cfx-20220930
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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 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number - 001-34045
Enovis Corporation
(Exact name of registrant as specified in its charter)
Delaware 54-1887631
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
2711 Centerville Road,Suite 400 
Wilmington,Delaware19808
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareENOVNew 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 28, 2022, there were 54,149,679 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
            Condensed Consolidated Statements of Operations
            Condensed Consolidated Statements of Comprehensive Income (Loss)
            Condensed Consolidated Balance Sheets
            Condensed Consolidated Statements of Equity
            Condensed Consolidated Statements of Cash Flows
            Notes to Condensed Consolidated Financial Statements
                 Note 1. General
                 Note 2. Recently Issued Accounting Pronouncements
                 Note 3. Discontinued Operations
                 Note 4. Acquisitions and Investments
                 Note 5. Revenue
                 Note 6. Net Income Per Share from Continuing Operations
                 Note 7. Income Taxes
                 Note 8. Equity
                 Note 9. Inventories, Net
                 Note 10. Debt
                 Note 11. Accrued Liabilities
                 Note 12. Financial Instruments and Fair Value Measurements
                 Note 13. Commitments and Contingencies
                 Note 14. Segment Information
Note 15. Related Party Transactions
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
SIGNATURES

1


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 EndedNine Months Ended
September 30, 2022October 1, 2021September 30, 2022October 1, 2021
Net sales$383,814 $359,923 $1,154,388 $1,027,130 
Cost of sales167,990 162,047 516,758 457,379 
Gross profit215,824 197,876 637,630 569,751 
Selling, general and administrative expense182,187 168,270 564,324 487,220 
Research and development expense15,599 12,458 46,102 33,860 
Amortization of acquired intangibles31,993 31,025 94,603 88,067 
Insurance settlement (gain) loss975  (32,059) 
Restructuring and other charges2,989 2,230 7,653 5,193 
Operating loss(17,919)(16,107)(42,993)(44,589)
Interest expense, net6,334 4,122 17,944 22,751 
Debt extinguishment charges  20,104 29,870 
Unrealized (gain) loss on investment in ESAB Corporation63,125  (72,412) 
Realized gain on cost basis investment(8,800) (8,800) 
Other income(300) (300) 
Income (loss) from continuing operations before income taxes(78,278)(20,229)471 (97,210)
Income tax benefit(12,329)(6,651)(16,176)(9,651)
Net income (loss) from continuing operations(65,949)(13,578)16,647 (87,559)
Income (loss) from discontinued operations, net of taxes(527)40,435 10,163 164,358 
Net income (loss)(66,476)26,857 26,810 76,799 
Less: net income attributable to noncontrolling interest from continuing operations - net of taxes136 191 533 836 
Less: net income attributable to noncontrolling interest from discontinued operations - net of taxes 818 966 2,399 
Net income (loss) attributable to Enovis Corporation$(66,612)$25,848 $25,311 $73,564 
Net income (loss) per share - basic
Continuing operations$(1.22)$(0.26)$0.30 $(1.76)
Discontinued operations$(0.01)$0.75 $0.17 $3.22 
Consolidated operations$(1.23)$0.49 $0.47 $1.46 
Net income (loss) per share - diluted
Continuing operations$(1.22)$(0.26)$0.30 $(1.76)
Discontinued operations$(0.01)$0.75 $0.17 $3.22 
Consolidated operations$(1.23)$0.49 $0.46 $1.46 
    

See Notes to Condensed Consolidated Financial Statements.

2


ENOVIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Dollars in thousands
(Unaudited)
Three Months EndedNine Months Ended
September 30, 2022October 1, 2021September 30, 2022October 1, 2021
Net income (loss)$(66,476)$26,857 $26,810 $76,799 
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 
Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $, $327, $199, $958
 1,093 629 3,193 
Other comprehensive income (loss)(28,836)(49,659)(103,516)(81,725)
Comprehensive income(95,312)(22,802)(76,706)(4,926)
Less: comprehensive income (loss) attributable to noncontrolling interest(1,030)1,373 (1,438)2,046 
Comprehensive loss attributable to Enovis Corporation$(94,282)$(24,175)$(75,268)$(6,972)


See Notes to Condensed Consolidated Financial Statements.

3


ENOVIS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except share amounts
(Unaudited)
September 30, 2022December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$54,957 $680,252 
Trade receivables, less allowance for credit losses of $7,516 and $6,589
258,823 254,958 
Inventories, net416,872 356,233 
Prepaid expenses28,992 26,046 
Other current assets48,293 29,176 
Investment in ESAB Corporation200,274  
Total current assets associated with discontinued operations 956,614 
Total current assets1,008,211 2,303,279 
Property, plant and equipment, net225,176 235,113 
Goodwill1,959,795 1,934,258 
Intangible assets, net1,116,539 1,154,028 
Lease asset - right of use67,084 76,485 
Other assets68,013 74,700 
Total non-current assets associated with discontinued operations 2,738,049 
Total assets$4,444,818 $8,515,912 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt$449,223 $7,701 
Accounts payable179,672 155,208 
Accrued liabilities225,021 225,391 
Total current liabilities associated with discontinued operations 635,284 
Total current liabilities853,916 1,023,584 
Long-term debt, less current portion 2,078,625 
Non-current lease liability52,032 56,549 
Other liabilities130,668 122,159 
Total non-current liabilities associated with discontinued operations 573,562 
Total liabilities1,036,616 3,854,479 
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 
Additional paid-in capital2,908,913 4,544,315 
Retained earnings614,335 589,024 
Accumulated other comprehensive loss(116,611)(516,013)
Total Enovis Corporation equity3,406,691 4,617,378 
Noncontrolling interest1,511 44,055 
Total equity3,408,202 4,661,433 
Total liabilities and equity$4,444,818 $8,515,912 

