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 September~~quarterly period ended June 30, ~~2022~~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 ~~October~~July 28, ~~2022,~~2023, there were ~~54,149,679~~54,539,676 shares of the registrant’s common stock, par value $.001 per share, outstanding.

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements			2
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Income (Loss)			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Equity			5
Condensed Consolidated Statements of Cash Flows			76
Notes to Condensed Consolidated Financial Statements			97
Note 1. General			97
Note 2. Recently Issued Accounting Pronouncements			107
Note 3. Discontinued Operations			108
Note 4. Acquisitions and Investments			118
Note 5. Revenue			1310
Note 6. Net ~~Income~~Loss Per Share from Continuing Operations			1511
Note 7. Income Taxes			1511
Note 8. Equity			1712
Note 9. Inventories, Net			1813
Note 10. Debt			1913
Note 11. Accrued Liabilities			2015
Note 12. Financial Instruments and Fair Value Measurements			2115
Note 13. Commitments and Contingencies			2217
Note 14. Segment Information			2217
~~Note 15. Related Party Transactions~~			24

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2519
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4535
Item 4. Controls and Procedures			4736

PART II - OTHER INFORMATION
Item 1. Legal Proceedings			4837
Item 1A. Risk Factors			4837
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4837
Item 3. Defaults Upon Senior Securities			4837
Item 4. Mine Safety Disclosures			4837
Item 5. Other Information			4837
Item 6. Exhibits			4938

SIGNATURES			5039

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				Nine Months Ended				Three Months Ended				Six Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021				June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022

Net sales	Net sales	$	383,814	$	359,923	$	1,154,388	$	1,027,130		Net sales	$	428,502	$	395,117	$	834,653	$	770,574
Cost of sales	Cost of sales	167,990		162,047		516,758		457,379			Cost of sales	180,143		179,211		351,229		348,768
Gross profit	Gross profit	215,824		197,876		637,630		569,751			Gross profit	248,359		215,906		483,424		421,806
Selling, general and administrative expense	Selling, general and administrative expense	182,187		168,270		564,324		487,220			Selling, general and administrative expense	207,881		193,657		415,046		382,137
Research and development expense	Research and development expense	15,599		12,458		46,102		33,860			Research and development expense	18,918		15,661		37,111		30,503
Amortization of acquired intangibles	Amortization of acquired intangibles	31,993		31,025		94,603		88,067			Amortization of acquired intangibles	32,249		31,824		64,289		62,610
Insurance settlement (gain) loss		975		—		(32,059)		—
Insurance settlement gain											Insurance settlement gain	—		(33,034)		—		(33,034)
Restructuring and other charges	Restructuring and other charges	2,989		2,230		7,653		5,193			Restructuring and other charges	3,805		2,245		6,440		4,664
Operating loss		(17,919)		(16,107)		(42,993)		(44,589)
Operating income (loss)											Operating income (loss)	(14,494)		5,553		(39,462)		(25,074)

Interest expense, net	Interest expense, net	6,334		4,122		17,944		22,751			Interest expense, net	4,076		4,546		9,728		11,610
Debt extinguishment charges	Debt extinguishment charges	—		—		20,104		29,870			Debt extinguishment charges	—		20,104		—		20,104
Unrealized (gain) loss on investment in ESAB Corporation		63,125		—		(72,412)		—
Realized gain on cost basis investment		(8,800)		—		(8,800)		—
Other income		(300)		—		(300)		—
Unrealized gain on investment in ESAB Corporation											Unrealized gain on investment in ESAB Corporation	—		(135,537)		—		(135,537)

Other expense, net											Other expense, net	753		—		92		—
Income (loss) from continuing operations before income taxes	Income (loss) from continuing operations before income taxes	(78,278)		(20,229)		471		(97,210)			Income (loss) from continuing operations before income taxes	(19,323)		116,440		(49,282)		78,749
Income tax benefit	Income tax benefit	(12,329)		(6,651)		(16,176)		(9,651)			Income tax benefit	(4,713)		(4,211)		(11,826)		(3,847)
Net income (loss) from continuing operations	Net income (loss) from continuing operations	(65,949)		(13,578)		16,647		(87,559)			Net income (loss) from continuing operations	(14,610)		120,651		(37,456)		82,596

Income (loss) from discontinued operations, net of taxes	Income (loss) from discontinued operations, net of taxes	(527)		40,435		10,163		164,358			Income (loss) from discontinued operations, net of taxes	4,797		(43,666)		4,485		10,690
Net income (loss)	Net income (loss)	(66,476)		26,857		26,810		76,799			Net income (loss)	(9,813)		76,985		(32,971)		93,286
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	136		191		533		836			Less: net income attributable to noncontrolling interest from continuing operations - net of taxes	182		130		374		397
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	—		818		966		2,399			Less: net income attributable to noncontrolling interest from discontinued operations - net of taxes	—		—		—		966
Net income (loss) attributable to Enovis Corporation	Net income (loss) attributable to Enovis Corporation	$	(66,612)	$	25,848	$	25,311	$	73,564		Net income (loss) attributable to Enovis Corporation	$	(9,995)	$	76,855	$	(33,345)	$	91,923
Net income (loss) per share - basic	Net income (loss) per share - basic										Net income (loss) per share - basic
Continuing operations	Continuing operations	$	(1.22)	$	(0.26)	$	0.30	$	(1.76)		Continuing operations	$	(0.27)	$	2.23	$	(0.70)	$	1.52
Discontinued operations	Discontinued operations	$	(0.01)	$	0.75	$	0.17	$	3.22		Discontinued operations	$	0.09	$	(0.81)	$	0.08	$	0.18
Consolidated operations	Consolidated operations	$	(1.23)	$	0.49	$	0.47	$	1.46		Consolidated operations	$	(0.18)	$	1.42	$	(0.61)	$	1.70
Net income (loss) per share - diluted	Net income (loss) per share - diluted										Net income (loss) per share - diluted
Continuing operations	Continuing operations	$	(1.22)	$	(0.26)	$	0.30	$	(1.76)		Continuing operations	$	(0.27)	$	2.21	$	(0.70)	$	1.51
Discontinued operations	Discontinued operations	$	(0.01)	$	0.75	$	0.17	$	3.22		Discontinued operations	$	0.09	$	(0.80)	$	0.08	$	0.18
Consolidated operations	Consolidated operations	$	(1.23)	$	0.49	$	0.46	$	1.46		Consolidated operations	$	(0.18)	$	1.41	$	(0.61)	$	1.69

See Notes to Condensed Consolidated Financial Statements.

ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Dollars in thousands

(Unaudited)


		Three Months Ended			Nine Months Ended							Three Months Ended	Six Months Ended
			September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021				June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
Net income (loss)	Net income (loss)		$	(66,476)	$	26,857	$	26,810	$	76,799	Net income (loss)		$	(9,813)	$	76,985	$	(32,971)	$	93,286
Other comprehensive income (loss):	Other comprehensive income (loss):										Other comprehensive income (loss):
Foreign currency translation, net of tax expense of $—, $1,948 , $338, and $5,124			(28,836)		(57,176)		(113,173)		(101,573)
Unrealized gain on hedging activities, net of tax expense of $—, $2,203, $2,711, $5,709			—		6,424		9,028		16,655
Foreign currency translation, net of tax expense of $—, $—, $— and $338											Foreign currency translation, net of tax expense of $—, $—, $— and $338		11,311		(30,876)		21,895		(84,337)
Unrealized gain (loss) on hedging activities, net of tax expense (benefit) of $(1,740), $—, $(1,740) and $2,711											Unrealized gain (loss) on hedging activities, net of tax expense (benefit) of $(1,740), $—, $(1,740) and $2,711		(5,449)		—		(5,449)		9,028

Amounts reclassified from Accumulated other comprehensive loss:	Amounts reclassified from Accumulated other comprehensive loss:										Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $—, $327, $199, $958			—		1,093		629		3,193
Amortization of pension and other post-retirement net actuarial gain (loss), net of tax expense (benefit) of $(41), $—, $(41) and $199											Amortization of pension and other post-retirement net actuarial gain (loss), net of tax expense (benefit) of $(41), $—, $(41) and $199		(882)		—		(882)		629

Other comprehensive income (loss)	Other comprehensive income (loss)		(28,836)		(49,659)		(103,516)		(81,725)		Other comprehensive income (loss)		4,980		(30,876)		15,564		(74,680)
Comprehensive income			(95,312)		(22,802)		(76,706)		(4,926)
Comprehensive income (loss)											Comprehensive income (loss)		(4,833)		46,109		(17,407)		18,606
Less: comprehensive income (loss) attributable to noncontrolling interest	Less: comprehensive income (loss) attributable to noncontrolling interest		(1,030)		1,373		(1,438)		2,046		Less: comprehensive income (loss) attributable to noncontrolling interest		190		(1,303)		406		(408)
Comprehensive loss attributable to Enovis Corporation			$	(94,282)	$	(24,175)	$	(75,268)	$	(6,972)
Comprehensive income (loss) attributable to Enovis Corporation											Comprehensive income (loss) attributable to Enovis Corporation		$	(5,023)	$	47,412	$	(17,813)	$	19,014

See Notes to Condensed Consolidated Financial Statements.

ENOVIS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

Dollars in thousands, except share amounts

(Unaudited)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	54,957	$	680,252	Cash and cash equivalents	$	32,491	$	24,295

Trade receivables, less allowance for credit losses of $7,516 and $6,589		258,823		254,958
Trade receivables, less allowance for credit losses of $8,158 and $7,965						Trade receivables, less allowance for credit losses of $8,158 and $7,965	298,976		267,380
Inventories, net	Inventories, net	416,872		356,233		Inventories, net	453,897		426,643
Prepaid expenses	Prepaid expenses	28,992		26,046		Prepaid expenses	26,758		28,550
Other current assets	Other current assets	48,293		29,176		Other current assets	75,117		48,155
Investment in ESAB Corporation		200,274		—
Total current assets associated with discontinued operations		—		956,614

Total current assets	Total current assets	1,008,211		2,303,279		Total current assets	887,239		795,023
Property, plant and equipment, net	Property, plant and equipment, net	225,176		235,113		Property, plant and equipment, net	260,754		236,741
Goodwill	Goodwill	1,959,795		1,934,258		Goodwill	2,034,087		1,983,588
Intangible assets, net	Intangible assets, net	1,116,539		1,154,028		Intangible assets, net	1,110,950		1,110,727
Lease asset - right of use	Lease asset - right of use	67,084		76,485		Lease asset - right of use	61,739		66,881
Other assets	Other assets	68,013		74,700		Other assets	88,784		80,288
Total non-current assets associated with discontinued operations		—		2,738,049

Total assets	Total assets	$	4,444,818	$	8,515,912	Total assets	$	4,443,553	$	4,273,248

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
CURRENT LIABILITIES:	CURRENT LIABILITIES:					CURRENT LIABILITIES:
Current portion of long-term debt	Current portion of long-term debt	$	449,223	$	7,701	Current portion of long-term debt	$	—	$	219,279
Accounts payable	Accounts payable	179,672		155,208		Accounts payable	147,180		135,628

Accrued liabilities	Accrued liabilities	225,021		225,391		Accrued liabilities	206,493		210,292
Total current liabilities associated with discontinued operations		—		635,284

Total current liabilities	Total current liabilities	853,916		1,023,584		Total current liabilities	353,673		565,199
Long-term debt, less current portion	Long-term debt, less current portion	—		2,078,625		Long-term debt, less current portion	400,000		40,000
Non-current lease liability	Non-current lease liability	52,032		56,549		Non-current lease liability	47,567		51,259
Other liabilities	Other liabilities	130,668		122,159		Other liabilities	191,553		166,989
Total non-current liabilities associated with discontinued operations		—		573,562

Total liabilities	Total liabilities	1,036,616		3,854,479		Total liabilities	992,793		823,447
Equity:	Equity:					Equity:
Common stock, $0.001 par value; 133,333,333 shares authorized; 54,148,315 and 52,083,078 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		54		52
Common stock, $0.001 par value; 133,333,333 shares authorized; 54,534,111 and 54,228,619 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively						Common stock, $0.001 par value; 133,333,333 shares authorized; 54,534,111 and 54,228,619 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	55		54
Additional paid-in capital	Additional paid-in capital	2,908,913		4,544,315		Additional paid-in capital	2,944,094		2,925,729
Retained earnings	Retained earnings	614,335		589,024		Retained earnings	542,387		575,732
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(116,611)		(516,013)		Accumulated other comprehensive loss	(37,898)		(53,430)
Total Enovis Corporation equity	Total Enovis Corporation equity	3,406,691		4,617,378		Total Enovis Corporation equity	3,448,638		3,448,085
Noncontrolling interest	Noncontrolling interest	1,511		44,055		Noncontrolling interest	2,122		1,716
Total equity	Total equity	3,408,202		4,661,433		Total equity	3,450,760		3,449,801
Total liabilities and equity	Total liabilities and equity	$	4,444,818	$	8,515,912	Total liabilities and equity	$	4,443,553	$	4,273,248

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 loss, 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
Net loss — — — (66,612) — 136 (66,476)
Other comprehensive loss, net of tax of $— — — — — (27,670) (1,166) (28,836)
Adjustments to distribution of ESAB Corporation — — 2,451 — — — 2,451
Acquisition — — — — — 345 345
Common stock-based award activity 37,197 — 9,255 — — — 9,255
Balance at September 30, 2022 54,148,315 $ 54 $ 2,908,913 $ 614,335 $ (116,611) $ 1,511 $ 3,408,202

