~~

On April 4, 2022, the ~~accompanying Notes to~~Company entered into a new credit agreement (the “Enovis Credit Agreement”) which replaces the ~~Condensed Consolidated Financial Statements for more information.~~Colfax Credit Facility and concurrently terminated all indebtedness of the Company outstanding thereunder being repaid on such date with proceeds of the Enovis Credit Agreement and other funds of the Company.

The Enovis Credit Agreement consists of a revolving credit facility that totals $900 million in commitments (the “Revolver”) and a term loan in an aggregate amount of $450 million (the “Enovis Term Loan”, and together with the Revolver, the “Enovis Credit Facility”). The Revolver includes a $50 million swing line loan sub-facility. The Revolver will be used to provide funds for the Company’s ongoing working capital requirements and for general corporate purposes. As of July ~~2, 2021, we~~1, 2022, there was$900 million available on the Revolver.

The Term Loan bears interest, at the election of the Company, at either the base rate (as defined in the Enovis Credit Agreement) or at the term SOFR rate plus an adjustment (as defined in the Enovis Credit Agreement), in each case, plus the applicable interest rate margin. The Revolver bears interest, at the election of the Company, at either the base rate or, in the case of loans denominated in dollars, the term SOFR rate plus an adjustment or the daily simple SOFR plus an adjustment, in the case of loans denominated in euros, the adjusted EURIBOR rate and, in the case of loans denominated in sterling, SONIA plus an adjustment (as all such rates are defined in ~~compliance~~the Enovis Credit Agreement), in each case, plus the applicable interest rate margin. Initially, the applicable interest rate margin will be 1.5% or, in the case of base rate loans, 0.5%, and in future quarters it may change based upon the Company’s total leverage ratio (ranging from 1.125% to 1.750% or in the case of the base rate margin, 0.125% to 0.750%). Each swing line loan denominated in dollars bears interest at the base rate plus the

applicable interest rate margin.

Certain U.S. subsidiaries of the Company have agreed to guarantee the obligations of the Company under the Enovis Credit

Agreement.

The Enovis Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments or pay dividends. In addition, the Enovis Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum total leverage ratio of not more than 4.50:1.00, with a step-down to, on the date on which the Company and its subsidiaries have transferred any retained shares of ESAB common stock to one or more unaffiliated third parties, 4.00:1.00, commencing with the fiscal quarter ending June 30, 2023, 3.75:1.00 and commencing with the fiscal quarter ending June 30, 2024, 3.50:1.00, and (ii) a minimum interest coverage ratio of 3.00:1:00. The Enovis Credit Agreement contains various events of default (including failure to comply with the covenants under the Enovis Credit ~~Facility. As~~Agreement and related agreements) and upon an event of ~~July 2, 2021,~~default the ~~weighted-average interest rate~~lenders may, subject to various customary cure rights, require the immediate payment of ~~borrowings~~all amounts outstanding under the ~~Credit Facility was 1.84%, excluding accretion of original issue discount~~Enovis Term Loan and ~~deferred financing fees, and there was$890 million available on~~ the Enovis Revolver.

Euro Senior Notes

Our senior unsecured notes with an aggregate principal amount of €350 million ~~(the “Euro Notes”) are~~were due in ~~April~~May 2025 ~~have~~and had an interest rate of 3.25%~~, and are guaranteed by certain~~. Upon the completion of ~~our domestic subsidiaries (the “Guarantees”). The~~the Separation, the Euro Senior Notes ~~and~~were redeemed on April 7, 2022 at a redemption premium of 100.813% of the ~~Guarantees have not been, and will not be, registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any other jurisdiction.~~principal amount.

TEU Amortizing Notes

~~Our~~On January 15, 2022, we made the final installment payment on our TEU amortizing notes, ~~with~~which had an initial principal amount of $15.6099 per unit ~~bear~~and an interest ~~at a~~ rate of 6.50% per annum, and have equal quarterly cash installments of $1.4375 per TEU amortizing note with a final installment payment date of January 15, 2022. The quarterly cash installment constitutes a payment of interest and a partial repayment of principal.annum. We paid ~~$12.3~~$6.5 million and ~~$11.5~~$12.3 million of principal on the TEU amortizing notes in the six months ended July 1, 2022 and July 2, 2021, ~~and July 3, 2020,~~ respectively. The TEU amortizing notes are the direct, unsecured and unsubordinated obligations of the Company and rank equally with all of the existing and future other unsecured and unsubordinated indebtedness of the Company. Refer to Note 10, “Debt” in the accompanying Notes to Condensed Consolidated Financial Statements for more information.

