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 1, 2022~~quarterly period ended March 31, 2023


☐			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 -~~File Number: 001-34045

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)~~No.)

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)

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	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 28, 2022,~~April 27, 2023, there were ~~54,129,530~~54,496,415 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)			34
Condensed Consolidated Balance Sheets			43
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			87
Note 3. Discontinued Operations			8
Note 4. Acquisitions and Investments			98
Note 5. Revenue			10
Note 6. Net ~~Income~~Loss Per Share from Continuing Operations			1211
Note 7. Income Taxes			1211
Note 8. Equity			1412
Note 9. Inventories, Net			1513
Note 10. Debt			1613
Note 11. Accrued Liabilities			1715
Note 12. Financial Instruments and Fair Value Measurements			1815
Note 13. Commitments and Contingencies			1916
Note 14. Segment Information			1916
~~Note 15. Related Party Transactions~~			21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2218
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4031
Item 4. Controls and Procedures			4232

PART II - OTHER INFORMATION
Item 1. Legal Proceedings			4333
Item 1A. Risk Factors			4333
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4333
Item 3. Defaults Upon Senior Securities			4333
Item 4. Mine Safety Disclosures			4333
Item 5. Other Information			4333
Item 6. Exhibits			4434

SIGNATURES			4535

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in thousands, except per share amounts

(Unaudited)


		Three Months Ended				Six Months Ended				Three Months Ended
		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021				March 31, 2023		April 1, 2022

Net sales	Net sales	$	395,117	$	356,124	$	770,574	$	667,207		Net sales	$	406,151	$	375,457
Cost of sales	Cost of sales	179,211		155,531		348,768		295,332			Cost of sales	171,086		169,557
Gross profit	Gross profit	215,906		200,593		421,806		371,875			Gross profit	235,065		205,900
Selling, general and administrative expense	Selling, general and administrative expense	225,481		197,913		444,747		375,992			Selling, general and administrative expense	207,165		188,480
Research and development expense	Research and development expense	15,661		11,039		30,503		21,402			Research and development expense	18,193		14,842
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)
Amortization of acquired intangibles											Amortization of acquired intangibles	32,040		30,786

Restructuring and other charges											Restructuring and other charges	2,635		2,419
Operating loss											Operating loss	(24,968)		(30,627)

Interest expense, net	Interest expense, net	4,546		5,689		11,610		18,629			Interest expense, net	5,652		7,064
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)

Other income											Other income	(661)		—
Loss from continuing operations before income taxes											Loss from continuing operations before income taxes	(29,959)		(37,691)
Income tax expense (benefit)	Income tax expense (benefit)	(4,211)		(3,783)		(3,847)		(3,000)			Income tax expense (benefit)	(7,113)		364
Net income (loss) from continuing operations		120,651		(42,127)		82,596		(73,981)
Net loss from continuing operations											Net loss from continuing operations	(22,846)		(38,055)

Income (loss) from discontinued operations, net of taxes	Income (loss) from discontinued operations, net of taxes	(43,666)		71,829		10,690		123,923			Income (loss) from discontinued operations, net of taxes	(312)		54,356
Net income		76,985		29,702		93,286		49,942
Net income (loss)											Net income (loss)	(23,158)		16,301
Less: net income attributable to noncontrolling interest from continuing operations - net of taxes	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 continuing operations - net of taxes	192		267
Less: net income attributable to noncontrolling interest from discontinued operations - net of taxes	Less: net income attributable to noncontrolling interest from discontinued operations - net of taxes	—		705		966		1,581			Less: net income attributable to noncontrolling interest from discontinued operations - net of taxes	—		966
Net income attributable to Enovis Corporation		$	76,855	$	28,642	$	91,923	$	47,716
Net income (loss) per share - basic
Net income (loss) attributable to Enovis Corporation											Net income (loss) attributable to Enovis Corporation	$	(23,350)	$	15,068
Net income (loss) per share - basic and diluted											Net income (loss) per share - basic and diluted
Continuing operations	Continuing operations	$	2.23	$	(0.83)	$	1.52	$	(1.53)		Continuing operations	$	(0.42)	$	(0.71)
Discontinued operations	Discontinued operations	$	(0.81)	$	1.39	$	0.18	$	2.50		Discontinued operations	$	(0.01)	$	0.99
Consolidated operations	Consolidated operations	$	1.42	$	0.56	$	1.70	$	0.98		Consolidated operations	$	(0.43)	$	0.28
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.

ENOVIS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share amounts

(Unaudited)


	March 31, 2023		December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	21,900	$	24,295

Trade receivables, less allowance for credit losses of $8,063 and $7,965	280,748		267,380
Inventories, net	438,957		426,643
Prepaid expenses	30,487		28,550
Other current assets	61,018		48,155
Total current assets	833,110		795,023
Property, plant and equipment, net	245,989		236,741
Goodwill	1,987,222		1,983,588
Intangible assets, net	1,081,801		1,110,727
Lease asset - right of use	63,590		66,881
Other assets	87,874		80,288
Total assets	$	4,299,586	$	4,273,248

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	—	$	219,279
Accounts payable	151,743		135,628
Accrued liabilities	197,754		210,292
Total current liabilities	349,497		565,199
Long-term debt, less current portion	285,000		40,000
Non-current lease liability	49,293		51,259
Other liabilities	170,525		166,989
Total liabilities	854,315		823,447
Equity:
Common stock, $0.001 par value; 133,333,333 shares authorized; 54,493,154 and 54,228,619 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	54		54
Additional paid-in capital	2,933,773		2,925,729
Retained earnings	552,382		575,732
Accumulated other comprehensive loss	(42,870)		(53,430)
Total Enovis Corporation equity	3,443,339		3,448,085
Noncontrolling interest	1,932		1,716
Total equity	3,445,271		3,449,801
Total liabilities and equity	$	4,299,586	$	4,273,248

See Notes to Condensed Consolidated Financial Statements.

ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Dollars in thousands

(Unaudited)

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


	Three Months Ended
		March 31, 2023		April 1, 2022
Net income (loss)		$	(23,158)	$	16,301
Other comprehensive income (loss):
Foreign currency translation, net of tax expense of $0 and $338		10,584		(53,461)
Unrealized gain on hedging activities, net of tax expense of $0 and $2,711		—		9,028


Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $0 and $199		—		629


Other comprehensive income (loss)		10,584		(43,804)
Comprehensive loss		(12,574)		(27,503)
Less: comprehensive income attributable to noncontrolling interest		216		895
Comprehensive loss attributable to Enovis Corporation		$	(12,790)	$	(28,398)

See Notes to Condensed Consolidated Financial Statements.

~~ENOVIS CORPORATION~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~Dollars in thousands, except share amounts~~

~~(Unaudited)~~

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.~~

ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Dollars in thousands, except share amounts

(Unaudited)

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, 2022	54,228,619	$	54	$	2,925,729	$	575,732	$	(53,430)	$	1,716	$	3,449,801
Net loss	—	—		—		(23,350)		—		192		(23,158)

Other comprehensive income, net of tax of $—	—	—		—		—		10,560		24		10,584


Common stock-based award activity	264,535	—		8,044		—		—		—		8,044
Balance at March 31, 2023	54,493,154	$	54	$	2,933,773	$	552,382	$	(42,870)	$	1,932	$	3,445,271


		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total			Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total
		Shares	Amount													Shares	Amount
Balance at December 31, 2020		39,498,896	$	40	$	3,478,086	$	517,367	$	(452,106)	$	44,487	$	3,587,874
Balance at December 31, 2021															Balance at December 31, 2021	52,083,078	$	52	$	4,544,315	$	589,024	$	(516,013)	$	44,055	$	4,661,433
Net income	Net income	—	—		—		19,074		—		1,166		20,240		Net income	—	—		—		15,068		—		1,233		16,301
Distributions to noncontrolling owners	Distributions to noncontrolling owners	—	—		—		—		—		(1,054)		(1,054)		Distributions to noncontrolling owners	—	—		—		—		—		(941)		(941)
Other comprehensive loss, net of tax of $6,840		—	—		—		—		(39,621)		(124)		(39,745)
Other comprehensive loss, net of tax of $3,248															Other comprehensive loss, net of tax of $3,248	—	—		—		—		(43,466)		(338)		(43,804)
Conversion of tangible equity units into common stock	Conversion of tangible equity units into common stock	114,804	—		—		—		—		—		—		Conversion of tangible equity units into common stock	1,691,845	2		(2)		—		—		—		—
Common stock offering, net of issuance costs		5,366,666	5		711,316		—		—		—		711,321
Common stock-based award activity	Common stock-based award activity	218,744	—		12,433		—		—		—		12,433		Common stock-based award activity	255,957	—		11,056		—		—		—		11,056
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

Balance at April 1, 2022															Balance at April 1, 2022	54,030,880	$	54	$	4,555,369	$	604,092	$	(559,479)	$	44,009	$	4,644,045

See Notes to Condensed Consolidated Financial Statements.

ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in thousands

(Unaudited)


		Six Months Ended					Three Months Ended
		July 1, 2022		July 2, 2021			March 31, 2023		April 1, 2022

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income		$	93,286	$	49,942
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Net (loss) income						Net (loss) income	$	(23,158)	$	16,301
Adjustments to reconcile net income to net cash provided by (used in) operating activities:						Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation, amortization and other impairment charges	Depreciation, amortization and other impairment charges	117,300		128,721		Depreciation, amortization and other impairment charges	51,991		66,026
Stock-based compensation expense	Stock-based compensation expense	19,793		17,262		Stock-based compensation expense	7,606		9,857
Non-cash interest expense	Non-cash interest expense	1,658		2,676		Non-cash interest expense	838		978
Unrealized gain on investment in ESAB Corporation		(135,537)		—
Debt extinguishment charges		20,104		29,870
Deferred income tax expense (benefit)		2,174		(3,865)
(Gain)/Loss on sale of property, plant and equipment		352		(1,437)

Deferred income tax expense						Deferred income tax expense	831		2,232
Loss on sale of property, plant and equipment						Loss on sale of property, plant and equipment	429		352

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade receivables, net	Trade receivables, net	(33,123)		(83,458)		Trade receivables, net	(12,288)		(20,690)
Inventories, net	Inventories, net	(92,910)		(79,338)		Inventories, net	(9,249)		(70,830)
Accounts payable	Accounts payable	15,919		124,354		Accounts payable	15,621		24,713

Other operating assets and liabilities	Other operating assets and liabilities	(48,329)		(21,975)		Other operating assets and liabilities	(25,164)		(43,362)
Net cash (used in) provided by operating activities		(39,313)		162,752
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	7,457		(14,423)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property, plant and equipment and intangibles	Purchases of property, plant and equipment and intangibles	(47,796)		(44,641)		Purchases of property, plant and equipment and intangibles	(30,443)		(24,089)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	2,746		3,191		Proceeds from sale of property, plant and equipment	—		2,746
Acquisitions, net of cash received, and investments	Acquisitions, net of cash received, and investments	(35,123)		(230,650)		Acquisitions, net of cash received, and investments	(3,942)		(13,823)

Net cash used in investing activities	Net cash used in investing activities	(80,173)		(272,100)		Net cash used in investing activities	(34,385)		(35,166)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from borrowings on term credit facility		450,000		455,641