~~See Notes to Condensed Consolidated Financial Statements.~~


	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
Net loss	—	—		—		(9,995)		—		182		(9,813)

Other comprehensive income, net of tax of $(1,781)	—	—		—		—		4,972		8		4,980


Common stock-based award activity	40,957	1		10,321		—		—		—		10,322
Balance at June 30, 2023	54,534,111	$	55	$	2,944,094	$	542,387	$	(37,898)	$	2,122	$	3,450,760

~~ENOVIS CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~Dollars in thousands, except share amounts~~


	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

~~(Unaudited)~~

Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total
Shares Amount
Balance at December 31, 2020 39,498,896 $ 40 $ 3,478,086 $ 517,367 $ (452,106) $ 44,487 $ 3,587,874
Net income — — — 19,074 — 1,166 20,240
Distributions to noncontrolling owners — — — — — (1,054) (1,054)
Other comprehensive loss, net of tax of $6,840 — — — — (39,621) (124) (39,745)
Conversion of tangible equity units into common stock 114,804 — — — — — —
Common stock offering, net of issuance costs 5,366,666 5 711,316 — — — 711,321
Common stock-based award activity 218,744 — 12,433 — — — 12,433
Balance at April 2, 2021 45,199,110 45 4,201,835 536,441 (491,727) 44,475 4,291,069
Net income — — — 28,642 — 1,060 29,702
Other comprehensive income (loss), net of tax of $473 — — — — 9,108 (1,429) 7,679
Conversion of tangible equity units into common stock 2,058,000 2 (2) — — — —
Common stock-based award activity 190,105 — 23,510 — — — 23,510
Balance at July 2, 2021 47,447,215 47 4,225,343 565,083 (482,619) 44,106 4,351,960
Net income — — — 25,848 — 1,009 26,857
Distributions to noncontrolling owners — — — — — (1,496) (1,496)
Other comprehensive income (loss), net of tax of $4,478 — — — — (50,023) 364 (49,659)
Conversion of tangible equity units into common stock 1,845,700 2 (2) — — — —
Common stock issued for acquisition, net of issuance costs 2,181,507 3 285,678 — — — 285,681
Common stock-based award activity 119,525 — 17,181 — — — 17,181
Balance at October 1, 2021 51,593,947 $ 52 $ 4,528,200 $ 590,931 $ (532,642) $ 43,983 $ 4,630,524

See Notes to Condensed Consolidated Financial Statements.

ENOVIS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in thousands

(Unaudited)


		Nine Months Ended					Six Months Ended
		September 30, 2022		October 1, 2021			June 30, 2023		July 1, 2022

Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income		$	26,810	$	76,799
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Net income (loss)						Net income (loss)	$	(32,971)	$	93,286
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:						Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation, amortization and other impairment charges	Depreciation, amortization and other impairment charges	167,453		197,641		Depreciation, amortization and other impairment charges	105,033		117,300
Stock-based compensation expense	Stock-based compensation expense	27,799		26,235		Stock-based compensation expense	16,981		19,793
Non-cash interest expense	Non-cash interest expense	3,021		3,757		Non-cash interest expense	1,481		1,658

Unrealized gain on investment in ESAB Corporation	Unrealized gain on investment in ESAB Corporation	(72,412)		—		Unrealized gain on investment in ESAB Corporation	—		(135,537)
Realized gain on cost basis investment		(8,800)		—
Debt extinguishment charges	Debt extinguishment charges	20,104		29,870		Debt extinguishment charges	—		20,104
Deferred income tax expense (benefit)	Deferred income tax expense (benefit)	(3,458)		(5,904)		Deferred income tax expense (benefit)	(107)		2,174
(Gain)/Loss on sale of property, plant and equipment		352		(1,483)
Loss on sale of property, plant and equipment						Loss on sale of property, plant and equipment	533		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	(43,315)		(70,407)		Trade receivables, net	(25,912)		(33,123)
Inventories, net	Inventories, net	(119,145)		(130,348)		Inventories, net	(10,476)		(92,910)
Accounts payable	Accounts payable	34,147		143,694		Accounts payable	8,324		15,919

Other operating assets and liabilities	Other operating assets and liabilities	(52,459)		(9,971)		Other operating assets and liabilities	(27,326)		(48,329)
Net cash (used in) provided by operating activities		(19,903)		259,883
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	35,560		(39,313)
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	(68,668)		(73,595)		Purchases of property, plant and equipment and intangibles	(67,248)		(47,796)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	2,746		2,908		Proceeds from sale of property, plant and equipment	—		2,746
Acquisitions, net of cash received, and investments	Acquisitions, net of cash received, and investments	(73,390)		(222,961)		Acquisitions, net of cash received, and investments	(98,740)		(35,123)

Net cash used in investing activities	Net cash used in investing activities	(139,312)		(293,648)		Net cash used in investing activities	(165,988)		(80,173)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from borrowings on term credit facility		450,000		515,696

Payments under term credit facility	Payments under term credit facility	(785,000)		—		Payments under term credit facility	(219,468)		(785,000)
Proceeds from borrowings on revolving credit facilities and other						Proceeds from borrowings on revolving credit facilities and other	370,000		450,000
Repayments of borrowings on revolving credit facilities and other						Repayments of borrowings on revolving credit facilities and other	(11,538)		(607,618)
Repayments of borrowings on Euro senior notes						Repayments of borrowings on Euro senior notes	—		(386,278)
Repayments of borrowings on Senior notes						Repayments of borrowings on Senior notes	—		(300,000)
Distribution from ESAB Corporation, net						Distribution from ESAB Corporation, net	—		1,143,369

Repayments of borrowings on revolving credit facilities and other		(608,877)		(409,961)
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	2,530		738,177		Proceeds from issuance of common stock, net	1,385		1,727

Payment of debt extinguishment costs	Payment of debt extinguishment costs	(12,704)		(24,375)		Payment of debt extinguishment costs	—		(12,704)
Deferred consideration payments and other	Deferred consideration payments and other	(6,857)		(7,700)		Deferred consideration payments and other	(1,668)		(9,795)
Net cash (used in) provided by financing activities		(506,755)		111,837
Effect of foreign exchange rates on Cash and cash equivalents and Restricted Cash		1,557		(1,659)
(Decrease) increase in Cash and cash equivalents and Restricted cash		(664,413)		76,413
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	138,711		(506,299)
Effect of foreign exchange rates on Cash and cash equivalents						Effect of foreign exchange rates on Cash and cash equivalents	(87)		2,020
Increase (decrease) in Cash and cash equivalents						Increase (decrease) in Cash and cash equivalents	8,196		(623,765)
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	$	54,957	$	177,482	Cash and cash equivalents, end of period	$	32,491	$	95,605

Supplemental disclosures:
Common stock issued for acquisition, net of issuance costs		$	—	$	285,681

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 two differentiated, independent, and publicly traded companies on April 4, 2022 as discussed below. 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.

~~On April 4, 2022 (the “Distribution Date”), the Company 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 one share of ESAB common stock for every three shares of Colfax common stock held at the close of business on March 22, 2022, with the Company retaining 10% of the shares of ESAB common stock immediately following the Separation. At September 30, 2022, the Company’s investment in ESAB was measured at fair value based on ESAB’s closing stock price, and was valued at $200.3 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~~the Company retained ~~the Company’s~~its specialty medical technology business, changed its name to Enovis ~~Corporation. On April 5, 2022, the Company~~Corporation, and began trading under the stock symbol “ENOV” on the New York Stock ~~Exchange.~~

~~Since the Separation occurred in the second quarter of 2022,~~Exchange on April 5, 2022. Enovis ~~has classified its fabrication~~is an innovation-driven medical technology ~~business as a discontinued operation in its historical financial statements for all periods presented.~~

~~Following the completion of the Separation, the~~growth company dedicated to developing clinically differentiated solutions that generate measurably better patient outcomes and transform workflows. The Company ~~revised its reporting structure to now conduct~~conducts its business through two operating segments, “Prevention ~~and~~& Recovery”~~, which consists of the Company’s bracing, recovery sciences, and footcare product lines,~~ and “Reconstructive”~~, which includes~~. The Prevention & Recovery segment provides orthopedic and recovery science solutions, including devices, software, and services across the ~~Company’s~~patient care continuum from injury prevention to rehabilitation after surgery, injury, or from degenerative disease. The Reconstructive segment provides surgical implant ~~product lines.~~

~~In connection with~~solutions, offering a comprehensive suite of reconstructive joint products for the Separation, ESAB issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to Enovis. The distribution proceeds were used by Enovis in conjunction with $450 million of borrowings on a term loan (the “Enovis Term Loan”) under the new Enovis credit facility (the “Enovis Credit Agreement”),hip, knee, shoulder, elbow, foot, ankle, and ~~$52.3 million of cash on hand to repay $1.4 billion of outstanding debt~~finger and accrued interest under the Company’s previous credit agreement, which was legally extinguished upon completion of the Separation, $302.8 million of outstanding debt and accrued interest on its 2026 Notes at a redemption price of 103.188% of the principal amount, and other fees and expenses due at closing. Additionally, on April 7, 2022, the Company completed a full redemption of its €350 million principal 3.250% Euro Senior Notes due 2025 using cash on hand at a redemption price of 100.813% of the principal amount.

Immediately following the Separation, the Company effected a one-for-three reverse stock split of all issued and outstanding shares of Enovis common stock. As a result of the 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.surgical productivity tools.

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. COVID-19, 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 periodic surges in cases, the extent and period of recovery, 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 ~~nine~~six months ended ~~September~~June 30, ~~2022.~~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.

3. Discontinued Operations

The Company’s discontinued operations include the following: (1) operating results of ESAB Corporation (“ESAB”) prior to Separation, ~~of Fabrication Technology Business~~(2) charges related to previously retained asbestos contingencies from certain divested businesses for which we did not retain an interest in the ongoing operations that were fully transferred to ESAB in conjunction with the Separation, and (3) certain expenses related to the Separation and prior divestitures.

On April 4, 2022, the Company completed the Separation of its fabrication technology business into an independent, publicly traded company: ESAB, a global organization that develops, manufactures and supplies consumable welding and cutting products and equipment, as well as gas control equipment, into diversified end markets such as medical and alternative energy. The 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 one share of ESAB for every three shares of Enovis stock they owned on the Record Date.

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


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

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

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

~~(1)Total assets and liabilities include asbestos-related contingencies and insurance coverages previously reported as discontinued operations. See~~ ~~Asbestos Contingencies~~ ~~section below for more information.~~

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~

The financial results of the discontinued operations for the three and nine months ended September 30, 2022 and October 1, 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 Company’s discontinued operations:

Three Months Ended Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
(in thousands)
Net sales $ — $ 605,968 $ 647,911 $ 1,803,900
Cost of sales — 398,973 423,580 1,178,719
Selling, general and administrative expense 527 124,313 175,191 382,037
Restructuring and other charges — 4,227 5,304 10,790
Operating income (loss) (527) 78,455 43,836 232,354
Interest expense — 9,417 8,035 34,254
Pension settlement gain — — — (11,208)
Income (loss) from discontinued operations before income taxes (527) 69,038 35,801 209,308
Income tax expense — 28,603 25,638 44,950
Income (loss) from discontinued operations, net of taxes $ (527) $ 40,435 $ 10,163 $ 164,358


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 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)	5,600		35,463		6,011		45,941
Operating (loss) income	(5,600)		(35,463)		(6,011)		44,363
Interest expense(2)	—		—		—		8,035


(Loss) income from discontinued operations before income taxes	(5,600)		(35,463)		(6,011)		36,328
Income tax (benefit) expense(3)	(10,397)		8,203		(10,496)		25,638
(Loss) income from discontinued operations, net of taxes	$	4,797	$	(43,666)	$	4,485	$	10,690

(1)

~~Total income attributable to noncontrolling interest related to ESAB, net of taxes was $1.0 million~~Divestiture-related expenses include a charge for the ~~nine months ended September 30, 2022, and $0.8 million and $2.4 million~~release of a tax indemnification with ESAB for the three and ~~nine~~six months ended ~~October~~June 30, 2023, and charges of $35.3 million and $45.0 million associated with the Separation for the three and six months ended July 1, ~~2021,~~2022, respectively.

(2) 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 the debt repaid at the time of the Separation.

(3) Includes benefit of release of uncertain tax positions for the three and six months ended June 30, 2023.

Cash used in operating activities related to discontinued operations for the ~~nine~~six months ended ~~September 30,~~July 1, 2022 was ~~$31.9 million. Cash provided by operating activities related to discontinued operations for the nine months ended October 1, 2021 was $198.8~~$26.2 million. Cash used in investing activities related to discontinued operations for the ~~nine~~six months ended ~~September 30,~~July 1, 2022 ~~and October 1, 2021~~ was $3.2 ~~million and $22.7 million, respectively.~~million.