~~2024 Notes and~~ 2026 Notes

We had senior notes with an aggregate principal amount of ~~$600~~$300 million, ~~(the “2024 Notes”),~~ which were due on February 15, ~~2024~~2026 and had an interest rate of ~~6.0%. We have senior notes with an initial aggregate principal amount of $400 million (the “2026 Notes”), which are due on February 15, 2026 and have an interest rate of~~ 6.375%. ~~The~~Upon the completion of the Separation, the 2026 Notes ~~are guaranteed by certain of our domestic subsidiaries. We~~were redeemed ~~all~~on April 7, 2022 at a redemption premium at 103.188% of the ~~outstanding 2024 Notes and $100 million of the outstanding~~ principal ~~amount of our 2026 Notes on April 24, 2021. Refer to Note 10, “Debt”, in the accompanying Notes to Condensed Consolidated Financial Statements for more information.~~amount.

Other Indebtedness

In addition, we are party to ~~various~~ bilateral credit facilities with a borrowing capacity of ~~$192.6~~$30.0 million. As of July ~~2, 2021,~~1, 2022, there were no$0.9 million in outstanding borrowings under these facilities.

We are also party to a letter of credit ~~facilities~~facility with an aggregate capacity of ~~$339.8~~$30.0 million. Total letters of credit of ~~$70.1~~$2.3 million were outstanding as of July ~~2, 2021.~~1, 2022.

We believe that our sources of liquidity are adequate to fund our operations for the next twelve months.

Cash Flows

As of July ~~2, 2021,~~1, 2022, we had ~~$62.3~~$95.6 million of Cash and cash equivalents, a decrease of ~~$38.8~~$623.8 million from the balance as of December 31, ~~2020~~2021 of ~~$101.1~~$719.4 million. The Cash and cash equivalents as of December 31, 2021 include $39.1 million related to ESAB which ~~included $4.0 million~~was part of ~~Restricted cash.~~the Separation and are reported in Total current assets associated with discontinued operations in the Condensed Consolidated Balance Sheets. The following table summarizes the change in Cash and cash equivalents during the periods indicated:


		Six Months Ended					Six Months Ended
		July 2, 2021		July 3, 2020			July 1, 2022		July 2, 2021
		(Dollars in millions)					(Dollars in millions)
Net cash provided by operating activities		$	162.8	$	93.2
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	$	(39.3)	$	162.8
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(44.6)		(50.4)		Purchases of property, plant and equipment	(47.8)		(44.6)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	3.2		5.0		Proceeds from sale of property, plant and equipment	2.7		3.2
Acquisitions, net of cash received, and investments	Acquisitions, net of cash received, and investments	(230.7)		(7.5)		Acquisitions, net of cash received, and investments	(35.1)		(230.7)

Net cash used in investing activities	Net cash used in investing activities	(272.1)		(53.0)		Net cash used in investing activities	(80.2)		(272.1)
Proceeds (repayments) from borrowings, net		(627.7)		(63.2)

Repayments of borrowings, net						Repayments of borrowings, net	(1,628.9)		(627.7)
Distribution from ESAB Corporation, net						Distribution from ESAB Corporation, net	1,143.4		—
Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	730.0		2.3		Proceeds from issuance of common stock, net	1.7		730.0
Payment of debt extinguishment costs	Payment of debt extinguishment costs	(24.4)		—		Payment of debt extinguishment costs	(12.7)		(24.4)
Other		(6.2)		(16.4)
Deferred consideration payments and other						Deferred consideration payments and other	(9.8)		(6.2)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	71.7		(77.4)		Net cash provided by (used in) financing activities	(506.3)		71.7
Effect of foreign exchange rates on Cash and cash equivalents	Effect of foreign exchange rates on Cash and cash equivalents	(1.1)		(6.1)		Effect of foreign exchange rates on Cash and cash equivalents	2.0		(1.1)
Decrease in Cash and cash equivalents		$	(38.8)	$	(43.2)
Increase (decrease) in Cash and cash equivalents						Increase (decrease) in Cash and cash equivalents	$	(623.8)	$	(38.8)

Cash flows from operating activities can fluctuate significantly from ~~period to period~~period-to-period due to changes in working capital and the timing of payments for items such as ~~pension funding, asbestos-related~~restructuring and strategic transaction costs ~~and restructuring program funding.~~such as Separation costs. Changes in significant operating cash flow items are discussed below.