Payments under term credit facility	Payments under term credit facility	(785,000)		—		Payments under term credit facility	(219,468)		—
Proceeds from borrowings on revolving credit facilities and other						Proceeds from borrowings on revolving credit facilities and other	250,000		—
Repayments of borrowings on revolving credit facilities and other						Repayments of borrowings on revolving credit facilities and other	(5,672)		(7,428)

Repayments of borrowings on revolving credit facilities and other		(607,618)		(383,384)
Repayments of borrowings on Senior notes		(300,000)		(700,000)
Repayments of borrowings on Euro senior notes		(386,278)		—
Distribution from ESAB Corporation, net		1,143,369		—
Payment of debt issuance costs		(2,938)		—

Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	1,727		730,002		Proceeds from issuance of common stock, net	438		1,199

Payment of debt extinguishment costs		(12,704)		(24,375)

Deferred consideration payments and other	Deferred consideration payments and other	(6,857)		(6,201)		Deferred consideration payments and other	(800)		(4,590)
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		2,020		(1,095)
Decrease in Cash and cash equivalents and Restricted cash		(623,765)		(38,760)
Cash and cash equivalents and Restricted Cash, beginning of period		719,370		101,069
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	24,498		(10,819)
Effect of foreign exchange rates on Cash and cash equivalents						Effect of foreign exchange rates on Cash and cash equivalents	35		2,542
Decrease in Cash and cash equivalents						Decrease in Cash and cash equivalents	(2,395)		(57,866)
Cash and cash equivalents, beginning of period						Cash and cash equivalents, beginning of period	24,295		719,370
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	95,605	$	62,309	Cash and cash equivalents, end of period	$	21,900	$	661,504

See Notes to Condensed Consolidated Financial Statements.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. General

Enovis Corporation (the “Company” or “Enovis”) was previously Colfax Corporation (“Colfax”) until its separation into 2two differentiated, independent, and publicly traded companies on April 4, 2022 ~~as discussed below.~~(the “Separation”). Colfax was a leading diversified technology company that provided fabrication technology and medical device products and services to customers around the world, principally under the ESAB and DJO brands. Following the completion of the Separation, the Company revised its reporting structure and conducts its business through two operating segments, “Prevention & Recovery” and “Reconstructive”. The segment results were retroactively restated to the current method the Company uses to conduct its business for all periods presented.

~~On April 4, 2022 (the “Distribution Date”), the Company~~The Separation was 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 1one 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 initially 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 was valued at $263.1 million. The 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, which retained the Company’s specialty medical technology business, changed its name to Enovis Corporation. On April 5, 2022, the Company began trading under 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 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.~~Enovis upon separation. The distribution proceeds were used by Enovis in conjunction with $450 million of borrowings on a term loan ~~(the “Enovis Term Loan”)~~ under the new Enovis credit facility (the “Enovis Credit Agreement”), and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest ~~under~~on the Company’s ~~previous~~prior credit ~~agreement, which was legally extinguished upon completion of the Separation,~~facility, repay $302.8 million of outstanding debt and accrued interest on its 6.375% senior notes due February 15, 2026 ~~Notes at~~(the “2026 Notes”), pay a redemption ~~price of~~premium at 103.188% of the principal amount of the 2026 Notes, and pay other fees and expenses due at closing. Additionally, on April 7, 2022, the Company completed ~~a full~~the redemption of its 3.250% senior unsecured notes due April 2025 (the “Euro Senior Notes”) representing all of its outstanding €350 million principal ~~3.250%~~ Euro Senior Notes, ~~due 2025 using cash on hand~~ at a redemption price of 100.813% of the principal amount.

~~Immediately following the Separation,~~On November 18, 2022, the Company ~~effected~~completed the divestiture of its 10% retained shares in ESAB in a ~~one-for-three reverse stock split~~tax-efficient exchange for $230.5 million of ~~all issued and~~its $450 million term loan outstanding ~~shares of~~under the Enovis common stock. As a result of the reverse stock split, prior-period 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.Credit Agreement.

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 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, ~~2021~~2022 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, ~~2021~~2022 (the ~~“2021~~“2022 Form 10-K”), filed with the SEC on ~~February 22, 2022.~~March 1, 2023.

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. The COVID-19 outbreak, which was characterized as a pandemic by the World Health Organization on March 11, 2020, 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, historical seasonality trends have been disrupted by the commercial impacts caused by the COVID-19 pandemic.~~

2. Recently Issued Accounting Pronouncements

The Company has not adopted any new accounting standards during the ~~six~~three months ended ~~July 1, 2022.~~March 31, 2023. 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.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

3. Discontinued Operations

The Company’s discontinued operations include the following: (1) operating results of ESAB prior to Separation, ~~of Fabrication Technology Business~~

~~On April 4, 2022,~~(2) charges related to previously retained asbestos contingencies from certain divested businesses for which we did not retain an interest in the ~~Company completed~~ongoing operations that were fully transferred to ESAB in conjunction with the Separation, and (3) expenses related to the Separation and the 2019 divestiture 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 asour former air & gas control equipment, into diversified end markets such as medical and alternative energy. The 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.handling business.

The ~~carrying value of~~following table presents the ~~assets and liabilities~~financial results 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:~~operations:


	~~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~~


	Three Months Ended
	March 31, 2023		April 1, 2022
	(in thousands)
Net sales	$	—	$	647,911
Cost of sales	—		423,580
Selling, general and administrative expense	—		125,529
Restructuring and other charges	—		5,304
Asbestos charges	—		3,194
Divestiture-related expenses(1)	411		10,478
Operating (loss) income	(411)		79,826
Interest expense(2)	—		8,035

(Loss) income from discontinued operations before income taxes	(411)		71,791
Income tax (benefit) expense	(99)		17,435
(Loss) income from discontinued operations, net of taxes	$	(312)	$	54,356

(1)Divestiture-related expenses include $9.8 million for the Separation for the three months ended April 1, 2022 and $0.4 million and $0.7 million for Air & Gas for the three months ended March 31, 2023 and April 1, 2022, respectively.

(2) ~~Total assets~~Interest expense was allocated to discontinued operations based on allocating $1.2 billion of corporate level debt to discontinued operations consistent with the dividend received from ESAB and ~~liabilities include asbestos-related contingencies and insurance coverages previously reported~~the debt repaid at the time of the Separation.

Cash provided by ~~Colfax as~~operating activities related to discontinued ~~operations. See~~ ~~Asbestos Contingencies~~ ~~section below~~operations for ~~more information.~~the three months ended April 1, 2022 was $9.2 million. Cash used in investing activities related to discontinued operations for the three months ended April 1, 2022 was $3.2 million.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

~~The financial results of the discontinued operation for the three~~4. Acquisitions and six months ended July 1, 2022 and July 2, 2021 include the fabrication technology business through the date of Separation and separation-related costs incurred and are presented as income from discontinued operations, net of income taxes, on the Company’s Consolidated Statements of Operations. The following table presents the financial results of the fabrication technology business:Investments

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.~~2023 Acquisitions

~~Total income attributable~~On March 31, 2023, the Company entered into a definitive agreement with Amplitude Surgical SA to ~~noncontrolling interest related~~acquire Novastep®, a leading player in Minimally Invasive Surgery (MIS) foot and ankle solutions. The transaction is subject to ~~ESAB, net~~customary closing conditions and regulatory approvals and is expected to close in the second quarter of ~~taxes was $1.0 million for the six months ended July 1, 2022, and $0.7 million and $1.6 million for the three and six months ended July 2, 2021, respectively.~~2023.

~~Cash used in operating activities related~~In April 2023, the Company entered into a definitive agreement to ~~discontinued operations for~~acquire the ~~six months ended July 1, 2022 was $29.6 million. Cash provided by operating activities related~~SEAL external fixation product line from D.N.E., LLC. The transaction is subject to ~~discontinued operations for the six months ended July 2, 2021 was $122.6 million. Cash used in investing activities related~~customary closing conditions and regulatory approvals and is expected to ~~discontinued operations for 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~~close 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 datesecond quarter 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~~2023.

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~~360 Med Care is ~~an Australian~~a 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 $12.8 million related to ~~certain~~expected results over future revenue targets. The Company has allocated ~~$13~~$16.3 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.

On July 5, 2022, the Reconstructive segment of the Company acquired a controlling interest of Insight Medical Systems (“Insight”). Insight’s flagship solution, ARVIS, is an FDA-cleared augmented reality solution precisely engineered for the specific needs of hip and knee replacement surgery. The ARVIS navigation unit consists of a hands-free heads-up display worn by the surgeon which provides surgical guidance at the point of care in a streamlined, space-conserving and cost-effective manner compared to traditional robotic offerings. The acquisition is accounted for under the acquisition method of accounting as a step-acquisition, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the acquisition date.

The Company made initial investments in Insight in 2020 and 2021, which were initially carried at cost. During the third quarter of 2022, the Company acquired an additional 53.7% interest in Insight for $34.2 million net of cash received, and recorded contingent consideration of $5.0 million, which is the maximum payable under the agreement based on Insight’s achievement of certain milestones related to ARVIS. The Company holds a 99.5% interest in Insight and recognized an initial $0.3 million noncontrolling equity interest in its financial statements attributed to Insight.

The Company has preliminarily allocated $36.3 million to goodwill and $38.4 million to intangible assets acquired. Goodwill is primarily driven by expected synergies between ARVIS’ augmented reality surgical guidance system and our existing customer base and existing products. The Company does not expect any of the goodwill to be deductible for tax purposes. Purchase accounting procedures are ongoing and revisions to contingent consideration, intangible assets acquired, and working capital adjustments may be recorded in future periods during the measurement period.

As a result of obtaining control of Insight, the Company remeasured its initial investments to fair value, resulting in a $8.8 million gain in the fourth quarter of 2022.

During the three months ended April 1, 2022, the Company also completed two asset acquisitions and one investment in its Prevention & Recovery segment. The asset acquisitions broaden the Company’s product offering and distribution network. Aggregate purchase consideration for the two asset acquisitions and one investment was $18.2 million, of which $13.6 million was paid in cash and $4.6 million of deferred and contingent consideration. For further information on prior year acquisitions and investments, refer to Note 5. “Acquisitions and Investments” in the in the Company’s 2022 Form 10-K.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Investments

As of ~~July 1, 2022,~~March 31, 2023, the balance of investments held by the ~~company~~Company without readily determinable fair values ~~was $31.9 million.~~was $21 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~~these 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 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 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 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~~While the Company’s sales are primarily derived from three sales channels including dealers and distributors, insurance, and direct to consumers and hospitals, substantially all ~~its~~of the Company’s revenue is recognized at a point in time. The Company disaggregates its revenue into the following segments:

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~


	Three Months Ended
	March 31, 2023		April 1, 2022
	(In thousands)
Prevention & Recovery:
U.S. Bracing & Support	$	104,375	$	103,035
U.S. Other P&R	62,347		57,714
International P&R (1)	84,018		84,086
Total Prevention & Recovery	250,740		244,835

Reconstructive:
U.S. Reconstructive	103,492		88,479
International Reconstructive	51,919		42,143
Total Reconstructive	155,411		130,622

Total	$	406,151	$	375,457

(1)

The quarter ended March 31, 2023 includes the unfavorable impact of $4.2 million of currency.