~~Asbestos Contingencies~~

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

118

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

4. Acquisitions and Investments

~~2022~~2023 Acquisitions

~~During the nine months ended September 30, 2022,~~On June 28, 2023, the Company completed ~~four asset acquisitions, two business combinations,~~the Novastep acquisition in its Reconstructive segment, a leading player in Minimally Invasive Surgery (MIS) foot and ~~one investment, which~~ankle solutions with a best-in-class MIS bunion system serving a rapidly growing portion of the global bunion segment. The acquisition is ~~carried at cost as it does not have a readily determinable fair value. Two~~accounted for under the acquisition method of ~~these transactions were completed~~accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the acquisition date. The Company paid $96.9 million for the acquisition, net of cash received. The Company has allocated $39.8 million to goodwill and $52 million to intangible assets acquired. The acquisition accounting reflects our preliminary estimates and are subject to adjustment. The acquired goodwill value is primarily driven by the ~~Company’s Reconstructive segment, and the other five transactions were completed by the Prevention~~expected synergies from cross-selling Novastep products to existing Enovis foot & ~~Recovery segment.~~ankle customers. The ~~asset acquisitions broaden the Company’s~~acquisition broadens our reconstructive product ~~offering and distribution network. Aggregate purchase consideration~~offerings for the ~~four asset acquisitions was $22.3~~foot and ankle market and expands our customer base in Europe. Purchase accounting procedures are ongoing and revisions may be recorded in future periods during the measurement period.

In April 2023, the Company entered into a definitive agreement to acquire the SEAL external fixation product line from D.N.E., LLC. The transaction closed on July 20, 2023 for a purchase price of $28 million, ~~of which $12.6 million was paid in cash and $9.6 million consists of deferred and contingent consideration. The investment was acquired for $10.0 million in cash consideration.~~subject to working capital adjustments.

2022 Acquisitions

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. 360 Med Care is 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 expected results over future revenue targets. The Company has ~~preliminarily~~ allocated ~~$13~~$16.3 million to goodwill and $18.2 million to intangible assets acquired. ~~Purchase~~The purchase price 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 measurement period.~~this acquisition was finalized. 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.

~~Enovis~~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 amount payable under the agreement based on Insight’s achievement of certain milestones related to ARVIS. ~~As of September 30, 2022, Enovis~~The Company holds a 99.5% interest in Insight and ~~recognizes~~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. The purchase price accounting for this acquisition was finalized. 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 adjustments for working capital true-ups 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 ~~its~~ fair value, resulting in a $8.8 million ~~gain.~~gain in the fourth quarter of 2022.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

During the six months ended July 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.

Investments

As of ~~September~~June 30, ~~2022,~~2023, the balance of investments held by the ~~company~~Company without readily determinable fair values ~~was $16.5 million.~~was $20.7 million. The investments are carried at cost minus impairments, if any, plus adjustments for fair value indicators from observable price changes in orderly transactions for the identical or similar investment of the same issuer. There have been no impairments or upward adjustments in the current year or since acquisition of the investments except for the gain on our previously held equity investment in Insight discussed above. As a result of acquiring control of Insight, Enovis now consolidates the assets, liabilities, and results of operations of Insight and therefore current year and previous investments in Insight of $16.6 million are no longer recorded as cost basisthese investments.

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~

The Company holds equity securities in ESAB Corporation with a total value of $200.3 million, which are recorded at fair value. During the three and nine months ended September 30, 2022, the Company recorded an unrealized loss of $63.1 million and an unrealized gain of $72.4 million over cost basis, respectively. The Company does not hold other equity securities measured at fair value.

~~2021 Acquisitions~~

During the nine months ended October 1, 2021, the Company completed three business combinations and one asset acquisition in its Reconstructive segment for aggregate net cash consideration of $196.4 million and one asset acquisition in its Prevention and Recovery segment for cash consideration of $4 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 of each business combination.

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 nine months ended October 1, 2021 has been completed. The Company also made two investments in medical technology businesses during the nine months ended October 1, 2021 for a total of $14.8 million, one of which was a previous investment in Insight for $13.3 million. The Insight investment is now consolidated as part of the acquisition discussed above and the other investment is carried at cost as of September 30, 2022, as it does 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 accounting procedures for this acquisition have been completed and the finalized allocation is presented below. 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.

~~July 28, 2021~~

~~(In thousands)~~

~~Trade receivables~~

~~19,578~~

~~Inventories~~

~~76,824~~

~~Property, plant and equipment~~

~~58,465~~

~~Goodwill~~

~~92,438~~

~~Intangible assets~~

~~106,000~~

~~Accounts payable~~

~~(4,808)~~

~~Other assets and liabilities, net~~

~~(77,494)~~

~~Consideration, net of cash acquired~~

~~271,003~~

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~~


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
	(In thousands)
Prevention & Recovery:
U.S. Bracing & Support	$	114,963	$	111,185	$	219,338	$	214,220
U.S. Other P&R	67,729		65,296		130,076		123,010
International P&R(1)	90,783		87,302		174,801		171,388
Total Prevention & Recovery	273,475		263,783		524,215		508,618

Reconstructive:
U.S. Reconstructive	106,146		90,643		209,638		179,122
International Reconstructive	48,881		40,691		100,800		82,834
Total Reconstructive	155,027		131,334		310,438		261,956

Total	$	428,502	$	395,117	$	834,653	$	770,574

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

~~(Unaudited)~~

(1)

Includes favorable currency impact of $0.1 million and unfavorable currency impacts of $4.1 million for the three and six months ended June 30, 2023, respectively.

Three Months Ended Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
(In thousands)
Prevention and Recovery $ 256,502 $ 256,229 $ 765,121 $ 757,822
Reconstructive 127,312 103,694 389,267 269,308
Total $ 383,814 $ 359,923 $ 1,154,388 $ 1,027,130

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 September 30, 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.

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

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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.

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:

Nine Months Ended September 30, 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 $ 3,345 $ (2,027) $ (391) $ 7,516


	Six Months Ended June 30, 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	$	1,844	$	(1,709)	$	58	$	8,158

~~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			Nine Months Ended							Three Months Ended	Six Months Ended
			September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021				June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
			(In thousands, except share and per share data)										(In thousands, except share and per share data)
Computation of Net income (loss) per share from continuing operations - basic:	Computation of Net income (loss) per share from continuing operations - basic:										Computation of Net income (loss) per share from continuing operations - basic:
Net income (loss) from continuing operations attributable to Enovis Corporation(1)	Net income (loss) from continuing operations attributable to Enovis Corporation(1)		$	(66,085)	$	(13,769)	$	16,114	$	(88,395)	Net income (loss) from continuing operations attributable to Enovis Corporation(1)		$	(14,792)	$	120,521	$	(37,830)	$	82,199
Weighted-average shares of Common stock outstanding – basic	Weighted-average shares of Common stock outstanding – basic		54,136,889		53,031,128		54,025,144		50,274,020		Weighted-average shares of Common stock outstanding – basic		54,510,688		54,080,549		54,418,554		53,969,738
Net income (loss) per share from continuing operations – basic	Net income (loss) per share from continuing operations – basic		$	(1.22)	$	(0.26)	$	0.30	$	(1.76)	Net income (loss) per share from continuing operations – basic		$	(0.27)	$	2.23	$	(0.70)	$	1.52

Computation of Net income (loss) per share from continuing operations - diluted:	Computation of Net income (loss) per share from continuing operations - diluted:										Computation of Net income (loss) per share from continuing operations - diluted:
Net income (loss) from continuing operations attributable to Enovis Corporation(1)	Net income (loss) from continuing operations attributable to Enovis Corporation(1)		$	(66,085)	$	(13,769)	$	16,114	$	(88,395)	Net income (loss) from continuing operations attributable to Enovis Corporation(1)		$	(14,792)	$	120,521	$	(37,830)	$	82,199
Weighted-average shares of Common stock outstanding – basic	Weighted-average shares of Common stock outstanding – basic		54,136,889		53,031,128		54,025,144		50,274,020		Weighted-average shares of Common stock outstanding – basic		54,510,688		54,080,549		54,418,554		53,969,738
Net effect of potentially dilutive securities - stock options and restricted stock units	Net effect of potentially dilutive securities - stock options and restricted stock units		—		—		434,859		—		Net effect of potentially dilutive securities - stock options and restricted stock units		—		441,300		—		489,134
Weighted-average shares of Common stock outstanding – diluted	Weighted-average shares of Common stock outstanding – diluted		54,136,889		53,031,128		54,460,003		50,274,020		Weighted-average shares of Common stock outstanding – diluted		54,510,688		54,521,849		54,418,554		54,458,872
Net income (loss) per share from continuing operations – diluted	Net income (loss) per share from continuing operations – diluted		$	(1.22)	$	(0.26)	$	0.30	$	(1.76)	Net income (loss) per share from continuing operations – diluted		$	(0.27)	$	2.21	$	(0.70)	$	1.51

(1) Net income (loss) from continuing operations attributable to Enovis Corporation for the respective periods is calculated using Net income (loss) from continuing operations less the continuing operations component of the income attributable to noncontrolling interest, net of taxes, of ~~$0.1~~$0.2 million and ~~$0.5~~$0.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, respectively,~~2023 and ~~$0.2~~$0.1 million and ~~$0.8~~$0.4 million for the three and ~~nine~~six months ended ~~October~~July 1, ~~2021, respectively.~~2022.

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 nine months ended September 30, 2022 and the three and nine months ended October 1, 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 the issued shares are included in the Common stock issued and outstanding as of September 30, 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 both the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 excludes ~~0.5~~1.2 million ~~and 0.4 million, respectively, of~~shares 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 both the three and ~~nine~~six months ended ~~October~~July 1, ~~2021~~2022 excludes ~~0.3 million and~~ 0.4 million ~~respectively, of~~shares underlying outstanding stock-based compensation awards, as their inclusion would be anti-dilutive.

~~7. Income Taxes~~

1511

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

7. Income Taxes

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, Income (loss)~~2023, Loss from continuing operations before income taxes was ~~$(78.3)~~$19.3 million and ~~$0.5~~$49.3 million, ~~respectively,~~ while Income tax benefit was ~~$12.3~~$4.7 million and ~~$16.2~~$11.8 million, respectively. The effective tax rate was ~~15.8%~~24.4% and ~~(3,434.4)~~24.0% for the three and six months ended June 30, 2023, both of which differed from the 2023 federal statutory rate of 21% mainly due to non-U.S. income taxed at lower rates, release of valuation allowance on non-U.S. attributes, tax credits for research and development, and release of uncertain tax positions. This was offset by other non-deductible expenses and U.S. taxation on international operations.

During the three and six months ended July 1, 2022, Income from continuing operations before income taxes was $116.4 million and $78.7 million, while Income tax benefit was $4.2 million and $3.8 million, respectively. The effective tax rate was (3.6)% and (4.9)% for the three and ~~nine~~six months ended ~~September 30,~~July 1, 2022, both of which differed from the 2022 U.S. federal statutory rate of 21% mainly due to ~~non-taxable~~non-deductible unrealized gains on the investment in ESAB ~~and non-taxable realized gain on cost basis investment~~ offset by non-deductible costs related to the tax-free separation transaction.

During the three and nine months ended October 1, 2021, Loss from continuing operations before income taxes was $20.2 million and $97.2 million, respectively, while Income tax benefit was $6.7 million and $9.7 million, respectively. The effective tax rate was 32.9% and 9.9% for the three and nine months ended October 1, 2021, respectively, both of which differed from the 2021 U.S. federal statutory rate of 21% mainly due to U.S. taxation on international operations and other non-deductible expenses.

~~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 ~~September~~June 30, ~~2022,~~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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~October~~July 1, ~~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 Benefit Cost		Foreign Currency Translation Adjustment		Unrealized Loss on Hedging Activities		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		(88,927)		—		(88,457)		Foreign currency translation adjustment	383		21,480		—		21,863
Loss on long-term intra-entity foreign currency transactions		—		(21,779)		—		(21,779)
Gain on net investment hedges		—		—		9,028		9,028

Loss on net investment hedges										Loss on net investment hedges	—		—		(5,449)		(5,449)

Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	470		(110,706)		9,028		(101,208)		Other comprehensive income (loss) before reclassifications	383		21,480		(5,449)		16,414
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)	(882)		—		—		(882)

Net Other comprehensive income (loss)	Net Other comprehensive income (loss)	1,099		(110,706)		9,028		(100,579)		Net Other comprehensive income (loss)	(499)		21,480		(5,449)		15,532
Distribution of ESAB Corporation		84,460		469,220		(53,699)		499,981
Balance at September 30, 2022		$	—	$	(116,611)	$	—	$	(116,611)

Balance at June 30, 2023										Balance at June 30, 2023	$	11,708	$	(44,157)	$	(5,449)	$	(37,898)

1712

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 1,089 (124,824) (2,582) (126,317)
Gain on long-term intra-entity foreign currency transactions — 25,933 — 25,933
Gain on net investment hedges — — 16,655 16,655
Other comprehensive income (loss) before reclassifications 1,089 (98,891) 14,073 (83,729)
Amounts reclassified from Accumulated other comprehensive loss 3,193 — — 3,193
Net Other comprehensive income (loss) 4,282 (98,891) 14,073 (80,536)
Balance at October 1, 2021 $ (108,501) $ (459,868) $ 35,727 $ (532,642)

~~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 3.0 million TEU prepaid stock purchase contracts were settled into approximately 1.7 million and 4.0 million shares of Company common stock~~ ~~as adjusted for the reverse split, during the nine months ended~~ September 30, 2022 and October 1, 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.