•~~During~~Year-to-date 2022 cash used in operating activities of $39.3 million includes $107.5 million of outflows from working capital, primarily due to business growth and increases in inventory to insulate for supply chain volatility. Results in the comparable prior year period include $47.6 million of outflows for working capital increases.

•Year-to-date 2022 cash used in operating activities also reflects $29.6 million of outflows for discontinued operations, which includes $41.2 million of net outflows related to the Separation. Cash provided by operating activities related to discontinued operations for the six months ended July 2, 2021 ~~and~~was $122.6 million, which included no net outflows related to the Separation.

•During the six months ended July ~~3, 2020,~~1, 2022, cash payments of ~~$10.2~~$53.8 million ~~and $23.6 million, respectively,~~ were made related to ~~our restructuring initiatives.~~the Separation, of which $41.2 million is related to discontinued operations. The comparable amounts for the 2021 period were immaterial.

•Year-to-date ~~2021 results~~2022 cash used in operating activities also include ~~$47.6~~$27.0 million of outflows ~~from working~~relating to the Company’s former capital ~~as a result~~structure before giving effect to the completion of ~~business growth. Results~~the refinancing transactions in connection with the Separation. The first six months of 2021 included $55.6 million of comparable ~~prior year period provided cash of $59.8 million due to a decrease in receivables, partially offset by a decrease in accounts payable due to COVID-related declines.~~outflows.

•~~Year-to-date 2021~~Prior year net cash provided by operating activities ~~also~~ included a one-time cash inflow from a $36.0 million U.S. federal tax refund received in the first quarter of 2021.

•~~Cash used in operating activities related to discontinued operations for~~During the six months ended July 1, 2022 and July 2, 2021, ~~was $4.6~~cash payments of $5.2 million ~~primarily due to a settlement~~and $3.4 million, respectively, were made related to ~~a disposed business, partially offset by net asbestos inflows. Cash used in operating activities related to discontinued operations for the six months ended July 3, 2020 was $7.9 million.~~our restructuring initiatives within our continuing operations.

Cash flows used in investing activities during the six months ended July ~~2, 2021 increased~~1, 2022 of $80.2 million decreased compared with the $272.1 million in the prior year period due to ~~cash paid~~lower outlays for acquisitions and investments. The amounts included in Purchases of property, plant and equipment related to discontinued operations for the six-month periods ended July 1, 2022 and July 2, 2021 were $5.9 million and $10.9 million, respectively. The amounts included in Proceeds from sale of property, plant and equipment related to discontinued operations for the six-month periods ended July 1, 2022 and July 2, 2021 were $2.7 million and $1.4 million, respectively. The amount included in Acquisitions, net of cash received, and investments ~~in our Medical Technology segment of $225.7 million, as well as an acquisition outlay in our Fabrication Technology segment of $5.0~~related to discontinued operations for the six-month period ended July 2, 2021 was $4.9 million.

Cash flows used in financing activities during the six months ended July 1, 2022 included $1.6 billion repayment of borrowings, which included the outstanding debt on our existing credit facility, 2026 Notes and Euro Senior Notes, partially offset by borrowings on a term loan under the new credit facility. The repayments were primarily funded by a $1.2 billion cash distribution from ESAB to us upon Separation. Cash flows provided by financing activities for the six months ended July 2, 2021 included the $711.3 million net proceeds from the public offering of ~~16.1 million shares of Colfax~~our Common stock on March 19, 2021. The net proceeds were used infor the $600 million full redemption of our 2024 Notes and the $100 million partial redemption of our 2026 ~~Notes. Cash flows from financing activities reflects a net borrowing on our Revolver in 2021 and a net repayment on our Revolver in 2020.~~

~~Our Cash and cash equivalents as of July 2, 2021 include $50.6 million held in jurisdictions outside the U.S., an increase of $7.4 million~~Notes in the second quarter of 2021. ~~Cash repatriation of non-U.S. cash into the U.S. may be subject to taxes, other local statutory restrictions and minority owner distributions.~~

Critical Accounting Policies

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on our results of operations and financial position. We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what our management anticipates, and different assumptions or estimates about the future could have a material impact on our results of operations and financial position.