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

Given the nature of the ~~Company’s business,~~businesses, the ~~total amount of~~Company does not generally have unsatisfied performance obligations with an original contract duration of greater than one ~~year as of July 1, 2022 is immaterial.~~year.

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, 2021 and 2020, total contract liabilities were $9.2 million and $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 $2.3 million and $3.1 million, respectively. As of July 1, 2022 and July 2, 2021, total contract liabilities were $3.1 million and $13.6 million, respectively, and were included in Accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. The contract liabilities as of December 31, 2021 included $4.9 million of certain one-time advance 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~~considering 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.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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 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


	Three Months Ended March 31, 2023
	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	$	7,965	$	528	$	(463)	$	33	$	8,063

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~

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

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

Three Months Ended Six Months Ended
July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021
(In thousands, except share and per share data)
Computation of Net income (loss) per share from continuing operations - basic:
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 54,080,549 51,291,986 53,969,738 48,902,883
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:
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 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 441,300 — 489,134 —
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 $ 2.21 $ (0.83) $ 1.51 $ (1.53)


	Three Months Ended
		March 31, 2023		April 1, 2022
		(In thousands, except share and per share data)
Computation of Net loss per share from continuing operations - basic:
Net loss from continuing operations attributable to Enovis Corporation(1)		$	(23,038)	$	(38,322)
Weighted-average shares of Common stock outstanding – basic		54,325,396		53,872,007
Net loss per share from continuing operations – basic		$	(0.42)	$	(0.71)

Computation of Net loss per share from continuing operations - diluted:
Net loss from continuing operations attributable to Enovis Corporation(1)		$	(23,038)	$	(38,322)
Weighted-average shares of Common stock outstanding – basic		54,325,396		53,872,007
Net effect of potentially dilutive securities - stock options and restricted stock units		—		—
Weighted-average shares of Common stock outstanding – diluted		54,325,396		53,872,007
Net loss per share from continuing operations – diluted		$	(0.42)	$	(0.71)

(1) Net ~~income (loss)~~loss from continuing operations attributable to Enovis Corporation for the respective periods is calculated using Net ~~income (loss)~~loss from continuing operations less the continuing operations component of the income attributable to noncontrolling interest, net of taxes, of ~~$0.1 million and $0.4~~$0.2 million for the three ~~and six~~ months ended ~~July 1, 2022, respectively,~~March 31, 2023 and ~~$0.4 million and $0.6~~$0.3 million for the three ~~and six~~ months ended ~~July 2, 2021, respectively.~~

As a result of the reverse stock split following the Separation, prior-period share and 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~~April 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 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 tangible equity units were converted at the minimum settlement rate as a result of the increase in the Company’s share price. All the issued shares are included in the Common stock issued and outstanding as of July 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 1, 2022~~March 31, 2023 excludes ~~0.4~~1.1 million ofshares underlying 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 2, 2021~~April 1, 2022 excludes 0.5 million ~~and 0.4 million, respectively, of~~shares underlying outstanding stock-based compensation awards, as their inclusion would be anti-dilutive.

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~

7. Income Taxes

During the three ~~and six~~ months ended ~~July 1, 2022, Income~~March 31, 2023, Loss from continuing operations before income taxes was ~~$116.4~~$30.0 million, ~~and $78.7 million, respectively,~~ while ~~income~~Income tax benefit was ~~$4.2 million and $3.8 million, respectively.~~$7.1 million. The effective tax rate was ~~(3.6)% and (4.9)%~~23.7% for the three ~~and six~~ months ended ~~July 1, 2022, both of~~March 31, 2023, which differed from the ~~2022~~2023 federal statutory rate of 21% mainly due to ~~non-taxable unrealized gains~~non-U.S. income taxed at lower rates, release of valuation allowance on ~~the investment in ESAB~~non-U.S. attributes, and tax credits for research and development offset by other non-deductible ~~costs related to the tax-free separation transaction.~~expenses and U.S. taxation on international operations.

During the three ~~and six~~ months ended ~~July 2, 2021,~~April 1, 2022, Loss from continuing operations before income taxes was ~~$45.9~~$37.7 million ~~and $77.0 million, respectively,~~ while ~~the income~~Income tax ~~benefit~~expense was ~~$3.8 million and $3.0 million, respectively.~~$0.4 million. The effective tax rate was ~~8.2% and 3.9%~~(1.0)% for the three ~~and six~~ months ended ~~July 2, 2021, respectively, both of~~April 1, 2022, which differed from the ~~2021~~2022 U.S. federal statutory rate of 21% mainly due to U.S. taxation on international operations and other non-deductible expenses.

1311

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

8. Equity

~~Outstanding shares~~

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 after the reverse stock 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 1, 2022,~~March 31, 2023, 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~~three months ended ~~July~~March 31, 2023 and April 1, ~~2022 and July 2, 2021.~~2022. All amounts are net of tax and noncontrolling interest, if any.


		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		Total
		(In thousands)									(In thousands)

Balance at January 1, 2022		$	(85,559)	$	(475,125)	$	44,671	$	(516,013)
Balance at January 1, 2023										Balance at January 1, 2023	$	12,207	$	(65,637)	$	(53,430)

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	470		(61,257)		—		(60,787)		Foreign currency translation adjustment	180		10,380		10,560
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	Other comprehensive income (loss) before reclassifications	470		(83,036)		9,028		(73,538)		Other comprehensive income (loss) before reclassifications	180		10,380		10,560
Amounts reclassified from Accumulated other comprehensive income (loss)	Amounts reclassified from Accumulated other comprehensive income (loss)	629		—		—		629		Amounts reclassified from Accumulated other comprehensive income (loss)	—		—		—

Net Other comprehensive income (loss)	Net Other comprehensive income (loss)	1,099		(83,036)		9,028		(72,909)		Net Other comprehensive income (loss)	180		10,380		10,560
Distribution of ESAB Corporation		84,460		469,220		(53,699)		499,981
Balance at July 1, 2022		$	—	$	(88,941)	$	—	$	(88,941)

Balance at March 31, 2023										Balance at March 31, 2023	$	12,387	$	(55,257)	$	(42,870)


	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		(38,333)		—		(37,863)
Loss on long-term intra-entity foreign currency transactions	—		(15,260)		—		(15,260)
Gain on net investment hedges	—		—		9,028		9,028


Other comprehensive income (loss) before reclassifications	470		(53,593)		9,028		(44,095)
Amounts reclassified from Accumulated other comprehensive loss	629		—		—		629

Net Other comprehensive income (loss)	1,099		(53,593)		9,028		(43,466)
Balance at April 1, 2022	$	(84,460)	$	(528,718)	$	53,699	$	(559,479)

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~

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 — 29,925 — 29,925
Gain on net investment hedges — — 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 — — 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)

~~Tangible equity unit offering~~

On January 11, 2019, the Company issued 4.6 million in Tangible Equity Units (“TEUs”) at the stated amount of $100 per unit. Net cash of $447.7 million was received upon closing. The gross proceeds and deferred finance costs from the issuance of the TEUs were allocated 84.4% to equity (the “TEU prepaid stock purchase 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” for additional information on the TEU amortizing notes. The TEU prepaid stock purchase contracts were mandatorily converted into shares of Company common stock ~~on January 15, 2022, unless previously settled at the holder’s option. All the~~ ~~TEU prepaid stock purchase contracts~~ ~~converted at the minimum settlement rate.~~ ~~Approximately 1.3 million and 1.6 million TEU prepaid stock purchase contracts were settled into approximately 1.7 million and 2.2 million shares of Company common stock~~ ~~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 the minimum settlement rate or greater, 6.1 million shares, as adjusted for the reverse split, are included in basic net income per 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 1, 2022 December 31, 2021
(In thousands)
Raw materials $ 83,048 $ 66,824
Work in process 30,183 29,506
Finished goods 338,568 298,450
451,799 394,780
Less: allowance for excess, slow-moving and obsolete inventory (50,947) (38,547)
$ 400,852 $ 356,233

1512

~~COLFAX~~ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

9. Inventories, Net

Inventories, net consisted of the following:


	March 31, 2023		December 31, 2022
	(In thousands)
Raw materials	$	100,095	$	100,038
Work in process	33,936		28,164
Finished goods	363,473		357,143
	497,504		485,345
Less: allowance for excess, slow-moving and obsolete inventory	(58,547)		(58,702)
	$	438,957	$	426,643

10. Debt

Long-term debt consisted of the following:


		July 1, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(In thousands)					(In thousands)
Term loan	Term loan	$	448,815	$	782,435	Term loan	$	—	$	219,279
Euro senior notes		—		395,552
2026 notes		—		297,906
TEU amortizing notes		—		6,501

Revolving credit facilities and other	Revolving credit facilities and other	644		603,932		Revolving credit facilities and other	285,000		40,000
Total debt	Total debt	449,459		2,086,326		Total debt	285,000		259,279
Less: current portion	Less: current portion	(449,459)		(7,701)		Less: current portion	—		(219,279)
Long-term debt	Long-term debt	$	—	$	2,078,625	Long-term debt	$	285,000	$	40,000

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 ~~new~~ Enovis Credit Agreement became effective on April 4, 2022 and consists of a $900 million revolving credit facility (the “Revolver”) with an April 4, 2027 maturity date and a term loan with an initial aggregate principal amount of $450 million and an April 4, 2023 maturity date (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 Enovis Credit ~~Facility.~~Agreement.

On November 18, 2022, the Company completed an exchange with a lender under the Enovis Credit Agreement of 6,003,431 shares of common stock of ESAB, representing all of the retained shares in ESAB following the Separation, for $230.5 million of the $450.0 million in term loan outstanding under the Credit Agreement, net of cost to sell. On March 1, 2023, the Company extinguished the remaining outstanding balance on the Enovis Term Loan with borrowings on the Revolver.

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~~stepping down to 3.75:1.00 for the fiscal quarter ending June 30, 2023 ~~3.75:~~and to 3.50:1.00 ~~and commencing with~~for 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 Agreement and related agreements), and upon an event of default the lenders may, subject to various customary cure rights,

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

require the immediate payment of all amounts outstanding under the Enovis ~~Term Loan and the Enovis Revolver.~~Credit Agreement. As of ~~July 1, 2022,~~March 31, 2023, 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,~~March 31, 2023, the weighted-average interest rate of borrowings under the Enovis Credit Agreement was ~~2.58%~~6.02%, excluding accretion of original issue discount and deferred financing fees, and there was $~~900~~615 million available on the Revolver.

The Company has $4.3 million in deferred financing fees recorded in conjunction with the Enovis Credit Agreement as of March 31, 2023, which are being accreted to Interest expense, net primarily using the effective interest method over the life of the facility.

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~~at a 100.813% redemption premium after the completion of the Separation.