	Accumulated Other Comprehensive Loss Components
	Net Unrecognized Pension and Other Post-Retirement Benefit Cost		Foreign Currency Translation Adjustment		Unrealized Gain on Hedging Activities		Total
	(In thousands)
Balance at January 1, 2022	$	(85,559)	$	(475,125)	$	44,671	$	(516,013)

Other comprehensive income (loss) before reclassifications:

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


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

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

9. Inventories, Net

Inventories, net consisted of the following:


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In thousands)					(In thousands)
Raw materials	Raw materials	$	98,384	$	66,824	Raw materials	$	98,223	$	100,038
Work in process	Work in process	28,021		29,506		Work in process	32,838		28,164
Finished goods	Finished goods	338,956		298,450		Finished goods	383,815		357,143
		465,361		394,780			514,876		485,345
Less: allowance for excess, slow-moving and obsolete inventory	Less: allowance for excess, slow-moving and obsolete inventory	(48,489)		(38,547)		Less: allowance for excess, slow-moving and obsolete inventory	(60,979)		(58,702)
		$	416,872	$	356,233		$	453,897	$	426,643

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~

10. Debt

Long-term debt consisted of the following:


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(In thousands)					(In thousands)
Term loan	Term loan	$	449,223	$	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	—		603,932		Revolving credit facilities and other	400,000		40,000
Total debt	Total debt	449,223		2,086,326		Total debt	400,000		259,279
Less: current portion	Less: current portion	(449,223)		(7,701)		Less: current portion	—		(219,279)
Long-term debt	Long-term debt	$	—	$	2,078,625	Long-term debt	$	400,000	$	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 (the “Euro Senior Notes”) and its 6.375% Senior Notes due ~~2026.~~2026 (the “2026 Notes”). As a result of these changes, the Company recorded Debt extinguishment charges of $20.1 million in the second quarter of 2022,

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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~~date. The Enovis Credit Agreement also had a term loan with an initial aggregate principal amount of $450 million ~~and an April 4, 2023 maturity date~~which has been fully extinguished (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 Enovis Term Loan outstanding under the Enovis 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:~~3.75:1.00 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 withfor the fiscal quarter ending June 30, 2023, ~~3.75:~~stepping down 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.~~Credit Agreement. As of ~~September~~June 30, ~~2022,~~2023, the Company was in compliance with the covenants under the Enovis Credit Agreement.

As of ~~September~~June 30, ~~2022,~~2023, the weighted-average interest rate of borrowings under the Enovis Credit Agreement was ~~3.98%~~6.32%, excluding accretion of original issue discount and deferred financing fees, and there was $~~900~~500 million available on the Revolver.

The Company has $4.0 million in deferred financing fees recorded in conjunction with the Enovis Credit Agreement as of June 30, 2023, which are being accreted to Interest expense, net primarily using a straight-line 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 at a 100.813% redemption premium after the completion of the Separation.

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

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~

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 $18.6 million~~ of principal on the TEU amortizing notes in ~~the nine months ended September 30, 2022 and October 1, 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 at a 103.188% redemption premium after the completion of the Separation.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Other Indebtedness

In addition to the debt agreements discussed above, the Company is party to overdraft facilities with a borrowing capacity of $30.0 million.

~~The Company is party to a letter of credit facility with a capacity of $15.0 million.~~ Total letters of credit and surety bonds of ~~$6.6~~$6.9 million were outstanding as of ~~September~~June 30, ~~2022.~~

2023.

~~Deferred Financing Fees~~

In total, the Company had deferred financing fees of $5.6 million included in its Condensed Consolidated Balance Sheet as of September 30, 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.

11. Accrued Liabilities

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

September 30, 2022 December 31, 2021
(In thousands)
Accrued compensation and related benefits $ 66,662 $ 66,290
Accrued taxes 12,675 12,970
Accrued freight 7,448 5,299
Contingent consideration - current portion 8,737 1,816
Warranty liability 2,608 2,503
Accrued restructuring liability 1,711 2,170
Accrued third-party commissions 25,128 22,362
Customer advances and billings in excess of costs incurred 3,113 9,203
Lease liability - current portion 23,847 21,936
Accrued interest 633 11,066
Accrued rebates 10,449 12,584
Accrued professional fees 14,946 13,711
Accrued royalties 4,839 5,045
Other 42,225 38,436
$ 225,021 $ 225,391

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~


	June 30, 2023		December 31, 2022
	(In thousands)
Accrued compensation and related benefits	$	52,814	$	51,384
Accrued taxes	16,288		13,676
Accrued freight	4,533		3,955
Contingent consideration - current portion	7,832		8,812
Warranty liability- current portion	2,826		2,804
Accrued restructuring liability	1,057		1,090
Accrued third-party commissions	25,643		24,958
Customer advances and billings in excess of costs incurred	3,423		3,560
Lease liability - current portion	22,278		24,281
Accrued interest	545		2,921
Accrued rebates	9,277		13,715
Accrued professional fees	8,774		15,670
Accrued royalties	5,892		5,777
Other	45,311		37,689
	$	206,493	$	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:


		Nine Months Ended September 30, 2022						Six Months Ended June 30, 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 charges:	Restructuring and other charges:										Restructuring and other charges:
Termination benefits(1)	Termination benefits(1)	$	2,470	$	2,606	$	(3,430)		$	1,646	Termination benefits(1)	$	972	$	3,122	$	(3,096)	$	998
Facility closure costs and other(2)	Facility closure costs and other(2)	358		5,299		(5,592)			65		Facility closure costs and other(2)	118		3,318		(3,377)		59
Total	Total	$	2,828	7,905		$	(9,022)		$	1,711	Total	$	1,090	6,440		$	(6,473)	$	1,057
Non-cash charges(2)	Non-cash charges(2)			592							Non-cash charges(2)			301
Total Provisions(3)	Total Provisions(3)			$	8,497						Total Provisions(3)			$	6,741

(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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~, ~~$4.7~~2023, $3.3 million and ~~$3.8~~$3.4 million of th~~of the~~e Company’s total provisions were related to the Prevention ~~and~~& Recovery and Reconstructive segments, respectively. Restructuring and other 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 ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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 ~~$0.4 billion and $2.1 billion~~$400.0 million as of ~~September~~June 30, ~~2022 and December 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.

As of ~~September~~June 30, ~~2022,~~2023, the Company held ~~$29.4~~$21.6 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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 the ~~company~~Company recorded a reduction in contingent consideration of ~~$24.4~~$0.8 million due to a final agreement on the payout from an acquisition in ~~conjunction with current acquisitions.~~2020 and payments of $0.9 million, offset by increases for interest accretion and effect of foreign currency. The gross range of outcomes for contingent consideration arrangements that have a fixed limit on the maximum payout is zero to $10.0 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 ~~nine~~six months ended ~~September~~June 30, ~~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 September 30, 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 nine months ended September 30, 2022. At September 30, 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 September 30, 2022 was $200.3 million, and there was an

~~ENOVIS CORPORATION~~

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

~~(Unaudited)~~

~~unrealized loss on investment of $63.1 million for the three months ended September 30, 2022 and an unrealized gain on investment of $72.4 million for the nine months ended September 30, 2022.~~2023.

Deferred Compensation Plans

The Company maintains deferred compensation plans for the benefit of certain employees and non-executive officers. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 the fair value of these plans were ~~$9.4~~$13.5 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 ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had foreign currency contracts related to purchases and sales with notional values of ~~$2.8~~$0.0 million and ~~$7.6~~$0.8 million, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company recognized an unrealized gain of $0.0 million and realized loss of ~~$0.2~~$1.4 million ~~related to its derivative instruments. During the three and nine months ended September 30, 2022, the Company recognized realized losses of $0.1 million and $0.3 million, respectively,~~ on its Condensed Consolidated Statements of Operations related to its derivative instruments. The realized loss is recorded in Other expense, net on Condensed Consolidated Statements of Operations.

Net investment hedges

On April 18, 2023, the Company entered into cross-currency swap agreements to hedge its net investment in its Swiss Franc-denominated subsidiaries against adverse movements in exchange rates between the U.S. Dollar and the Swiss Franc. These swap agreements are designated and qualify as net investment hedges. These contracts have a Swiss Franc notional amount of approximately ₣403 million and a U.S. Dollar aggregate notional amount of $450 million at June 30, 2023.

Cross-currency swaps involve the receipt of functional-currency fixed-rate amounts from a counterparty in exchange for the Company making foreign-currency fixed-rate payments over the life of the agreement. For derivatives designated as net investment hedges, the gain or loss on the derivative is reported in Accumulated other comprehensive income (loss) in the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss) as part of the cumulative translation adjustment. Amounts are reclassified out of Accumulated other comprehensive loss into earnings when the hedged net investment is either sold or substantially liquidated.

ENOVIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

During the three and six months ended June 30, 2023, the Company received interest income on its Cross-currency swap derivatives of $2.1 million, which is included within Interest expense, net in the Condensed Consolidated Statements of Operations.

The following table presents the amount of loss recognized in Other comprehensive loss for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended				Six Months Ended
	June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
	(In thousands)
Loss on cross-currency swaps	$	(7,189)	$	—	$	(7,189)	$	—
	$	(7,189)	$	—	$	(7,189)	$	—

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022:


	June 30, 2023				December 31, 2022
	Other current assets		Other liabilities		Other current assets		Other liabilities
	(In thousands)
Derivatives designated as hedging instruments:
Cross-currency swaps	$	9,977	$	17,166	$	—	$	—
	$	9,977	$	17,166	$	—	$	—

13. Commitments and Contingencies

The Company is involved in various pending legal, regulatory, and other 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 second 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 second quarter.surgical productivity tools.

2217

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 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				Nine Months Ended						Three Months Ended				Six Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021						June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
		(In thousands)								(In thousands)
Net sales:	Net sales:										Net sales:
Prevention and Recovery		$	256,502	$	256,229	$	765,121	$	757,822
Prevention & Recovery													Prevention & Recovery	$	273,475	$	263,783	$	524,215	$	508,618
Reconstructive	Reconstructive	127,312		103,694		389,267		269,308					Reconstructive	155,027		131,334		310,438		261,956
		$	383,814	$	359,923	$	1,154,388	$	1,027,130					$	428,502	$	395,117	$	834,653	$	770,574
Segment Adjusted EBITDA(1):	Segment Adjusted EBITDA(1):												Segment Adjusted EBITDA(1):
Prevention and Recovery		$	39,532	$	40,432	$	101,050	$	94,982
Prevention & Recovery													Prevention & Recovery	$	39,323	$	35,148	$	65,018	$	61,518
Reconstructive	Reconstructive	17,677		16,040		60,076		49,389					Reconstructive	26,359		21,042		57,075		42,399
		$	57,209	$	56,472	$	161,126	$	144,371					$	65,682	$	56,190	$	122,093	$	103,917

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


		Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
		September 30, 2022		October 1, 2021		September 30, 2022		October 1, 2021				June 30, 2023		July 1, 2022		June 30, 2023		July 1, 2022
		(In thousands)										(In thousands)
Operating loss (GAAP)		$	(17,919)	$	(16,107)	$	(42,993)	$	(44,589)
Income (loss) from continuing operations before income taxes (GAAP)											Income (loss) from continuing operations before income taxes (GAAP)	$	(19,323)	$	116,440	$	(49,282)	$	78,749
Restructuring and other charges(1)	Restructuring and other charges(1)	2,989		2,230		8,497		5,193			Restructuring and other charges(1)	3,806		2,555		6,742		5,508
MDR and other costs(2)	MDR and other costs(2)	3,600		1,902		10,648		5,574			MDR and other costs(2)	8,997		4,421		16,793		7,048
Strategic transaction costs	Strategic transaction costs	8,146		11,362		32,549		15,780			Strategic transaction costs	5,435		12,707		17,065		24,403
Stock-based compensation	Stock-based compensation	7,205		6,253		21,734		19,000			Stock-based compensation	8,868		7,821		15,776		14,529
Depreciation and other amortization	Depreciation and other amortization	18,159		18,397		56,109		51,639			Depreciation and other amortization	20,794		19,450		40,745		37,950
Amortization of acquired intangibles	Amortization of acquired intangibles	31,993		31,025		94,603		88,067			Amortization of acquired intangibles	32,249		31,824		64,289		62,610
Insurance settlement (gain) loss(3)		975		—		(32,059)		—
Inventory step-up	Inventory step-up	2,061		1,410		12,038		3,707			Inventory step-up	27		4,893		146		9,977
Interest expense, net											Interest expense, net	4,076		4,546		9,728		11,610
Other expense, net											Other expense, net	753		—		92		—
Debt extinguishment charges											Debt extinguishment charges	—		20,104		—		20,104
Insurance settlement gain(3)											Insurance settlement gain(3)	—		(33,034)		—		(33,034)
Unrealized gain on investment in ESAB Corporation											Unrealized gain on investment in ESAB Corporation	—		(135,537)		—		(135,537)
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	57,209	$	56,472	$	161,126	$	144,371		Adjusted EBITDA (non-GAAP)	$	65,682	$	56,190	$	122,093	$	103,917

(1) Restructuring and other charges ~~includes~~includes $— million and $0.3 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023, respectively. Restructuring and other charges includes $0.3 million and $0.8 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the ~~nine~~three and six months ended ~~September 30, 2022.~~July 1, 2022, respectively.

(2) Primarily related to costs specific to compliance with medical device reporting ~~regulations~~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) loss~~gain is related to the 2019 acquisition of DJO.

~~ENOVIS 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.