There have been no ~~other~~ significant additions or changes to the methods, estimates and judgments included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies” in our ~~2020~~2021 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in short-term interest rates, foreign currency exchange rates and commodity prices that could impact our results of operations and financial condition. We address our exposure to these risks through our normal operating and financing activities. We do not enter into derivative contracts for ~~trading~~speculative purposes.

Interest Rate Risk

We are subject to exposure from changes in short-term interest rates related to interest payments on our borrowing arrangements. A significant amount of our borrowings as of July ~~2, 2021~~1, 2022 are variable-rate facilities based on ~~LIBOR or EURIBOR.~~SOFR. In order to mitigate our interest rate risk, we may enter into interest rate swap or collar agreements. A hypothetical increase in interest rates of 1% during the three and six months ended July ~~2, 2021~~1, 2022 would have increased Interest expense for our variable rate-based debt by approximately ~~$2.3~~$1.5 million and ~~$4.3~~$4.9 million, respectively.

Exchange Rate Risk

We ~~have manufacturing sites throughout the world and sell our products globally. As a result, we~~ are exposed to movements in the exchange rates of various currencies against the U.S. dollar and against the currencies of other countries in which we manufacture and sell products and services. During the three ~~and six~~ months ended July 1, 2022 and July 2, 2021, approximately ~~59%~~30% and ~~60%~~25% of our sales ~~respectively,~~ were derived from operations outside the U.S. We have ~~significant~~ manufacturing operations in ~~European~~certain foreign countries ~~that are not part of the Eurozone.~~including Mexico, Switzerland, Germany, Tunisia, and China. Sales are more highly weighted toward the Euro and U.S. dollar. We also have significant contractual obligations in U.S. dollars that are met with

cash flows in other currencies as well

as U.S. dollars. To better match revenue and expense, as well as cash needs from contractual liabilities, we ~~regularly~~may enter into currency swaps and forward contracts.

We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries. Euro denominated borrowings under the Euro Senior Notes provide a natural hedge to a portion of our European net asset position. The effect of a change in currency exchange rates on our net investment in international subsidiaries, net of the translation effect of our Euro denominated borrowings, is reflected in the Accumulated other comprehensive loss component of Equity. A 10% depreciation in major currencies relative to the U.S. dollar as of July 2, 2021 (net of the translation effect of our Euro denominated borrowings) would result in a reduction in Equity of approximately $169 million.

We also face exchange rate risk from intercompany transactions between affiliates. Although we use the U.S. dollar as our functional currency for reporting purposes, we have manufacturing sites throughout the world, and a substantial portion of our costs are incurred and sales are generated in foreign currencies. Costs incurred and sales recorded by subsidiaries operating outside of the U.S. are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. Similarly, tax costs may increase or decrease as local currencies strengthen or weaken against the U.S. dollar.

Commodity Price Risk

We are exposed to changes in the prices of raw materials used in our production processes. In order to manage commodity price risk, we periodically enter into fixed price contracts directly with suppliers.

See Note 12, “Financial Instruments and Fair Value Measurements” in our Notes to Condensed Consolidated Financial Statements included in this Form 10-Q for additional information regarding our derivative instruments.

4041

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of July ~~2, 2021.~~1, 2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report on Form 10-Q, our disclosure controls and procedures were effective in providing reasonable assurance that the information required to be disclosed by us in ~~this report on Form 10-Q has been~~the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as ~~of the end of the period covered by this report on Form 10-Q.~~appropriate, to allow timely decisions regarding required disclosures.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

4142

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Discussion of legal proceedings is incorporated by reference to Note 13, “Commitments and Contingencies,” in the Notes to Condensed Consolidated Financial Statements included in Part I. Item 1. “Financial Statements” of this Form 10-Q.