~~COLFAX CORPORATION~~

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

~~(Unaudited)~~

~~TEU~~Tangible Equity Unit (“TEU”) Amortizing Notes

The Company previously had 6.50% TEU amortizing notes at an initial principal amount of $15.6099 per note with equal quarterly cash installments of $1.4375 per note representing a payment of interest and partial payment of principal. The Company paid $6.5 million ~~and $12.3 million~~ of principal on the TEU amortizing notes in the ~~six~~three months ended ~~July~~April 1, ~~2022 and July 2, 2021, respectively.~~2022. The final installment payment was made on January 15, 2022.

2026 Notes

The Company had senior notes with a remaining principal amount of $300 million, which were due on February 15, 2026 and had an interest rate of 6.375%. The 2026 Notes were redeemed on April 7, 2022 ~~including~~at a 103.188% redemption premium after the completion of the Separation.

Other Indebtedness

In addition to the debt agreements discussed above, the Company is party to ~~bilateral credit~~overdraft facilities with a borrowing capacity of $30.0 million. ~~As of July 1, 2022, there were $0.9 million in outstanding borrowings under these facilities.~~

~~The Company is party to a letter of credit facility with a capacity of $30.0 million.~~ Total letters of credit and surety bonds of ~~$2.3~~$7.1 million were outstanding as of ~~July 1, 2022.~~

~~Deferred Financing Fees~~

In total, the Company had deferred financing fees of $6.2 million included in its Condensed Consolidated Balance Sheet as of July 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.March 31, 2023.

ENOVIS 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 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)~~


	March 31, 2023		December 31, 2022
	(In thousands)
Accrued compensation and related benefits	$	47,252	$	51,384
Accrued taxes	16,980		13,676
Accrued freight	4,155		3,955
Contingent consideration - current portion	7,841		8,812
Warranty liability- current portion	2,826		2,804
Accrued restructuring liability - current portion	944		1,090
Accrued third-party commissions	23,945		24,958
Customer advances and billings in excess of costs incurred	3,919		3,560
Lease liability - current portion	23,116		24,281
Accrued interest	599		2,921
Accrued rebates	7,211		13,715
Accrued professional fees	13,708		15,670
Accrued royalties	5,996		5,777
Other	39,262		37,689
	$	197,754	$	210,292

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 1, 2022						Three Months Ended March 31, 2023
		Balance at Beginning of Period		Provisions		Payments			Balance at End of Period			Balance at Beginning of Period		Provisions		Payments		Balance at End of Period
		(In thousands)						(In thousands)
Restructuring and other related charges:
Restructuring and other charges:											Restructuring and other charges:
Termination benefits(1)	Termination benefits(1)	$	2,470	$	2,352	$	(2,233)		$	2,589	Termination benefits(1)	$	973	$	874	$	(926)	$	921
Facility closure costs and other(2)	Facility closure costs and other(2)	358		2,564		(2,922)			—		Facility closure costs and other(2)	118		1,761		(1,856)		23
Total	Total	$	2,828	4,916		$	(5,155)		$	2,589	Total	$	1,091	2,635		$	(2,782)	$	944
Non-cash charges(2)	Non-cash charges(2)			592							Non-cash charges(2)			301
Total Provisions(3)	Total Provisions(3)			$	5,508						Total Provisions(3)			$	2,936

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

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

(3) For the ~~six~~three months ended ~~July 1, 2022~~, ~~$3.4~~March 31, 2023, $1.3 million and ~~$2.1~~$1.6 million of of the Company’s total provisions were related to the Prevention ~~and~~& Recovery and Reconstructive segments, respectively. Restructuring and other ~~related~~ charges includes ~~$0.8~~$0.3 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the ~~six~~three months ended ~~July 1, 2022.~~March 31, 2023.

12. Financial Instruments and Fair Value Measurements

The carrying values of financial instruments, including trade receivables, other receivables and accounts payable, approximate their fair values due to their short-term maturities. The estimated fair value of the Company’s debt, which was ~~$0.5 billion and $2.1 billion~~$285.0 million as of ~~July 1, 2022 and December~~March 31, ~~2021, respectively,~~2023, 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.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

As of ~~July 1, 2022,~~March 31, 2023, the Company held ~~$25.0~~$22.2 million in Level Three liabilities arising from contingent consideration related to acquisitions. The fair value of the contingent consideration liabilities is determined using unobservable inputs and 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 measurement at the reporting date due to the nature of uncertainty inherent to the estimates. During the ~~six~~three months ended ~~July 1, 2022,~~March 31, 2023 the ~~company~~Company recorded a reduction in contingent consideration of ~~$20.0~~$0.8 million due to a final agreement on the payout from an acquisition in ~~conjunction with current acquisitions.~~2020. The gross range of outcomes for contingent consideration arrangements that have a fixed limit on the maximum payout is zero to $10.9 million. There are two contingent consideration arrangements that have no limits and are based on a percentage of sales in excess of a benchmark over a three-year period and five-year period, respectively.

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

~~COLFAX CORPORATION~~

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

~~(Unaudited)~~

March 31, 2023.

Deferred Compensation Plans

The Company maintains deferred compensation plans for the benefit of certain employees and non-executive officers. As of ~~July 1, 2022~~March 31, 2023 and December 31, ~~2021~~2022 the fair value of these plans were ~~$9.7~~$12.8 million and ~~$11.2~~$10.3 million, respectively. These plans are deemed to be Level Two within the fair value hierarchy.

Foreign Currency Contracts

As of ~~July 1, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had foreign currency contracts related to purchases and sales with notional values of ~~$4.6~~$3.0 million and ~~$7.6~~$0.8 million, respectively. During the three ~~and six~~ months ended ~~July 1, 2022,~~March 31, 2023, the Company recognized an unrealized ~~losses~~gain 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 Statements of Operations related to its derivative instruments.

13. Commitments and Contingencies

The Company is involved in 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, management of the Company believes that either it will ~~either~~ prevail, has adequate insurance coverage or has established appropriate accruals to cover potential liabilities. Legal costs related to proceedings or claims are recorded as incurred. Other costs that management estimates may be paid related to 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.

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 ~~2021~~2022 Form 10-K.

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~~innovation market-leader positioned in the fast-growing surgical implant business, 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~~finger 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.

surgical productivity tools.

1916

~~COLFAX~~ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The Company’s management, including the chief operating decision maker, evaluates the operating results of each of its reportable segments based upon Net sales and Adjusted EBITDA, which excludes the effect of restructuring and certain other ~~related~~ charges, MDR and ~~related~~other costs, strategic transaction costs, stock-based compensation, depreciation and other amortization, ~~charges,~~acquisition-related intangible asset amortization, ~~of acquired intangibles, insurance settlement gains,~~ and inventory step-up charges from the ~~operating income~~results 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						Three Months Ended
		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021						March 31, 2023		April 1, 2022
		(In thousands)								(In thousands)
Net sales:	Net sales:										Net sales:
Prevention and Recovery		$	263,783	$	266,919	$	508,618	$	501,593
Prevention & Recovery													Prevention & Recovery	$	250,740	$	244,835
Reconstructive	Reconstructive	131,334		89,205		261,956		165,614					Reconstructive	155,411		130,622
		$	395,117	$	356,124	$	770,574	$	667,207					$	406,151	$	375,457
Segment Adjusted EBITDA(1):	Segment Adjusted EBITDA(1):												Segment Adjusted EBITDA(1):
Prevention and Recovery		$	35,148	$	33,299	$	61,518	$	54,550
Prevention & Recovery													Prevention & Recovery	$	25,695	$	26,370
Reconstructive	Reconstructive	21,042		17,350		42,399		33,349					Reconstructive	30,716		21,357
		$	56,190	$	50,649	$	103,917	$	87,899					$	56,411	$	47,727

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


		Three Months Ended				Six Months Ended				Three Months Ended
		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021				March 31, 2023		April 1, 2022
		(In thousands)										(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
Loss from continuing operations before income taxes (GAAP)											Loss from continuing operations before income taxes (GAAP)	$	(29,959)	$	(37,691)
Restructuring and other charges(1)											Restructuring and other charges(1)	2,936		2,953
MDR and other costs(2)	MDR and other costs(2)	4,421		1,919		7,048		3,672			MDR and other costs(2)	7,796		2,627
Strategic transaction costs	Strategic transaction costs	12,707		4,037		24,403		4,418			Strategic transaction costs	11,629		11,696
Stock-based compensation	Stock-based compensation	7,821		6,793		14,529		12,747			Stock-based compensation	6,908		6,708
Depreciation and other amortization	Depreciation and other amortization	19,450		16,350		37,950		33,242			Depreciation and other amortization	19,951		18,500
Amortization of acquired intangibles	Amortization of acquired intangibles	31,824		29,504		62,610		57,042			Amortization of acquired intangibles	32,040		30,786
Insurance settlement gain(3)		(33,034)		—		(33,034)		—
Inventory step-up	Inventory step-up	4,893		405		9,977		2,297			Inventory step-up	119		5,084
Interest expense, net											Interest expense, net	5,652		7,064

Other income											Other income	(661)		—
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	56,190	$	50,649	$	103,917	$	87,899		Adjusted EBITDA (non-GAAP)	$	56,411	$	47,727

(1) Restructuring and other ~~related~~ charges includes $0.3 million and ~~$0.8~~$0.5 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~~March 31, 2023 and April 1, 2022, respectively.

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

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

~~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.

2117

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 Enovis Corporation (“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 1, 2022~~March 31, 2023 (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, ~~2021~~2022 (the ~~“2021~~“2022 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on ~~February 22, 2022.~~March 1, 2023.

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, as amended (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 ~~Securities and Exchange Commission (the “SEC”). All statements~~SEC. Statements other than statements of historical fact are statements ~~that~~ could be deemed forward-looking statements, including statements regarding: the ~~separation~~impacts of ~~our fabrication and medical technology businesses~~the recently completed spin-off of ESAB Corporation (“ESAB”) into ~~two differentiated,~~an independent publicly traded ~~companies~~company (the “Separation”); ~~the anticipated benefits of the Separation;~~ the expected financial and operating performance of, and future opportunities for, ~~each company~~the 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;pandemic; projections of revenue, profit margins, expenses, tax provisions and tax rates, earnings or losses from operations, impact of foreign exchange rates, cash flows, synergies or other financial items; plans, strategies and objectives of management for future operations including statements relating to potential acquisitions, compensation plans or purchase commitments; developments, performance, industry or market rankings relating to products or services; future economic conditions or performance, including the impact of increasing inflationary pressures; the outcome of outstanding claims or legal 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 characterized by terminology such as “believe,” “anticipate,” “should,” “would,” “could,” “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 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~~an inability to ~~the impact of the COVID-19 global pandemic, including the rise, prevalence~~identify, finance, acquire 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 the Company’s business and ability to execute business continuity plans;successfully integrate attractive acquisition targets;

•~~risks related~~the availability of additional capital and our inability to ~~the Separation, including~~pursue our ability to realize the anticipated benefits of the 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 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;growth strategy without it;

•~~volatility~~our indebtedness and our debt agreements, which contain restrictions that may limit our flexibility in ~~the commodity markets and certain commodity prices due to economic disruptions from the COVID-19 pandemic and various geopolitical events, including the ongoing conflict between Russia and Ukraine~~operating our business;

•~~changes~~our restructuring activities, which may subject us to additional uncertainty 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;our operating results;