2418

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 ~~September~~June 30, ~~2022~~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 ~~recently~~impacts of the completed spin-off of ESAB Corporation (“ESAB”) into an independent publicly traded 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 or the remaining portion of our investment in ESAB is monetized in a taxable manner; potential indemnification liabilities to ESAB pursuant to the separation and distribution agreement and related agreements entered into in connection with the Separation; the financial and operating performance of each company following the Separation; and volatility associated with ESAB’s share price and the related value of our investment in ESAB;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,~~ defend our intellectual property rights;

•the ~~cost and availability~~effects of ~~power in Europe, part, component, freight and delivery costs;~~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 the global economy caused by the ongoing conflict between Russia~~failure to comply with federal and ~~Ukraine (including rising utilities costs in the European market as well as any other political or economic response~~state regulations related to the ~~conflict 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;~~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

2620

•~~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.

2721

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, the Company holds only the medical technology business reported through our Prevention and Recovery and Reconstructive segments. On April 4, 2022,~~Separation, 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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~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 through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to our stockholders. We retained 10% of the shares of ESAB common stock immediately following the Separation. We intend to divest the retained shares in ESAB in a tax-efficient exchange for outstanding debt no later than 12 months after the Distribution Date. Until the remaining shares are sold, we record unrealized gains or losses in earnings due to changes in the investment’s fair value.

Since the disposition occurred in the second quarter of 2022, we began classifying our fabrication technology business as a discontinued operation in our financial statements beginning in the second quarter of 2022. Accordingly, the results of our fabrication technology businesses are excluded from continuing operations in the accompanying financials for the three and nine months ended September 30, 2022 and October 1, 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 and Other Market Dynamics~~

The COVID-19 pandemic has caused 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 and other market dynamics 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 ~~nine~~three and six months ended ~~September~~June 30, ~~2022~~2023 presented in this filing represents the incremental sales subsequent to the beginning of the prior year ~~periods.~~ period.

During ~~this period~~ the second quarter of 2023, we completed one business acquisition in our Reconstructive ~~segment~~segment. On June 28, 2023, we acquired Novastep, a leading player in Minimally Invasive Surgery (MIS) foot and ankle solutions for total consideration of $97.9 million. The company’s best-in-class MIS bunion system serves a rapidly growing portion of the global bunion segment. In April 2023, the Company also entered into a definitive agreement to acquire the SEAL external fixation product line from D.N.E., LLC. The transaction was closed on July 20, 2023 for a purchase price of $28 million. During the first quarter of 2023, we also completed two ~~business combinations for aggregate consideration of $92.1 million and the~~asset acquisitions in our Prevention & Recovery segment for net cash consideration of $3.7 million.

During the year ended December 31, 2022, we completed ~~four asset~~two business acquisitions for aggregate net cash consideration of ~~$22.3~~$50.5 million. ~~The~~In the second quarter of 2022, we acquired ~~businesses include Insight, whose flagship product is the ARVIS surgical navigation system,~~KICo Knee Innovation Company Pty Limited and subsidiaries, an Australian private company doing business as 360 Med Care, ~~an Australian~~which is 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. ~~We previously held investments~~In the third quarter of 2022, we acquired a controlling interest in Insight ~~without a readily determinable fair value which were marked to fair value upon~~Medical Systems, whose flagship product is the ~~acquisition and resulted in a one-time realized gain of $8.8 million on our previous investment. Refer to Note 4 “Acquisitions and Investments” for further details regarding these acquisitions.~~

During 2021, we completed four acquisitions in our Reconstructive segment and one acquisition in our Prevention and Recovery segment for net cash consideration of $201.6 million and equity consideration of $285.7 million. The largest of these acquisitions include Trilliant Surgical, a provider of foot and ankle orthopedic implants; MedShape, Inc., a provider of innovativeARVIS surgical solutions for foot and ankle surgeons; 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.navigation system.

Foreign Currency Fluctuations

~~Approximately 30%~~During the three and ~~26%~~six months ended June 30, 2023, approximately 33% and 33% of our sales, respectively, 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 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 nine months ended September 30, 2022 and October 1, 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 ~~nine~~three months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine~~three months ended ~~October~~July 1, ~~2021,~~2022, fluctuations in foreign currencies ~~unfavorably reduced~~increased Net sales ~~and~~by 0.3%, decreased Gross profit by approximately ~~2.0%~~0.3%, and ~~2.0%, respectively, and favorably reduced Selling, general and administrative~~increased operating expenses by ~~less than 2.0%~~approximately 0.4%. ~~The changes~~Impact on gross profits is due to the Mexican peso currency impact on costs at one of our primary manufacturing facilities. For the six months ended June 30, 2023 compared to the six months ended July 1, 2022, fluctuations in foreign ~~exchange rates since December 31, 2021 also~~currencies decreased ~~net assets~~Net sales by 0.6%, decreased Gross profit by approximately ~~2.0% as of September 30, 2022.~~1.1%, and decreased operating expenses by approximately 0.3%.

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.

3023

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) expense, net, non-operating (gain) loss on investments, debt extinguishment charges, interest expense, net, restructuring and other charges, ~~MDR~~Medical Device Regulation (MDR) fees 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,~~gain, and ~~inventory step-up.~~fair value charges on acquired 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 and six months ended June 30, 2023 and July 1, 2022.

Three Months Ended Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
(Dollars in millions)
Operating loss (GAAP) $ (17.9) $ (16.1) $ (43.0) $ (44.6)
Adjusted to add (deduct):
Restructuring and other charges(1)
3.0 2.2 8.5 5.2
MDR and other costs(2)
3.6 1.9 10.6 5.6
Strategic transaction costs(3)
8.1 11.4 32.5 15.8
Stock-based compensation 7.2 6.3 21.7 19.0
Depreciation and other amortization 18.2 18.4 56.1 51.6
Amortization of acquired intangibles 32.0 31.0 94.6 88.1
Insurance settlement (gain) loss(4)
1.0 — (32.1) —
Inventory step-up 2.1 1.4 12.0 3.7
Adjusted EBITDA (non-GAAP) $ 57.2 $ 56.5 $ 161.1 $ 144.4
Operating loss margin (4.7) % (4.5) % (3.7) % (4.3) %
Adjusted EBITDA margin (non-GAAP) 14.9 % 15.7 % 14.0 % 14.1 %


	Three Months Ended
	June 30, 2023									July 1, 2022
	Prevention & Recovery			Reconstructive			Total			Prevention & Recovery			Reconstructive			Total
	(Dollars in millions)
Net income (loss) from continuing operations (GAAP)(1)							$	(14.6)								$	120.7
Income tax benefit							(4.7)									(4.2)
Other expense, net							0.8									—
Unrealized gain on investment in ESAB Corporation							—									(135.5)
Debt extinguishment charges							—									20.1
Interest expense, net							4.1									4.5
Operating income (loss) (GAAP)	$	(4.4)		$	(10.1)		(14.5)			$	13.4		$	(7.9)		5.6
Operating income (loss) margin	(1.6)		%	(6.5)		%	(3.4)		%	5.1		%	(6.0)		%	1.4		%
Adjusted to add (deduct):
Restructuring and other charges(2)	2.0			1.8			3.8			1.3			1.3			2.6
MDR and other costs(3)	5.0			4.0			9.0			3.0			1.5			4.4
Strategic transaction costs(3)	1.8			3.7			5.4			8.5			4.2			12.7
Stock-based compensation(3)	5.8			3.0			8.9			5.2			2.6			7.8
Depreciation and other amortization	5.8			15.0			20.8			6.3			13.1			19.5
Amortization of acquired intangibles	23.4			8.9			32.2			19.5			12.3			31.8
Insurance settlement gain(3)	—			—			—			(22.1)			(11.0)			(33.0)
Inventory step-up	—			—			—			—			4.9			4.9
Adjusted EBITDA (non-GAAP)	$	39.3		$	26.4		$	65.7		$	35.1		$	21.0		$	56.2
Adjusted EBITDA margin (non-GAAP)	14.4		%	17.0		%	15.3		%	13.3		%	16.0		%	14.2		%

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

(2) Restructuring and other charges includes $— million and $0.3 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the three months ended June 30, 2023 and July 1, 2022, respectively.

(3) Certain amounts are allocated to the segments as a percentage of revenue as the costs are not discrete to either segment.


	Six Months Ended
	June 30, 2023									July 1, 2022
	Prevention & Recovery			Reconstructive			Total			Prevention & Recovery			Reconstructive			Total
	(Dollars in millions)
Net income (loss) from continuing operations (GAAP)(1)							$	(37.5)								$	82.6
Income tax benefit							(11.8)									(3.8)
Other expense, net							0.1									—
Unrealized gain on investment in ESAB Corporation							—									(135.5)
Debt extinguishment charges							—									20.1
Interest expense, net							9.7									11.6
Operating loss (GAAP)	$	(22.6)		$	(16.9)		(39.5)			$	(1.0)		$	(24.1)		(25.1)
Operating loss margin	(4.3)		%	(5.4)		%	(4.7)		%	(0.2)		%	(9.2)		%	(3.3)		%
Adjusted to add (deduct):
Restructuring and other charges(2)	3.3			3.4			6.7			3.4			2.1			5.5
MDR and other costs(3)	8.2			8.6			16.8			4.7			2.4			7.0
Strategic transaction costs(3)	8.0			9.1			17.1			16.1			8.3			24.4
Stock-based compensation(3)	9.9			5.9			15.8			9.6			4.9			14.5
Depreciation and other amortization	11.5			29.3			40.7			12.2			25.8			38.0
Amortization of acquired intangibles	46.7			17.6			64.3			38.6			24.1			62.6
Insurance settlement gain	—			—			—			(22.1)			(11.0)			(33.0)
Inventory step-up	—			0.1			0.1			—			10.0			10.0
Adjusted EBITDA (non-GAAP)	$	65.0		$	57.1		$	122.1		$	61.5		$	42.4		$	103.9
Adjusted EBITDA margin (non-GAAP)	12.4		%	18.4		%	14.6		%	12.1		%	16.2		%	13.5		%

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

(2) Restructuring and other 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 ~~nine~~six months ended ~~September~~June 30, ~~2022.~~

~~(2)~~ ~~Primarily related to costs specific to compliance with medical device reporting regulations~~2023 and ~~other requirements of the European Union MDR. These costs are classified as Selling, general and administrative expense on our Condensed Consolidated Statements of Operations.~~July 1, 2022, respectively.

(3) ~~Strategic transaction costs includes costs related to the Separation and certain transaction and integration costs related to recent acquisitions.~~

~~(4)~~ ~~Insurance settlement loss (gain) is related to our 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 nine months ended September 30, 2022 and October 1, 2021, respectively.

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
Prevention and Recovery Reconstructive Total Prevention and Recovery Reconstructive Total
(Dollars in millions)
Operating loss (GAAP) $ (0.4) $ (17.5) $ (17.9) $ (1.4) $ (41.6) $ (43.0)
Adjusted to add (deduct):
Restructuring and other charges(1)
1.3 1.7 3.0 4.7 3.8 8.5
MDR and other costs(2)
2.4 1.2 3.6 7.1 3.6 10.6
Strategic transaction costs(2)
5.4 2.7 8.1 21.6 11.0 32.5
Stock-based compensation(2)
4.8 2.4 7.2 14.4 7.3 21.7
Depreciation and other amortization 5.5 12.6 18.2 17.7 38.4 56.1
Amortization of acquired intangibles 19.8 12.2 32.0 58.4 36.3 94.6
Insurance settlement (gain) loss(2)
0.7 0.3 1.0 (21.4) (10.6) (32.1)
Inventory step-up — 2.1 2.1 — 12.0 12.0
Adjusted EBITDA (non-GAAP) $ 39.5 $ 17.7 $ 57.2 $ 101.1 $ 60.1 $ 161.1
Operating loss margin (0.2) % (13.8) % (4.7) % (0.2) % (10.7) % (3.7) %
Adjusted EBITDA margin (non-GAAP) 15.4 % 13.9 % 14.9 % 13.2 % 15.4 % 14.0 %

~~(1)~~ ~~Restructuring and other charges includes $0.8 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the nine months ended September 30, 2022.~~

~~(2)~~ ~~Amounts~~Certain 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 October 1, 2021 Nine Months Ended October 1, 2021
Prevention and Recovery Reconstructive Total Prevention and Recovery Reconstructive Total
(Dollars in millions)
Operating income (loss) (GAAP) $ 1.5 $ (17.6) $ (16.1) $ (12.1) $ (32.5) $ (44.6)
Adjusted to add (deduct):
Restructuring and other charges 1.7 0.5 2.2 3.7 1.5 5.2
MDR and other costs(1)
1.4 0.5 1.9 4.1 1.4 5.6
Strategic transaction costs(1)
7.3 4.0 11.4 10.7 5.1 15.8
Stock-based compensation(1)
3.9 2.3 6.3 13.5 5.5 19.0
Depreciation and other amortization 6.6 11.8 18.4 18.8 32.8 51.6
Amortization of acquired intangibles 18.1 12.9 31.0 55.6 32.5 88.1
Inventory step-up — 1.4 1.4 0.7 3.0 3.7
Adjusted EBITDA (non-GAAP) $ 40.4 $ 16.0 $ 56.5 $ 95.0 $ 49.4 $ 144.4
Operating income (loss) margin 0.6 % (17.0) % (4.5) % (1.6) % (12.1) % (4.3) %
Adjusted EBITDA margin (non-GAAP) 15.8 % 15.5 % 15.7 % 12.5 % 18.3 % 14.1 %

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

3326

Total Company

Sales

Net sales for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 increased from the three and ~~nine~~six months ended ~~October~~July 1, ~~2021.~~2022. The following table presents the components of changes in our consolidated Net sales.