Item 1A. Risk Factors

~~An investment in our common stock involves a high degree of risk. In addition~~There have been no material changes to the risk factors included in “Part I. Item 1A. Risk Factors” in our ~~2020~~2021 Form 10-K ~~we face~~and “Part II. Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the ~~following risks:~~

~~Risks Relating to the Separation~~

The separation of our fabrication technology and medical technology business into two, differentiated, independent publicly traded companies may not be completed on the currently contemplated timeline, or at all, and may not achieve the intended benefits.

In March 2021, we announced our intention to separate our fabrication technology and medical technology business into two, differentiated, independent publicly traded companies (the “Separation”). We are targeting completion of the Separation in the first quarter ofquarterly period ended April 1, 2022. Completion of the Separation is subject to, among other things, completion of financing and other transactions on satisfactory terms, other steps necessary to qualify the Separation as a generally tax-free transaction, receipt of other regulatory approvals, obtaining final approvals from our board of directors and market conditions. The Separation is complex in nature, and unanticipated developments or changes, including changes in the law, macroeconomic environment and competitive conditions of our markets, the need both to receive regulatory approvals or clearances and to satisfy the requirements to effectuate a generally tax-free transaction, the uncertainty of the financial markets and challenges in executing the Separation, could delay or prevent the completion of the Separation or cause the Separation to occur on terms or conditions that are different or less favorable than expected.

~~Whether or not we complete the Separation, our ongoing businesses may face material challenges in connection with the Separation, including, but not limited to:~~

•~~the diversion of our management’s attention from operating and growing our business as a result of the significant amount of time and effort required to execute the Separation;~~

•foreseen and unforeseen costs and expenses that will be incurred in connection with the Separation, including accounting, tax, legal and other professional services costs, and potential prepayment charges and write-offs of deferred costs related to establishing new capital structures;

•~~retaining existing business and operational relationships, including with customers, suppliers and employees, as well as cultivating new business relationships; and~~

•~~potential negative reactions from the financial markets if we fail to complete the Separation in its currently intended form, within the anticipated time frame or at all.~~

Additionally, volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets. Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions. These conditions may adversely affect our anticipated timeline to complete the Separation and the expected benefits of the Separation, including by increasing the time and expense involved in the Separation. Other challenges associated with effectively executing the Separation include attracting, retaining and motivating key management and employees during the pendency of the Separation and following its completion, addressing any disruptions to our supply chain, manufacturing, sales and distribution, and other operations resulting from separating our fabrication and specialty medical technology business into two, differentiated, independent publicly traded companies. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or the price of our common stock. Furthermore, if the Separation is completed, we cannot provide assurance that

the Separation will achieve the full strategic and financial benefits expected to result from the Separation, nor can we provide assurance that each independent company will be successful in meeting its objectives.

~~If the Separation occurs, our financial and operational profile will change, and we will be a smaller, less diversified company than we are today.~~

If the Separation occurs, it will result in two smaller, less diversified companies, each with a more concentrated area of focus. As a result, each company may be more vulnerable to changing market conditions and competitive pressures, which could have a material adverse effect on our business, financial condition and results of operations. The diversification of revenues, costs and cash flows will diminish as a result of the Separation, such that each company’s results of operations, cash flows, working capital, effective tax rate and financing requirements may be subject to increased volatility, and each company’s ability to fund capital expenditures, investments and service our debt may be diminished. There can be no assurance that the combined value of the common stock of the two independent publicly traded companies following the completion of the Separation will be equal to or greater than what the value of our common stock would have been had the Separation not occurred.

If the Separation and/or certain related transactions do not qualify as transactions that are generally tax-free for U.S. federal income tax purposes, we and our stockholders could be subject to significant tax liabilities.

Notwithstanding that we intend to structure the Separation to generally be a tax-free transaction, the U.S. Internal Revenue Service (the “IRS”) could determine that the Separation and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes. Accordingly, there can be no assurance that the IRS will not assert that the Separation and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge. In the event the IRS were to prevail with such challenge, we and our stockholders could be subject to significant U.S. federal income tax liability.