•~~supply chain constraints~~any impairment in the value of our intangible assets, including goodwill;

•a material disruption at any of our manufacturing facilities;

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

•the effects of the COVID-19 global pandemic;

•significant movements in foreign currency exchange rates;

•the availability of raw materials, as well as parts and components used in our ~~ability to identify, finance, acquire~~products, as well as the impact of raw material, energy and ~~successfully integrate attractive acquisition targets;~~labor price fluctuations and supply shortages;

•the competitive environment in which we operate;

•our ~~exposure~~reliance on a variety of distribution methods to ~~unanticipated liabilities resulting from acquisitions;~~market and sell our medical device products;

•~~our ability~~extensive government regulation and ~~the ability~~oversight of our ~~customers to access required capital at a reasonable cost;~~products;

•safety issues or recalls of our ~~ability to accurately estimate the cost of or realize savings from our restructuring programs;~~products;

•~~disruptions in~~failure to comply with federal and state regulations related to the ~~global economy caused by the ongoing conflict between Russia and Ukraine (including any political or economic responses and counter-responses);~~manufacture of our products;

•~~material disruptions at any~~improper marketing or promotion 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;~~products;

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

•failure to comply with governmental regulations for products for which we obtain clearance or approval;

•our exposure to product liability claims;

•~~potential costs~~our inability to obtain coverage and ~~liabilities associated~~adequate levels of reimbursement from third party payors for our medical device products;

•audits or denials of claims by government officials;

•federal and state health reform and cost control efforts;

•our failure or the failure of our employees or third parties with ~~environmental, health and safety~~which we have relationships to comply with healthcare laws and regulations;

•~~failure~~our relationships with leading surgeons and our ability to ~~maintain, protect and defend our intellectual property rights;~~comply with enhanced disclosure requirements regarding payments to physicians;

•~~the loss of key members of our leadership team,~~actual or ~~the inability~~perceived failures to ~~attract, develop, engage,~~comply with applicable data protection, privacy 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;~~

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

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

•~~risks arising from changes in technology;~~noncompliance with anti-bribery laws, export control regulations, economic sanctions or other trade laws;

•our inability to achieve some or all of the ~~competitive environment in~~expected benefits of the Separation;

•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 ~~industry;~~stockholders could be subject to significant tax liabilities;

•potential indemnification liabilities to ESAB pursuant to the Separation and distribution agreement and other related agreements

•changes in ~~our tax rates, realizability of deferred tax assets, or exposure to additional income tax liabilities;~~the general economy;

•~~our ability to manage~~disruptions in the global economy caused by the ongoing conflict between Russia and ~~grow our business and execution of our business and growth strategies;~~Ukraine;

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

2319

•~~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 ~~2021~~2022 Form ~~10-K and Part II. Item 1A. “Risk Factors” in our Form 10-Q for the quarter ended April 1, 2022.~~10-K.

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 ~~2021~~2022 Form 10-K ~~and Part II. Item 1A. “Risk Factors” in 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.

2420

Overview

Please see Part I, Item 1. “Business” in our ~~2021~~2022 Form 10-K for a discussion of the Company’s objectives and methodologies for delivering shareholder value.

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,~~Separation, 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.”~~“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: Prevention ~~and~~& Recovery and Reconstructive. We have reflected this change in all historical periods presented.

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

We have a global footprint, with production facilities in North America, Europe, North Africa, and 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 market.

Integral to our operations is our business management 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 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 and Adjusted EBITDA, as defined in the “Non-GAAP Measures” section.

Items Affecting Comparability of Reported Results and Other Recent Developments

The comparability of our operating results for the three ~~and six~~ months ended ~~July 1, 2022~~March 31, 2023 to the comparable period in ~~2021~~2022 is affected by the following significant items:

The Separation

On April 4, 2022, ~~(the “Distribution Date”),~~ we completed the Separation of our fabrication technology business through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to our stockholders. WeOn November 18, 2022, we subsequently disposed of the retained 10% ofstake in the shares of ESAB common stock ~~immediately following~~through a debt-for-equity exchange with a lender under our Enovis Credit Agreement. Once 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~~Separation was completed in the second quarter of 2022, we began classifying ~~our~~the results from the fabrication technology business for the comparable periods presented as a discontinued operation in our financial ~~statements beginning in the second quarter of 2022.~~statements. Accordingly, the results of our fabrication technology businesses ~~are excluded from continuing operations~~have been recast as a discontinued operation in the accompanying ~~financials~~financial statements for the three ~~and six~~ months ended ~~July~~April 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 also provides each company with an appropriately valued acquisition currency that could be used for larger, transformational transactions.

~~Refer to the accompanying Notes to the Condensed Consolidated Financial Statements for more information regarding the Separation.~~

~~The COVID-19 Pandemic~~

The COVID-19 pandemic has cause economic disruptions since its emergence in 2020. Despite increased access to vaccines, the emergence of variants and outbreaks have caused some volatility, including spikes in the second half of 2021 and second quarter of 2022, which slowed the pace of recovery in 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 2021 and 2022, including sales levels, inflation and supply chain challenges.

There may be developments outside our control that require us to further adjust our operations. Given the potential 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 I. Item 1A. “Risk Factors” in our 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 ~~six~~three months ended ~~July 1, 2022~~March 31, 2023 presented in this filing represents the incremental sales subsequent to the beginning of the prior year ~~periods.~~period. During ~~this period~~ the ~~Reconstructive segment~~year ended December 31, 2022, the Company completed ~~one~~two business ~~combination for aggregate consideration of $27.1 million and the Prevention & Recovery segment completed three asset~~ acquisitions for aggregate net cash consideration of ~~$18.2~~$50.5 million. ~~The~~In the second quarter of 2022, the Company acquired KICo Knee Innovation Company Pty Limited and subsidiaries, an Australian private company doing business as 360 Med Care, which is ~~an Australian~~a medical device distributor that bundles certain ~~computer assisted~~computer-assisted surgery and patient experience enhancement programs to add value to the device supply arrangements with surgeons, hospitals, and insurers.

~~During 2021,~~ In the third quarter of 2022, the Company acquired a controlling interest in Insight Medical Systems, the flagship product of which is the ARVIS surgical navigation system. Additionally, during the three months ended April 1, 2022, we completed ~~five~~two asset acquisitions in our ~~Reconstructive~~Prevention & Recovery segment for net cash consideration of ~~$201.6 million and equity consideration of $285.7~~$3.7 million. ~~The largest of these acquisitions include Trilliant~~

On March 31, 2023, the Company also entered into a definitive agreement with Amplitude Surgical SA to acquire Novastep®, a ~~provider of~~leading player in Minimally Invasive Surgery (MIS) foot and ankle ~~orthopedic implants; MedShape, Inc., a provider of innovative surgical~~ solutions for ~~foot~~cash considerations of 90 million Euros. The transaction is subject to customary closing conditions and ~~ankle surgeons;~~regulatory approvals and ~~Mathys AG Bettlach, a Switzerland-based company that develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions and sports medicine.~~is expected to close in the second quarter of 2023.

Foreign Currency Fluctuations

~~Approximately 31%~~During the three months ended March 31, 2023, approximately 33% of our sales are derived from operations outside the U.S., the majority of which is in Europe, with the remaining portion mostly in the Asia-Pacific region. Accordingly, we can be affected by market demand, economic and ~~25%~~political factors in countries in Europe and the Asia-Pacific region, and significant movements in foreign exchange rates. Our ability to grow and our financial performance will be affected by our ability to address challenges and opportunities that are a consequence of expanding our global operations through our recent acquisitions, including efficiently utilizing our international sales channels, manufacturing and distribution capabilities, participating in the expansion of market opportunities, successfully completing global acquisitions and engineering innovative new product applications to create better patient outcomes.

The majority of our Net sales ~~from continuing operations for the six months ended July 1, 2022 and July 2, 2021, respectively, were~~ derived from ~~sales~~operations outside the U.S. are denominated in currencies other than the U.S. dollar. ~~Our~~Similar portions of our manufacturing and employee costs are also ~~exposed to~~outside the U.S. and denominated in 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~~three months ended ~~July 1, 2022~~March 31, 2023 compared to the ~~six~~three months ended ~~July 2, 2021,~~April 1, 2022, fluctuations in foreign currencies ~~reduced~~decreased Net sales ~~and~~by 1.5%, decreased Gross profit by approximately 2%1.9% and ~~reduced Selling, general and administrative~~decreased operating expenses by ~~1%. The changes in foreign exchange rates since December 31, 2021 also decreased net assets by~~ approximately 1% ~~as of July 1, 2022.~~.

Seasonality

~~Our sales~~Sales in our Prevention & Recovery and Reconstructive segments typically peak in the fourth ~~quarter,~~quarter. General economic conditions and other factors may, however, ~~the business~~ impact ~~caused by the COVID-19 pandemic has distorted the effects of historical seasonality patterns.~~future seasonal variations.

2722

Non-GAAP Measures

Adjusted EBITDA

Adjusted EBITDA and Adjusted EBITDA margin, two non-GAAP performance measures, are included in this report because they are key metrics used by our management to assess our operating performance. Adjusted EBITDA ~~and Adjusted EBITDA margin exclude~~excludes from ~~Operating~~Net income (loss) from continuing operations the effect of income tax expense (benefit), Other income, non-operating (gain) loss on investments, debt extinguishment charges, interest expense, net, restructuring and other ~~related~~ charges, ~~MDR~~Medical Device Regulation (MDR) fees and ~~related~~other costs, strategic transaction costs, stock-based compensation, depreciation and other amortization, acquisition-related intangible asset amortization, and fair value charges ~~amortization of~~on acquired ~~intangibles, insurance settlement gains, and inventory step-up.~~inventory. We also present Adjusted EBITDA and Adjusted EBITDA margin by operating segment, which are subject to the same 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 EBITDA assists ~~Enovis~~our 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. ~~Enovis~~Our management also believes that presenting these measures allows investors to view ~~its~~our performance using the same 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 ~~Operating income (loss),~~net loss from continuing operations, the most directly comparable ~~GAAP~~ financial statement measure, to Adjusted ~~EBITDA.~~EBITDA, for the three months ended March 31, 2023 and April 1, 2022.

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 %


	Three Months Ended March 31, 2023
	Prevention & Recovery			Reconstructive			Total
	(Dollars in millions)
Net loss from continuing operations (GAAP)(1)							$	(22.8)
Income tax benefit							(7.1)
Other income							(0.7)
Interest expense, net							5.7
Operating loss (GAAP)	$	(18.1)		$	(6.8)		(25.0)
Operating loss margin	(7.2)		%	(4.4)		%	(6.1)		%
Adjusted to add (deduct):
Restructuring and other charges(2)	1.3			1.6			2.9
MDR and other costs(3)	3.2			4.6			7.8
Strategic transaction costs(3)	6.2			5.4			11.6
Stock-based compensation(3)	4.1			2.8			6.9
Depreciation and other amortization	5.7			14.2			20.0
Amortization of acquired intangibles	23.3			8.8			32.0
Inventory step-up	—			0.1			0.1
Adjusted EBITDA (non-GAAP)	$	25.7		$	30.7		$	56.4
Adjusted EBITDA margin (non-GAAP)	10.3		%	19.8		%	13.9		%

(1) Non-operating components of Net loss from continuing operations are not allocated to the segments.