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		Net Sales		Change %		Net Sales		Change %			Net Sales		Change %		Net Sales		Change %
		(Dollars in millions)									(Dollars in millions)
For the three and nine months ended October 1, 2021		$	359.9			$	1,027.1
For the three and six months ended July 1, 2022										For the three and six months ended July 1, 2022	$	395.1			$	770.6
Components of Change:	Components of Change:									Components of Change:
Existing Businesses(1)	Existing Businesses(1)	25.1		7.0	%	58.8		5.7	%	Existing Businesses(1)	31.4		7.9	%	66.6		8.6	%
Acquisitions(2)	Acquisitions(2)	9.0		2.5	%	92.0		9.0	%	Acquisitions(2)	0.9		0.2	%	2.1		0.3	%
Foreign Currency Translation(3)	Foreign Currency Translation(3)	(10.3)		(2.9)	%	(23.6)		(2.3)	%	Foreign Currency Translation(3)	1.1		0.3	%	(4.5)		(0.6)	%
		23.8		6.6	%	127.2		12.4	%		33.4		8.4	%	64.1		8.3	%
For the three and nine months ended September 30, 2022		$	383.8			$	1,154.3
For the three and six months ended June 30, 2023										For the three and six months ended June 30, 2023	$	428.5			$	834.7

(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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the prior year ~~periods~~period was primarily attributable to an increase in sales from existing businesses across both of our segments, ~~and sales from acquired businesses in our Reconstructive segment,~~ partially offset by foreign currency ~~headwinds.~~headwinds for the six months ended June 30, 2023. Existing business sales in our Reconstructive segment increased ~~$15.5~~$21.8 million and ~~$29.4~~$46.9 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, respectively, due to ~~significantly~~ higher sales volumes compared to the prior year ~~periods across all product lines~~period, driven by broad market ~~outperformance~~strength and ~~recovery from COVID-related surges in 2021.~~market outperformance. Existing business sales in our Prevention ~~and~~& Recovery segment increased ~~$9.5~~$9.6 million and ~~$29.4~~$19.7 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, respectively, due to ~~improved sales volumes~~volume and inflation-related pricing increases. Net sales from acquisitions increased in the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 due to ~~acquisitions~~the 360 Med Care acquisition in our Reconstructive segment ~~that closed since the beginning of the prior year period.~~in May 2022. The strengthening of the U.S. dollar relative to other currencies resulted in ~~$10.3 million and $23.6~~$4.5 million unfavorable foreign currency translation impacts during the ~~three and nine~~six months ended ~~September~~June 30, ~~2022, respectively.~~2023.

3427

Operating Results

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


		Three Months Ended						Nine Months Ended							Three Months Ended						Six Months Ended
		September 30, 2022			October 1, 2021			September 30, 2022			October 1, 2021				June 30, 2023			July 1, 2022			June 30, 2023			July 1, 2022
		(Dollars in millions)													(Dollars in millions)
Gross profit	Gross profit	$	215.8		$	197.9		$	637.6		$	569.8		Gross profit	$	248.4		$	215.9		$	483.4		$	421.8
Gross profit margin	Gross profit margin	56.2		%	55.0		%	55.2		%	55.5		%	Gross profit margin	58.0		%	54.6		%	57.9		%	54.7		%
Selling, general and administrative expense	Selling, general and administrative expense	$	182.2		$	168.3		$	564.3		$	487.2		Selling, general and administrative expense	$	207.9		$	193.7		$	415.0		$	382.1
Research and development expense	Research and development expense	$	15.6		$	12.5		$	46.1		$	33.9		Research and development expense	$	18.9		$	15.7		$	37.1		$	30.5
Operating loss		$	(17.9)		$	(16.1)		$	(43.0)		$	(44.6)
Operating loss margin		(4.7)		%	(4.5)		%	(3.7)		%	(4.3)		%
Operating income (loss)														Operating income (loss)	$	(14.5)		$	5.6		$	(39.5)		$	(25.1)
Operating income (loss) margin														Operating income (loss) margin	(3.4)		%	1.4		%	(4.7)		%	(3.3)		%
Net income (loss) from continuing operations	Net income (loss) from continuing operations	$	(65.9)		$	(13.6)		$	16.6		$	(87.6)		Net income (loss) from continuing operations	$	(14.6)		$	120.7		$	(37.5)		$	82.6
Net income (loss) from continuing operations margin (GAAP)		(17.2)		%	(3.8)		%	1.4		%	(8.5)		%
Net loss from continuing operations margin (GAAP)														Net loss from continuing operations margin (GAAP)	(3.4)		%	30.5		%	(4.5)		%	10.7		%
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	57.2		$	56.5		$	161.1		$	144.4		Adjusted EBITDA (non-GAAP)	$	65.7		$	56.2		$	122.1		$	103.9
Adjusted EBITDA margin (non-GAAP)	Adjusted EBITDA margin (non-GAAP)	14.9		%	15.7		%	14.0		%	14.1		%	Adjusted EBITDA margin (non-GAAP)	15.3		%	14.2		%	14.6		%	13.5		%
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)	$	3.0		$	2.2		$	8.5		$	5.2		Restructuring and other related charges(1)	$	3.8		$	2.6		$	6.7		$	5.5
MDR and other costs	MDR and other costs	$	3.6		$	1.9		$	10.6		$	5.6		MDR and other costs	$	9.0		$	4.4		$	16.8		$	7.0
Strategic transaction costs	Strategic transaction costs	$	8.1		$	11.4		$	32.5		$	15.8		Strategic transaction costs	$	5.4		$	12.7		$	17.1		$	24.4
Stock-based compensation	Stock-based compensation	$	7.2		$	6.3		$	21.7		$	19.0		Stock-based compensation	$	8.9		$	7.8		$	15.8		$	14.5
Depreciation and other amortization	Depreciation and other amortization	$	18.2		$	18.4		$	56.1		$	51.6		Depreciation and other amortization	$	20.8		$	19.5		$	40.7		$	38.0
Amortization of acquired intangibles	Amortization of acquired intangibles	$	32.0		$	31.0		$	94.6		$	88.1		Amortization of acquired intangibles	$	32.2		$	31.8		$	64.3		$	62.6
Insurance settlement (gain) loss		$	1.0		$	—		$	(32.1)		$	—
Insurance settlement gain														Insurance settlement gain	$	—		$	(33.0)		$	—		$	(33.0)
Inventory step-up	Inventory step-up	$	2.1		$	1.4		$	12.0		$	3.7		Inventory step-up	$	—		$	4.9		$	0.1		$	10.0
Unrealized (gain) loss on investment in ESAB Corporation		$	63.1		$	—		$	(72.4)		$	—
Realized gain on cost basis investment		$	(8.8)		$	—		$	(8.8)		$	—
Unrealized gain on investment in ESAB Corporation														Unrealized gain on investment in ESAB Corporation	$	—		$	(135.5)		$	—		$	(135.5)
Interest expense, net	Interest expense, net	$	6.3		$	4.1		$	17.9		$	22.8		Interest expense, net	$	4.1		$	4.5		$	9.7		$	11.6
Debt extinguishment charges	Debt extinguishment charges	$	—		$	—		$	20.1		$	29.9		Debt extinguishment charges	$	—		$	20.1		$	—		$	20.1
Other income														Other income	$	0.8		$	—		$	0.1		$	—
Income tax benefit	Income tax benefit	$	(12.3)		$	(6.7)		$	(16.2)		$	(9.7)		Income tax benefit	$	(4.7)		$	(4.2)		$	(11.8)		$	(3.8)
Other income		$	(0.3)		$	—		$	(0.3)		$	—

(1) Restructuring and other charges ~~includes~~includes $— million and $0.3 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023, respectively. Restructuring and other charges includes $0.3 million and $0.8 million of expense classified as Cost of sales on ~~our~~the Company’s Condensed Consolidated Statements of Operations for the ~~nine~~three and six months ended ~~September 30, 2022.~~July 1, 2022, respectively.

~~Third Quarter of 2022~~Three Months Ended June 30, 2023 Compared to ~~Third Quarter of 2021~~Three Months Ended July 1, 2022

Gross profit increased in the ~~third quarter of 2022~~three months ended June 30, 2023 compared with the prior year period due to a ~~$16.7~~$24.0 million increase in our Reconstructive segment and a ~~$1.2~~$8.5 million increase in our Prevention ~~and~~& Recovery segment. The Gross profit increase was ~~primarily~~ attributable to increased sales ~~from~~in our existing businesses from volume and ~~contributions from recent acquisitions, partially offset by inflation~~inflation-related pricing increases, improved operating cost leverage, and the benefit of ~~supply chain, logistics, and other costs, unfavorable foreign currency translation, and $0.7~~a decrease of $4.9 million ~~of higher~~in inventory fair value step-up ~~charges related to recent acquisitions.~~amortization charges. Gross profit margin increased due to ~~segment performance, including pricing and other benefits, offset by inflation of supply chain, logistics, and other costs.~~the aforementioned factors.

Selling, general and administrative expense increased ~~$13.9~~$14.2 million in the third quarter of 2022 compared to the prior year period due to $8.3 million from acquired businesses, offset by a $3.2 million decrease in strategic transaction costs driven by lower Separation-related costs. Research and development costs also increased compared to the prior year period primarily due

~~to recent acquisitions and investments in new product development. Amortization of acquired intangibles also increased compared to the prior year period due to acquisitions.~~

Following the Separation, we retained 10% of the shares of ESAB common stock, which is recorded at fair value. During the third quarter of 2022, we recorded a $63.1 million loss related to this investment. During the third quarter of 2022, we recorded an insurance settlement loss of $1.0 million which, along with the aforementioned $63.1 million loss on our retained investment in ESAB, significantly impacted our results.

~~Interest expense, net increased in the third quarter of 2022 due to higher interest rates and non-cash interest accretion on acquisition-related contingent consideration.~~

The effective tax rate for Net income from continuing operations during the third quarter of 2022 was 15.8%, 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 and non-taxable realized gain on cost basis investment offset by non-deductible costs related to the tax-free separation transaction. The effective tax rate for the third quarter of 2021 was 32.9%, which was higher 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 decreased in the third quarter of 2022 compared with the prior year period primarily due to the unrealized loss on the retained ESAB common stock, offset by existing business and acquisition growth. Net income margin from continuing operations decreased due to the aforementioned factors. Adjusted EBITDA increased primarily due to existing business and acquisition growth, offset by inflation of supply chain, logistics, and other costs. Adjusted EBITDA margin of the core business, excluding the effects of recent acquisitions and foreign currency pressures increased by approximately 40 basis points. Our recent acquisitions mainly in our Reconstructive segment, which were dilutive to the margin by approximately 100 basis points, are expected to be accretive to margins in future years.

~~Other income increased due to the receipt of a dividend payment from our investment in ESAB.~~

~~Nine~~three months ended ~~September~~June 30, ~~2022 Compared to Nine months ended October 1, 2021~~

Gross profit increased in the nine months ended September 30, 2022 compared with the prior year period due to a $66.4 million increase in our Reconstructive segment and a $1.3 million increase in our Prevention and Recovery segment. The Gross profit increase was attributable to contribution from recent business acquisitions and increased sales in our existing businesses, partially offset by inflation of supply chain, logistics, and other costs, unfavorable foreign currency translation, and higher inventory step-up charges of $8.3 million. Gross profit margin decreased primarily due to inflation of supply chain, logistics, and other costs that exceeded customer pricing and other benefits.

~~Selling, general and administrative expense increased $77.1 million in the nine months ended September 30, 2022~~2023 compared to the prior year period, primarily due to ~~$48.0 million of costs included in acquired businesses and $16.8 million more strategic transaction costs,~~increased commissions driven by higher sales, investments to support growth, spending on MDR and other costs, ~~incurred in the first quarter of 2022.~~and cost inflation, partially offset by cost 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 is 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.~~

Following the Separation, we retained 10% of the shares of ESAB common stock, which is recorded at fair value. During the nine months ended September 30, 2022, we recorded a $72.4 million gain related to this investment.

During the nine months ended September 30, 2022, we recorded an insurance settlement gain of $32.1 million which, along with the aforementioned gain on our retained investment in ESAB, significantly impacted our results for the nine months ended September 30, 2022.acquisitions.

Interest expense, net decreased in the ~~nine~~three months ended ~~September~~June 30, 2023 compared to the prior year period due to a reduction in debt balances as a result of the extinguishment of the outstanding balance of the Enovis Term Loan and interest savings from the lower interest rates on the Swiss Franc cross-currency swap agreements.

The effective tax rate for Net loss from continuing operations during the three months ended June 30, 2023 was 24.4%, which differed from the 2023 U.S. federal statutory tax rate of 21%, primarily due to non-U.S. income taxed at lower rates, release of valuation allowance on non-U.S attributes, tax credits for research and development, and release of uncertain tax positions. This was offset by other non-deductible expenses and U.S. taxation on international operations. The effective tax rate for Net income from continuing operations during the six months ended July 1, 2022 was (4.9)%, 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.

Net loss from continuing operations increased in the three months ended June 30, 2023 compared with the prior year period, primarily due to the one-time income items in the prior year period, including the Unrealized gain on investment in ESAB Corporation and Insurance settlement gain, partially offset by the reduction of debt extinguishment and the aforementioned Gross profit and Selling, general, and administrative increases. Net loss margin from continuing operations increased by 3390 basis points due to the aforementioned factors. Adjusted EBITDA increased due to organic growth. Adjusted EBITDA margin excluding the effects of recent acquisitions and foreign currency pressures increased by approximately 160 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 10 basis points, are expected to be accretive to margins in future years.