If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), in general, for U.S. federal income tax purposes, we would recognize taxable gain as if we had sold the common stock of the separated entity in a taxable sale for its fair market value (unless we and the separated entity jointly make an election under Section 336(e) of the Code with respect to the Separation, in which case, in general, (a) we would recognize taxable gain as if the separated entity had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of its common stock and the assumption of all its liabilities and (b) the separated entity would obtain a related step-up in the basis of its assets), and our stockholders who receive shares of common stock of the separated entity in the Separation would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

~~The information set forth below is included herein for the purpose of providing the disclosure required under “Item 3.02 - Unregistered Sales of Equity Securities.” of Form 8-K.~~

On June 7, 2021, we entered into a definitive agreement to acquire Mathys AG Bettlach, a Swiss company that develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions, and sports medicine. On July 26, 2021, we provided the sellers with notice of our election to exercise our right under the acquisition agreement to fund the purchase price in shares of our common stock. Total acquisition consideration of approximately $285 million is expected to be financed with our common stock, with the aggregate number of shares to be determined based on, among other things, the share price of our common stock on the New York Stock Exchange on the closing date. We intend to issue the consideration shares at closing, which is expected to occur on July 28, 2021 subsequent to the filing of this Form 10-Q, subject to the satisfaction of closing conditions, in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, on the basis that it did not involve a public offering.None.

4443

Item 6. Exhibits


Exhibit No.			Exhibit Description

3.013.01.1			Amended and Restated Certificate of Incorporation.

3.023.01.2*			~~Colfax Corporation~~Certificate of Amendment to Amended and Restated ~~Bylaws.~~Certificate of Incorporation

3.02***			Amended and Restated Bylaws of Enovis Corporation.

10.1			~~Amendment~~Transition Services, dated April 4, 2022, between Enovis Corporation and ESAB Corporation (incorporated by reference to Exhibit 10.1 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 8, 2022)

10.2			Tax Matters Agreement, dated April 4, 2022, between Enovis Corporation and ESAB Corporation (incorporated by reference to Exhibit 10.2 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 8, 2022)

10.3			Employee Matters Agreement, dated April 4, 2022, between Enovis Corporation and ESAB Corporation (incorporated by reference to Exhibit 10.3 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 8, 2022)

10.4			Intellectual Property Matters Agreement, dated April 4, 2022, between Enovis Corporation and ESAB Corporation (incorporated by reference to Exhibit 10.4 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 8, 2022)

10.5			EBS License Agreement, dated April 4, 2022, between Enovis Corporation and ESAB Corporation (incorporated by reference to Exhibit 10.5 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 8, 2022)

10.6			Stockholder’s and Registration Rights Agreement, dated April 4, 2022, between Enovis Corporation and ESAB Corporation (incorporated by reference to Exhibit 10.6 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 8, 2022)

10.7			Credit Agreement, dated April 4, 2022, by and among Enovis Corporation, as the lead borrower, certain subsidiaries of the Enovis Corporation identified therein as guarantors, each of the lenders from time to time party thereto, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A., Goldman Sachs Bank USA, Citizens Bank, N.A., BNP Paribas, Bank of Montreal and Wells Fargo Bank, National Association, as co-syndication agents, and joint bookrunners and joint lead arrangers named therein (incorporated by reference to Exhibit 10.7 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April ~~15, 2021.~~8, 2022)

10.8			First Amendment to Enovis Corporation 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on June 13, 2022)

31.01			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.02			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.01			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.02			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document.

101.CAL			Inline XBRL Extension Calculation Linkbase Document.

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104			Cover Page Interactive Data File - The cover page from this Quarterly Report on Form 10-Q for the quarter ended July ~~2, 2021~~1, 2022 is formatted in Inline XBRL (included as Exhibit 101).


*			Incorporated by reference to Exhibit 3.01 to ~~Colfax~~Enovis (formerly Colfax) Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on January 30, 2012.

**			Incorporated by reference to Exhibit ~~3.02~~3.1 to ~~Colfax~~Enovis Corporation’s Form ~~10-Q~~8-K (File No. 001-34045) as filed with the SEC on ~~July 23, 2015.~~April 8, 2022.