(2) Restructuring and other ~~related~~ charges includes $0.3 ~~million and $0.8~~ million of expense classified as Cost of sales on our Condensed Consolidated Statements of ~~Operations for~~Operations.

(3) Certain amounts are allocated to the ~~three and six months ended July 1, 2022, respectively.~~segments as a percentage of revenue as the costs are not discrete to either segment.


	Three Months Ended April 1, 2022
	Prevention & Recovery			Reconstructive			Total
	(Dollars in millions)
Net loss from continuing operations (GAAP)(1)							$	(38.1)
Income tax expense							0.4
Interest expense, net							7.1
Operating loss (GAAP)	$	(14.4)		$	(16.2)		(30.6)
Operating loss margin	(5.9)		%	(12.4)		%	(8.2)		%
Adjusted to add (deduct):
Restructuring and other charges(2)	2.1			0.8			3.0
MDR and other costs(3)	1.7			0.9			2.6
Strategic transaction costs(3)	7.6			4.1			11.7
Stock-based compensation(3)	4.4			2.3			6.7
Depreciation and other amortization	5.8			12.7			18.5
Amortization of acquired intangibles	19.1			11.7			30.8
Inventory step-up	—			5.1			5.1
Adjusted EBITDA (non-GAAP)	$	26.4		$	21.4		$	47.7
Adjusted EBITDA margin (non-GAAP)	10.8		%	16.4		%	12.7		%

(1) Non-operating components of Net loss from continuing operations are not allocated to the segments.

(2) ~~Primarily related to costs specific to compliance with medical device reporting regulations~~Restructuring and other ~~requirements~~charges includes $0.5 million of ~~the European Union MDR. These costs are~~expense classified as ~~Selling, general and administrative expense~~Cost of sales on our Condensed Consolidated Statements of Operations.

(3) ~~Strategic transaction costs includes costs related~~Certain amounts are allocated to the ~~Separation and certain transaction and integration~~segments as a percentage of revenue as the costs ~~related~~are not discrete to ~~recent acquisitions.~~either segment.

~~(4)~~ ~~Insurance settlement gain related to the Company’s 2019 acquisition of DJO.~~

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

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 %

~~(1)~~ Restructuring and other related charges includes $0.3 million and $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 1, 2022, respectively.

~~(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.~~

2924

Total Company

Sales

Net sales for the three ~~and six~~ months ended ~~July 1, 2022~~March 31, 2023 increased from the three ~~and six~~ months ended ~~July 2, 2021.~~April 1, 2022. The following table presents the components of changes in our consolidated Net sales.


		Three Months Ended				Six Months Ended					Three Months Ended
		Net Sales		Change %		Net Sales		Change %			Net Sales		Change %
		(Dollars in millions)									(Dollars in millions)
For the three and six months ended July 2, 2021		$	356.1			$	667.2
For the three months ended April 1, 2022										For the three months ended April 1, 2022	$	375.5
Components of Change:	Components of Change:									Components of Change:
Existing Businesses(1)	Existing Businesses(1)	10.5		2.9	%	33.7		5.1	%	Existing Businesses(1)	35.2		9.4	%
Acquisitions(2)	Acquisitions(2)	37.4		10.5	%	83.0		12.4	%	Acquisitions(2)	1.1		0.3	%
Foreign Currency Translation(3)	Foreign Currency Translation(3)	(8.8)		(2.5)	%	(13.4)		(2.0)	%	Foreign Currency Translation(3)	(5.6)		(1.5)	%
		39.0		10.9	%	103.4		15.5	%		30.7		8.2	%
For the three and six months ended July 1, 2022		$	395.1			$	770.6
For the three months ended March 31, 2023										For the three months ended March 31, 2023	$	406.2

(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 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 1, 2022~~March 31, 2023 compared to the prior year ~~periods~~period was primarily attributable to an increase in sales from ~~acquired~~existing businesses ~~and increases from~~across both of our ~~existing businesses.~~segments, partially offset by foreign currency headwinds. Existing business sales in our Reconstructive segment increased ~~$5.1 million and $13.8~~$25.1 million during the three ~~and six~~ months ended ~~July 1, 2022 respectively,~~March 31, 2023 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.~~driven by broad market strength and market outperformance. Existing business sales in our Prevention ~~and~~& Recovery segment increased ~~$5.4 million and $19.9~~$10.1 million during the three ~~and six~~ months ended ~~July 1, 2022, respectively,~~March 31, 2023 due to volume and ~~included~~ inflation-related pricing ~~increases and improved sales volumes.~~increases. Net sales from acquisitions increased in the three ~~and six~~ months ended ~~July 1, 2022~~March 31, 2023 due to ~~acquisitions~~the 360 Med Care acquisition in our Reconstructive segment ~~that closed since the beginning of the prior year period~~ in ~~2021.~~May 2022. The strengthening of the U.S. dollar relative to other currencies resulted in ~~$8.8 million and $13.4~~$5.6 million unfavorable foreign currency translation impacts during the three ~~and six~~ months ended ~~July 1, 2022, respectively.~~March 31, 2023.

3025

Operating Results

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


		Three Months Ended						Six Months Ended							Three Months Ended
		July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021				March 31, 2023			April 1, 2022
		(Dollars in millions)													(Dollars in millions)
Gross profit	Gross profit	$	215.9		$	200.6		$	421.8		$	371.9		Gross profit	$	235.1		$	205.9
Gross profit margin	Gross profit margin	54.6		%	56.3		%	54.7		%	55.7		%	Gross profit margin	57.9		%	54.8		%
Selling, general and administrative expense	Selling, general and administrative expense	$	225.5		$	197.9		$	444.7		$	376.0		Selling, general and administrative expense	$	207.2		$	188.5
Research and development expense	Research and development expense	$	15.7		$	11.0		$	30.5		$	21.4		Research and development expense	$	18.2		$	14.8
Operating income (loss)		$	5.6		$	(10.4)		$	(25.1)		$	(28.5)
Operating income (loss) margin		1.4		%	(2.9)		%	(3.3)		%	(4.3)		%
Net income (loss) from continuing operations		$	120.7		$	(42.1)		$	82.6		$	(74.0)
Net income (loss) margin from continuing operations (GAAP)		30.5		%	(11.8)		%	10.7		%	(11.1)		%
Operating loss														Operating loss	$	(25.0)		$	(30.6)
Operating loss margin														Operating loss margin	(6.1)		%	(8.2)		%
Net loss from continuing operations														Net loss from continuing operations	$	(22.8)		$	(38.1)
Net loss from continuing operations margin (GAAP)														Net loss from continuing operations margin (GAAP)	(5.6)		%	(10.1)		%
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	56.2		$	50.6		$	103.9		$	87.9		Adjusted EBITDA (non-GAAP)	$	56.4		$	47.7
Adjusted EBITDA margin (non-GAAP)	Adjusted EBITDA margin (non-GAAP)	14.2		%	14.2		%	13.5		%	13.2		%	Adjusted EBITDA margin (non-GAAP)	13.9		%	12.7		%
Items excluded from Adjusted EBITDA:	Items excluded from Adjusted EBITDA:													Items excluded from Adjusted EBITDA:
Restructuring and other related charges(1)	Restructuring and other related charges(1)	$	2.6		$	2.0		$	5.5		$	3.0		Restructuring and other related charges(1)	$	2.9		$	3.0
MDR and other costs	MDR and other costs	$	4.4		$	1.9		$	7.0		$	3.7		MDR and other costs	$	7.8		$	2.6
Strategic transaction costs	Strategic transaction costs	$	12.7		$	4.0		$	24.4		$	4.4		Strategic transaction costs	$	11.6		$	11.7
Stock-based compensation	Stock-based compensation	$	7.8		$	6.8		$	14.5		$	12.7		Stock-based compensation	$	6.9		$	6.7
Depreciation and other amortization	Depreciation and other amortization	$	19.5		$	16.4		$	38.0		$	33.2		Depreciation and other amortization	$	20.0		$	18.5
Amortization of acquired intangibles	Amortization of acquired intangibles	$	31.8		$	29.5		$	62.6		$	57.0		Amortization of acquired intangibles	$	32.0		$	30.8
Insurance settlement gain		$	(33.0)		$	—		$	(33.0)		$	—
Inventory step-up	Inventory step-up	$	4.9		$	0.4		$	10.0		$	2.3		Inventory step-up	$	0.1		$	5.1
Unrealized gain on investment in ESAB Corporation		$	(135.5)		$	—		$	(135.5)		$	—
Interest expense, net	Interest expense, net	$	4.5		$	5.7		$	11.6		$	18.6		Interest expense, net	$	5.7		$	7.1
Debt extinguishment charges		$	20.1		$	29.9		$	20.1		$	29.9
Other income														Other income	$	(0.7)		$	—
Income tax expense (benefit)	Income tax expense (benefit)	$	(4.2)		$	(3.8)		$	(3.8)		$	(3.0)		Income tax expense (benefit)	$	(7.1)		$	0.4

(1) Restructuring and other ~~related~~ charges includes $0.3 million and ~~$0.8~~$0.5 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~July~~March 31, 2023 and April 1, 2022, respectively.

~~Second Quarter of 2022~~Three Months Ended March 31, 2023 Compared to ~~Second Quarter of 2021~~Three Months Ended April 1, 2022

Gross profit increased in the ~~second quarter of 2022~~three months ended March 31, 2023 compared with the prior year period due to a ~~$19.9~~$24.7 million increase in our Reconstructive segment ~~partially offset by~~and a ~~$4.7~~$4.4 million ~~decrease~~increase in our Prevention ~~and~~& Recovery segment. The Gross profit increase was ~~primarily~~ attributable to ~~acquisitions and~~ increased sales ~~from~~in our existing businesses from volume and inflation-related pricing increases, improved operating cost leverage, and the benefit of a decrease of $5.0 million in inventory fair value step-up amortization charges, partially offset by ~~increased supply chain~~unfavorable foreign currency translation and ~~logistic costs and $4.5 million of higher inventory step-up charges related to recent acquisitions. Gross profit margin decreased slightly due to~~inflation in supply chain, logistics, and other ~~cost inflation that exceeded pricing and other benefits.~~costs. Gross profit margin increased due to the aforementioned factors.

Selling, general and administrative expense increased ~~$27.6~~$18.7 million in the second quarter of 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 increasedthree months ended March 31, 2023 compared to the prior year period, primarily due to ~~recent acquisitions. Amortization of acquired intangibles and Depreciation~~increased commissions driven by higher sales, investments to support growth, spending on MDR and other ~~amortization also increased compared to the prior year period due to acquisition-related increases.~~

~~During the second quarter of 2022, we recorded an insurance settlement gain of $33.0 million related to the 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 $135.5 million gain related to 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~~costs, 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 2022 due to a reduction in debt balances due to the Separation-related debt redemptions at the beginning of the second quarter of 2022.~~

The effective tax rate for Net income from continuing operations during the second quarter of 2022 was (3.6)%, which was 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 U.S. taxation on international operations and other non-deductible expenses.