Six Months Ended June 30, 2023 Compared to Six Months Ended July 1, 2022

Gross profit increased in the six months ended June 30, 2023 compared with the prior year period due to a $48.7 million increase in our Reconstructive segment and a $13.0 million increase in our Prevention & Recovery segment. The Gross profit increase was attributable to increased sales in our existing businesses from volume and inflation-related pricing increases, improved operating cost leverage, and the benefit of a decrease of $9.8 million in inventory fair value step-up amortization charges, partially offset by unfavorable foreign currency translation and inflation in supply chain, logistics, and other costs. Gross profit margin increased due to the aforementioned factors.

Selling, general and administrative expense increased $32.9 million in the six months ended June 30, 2023 compared to the prior year period, primarily due to increased commissions driven by higher sales, investments to support growth, spending on MDR and other costs, and cost inflation, partially offset by a reduction of strategic transaction costs and cost 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, 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 acquisitions.

Interest expense, net decreased in the six months ended June 30, 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.~~2022, the extinguishment of the outstanding balance of the Enovis Term Loan, and interest savings from the lower interest rates on the Swiss Franc cross-currency swap agreements.

The effective tax rate for Net ~~income~~loss from continuing operations during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~(3,434.4)%~~24.0%, which 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, tax credits for research and ~~non-taxable realized gain on cost basis investment~~development, and release of uncertain tax positions. This was 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 ~~nine~~six months ended ~~October~~July 1, ~~2021~~2022 was ~~9.9%~~(3.6)%, 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 in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared with the prior year period, primarily due to one-time income items in the prior year period, including the Unrealized gain on ~~the retained~~investment in ESAB ~~common stock, as well as the insurance~~Corporation and Insurance settlement gain, ~~and acquisition-related sales,~~partially offset by ~~costs associated with~~ the ~~Separation~~reduction of debt extinguishment and ~~acquisition-related costs.~~the aforementioned Gross profit and Selling, general, and administrative increases. Net ~~income~~loss margin from continuing operations increased by ~~990~~1520 basis points due to the aforementioned factors. Adjusted EBITDA increased due to organic ~~growth and lower operating expenses in existing businesses, partially offset by inflation of supply chain, logistics, and other costs.~~growth. Adjusted EBITDA margin ~~of the core business,~~ excluding the effects of recent acquisitions and foreign currency pressures increased by approximately 80180 basis points. Our recent acquisitions ~~primarily~~ in our Reconstructive segment, which were dilutive to the net loss margin from continuing operations and to Adjusted EBITDA margin by approximately 7020 basis points, are expected to be accretive to margins in future years.

~~Other income increased due to the receipt of a dividend payment from our investment in ESAB.~~

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, as well as digital and workflow solution offerings that enhance our products and the continuum of care path.~~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 Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
(Dollars in millions)
Net sales $ 256.5 $ 256.2 $ 765.1 $ 757.8
Gross profit $ 132.5 $ 131.3 $ 388.7 $ 387.5
Gross profit margin 51.7 % 51.2 % 50.8 % 51.1 %
Selling, general and administrative expenses $ 102.7 $ 103.5 $ 323.7 $ 319.3
Research and development expense $ 8.5 $ 6.6 $ 25.5 $ 20.8
Operating income (loss) (GAAP) $ (0.4) $ 1.5 $ (1.4) $ (12.1)
Adjusted EBITDA (non-GAAP) $ 39.5 $ 40.4 $ 101.1 $ 95.0
Adjusted EBITDA margin (non-GAAP) 15.4 % 15.8 % 13.2 % 12.5 %
Items excluded from Adjusted EBITDA:
Restructuring and other charges $ 1.3 $ 1.7 $ 4.7 $ 3.7
MDR and other costs $ 2.4 $ 1.4 $ 7.1 $ 4.1
Strategic transaction costs $ 5.4 $ 7.3 $ 21.6 $ 10.7
Stock-based compensation $ 4.8 $ 3.9 $ 14.4 $ 13.5
Depreciation and other amortization $ 5.5 $ 6.6 $ 17.7 $ 18.8
Amortization of acquired intangibles $ 19.8 $ 18.1 $ 58.4 $ 55.6
Insurance settlement (gain) loss $ 0.7 $ — $ (21.4) $ —
Inventory step up $ — $ — $ — $ 0.7


	Three Months Ended						Six Months Ended
	June 30, 2023			July 1, 2022			June 30, 2023			July 1, 2022
	(Dollars in millions)
Net sales	$	273.5		$	263.8		$	524.2		$	508.6
Gross profit	$	142.2		$	133.7		$	269.2		$	256.2
Gross profit margin	52.0		%	50.7		%	51.4		%	50.5		%
Selling, general and administrative expenses	$	112.4		$	112.9		$	224.6		$	221.0
Research and development expense	$	8.9		$	8.8		$	17.4		$	17.1

Operating loss (GAAP)	$	(4.4)		$	13.4		$	(22.6)		$	(1.0)
Operating loss margin (GAAP)	(1.6)		%	5.1		%	(4.3)		%	(0.2)		%
Adjusted EBITDA (non-GAAP)	$	39.3		$	35.1		$	65.0		$	61.5
Adjusted EBITDA margin (non-GAAP)	14.4		%	13.3		%	12.4		%	12.1		%

Three Months Ended June 30, 2023 Compared to Three Months Ended July 1, 2022

Net sales in our Prevention & Recovery segment increased $9.7 million, or 3.7%, in the second quarter ended June 30, 2023 compared with the prior year period, driven by increases in volume and inflation-related pricing increases. Gross profit increased $8.5 million due to inflation-related pricing increases, improved sales mix in our existing businesses, and reductions in freight costs, partially offset by the effect of unfavorable foreign currency impacts in a primary production facility. Gross profit margin increased 130 basis points due to the aforementioned factors. Selling, general and administrative expense was flat due to reduced central cost allocations, offset by investment to support growth and spending on MDR and other costs. Research and development expense was flat. Operating loss increased due to a one-time Insurance settlement gain in 2022, as well as higher acquisition amortization, offset by improved sales mix in our existing businesses. Adjusted EBITDA and Adjusted

3730

EBITDA margin increased due to improved sales mix, partially offset by unfavorable foreign currency impacts in a primary manufacturing facility.

~~(1)~~
~~Restructuring and other charges includes $0.8 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the nine months ended September~~

Six Months Ended June 30, ~~2022.~~2023 Compared to Six Months Ended July 1, 2022

~~Third Quarter of 2022 Compared to Third Quarter of 2021~~

Net sales in our Prevention and Recovery segment increased $0.3 million in the third quarter of 2022 compared with the prior year period driven primarily by an increase in existing business sales of $9.5 million, offset by $9.2 million in foreign currency pressures. Gross profit and Gross profit margin increased primarily due to volume growth in our higher margin product lines and partially offset by the effect of unfavorable foreign currency. Selling, general and administrative expense decreased primarily due to decreased central cost allocations. Operating income decreased due to inflation of supply chain, logistics, and other costs and the effect of unfavorable foreign currency. Adjusted EBITDA and Adjusted EBITDA margin increased primarily due to the reduced Selling, general and administrative expenses compared to the prior period, partially offset by inflation of supply chain, logistics, and other costs.

~~Nine months ended September 30, 2022 Compared to Nine months ended October 1, 2021~~

~~Net sales in our Prevention and Recovery segment increased $29.4~~$15.6 million, or ~~3.9%~~3.1%, ~~before~~despite currency translation pressure of ~~$22.1~~$4.1 million in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared with the prior year period, driven by organic growth in existing businesses which was aided by pricing increases to mitigate inflation. Gross profit increased ~~$1.3~~$13.0 million due to the improved sales, offset by the effect of unfavorable foreign currency and inflation of supply chain, logistics, and other ~~costs~~costs. Gross profit margin increased 90 basis points due to improved sales mix andinflation-related customer pricing, partially offset by the effect of unfavorable foreign ~~currency. Gross profit margin decreased 30 basis points due to inflation-related customer pricing and cost increases and the effect of unfavorable foreign currency.~~currency in a primary manufacturing facility. Selling, general and administrative expense increased primarily due to ~~increased~~investment to support growth, spending on MDR and other costs, ~~related to the Separation,~~ offset by lower allocated central costs. Operating ~~income (loss) improved~~loss increased due to an insurance settlement gain recorded in the second quarter of 2022 and ~~lower~~higher Selling, general and administrative expenses, partially offset by ~~inflation of supply chain, logistics, and other costs as well as increases in strategic transaction costs related to~~ the ~~Separation.~~higher gross profit. Adjusted EBITDA and Adjusted EBITDA margin increased due to ~~the reduction in central cost allocations,~~improved sales mix, partially offset by ~~inflation of supply chain, logistics, and other costs~~unfavorable foreign currency impacts in a primary manufacturing facility during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the prior year period.

Reconstructive

We develop, manufacture, and market a wide variety of knee, hip, shoulder, elbow, foot, ankle, and finger implant products 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 Nine Months Ended
September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021
(Dollars in millions)
Net sales $ 127.3 $ 103.7 $ 389.3 $ 269.3
Gross profit $ 83.3 $ 66.6 $ 248.9 $ 182.5
Gross profit margin 65.4 % 64.3 % 63.9 % 67.8 %
Selling, general and administrative expenses $ 79.5 $ 64.7 $ 240.6 $ 167.8
Research and development expense $ 7.1 $ 5.8 $ 20.6 $ 13.1
Operating loss (GAAP) $ (17.5) $ (17.6) $ (41.6) $ (32.5)
Adjusted EBITDA (non-GAAP) $ 17.7 $ 16.0 $ 60.1 $ 49.4
Adjusted EBITDA margin (non-GAAP) 13.9 % 15.4 % 15.4 % 18.3 %
Items excluded from Adjusted EBITDA:
Restructuring and other related charges $ 1.7 $ 0.5 $ 3.8 $ 1.5
MDR and other costs $ 1.2 $ 0.5 $ 3.6 $ 1.4
Strategic transaction costs $ 2.7 $ 4.0 $ 11.0 $ 5.1
Stock-based compensation $ 2.4 $ 2.3 $ 7.3 $ 5.5
Depreciation and other amortization $ 12.6 $ 11.8 $ 38.4 $ 32.8
Amortization of acquired intangibles $ 12.2 $ 12.9 $ 36.3 $ 32.5
Insurance settlement (gain) loss $ 0.3 $ — $ (10.6) $ —
Inventory step up $ 2.1 $ 1.4 $ 12.0 $ 3.0


	Three Months Ended						Six Months Ended
	June 30, 2023			July 1, 2022			June 30, 2023			July 1, 2022
	(Dollars in millions)
Net sales	$	155.0		$	131.3		$	310.4		$	262.0
Gross profit	$	106.1		$	82.1		$	214.2		$	165.5
Gross profit margin	68.5		%	62.5		%	69.0		%	63.2		%
Selling, general and administrative expenses	$	95.5		$	80.7		$	190.5		$	161.1
Research and development expense	$	10.0		$	6.9		$	19.7		$	13.5

Operating loss (GAAP)	$	(10.1)		$	(7.9)		$	(16.9)		$	(24.1)
Operating loss margin (GAAP)	(6.5)		%	(6.0)		%	(5.4)		%	(9.2)		%
Adjusted EBITDA (non-GAAP)	$	26.4		$	21.0		$	57.1		$	42.4
Adjusted EBITDA margin (non-GAAP)	17.0		%	16.0		%	18.4		%	16.2		%

~~Third Quarter of 2022~~Three Months Ended June 30, 2023 Compared to ~~Third Quarter of 2021~~Three Months Ended July 1, 2022

Net ~~sales~~sales increased in our Reconstructive segment by $23.7 million, or 18.1%, primarily due to higher sales volumes driven by broad market strength and market outperformance. Gross profit and profit margin increased in the ~~third~~second quarter ~~of 2022~~ended June 30, 2023 compared ~~with~~ to the prior year period, primarily due to ~~$15.5~~increased sales in our existing businesses, improved operating cost leverage, and the benefit of a decrease of $4.9 million of organic sales growth and of $9.0 million acquisition-related sales growth. Gross profit and Gross profit margin increased due to sales growth mentioned previously, partially offset by inflation of supply chain, logistics, and other costs.in inventory fair value step-up amortization charges. Selling, general and administrative expense increased over the same period primarily due to ~~$8.3 million from~~increased commissions driven by higher sales, investments to support growth, spending on MDR and other costs, and cost inflation, partially offset by cost reduction initiatives. Research and development expense increased compared to the prior year period, primarily due to increased spend within recently acquired businesses ~~including integration costs for~~in our Reconstructive segment, which are investing in surgical productivity solutions and computer-assisted surgery technologies. Operating loss increased, primarily due to an insurance settlement gain recorded in the ~~newly-acquired businesses.~~second quarter of 2022, partially offset by the aforementioned factors driving organic growth. Adjusted EBITDA increased primarily due to growth in existing ~~business-related growth. Recent~~businesses and improved operating cost leverage. Without the impact of

recent acquisitions, ~~drove a reduction in the~~ Adjusted EBITDA ~~margin, as the recent~~margins increased 120 basis points compared to prior year. Recent acquisitions were dilutive to the margin by approximately ~~320~~20 basis points, ~~and~~but are expected to be accretive to margins in future years.