***			Incorporated by reference to Exhibit 3.2 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 8, 2022.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Registrant: ~~Colfax~~Enovis Corporation

By:

/s/ Matthew L. Trerotola

President and Chief Executive Officer

Matthew L. Trerotola

(Principal Executive Officer)

~~July 28, 2021~~August 4, 2022

/s/ Christopher M. Hix

Executive Vice President, Finance

Christopher M. Hix

Chief Financial Officer

~~July 28, 2021~~August 4, 2022

(Principal Financial Officer)

/s/ ~~Douglas J. Pitts~~John Kleckner

Vice President

~~Douglas J. Pitts~~John Kleckner

~~Controller and~~ Chief Accounting Officer

~~July 28, 2021~~August 4, 2022

(Principal Accounting Officer)

4645


	July 2, 2021
	Level One		Level Two		Level Three		Total
	(In thousands)
Assets:
Cash equivalents	$	6,787	$	—	$	—	$	6,787


Foreign currency contracts - not designated as hedges	—		1,788		—		1,788


Deferred compensation plans	—		12,445		—		12,445
	$	6,787	$	14,233	$	—	$	21,020

Liabilities:

Foreign currency contracts - not designated as hedges	$	—	$	4,065	$	—	$	4,065


Deferred compensation plans	—		12,445		—		12,445
	$	—	$	16,510	$	—	$	16,510


	Three Months Ended July 2, 2021												Six Months Ended July 2, 2021
	Fabrication Technology			Medical Technology			Corporate and other			Total			Fabrication Technology			Medical Technology			Corporate and other			Total
	(Dollars in millions)
Operating income (loss) (GAAP)	$	90.9		$	14.3		$	(29.3)		$	75.9		$	170.1		$	13.8		$	(46.7)		$	137.2
Restructuring and other related charges	3.5			2.0			—			5.5			6.6			3.0			—			9.5
MDR and other costs	—			1.9			—			1.9			—			3.7			—			3.7
Segment operating income (loss) (non-GAAP)	94.4			18.2			(29.3)			83.3			176.7			20.4			(46.7)			150.4
Strategic transaction costs	0.1			—			7.9			8.0			0.1			—			9.3			9.4
Acquisition-related amortization and other non-cash charges	9.1			29.9			—			39.0			18.2			59.3			—			77.5
Adjusted EBITA (non-GAAP)	$	103.6		$	48.2		$	(21.5)		$	130.3		$	195.0		$	79.8		$	(37.4)		$	237.4
Segment operating income margin (non-GAAP)	15.0		%	5.1		%	—		%	8.5		%	14.8		%	3.1		%	—		%	8.1		%
Adjusted EBITA margin (non-GAAP)	16.4		%	13.5		%	—		%	13.2		%	16.3		%	12.0		%	—		%	12.7		%


	Three Months Ended July 3, 2020												Six Months Ended July 3, 2020
	Fabrication Technology			Medical Technology			Corporate and other			Total			Fabrication Technology			Medical Technology			Corporate and other			Total
	(Dollars in millions)
Operating income (loss) (GAAP)	$	37.5		$	(26.9)		$	(15.6)		$	(4.9)		$	103.8		$	(32.2)		$	(29.6)		$	41.9
Restructuring and other related charges(1)	6.1			5.1			—			11.2			8.9			13.3			—			22.2
MDR and other costs	—			1.0			—			1.0			—			1.9			—			1.9
Segment operating income (loss) (non-GAAP)	43.6			(20.8)			(15.6)			7.2			112.6			(17.0)			(29.6)			66.0
Strategic transaction costs	—			—			1.7			1.7			—			—			2.6			2.6
Acquisition-related amortization and other non-cash charges	8.8			27.3			—			36.1			17.7			54.2			—			71.9
Adjusted EBITA (non-GAAP)	$	52.4		$	6.5		$	(13.8)		$	45.1		$	130.3		$	37.2		$	(27.0)		$	140.6
Segment operating income (loss) margin (non-GAAP)	10.5		%	(10.1)		%	—		%	1.2		%	12.0		%	(3.4)		%	—		%	4.6		%
Adjusted EBITA margin (non-GAAP)	12.6		%	3.2		%	—		%	7.3		%	13.9		%	7.5		%	—		%	9.8		%