Net income from continuing operations increased in the second quarter of 2022 compared with the prior year period primarily due to the gain on the retained ESAB common stock, as well as the insurance settlement gain and acquisition-related sales, offset by costs associated with the Separation, debt extinguishment charges and acquisition-related costs. Net income margin from continuing operations increased due to the aforementioned factors. Adjusted EBITDA increased primarily due to increased sales and lower operating expenses in existing businesses,cost inflation, partially offset by higher 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 margin by approximately 70 basis points and are expected to be accretive to margins in future years.

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

Gross profit increased in the six months ended July 1, 2022 compared with the prior year period due to a $49.6 million increase in our Reconstructive segment and a $0.2 million increase in our Prevention and Recovery segment. The Gross profit increase was attributable to the benefit from business acquisitions and growth in our existing businesses, partially offset by higher inventory step-up charges of $7.7 million and increased supply chain and logistic costs. Gross profit margin decreased slightly due to supply chain, logistics and other cost ~~inflation that exceeded pricing and other benefits.~~

Selling, general and administrative expense increased $68.7 million in the six months ended July 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.reduction initiatives. Research and development costs also increased compared to the prior year period, primarily due to increased spend within recently acquired businesses in our Reconstructive ~~segment.~~segment, which are investing in surgical productivity solutions and computer-assisted surgery technologies. Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to business ~~acquisition-related increases.~~acquisitions.

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 ESAB, which significantly impacted our results for the six months ended July 1, 2022.

Interest expense, net decreased in the ~~six~~three months ended ~~July 1, 2022~~March 31, 2023 compared to the prior year period due to a reduction in debt balances as a result of the Separation-related debt redemptions at the beginning of the second quarter of 2022 and the partial extinguishment of the outstanding balance of the Enovis Term Loan (as defined below) in November 2022.

The effective tax rate for Net ~~income~~loss from continuing operations during the ~~six~~three months ended ~~July 1, 2022~~March 31, 2023 was ~~(4.9)%~~23.7%, which ~~was lower than~~differed from the ~~2022~~2023 U.S. federal statutory tax rate of 21%, ~~mainly~~primarily due to ~~non-taxable unrealized gains~~non-U.S. income taxed at lower rates, release of valuation allowance on ~~the investment in ESAB~~non-U.S attributes, and tax credits for research and development offset by other non-deductible ~~costs related to the tax-free separation transaction.~~expenses and U.S. taxation on international operations. The effective tax rate for the ~~six~~three months ended ~~July 2, 2021~~April 1, 2022 was ~~3.9%~~(1.0)%, which was lower than the ~~2021~~2022 U.S. federal statutory tax rate of 21% mainly due to U.S. taxation on international operations and other non-deductible expenses.

Net ~~income~~loss from continuing operations ~~increased~~decreased in the ~~six~~three months ended ~~July 1, 2022~~March 31, 2023 compared with the prior year period, primarily due to the ~~gain on the retained ESAB common stock, as well as the insurance settlement gain~~aforementioned Gross profit increase and ~~acquisition-related sales,~~an income tax benefit, offset by ~~costs associated with~~ the ~~Separation, debt extinguishment charges~~aforementioned Selling, general and ~~acquisition-related costs.~~administrative expense increase. Net ~~income~~loss margin from continuing operations ~~increased~~decreased by ~~over 20~~450 basis points due to the aforementioned factors. Adjusted EBITDA increased due to organic ~~growth and lower operating expenses in existing businesses, partially offset by higher supply chain and logistic costs.~~growth. Adjusted EBITDA margin excluding the effects of recent acquisitions and foreign currency pressures increased 30by approximately 200 basis points. Our recent acquisitions in our Reconstructive segment, which were dilutive to the net loss margin from continuing operations and to Adjusted EBITDA margin by approximately 40 basis points, ~~for the same reasons; excluding acquisitions,~~are expected to be accretive to margins ~~increased by 70 basis points.~~in future years.

Business Segments

~~Following~~As discussed further above, we report results in two reportable segments: Prevention & Recovery and Reconstructive. Operating loss, adjusted EBITDA, and adjusted EBITDA margins at the ~~completion~~operating segment level also include allocations of ~~the Separation, we revised our reporting structure~~certain central function expenses not directly attributable to either operating segment. See Item 2. “Non-GAAP Measures” for a further discussion and ~~conduct our business through two operating segments, “Prevention and Recovery”, which consists~~reconciliation of ~~our orthopedic and rehabilitation business, and “Reconstructive”, which includes our surgical business.~~these non-GAAP measures to their most directly comparable GAAP financial measures.

Prevention ~~and~~& Recovery

We develop, manufacture, and distribute rigid bracing products, orthopedic soft goods, vascular systems, and compression garments, and hot and cold therapy products and offer robust recovery sciences products in the clinical rehabilitation and sports medicine markets such as bone growth stimulators and electrical stimulators used for pain management. Our Prevention ~~and~~& Recovery products are marketed under several brand names, most notably DJO, ~~and Don-Joy,~~ to orthopedic specialists, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers, and other healthcare 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 and 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 selected financial results for our Prevention ~~and~~& Recovery segment:

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


	Three Months Ended
	March 31, 2023			April 1, 2022
	(Dollars in millions)
Net sales	$	250.7		$	244.8
Gross profit	$	126.9		$	122.5
Gross profit margin	50.6		%	50.0		%
Selling, general and administrative expenses	$	112.2		$	108.1
Research and development expense	$	8.5		$	8.3

Operating loss (GAAP)	$	(18.1)		$	(14.4)
Operating loss margin (GAAP)	(7.2)		%	(5.9)		%
Adjusted EBITDA (non-GAAP)	$	25.7		$	26.4
Adjusted EBITDA margin (non-GAAP)	10.3		%	10.8		%

3327

~~Second Quarter of 2022~~Three Months Ended March 31, 2023 Compared to ~~Second Quarter of 2021~~Three Months Ended April 1, 2022

Net sales in our Prevention ~~and~~& Recovery ~~segment decreased $3.1~~segment increased $5.9 million, or 1%2.4%, in the ~~second~~first quarter ~~of 2022~~ended March 31, 2023 compared with the prior year period, driven ~~primarily~~ by ~~$8.5~~a 4.1% or $10.1 million increase from volume and inflation-related pricing increases, offset by foreign currency ~~translation headwinds and fewer selling days, partially offset by~~headwinds. Gross profit increased $4.4 million due to inflation-related pricing ~~increases. Gross profit decreased $4.7 million,~~increases and improved sales mix in our existing businesses, partially offset by the effect of unfavorable foreign currency impacts in a primary production facility. Gross profit margin ~~decreased 120~~increased 60 basis points due to ~~inflation-driven supply chain and logistics cost increases, partially offset by pricing increases.~~the aforementioned factors. Selling, general and administrative expense ~~decreased~~increased over the same period primarily due to ~~decreased central~~investments to support growth, spending on MDR and other costs, and cost ~~allocations,~~inflation, partially offset by ~~costs incurred related to the Separation. Operating income (loss) improved~~cost reduction initiatives. Research and development expense increased slightly due to ~~an insurance settlement gain recorded in the second quarter~~timing of ~~2022 and lower Selling,~~certain initiatives. Operating loss increased due to higher acquisition amortization, higher selling, general and administrative expenses ~~partially~~and inflation of supply chain, logistics, and other costs, offset by ~~increases~~improved sales mix in ~~supply chain costs and strategic transaction costs related to the Separation.~~our existing businesses. Adjusted EBITDA and Adjusted EBITDA margin ~~increased primarily~~decreased 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 offsethigher costs caused by unfavorable foreign currency ~~translation of $12.9 million. Gross profit increased $0.2 million due to the improved sales,~~impacts and inflation-related pricing increases which partially offset by ~~inflation-driven supply chain cost increases.~~improved 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.

sales mix.

Reconstructive

We develop, manufacture, and market a wide variety of knee, hip, shoulder, elbow, foot, ankle, and finger implant products and surgical productivity solutions 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.~~procedures.

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


	Three Months Ended
	March 31, 2023			April 1, 2022
	(Dollars in millions)
Net sales	$	155.4		$	130.6
Gross profit	$	108.1		$	83.4
Gross profit margin	69.6		%	64.0		%
Selling, general and administrative expenses	$	95.0		$	80.4
Research and development expense	$	9.7		$	6.6

Operating loss (GAAP)	$	(6.8)		$	(16.2)
Operating loss margin (GAAP)	(4.4)		%	(12.4)		%
Adjusted EBITDA (non-GAAP)	$	30.7		$	21.4
Adjusted EBITDA margin (non-GAAP)	19.8		%	16.4		%

~~Second Quarter of 2022~~Three Months Ended March 31, 2023 Compared to ~~Second Quarter of 2021~~Three Months Ended April 1, 2022

Net ~~sales~~sales increased in our Reconstructive segment by $24.8 million, or 19.0%, in the ~~second~~ first quarter ~~of 2022~~ended March 31, 2023 compared with the prior year period, primarily due to ~~acquisition-related~~higher sales ~~growth of $37.4 million~~volumes driven by broad market strength and organic growth in existing businesses in the current year period, partially offset by fewer selling days in comparison to the prior year. Gross profit increased due to acquisitions and 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 $17.4 million from acquired businesses including integration costs 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 Adjusted EBITDA margin, as the recent acquisitions were dilutive to the margin by approximately 320 basis points and are expected to be accretive to margins in future years.

market outperformance. Gro

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

Net sales increased in our Reconstructive segment in the six months ended July 1, 2022 compared with the prior year period primarily due to acquisition-related sales growth of $83.0 million and organic growth in existing businesses of $13.8 million. Grossss profit increased in the ~~six months~~first quarter ended ~~July 1, 2022~~March 31, 2023 compared to the ~~six months~~first quarter ended ~~July 2, 2021~~April 1, 2022, primarily due to ~~acquisition~~increased sales in our existing businesses and ~~existing business growth, partially offset by increased supply chain and logistic costs and acquisition-related inventory valuation step-up charges of $8.4 million,~~improved operating cost leverage, which also led to ~~a decrease~~an increase in Gross profit margin. Selling, general and administrative expense increased over the same period primarily due to ~~$39.7 million of~~increased commissions driven by higher sales, investments to support growth, spending on MDR and other costs, ~~from acquisitions including integration costs for~~and cost inflation, partially offset by cost reduction initiatives. Research and development expense increased compared to the ~~newly-acquired~~prior year period, primarily due to increased spend within recently acquired businesses ~~as well as increased central cost allocations~~in our Reconstructive segment, which are investing in surgical productivity solutions and ~~costs associated with the Separation.~~computer-assisted surgery technologies. Operating ~~income~~loss decreased in the ~~six months~~first quarter ended ~~July 1, 2022~~March 31, 2023 compared to the ~~six months~~first quarter ended ~~July 2, 2021~~April 1, 2022, primarily due to the ~~increases in~~aforementioned Gross profit increase and a reduction of acquisition amortization, offset by the aforementioned Selling, general and administrative ~~expenses from acquisitions.~~expense increase. Adjusted EBITDA increased primarily due to growth in existing businesses ~~partially offset by increased supply chain~~ and ~~logistic costs.~~

~~Recent~~improved operating cost leverage. Without the impact of recent acquisitions, ~~drove a reduction in the~~ Adjusted EBITDA ~~margin, as they~~margins increased 450 basis points compared to prior year. Recent acquisitions were dilutive to the margin by approximately ~~250~~100 basis points, ~~and~~but are expected to be accretive to margins in future years.