~~Nine months ended September~~Six Months Ended June 30, ~~2022~~2023 Compared to ~~Nine months ended October~~Six Months Ended July 1, ~~2021~~2022

Net ~~sales~~sales increased in our Reconstructive segment ~~in the nine months ended September 30, 2022 compared with the prior year period,~~ by $48.4 million, or 18.5%, primarily due to ~~acquisition-related~~higher sales ~~growth of $92.0 million~~volumes driven by broad market strength and ~~existing business sales growth of $29.4 million. Gross~~market outperformance. Gross profit increased in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~nine months ended October 1, 2021,~~prior year period, primarily due to ~~acquisition~~ increased sales in our existing businesses, improved operating cost leverage, and ~~existing business growth, partially offset by inflation~~the benefit of ~~supply chain, logistics, and other costs and acquisition-related~~a decrease of $9.8 million in inventory ~~valuation~~fair value step-up amortization charges, ~~of $9.0 million,~~ 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 ~~$48.0 million of~~increased commissions driven by higher sales, investments to support growth, spending on MDR and other costs, ~~from acquisitions, including integration costs for the newly-acquired businesses, as well as~~and cost inflation, partially offset by cost reduction initiatives. Research and development expense increased ~~central cost allocations and costs associated with the Separation. Operating income decreased in the nine months ended September 30, 2022~~ compared to the ~~nine months ended October 1, 2021,~~prior year period, primarily due to increased spend within recently acquired businesses in our Reconstructive segment, which are investing in surgical productivity solutions and computer-assisted surgery technologies. Operating loss decreased primarily due to the ~~increase~~aforementioned factors driving organic growth, offset by an insurance settlement gain recorded in ~~Selling, general and administrative expenses from acquisitions.~~the second quarter of 2022. Adjusted EBITDA increased primarily due to growth in existing businesses, partially offset by inflation of supply chain, logistics, and other costs. Without the impact of recent acquisition, Adjusted EBITDA increased primarily due to growth in existing businesses and improved operating cost leverage. Without the impact of recent acquisitions, Adjusted EBITDA margins ~~were~~

~~flat~~increased 280 basis points compared to prior year. Recent acquisitions were dilutive to the margin by approximately ~~270~~60 basis points, but are expected to be accretive to margins in future years.

4132

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 costs, 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 ~~September~~June 30, ~~2022,~~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 which has been fully extinguished (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 September 30, 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:~~3.75:1.00, ~~with a step-down~~stepping 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:~~3.50:1.00 ~~commencing with~~for the fiscal quarter ending June 30, ~~2023, 3.75:1.00 and commencing with the fiscal quarter ending June 30,~~ 2024, ~~3.50:1.00,~~ and (ii) a minimum interest coverage ratio of 3.00:1:00. The Enovis Credit Agreement contains various events of default (including failure to comply with the covenants under the Enovis Credit 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 $18.6 million of principal on the TEU amortizing notes in the nine months ended September 30, 2022 and October 1, 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 overdraft facilities with a borrowing capacity of $30.0 million.

~~We are also party to a letter of credit facility with an aggregate capacity of $15.0 million.~~ Total letters of credit and surety bonds of ~~$6.6~~$6.9 million are outstanding as of ~~September~~June 30, ~~2022.~~2023.

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

Cash Flows

As of ~~September~~June 30, ~~2022,~~2023, we had ~~$55.0~~$32.5 million of Cash and cash equivalents, ~~a decrease~~an increase of ~~$664.4~~$8.2 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:


		Nine Months Ended					Six Months Ended
		September 30, 2022		October 1, 2021			June 30, 2023		July 1, 2022
		(Dollars in millions)					(Dollars in millions)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	(19.9)	$	259.9	Net cash provided by (used in) operating activities	$	35.6	$	(39.3)
Purchases of property, plant and equipment and intangibles	Purchases of property, plant and equipment and intangibles	(68.7)		(73.6)		Purchases of property, plant and equipment and intangibles	(67.2)		(47.8)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	2.7		2.9		Proceeds from sale of property, plant and equipment	—		2.7
Acquisitions, net of cash received, and investments	Acquisitions, net of cash received, and investments	(73.4)		(223.0)		Acquisitions, net of cash received, and investments	(98.7)		(35.1)

Net cash used in investing activities	Net cash used in investing activities	(139.3)		(293.6)		Net cash used in investing activities	(166.0)		(80.2)
Repayments of borrowings, net		(1,630.2)		(594.3)
Net borrowings (repayments) of debt						Net borrowings (repayments) of debt	139.0		(1,628.9)
Distribution from ESAB Corporation, net	Distribution from ESAB Corporation, net	1,143.4		—		Distribution from ESAB Corporation, net	—		1,143.4
Proceeds from issuance of common stock, net	Proceeds from issuance of common stock, net	2.5		738.2		Proceeds from issuance of common stock, net	1.4		1.7
Payment of debt extinguishment costs	Payment of debt extinguishment costs	(12.7)		(24.4)		Payment of debt extinguishment costs	—		(12.7)
Deferred consideration payments and other	Deferred consideration payments and other	(9.8)		(7.7)		Deferred consideration payments and other	(1.7)		(9.8)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(506.8)		111.8		Net cash provided by (used in) financing activities	138.7		(506.3)
Effect of foreign exchange rates on Cash and cash equivalents	Effect of foreign exchange rates on Cash and cash equivalents	1.6		(1.7)		Effect of foreign exchange rates on Cash and cash equivalents	(0.1)		2.0
Increase (decrease) in Cash and cash equivalents	Increase (decrease) in Cash and cash equivalents	$	(664.4)	$	76.4	Increase (decrease) in Cash and cash equivalents	$	8.2	$	(623.8)

Cash used in operating activities related to discontinued operations for the six months ended July 1, 2022 was $26.2 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~~Excluding the $26.2 million impact of discontinued operations, cash flows from operating activities increased $48.7 million year-over-year. This increase is primarily due to a lower investment in ~~significant operating~~working capital of $22 million, a decrease in cash ~~flow items are discussed below.~~paid for interest of $18 million and favorable changes in accrued compensation and benefits of approximately $9 million.

•Year-to-date 2022 cash used in operating activities of $19.9 million includes $136.0 million of outflows from working capital, primarily due to business growth and increases in inventory to insulate for supply chain volatility. Results in the comparable prior year period include $69.0 million of outflows for working capital increases.

•Year-to-date 2022 cash used in operating activities also reflects $31.9 million of outflows for discontinued operations, which includes $42.6 million of net outflows related to the Separation. Cash provided by operating activities related to discontinued operations for the nine months ended October 1, 2021 was $198.8 million.

•During the nine months ended September 30, 2022, cash payments of $59.7 million were made related to the Separation, of which $42.6 million is related to discontinued operations. Separation related payments made during the comparable 2021 period were $6.3 million.

•Year-to-date 2022 cash used in operating activities includes $33.4 million of cash interest payments, of which $28.3 million relates to the Company’s former capital structure before giving effect to the completion of the refinancing transactions in connection with the Separation. At the time of the Separation, the Company’s total debt of $2.1 billion was repaid and replaced with $450 million of term loan A proceeds. The first nine months of 2021 included cash interest payments of $72.0 million.

•~~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 nine months ended September 30, 2022 and October 1, 2021, cash payments of $9.0 million and $4.9 million, respectively, were made related to our restructuring initiatives within our continuing operations.

Cash flows used in investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2022 of $139.3~~2023 were $166.0 million ~~decreased~~ compared ~~with the $293.6~~to $80.2 million in the prior year period due to ~~lower outlays~~higher investments in the current year driven by the June 28, 2023 acquisition of Novastep for ~~acquisitions and investments.~~$96.9 million, net of cash received. The amounts included in Purchases of property, plant and equipment and intangibles related to discontinued operations for the ~~nine-month periods~~six months ended ~~September 30,~~July 1 2022 ~~and October 1, 2021~~ were ~~$5.9 million and $18.9 million, respectively.~~$3.2 million. The amounts included in Proceeds from sale of property, plant and equipment related to discontinued operations for the ~~nine-month periods~~six months ended ~~September 30,~~July 1 2022 ~~and October 1, 2021~~ were $2.7 million and $1.1 million, respectively. The amount included in Acquisitions, net of cash received, and investments related to discontinued operations for the nine-month period ended October 1, 2021 was $4.9 million.

Cash flows provided by financing activities during the six months ended June 30, 2023 include $139.0 million of net debt borrowings primarily used for the acquisition of Novastep. Cash flows used in financing activities ~~during~~for the ~~nine~~six months ended ~~September 30,~~July 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 and Euro Senior Notes,~~$1,628.9 million, 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~~Distribution from ESAB ~~to us upon Separation. Cash flows provided by financing activities for the nine months ended October 1, 2021 included the $711.3 million~~Corporation, net ~~proceeds from the public offering~~ 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 third quarter of 2021.$1,143.4 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 ~~September~~June 30, ~~2022~~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 ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 would have increased Interest expense for our variable rate-based debt by approximately ~~$1.1~~$0.8 million and ~~$6.1~~$1.5 million, respectively.

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 and six months ended ~~September~~June 30, ~~2022~~2023, approximately 33% and ~~October 1, 2021, approximately 28%~~33% of our sales, respectively, 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 our investments in subsidiaries owned and operated in foreign countries. Our cross-currency swap agreements hedge our net investment in its Swiss Franc-denominated subsidiaries against adverse movements in exchange rates between the U.S. Dollar and the Swiss Franc. These swap agreements are designated and qualify as net investment hedges of our Swiss Franc net asset position. The effect of a change in currency exchange rates on our investment in Swiss Franc subsidiaries, offset by the unrealized gain or loss the cross-currency swap investment hedges, is reflected in the Accumulated other comprehensive loss component of Equity.

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.

4635

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 ~~September~~June 30, ~~2022.~~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.

4736

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.~~During the three months ended June 30, 2023, none of our directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement as defined in Item 408 of Regulation S-K

4837

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.

10.01			Enovis Corporation 2023 Non-Qualified Stock Purchase 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 May 22, 2023)

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 ~~September~~June 30, ~~2022~~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.

4938

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)

~~November 2, 2022~~August 3, 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~~

~~November 2, 2022~~

(Principal Financial Officer)

August 3, 2023

/s/ John Kleckner

Vice President, Controller and Chief Accounting Officer

John Kleckner

~~Chief Accounting Officer~~

~~November 2, 2022~~

(Principal Accounting Officer)

August 3, 2023

5039


	Three Months Ended September 30, 2022									Nine Months Ended September 30, 2022
	Prevention and Recovery			Reconstructive			Total			Prevention and Recovery			Reconstructive			Total
	(Dollars in millions)
Operating loss (GAAP)	$	(0.4)		$	(17.5)		$	(17.9)		$	(1.4)		$	(41.6)		$	(43.0)
Adjusted to add (deduct):
Restructuring and other charges(1)	1.3			1.7			3.0			4.7			3.8			8.5
MDR and other costs(2)	2.4			1.2			3.6			7.1			3.6			10.6
Strategic transaction costs(2)	5.4			2.7			8.1			21.6			11.0			32.5
Stock-based compensation(2)	4.8			2.4			7.2			14.4			7.3			21.7
Depreciation and other amortization	5.5			12.6			18.2			17.7			38.4			56.1
Amortization of acquired intangibles	19.8			12.2			32.0			58.4			36.3			94.6
Insurance settlement (gain) loss(2)	0.7			0.3			1.0			(21.4)			(10.6)			(32.1)
Inventory step-up	—			2.1			2.1			—			12.0			12.0
Adjusted EBITDA (non-GAAP)	$	39.5		$	17.7		$	57.2		$	101.1		$	60.1		$	161.1
Operating loss margin	(0.2)		%	(13.8)		%	(4.7)		%	(0.2)		%	(10.7)		%	(3.7)		%
Adjusted EBITDA margin (non-GAAP)	15.4		%	13.9		%	14.9		%	13.2		%	15.4		%	14.0		%


	Three Months Ended October 1, 2021									Nine Months Ended October 1, 2021
	Prevention and Recovery			Reconstructive			Total			Prevention and Recovery			Reconstructive			Total
	(Dollars in millions)
Operating income (loss) (GAAP)	$	1.5		$	(17.6)		$	(16.1)		$	(12.1)		$	(32.5)		$	(44.6)
Adjusted to add (deduct):
Restructuring and other charges	1.7			0.5			2.2			3.7			1.5			5.2
MDR and other costs(1)	1.4			0.5			1.9			4.1			1.4			5.6
Strategic transaction costs(1)	7.3			4.0			11.4			10.7			5.1			15.8
Stock-based compensation(1)	3.9			2.3			6.3			13.5			5.5			19.0
Depreciation and other amortization	6.6			11.8			18.4			18.8			32.8			51.6
Amortization of acquired intangibles	18.1			12.9			31.0			55.6			32.5			88.1

Inventory step-up	—			1.4			1.4			0.7			3.0			3.7
Adjusted EBITDA (non-GAAP)	$	40.4		$	16.0		$	56.5		$	95.0		$	49.4		$	144.4
Operating income (loss) margin	0.6		%	(17.0)		%	(4.5)		%	(1.6)		%	(12.1)		%	(4.3)		%
Adjusted EBITDA margin (non-GAAP)	15.8		%	15.5		%	15.7		%	12.5		%	18.3		%	14.1		%