3628

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 and ~~debt service~~other non-routine cots, and interest and principal ~~repayments.~~repayments on amounts drawn on our revolving credit facility. We believe we could raise additional funds in the form of debt or equity if it 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~~ We believe that our sources 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~~liquidity are adequate to fund ~~a $1.2 billion cash distribution to us upon Separation. We used~~our operations for 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.next twelve months.

Equity Capital

~~On March 19, 2021, we completed an underwritten public offering of 5.4 million shares of our Common stock, as adjusted for the reverse split, resulting in net proceeds of~~ ~~$711.3 million, after deducting offering expenses~~ ~~and underwriters’ discount and commissions. We used the proceeds to pay down certain of our senior~~ ~~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~~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 1, 2022,~~March 31, 2023, 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 “Colfax Credit Facility”) consisted 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 contained a $50 million swing line loan sub-facility.

On April 4, 2022, ~~the Company~~we entered into a new credit agreement (the “Enovis Credit Agreement”) ~~which replaces the Colfax Credit Facility and concurrently terminated all indebtedness~~, consisting 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 $900 million revolving credit facility ~~that totals $900 million in commitments~~ (the “Revolver”) with an April 4, 2027 maturity date and a term loan inwith an initial aggregate principal amount of $450 million and an April 4, 2023 maturity date (the “Enovis Term Loan”~~, and together with the Revolver, the “Enovis Credit Facility”~~). The Revolver ~~includes~~contains 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 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 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.

~~Agreement.~~

On November 18, 2022, the Company completed an exchange with a lender under the Enovis Credit Agreement of 6,003,431 shares of common stock of ESAB, representing all of the retained shares in ESAB following the Separation, for $230.5 million of the $450.0 million in Enovis Term Loan outstanding under the Enovis Credit Agreement, net of cost to sell. The remaining balance on the Enovis Term Loan was extinguished on March 1, 2023, with proceeds from the Revolver.

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 current 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~~stepping down to 3.75:1.00 for the fiscal quarter ending June 30, 2023 ~~3.75:~~and to 3.50:1.00 ~~and commencing with~~for 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 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.

~~Euro Senior Notes~~

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

~~TEU Amortizing Notes~~

On January 15, 2022, we made the final installment payment on our TEU amortizing notes, which had an initial principal amount of $15.6099 per unit and an interest rate of 6.50% per annum. We paid $6.5 million and $12.3 million of principal on the TEU amortizing notes in the six months ended July 1, 2022 and July 2, 2021, respectively.

~~2026 Notes~~

We had senior notes with an aggregate principal amount of $300 million, which were due on February 15, 2026 and had an interest rate of 6.375%. Upon the completion of the Separation, the 2026 Notes were redeemed on April 7, 2022 at a redemption premium at 103.188% of the principal amount.

Other Indebtedness

In addition, we are party to ~~bilateral credit~~overdraft facilities with a borrowing capacity of $30.0 million. ~~As of July 1, 2022, there were $0.9 million in outstanding borrowings under these facilities.~~

~~We are also party to a letter of credit facility with an aggregate capacity of $30.0 million.~~ Total letters of credit and surety bonds of ~~$2.3~~$7.1 million ~~were~~are outstanding as of ~~July 1, 2022.~~March 31, 2023.

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

Cash Flows

As of ~~July 1, 2022,~~March 31, 2023, we had ~~$95.6~~$21.9 million of Cash and cash equivalents, a decrease of ~~$623.8~~$2.4 million from the balance as of December 31, ~~2021~~2022 of ~~$719.4~~$24.3 million. The Cash and cash equivalents as of December 31, 2021 include $39.1 million related to ESAB which was part of 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					Three Months Ended
		July 1, 2022		July 2, 2021			March 31, 2023		April 1, 2022
		(Dollars in millions)					(Dollars in millions)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	(39.3)	$	162.8	Net cash provided by (used in) operating activities	$	7.5	$	(14.4)
Purchases of property, plant and equipment		(47.8)		(44.6)
Purchases of property, plant and equipment and intangibles						Purchases of property, plant and equipment and intangibles	(30.4)		(24.1)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	2.7		3.2		Proceeds from sale of property, plant and equipment	—		2.7
Acquisitions, net of cash received, and investments	Acquisitions, net of cash received, and investments	(35.1)		(230.7)		Acquisitions, net of cash received, and investments	(3.9)		(13.8)

Net cash used in investing activities	Net cash used in investing activities	(80.2)		(272.1)		Net cash used in investing activities	(34.4)		(35.2)
Repayments of borrowings, net		(1,628.9)		(627.7)
Distribution from ESAB Corporation, net		1,143.4		—
Net borrowings (repayments) of debt						Net borrowings (repayments) of debt	24.9		(7.4)

Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	1.7		730.0		Proceeds from issuance of common stock, net	0.4		1.2
Payment of debt extinguishment costs		(12.7)		(24.4)

Deferred consideration payments and other	Deferred consideration payments and other	(9.8)		(6.2)		Deferred consideration payments and other	(0.8)		(4.6)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(506.3)		71.7		Net cash provided by (used in) financing activities	24.5		(10.8)
Effect of foreign exchange rates on Cash and cash equivalents	Effect of foreign exchange rates on Cash and cash equivalents	2.0		(1.1)		Effect of foreign exchange rates on Cash and cash equivalents	—		2.5
Increase (decrease) in Cash and cash equivalents	Increase (decrease) in Cash and cash equivalents	$	(623.8)	$	(38.8)	Increase (decrease) in Cash and cash equivalents	$	(2.4)	$	(57.9)

Cash provided by operating activities related to discontinued operations for the three months ended April 1, 2022 was $9.2 million.

Cash flows from operating activities can fluctuate significantly from period-to-period due to changes in working capital and the timing of payments for items such as restructuring and strategic transaction ~~costs such as Separation~~ costs. ~~Changes in significant operating~~Excluding the $9.2 million impact of discontinued operations, cash ~~flow items are discussed below.~~

•~~Year-to-date 2022 cash used in~~flows from operating activities ~~of $39.3~~increased $31.1 million ~~includes $107.5 million of outflows from working capital,~~year-over-year. This increase is primarily due to ~~business growth and increases~~a lower net loss from continuing operations of $15.2 million, a decrease in ~~inventory to insulate~~cash paid for ~~supply chain volatility. Results in the comparable prior year period include $47.6 million~~interest 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 was $122.6 million, which included no net outflows related to the Separation.

•During the six months ended July 1, 2022, cash payments of $53.8 million were made related to the Separation, of which $41.2 million is related to discontinued operations. The comparable amounts for the 2021 period were immaterial.

•Year-to-date 2022 cash used in operating activities also include $27.0 million of outflows relating to the Company’s former capital structure before giving effect to the completion of the refinancing transactions in connection with the Separation. The first six months of 2021 included $55.6 million of comparable outflows.

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

•~~During the six months ended July 1, 2022 and July 2, 2021, cash payments of $5.2~~$8.6 million, and ~~$3.4 million, respectively, were made related to our restructuring initiatives within our continuing operations.~~a lower decrease in accrued compensation and benefits.

Cash flows used in investing activities during the ~~six~~three months ended ~~July 1, 2022 of $80.2~~March 31, 2023 were $34.4 million ~~decreased~~ compared ~~with the $272.1~~to $35.2 million in the prior year ~~period due to lower outlays for acquisitions and investments.~~period. The amounts included in Purchases of property, plant and equipment and intangibles related to discontinued operations for the ~~six-month periods~~three months ended ~~July~~April 1, 2022 ~~and July 2, 2021~~ were $5.9 ~~million and $10.9 million, respectively.~~million. The amounts included in Proceeds from sale of property, plant and equipment related to discontinued operations for the ~~six-month periods~~three months ended ~~July~~April 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 related to discontinued operations for the six-month period ended July 2, 2021 was $4.9 million.

Cash flows provided by financing activities during the three months ended March 31, 2023 include $24.9 million of net debt borrowings. Cash flows used in financing activities ~~during~~for the ~~six~~three months ended ~~July~~April 1, 2022 ~~included $1.6 billion repayment~~include net debt repayments of ~~borrowings, which included the outstanding debt on our existing credit facility, 2026 Notes~~$7.4 million 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 offeringdeferred consideration payments of our Common stock on March 19, 2021. The net proceeds were used for the $600 million full redemption of our 2024 Notes and the $100 million partial redemption of our 2026 Notes in the second quarter of 2021.$3.0 million.

Critical Accounting Policies and Estimates

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 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 ~~2021~~2022 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 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 1, 2022~~March 31, 2023 are variable-rate facilities based on the Secured Overnight Financing Rate or 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 1, 2022~~March 31, 2023 would have increased Interest expense for our variable rate-based debt by approximately ~~$1.5 million and $4.9 million, respectively.~~$0.7 million.

Exchange Rate Risk

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 months ended ~~July~~March 31, 2023 and April 1, 2022, ~~and July 2, 2021,~~ approximately ~~30% and 25%~~33% of our sales were derived from operations outside the U.S. We have manufacturing operations in certain foreign countries including Mexico, Switzerland, Germany, Tunisia, and China. Sales are more highly weighted toward the U.S. dollar and Euro ~~and U.S. dollar.~~than other currencies. 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 may enter into currency swaps and forward contracts.

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.

4131

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 1, 2022.~~March 31, 2023. 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 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 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.

4232

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

There have been no material changes to the risk factors included in “Part I. Item 1A. Risk Factors” in our ~~2021~~2022 Form ~~10-K and “Part II. Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2022.~~10-K.

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

None.

4333

Item 6. Exhibits


Exhibit No.			Exhibit Description

3.01.1*			Amended and Restated Certificate of Incorporation.

3.01.2**			Certificate of Amendment to Amended and Restated Certificate of Incorporation

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

~~10.1~~			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 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 1, 2022~~March 31, 2023 is formatted in Inline XBRL (included as Exhibit 101).


*			Incorporated by reference to Exhibit 3.01 to 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 3.1 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 8, 2022.

***			Incorporated by reference to Exhibit ~~3.2~~3.02 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on ~~April 8,~~December 15, 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: Enovis Corporation

By:

/s/ Matthew L. Trerotola

~~President and~~ Chief Executive Officer and Director

Matthew L. Trerotola

(Principal Executive Officer)

~~August~~May 4, ~~2022~~2023

/s/ ~~Christopher M. Hix~~Phillip B. Berry

~~Executive~~Senior Vice President ~~Finance~~and Chief Financial Officer

~~Christopher M. Hix~~Phillip B. Berry

~~Chief Financial Officer~~

~~August 4, 2022~~

(Principal Financial Officer)

May 4, 2023

/s/ John Kleckner

Vice President, Controller and Chief Accounting Officer

John Kleckner

~~Chief Accounting Officer~~

~~August 4, 2022~~

(Principal Accounting Officer)

May 4, 2023

4535


	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		%


	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		%