See Notes to Condensed Consolidated Financial Statements.
4


ENOVIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Dollars in thousands, except share amounts
(Unaudited)
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal
SharesAmount
Balance at December 31, 202152,083,078 $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 stock1,691,845 2 (2)— — — — 
Common stock-based award activity255,957 — 11,056 — — — 11,056 
Balance at April 1, 202254,030,880 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 activity80,238 — 8,570 — — — 8,570 
Balance at July 1, 202254,111,118 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 activity37,197 — 9,255 — — — 9,255 
Balance at September 30, 202254,148,315 $54 $2,908,913 $614,335 $(116,611)$1,511 $3,408,202 
See Notes to Condensed Consolidated Financial Statements.


5


ENOVIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Dollars in thousands, except share amounts
(Unaudited)
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal
SharesAmount
Balance at December 31, 202039,498,896 $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 stock114,804 — — — — — — 
Common stock offering, net of issuance costs5,366,666 5 711,316 — — — 711,321 
Common stock-based award activity218,744  12,433 — — — 12,433 
Balance at April 2, 202145,199,110 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 stock2,058,000 2 (2)— — — — 
Common stock-based award activity190,105  23,510 — — — 23,510 
Balance at July 2, 202147,447,215 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 stock1,845,700 2 (2)— — — — 
Common stock issued for acquisition, net of issuance costs2,181,507 3 285,678 — — — 285,681 
Common stock-based award activity119,525 — 17,181 — — — 17,181 
Balance at October 1, 202151,593,947 $52 $4,528,200 $590,931 $(532,642)$43,983 $4,630,524 

See Notes to Condensed Consolidated Financial Statements.
6


ENOVIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
(Unaudited)
Nine Months Ended
September 30, 2022October 1, 2021
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:
Depreciation, amortization and other impairment charges167,453 197,641 
Stock-based compensation expense27,799 26,235 
Non-cash interest expense3,021 3,757 
Unrealized gain on investment in ESAB Corporation(72,412) 
Realized gain on cost basis investment(8,800) 
Debt extinguishment charges20,104 29,870 
Deferred income tax expense (benefit)(3,458)(5,904)
(Gain)/Loss on sale of property, plant and equipment352 (1,483)
Changes in operating assets and liabilities:
Trade receivables, net(43,315)(70,407)
Inventories, net(119,145)(130,348)
Accounts payable34,147 143,694 
Other operating assets and liabilities(52,459)(9,971)
Net cash (used in) provided by operating activities(19,903)259,883 
Cash flows from investing activities:
Purchases of property, plant and equipment and intangibles(68,668)(73,595)
Proceeds from sale of property, plant and equipment2,746 2,908 
Acquisitions, net of cash received, and investments(73,390)(222,961)
Net cash used in investing activities(139,312)(293,648)
Cash flows from financing activities:
Proceeds from borrowings on term credit facility450,000 515,696 
Payments under term credit facility(785,000) 
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, net1,143,369  
Payment of debt issuance costs(2,938) 
Proceeds from issuance of common stock, net2,530 738,177 
Payment of debt extinguishment costs(12,704)(24,375)
Deferred consideration payments and other(6,857)(7,700)
Net cash (used in) provided by financing activities(506,755)111,837 
Effect of foreign exchange rates on Cash and cash equivalents and Restricted Cash1,557 (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 period719,370 101,069 
Cash and cash equivalents, end of period$54,957 $177,482 
Supplemental disclosures:
Common stock issued for acquisition, net of issuance costs$ $285,681 
    


7


See Notes to Condensed Consolidated Financial Statements.
8

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 retained the Company’s specialty medical technology business, changed its name to Enovis Corporation. On April 5, 2022, the Company began trading under the stock symbol “ENOV” on the New York Stock Exchange.

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

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

In connection with the Separation, ESAB issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to Enovis. The distribution proceeds were used by Enovis in conjunction with $450 million of borrowings on a term loan (the “Enovis Term Loan”) under the new Enovis credit facility (the “Enovis Credit Agreement”), and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest under 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.

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

The Company makes certain estimates and assumptions in preparing its Condensed Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from those estimates. 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
9

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 months ended September 30, 2022. There are no recently issued accounting pronouncements that are expected to have a material effect on the Company’s financial position, results of operations or cash flows.


3. Discontinued Operations

Separation of Fabrication Technology Business

On April 4, 2022, the Company completed the Separation of its fabrication technology business into an independent, publicly traded company: ESAB, a global organization that develops, manufactures and supplies consumable welding and cutting products and equipment, as well as gas control equipment, into diversified end markets such as medical and alternative energy. The 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, net383,742 
Inventories, net420,062 
Prepaid expenses52,140 
Other current assets61,552 
Total current assets associated with discontinued operations956,614 
Property, plant and equipment, net286,278 
Goodwill1,533,037 
Other intangibles, net521,434 
Lease asset - right of use107,944 
Other assets289,356 
Total assets associated with discontinued operations(1)
$3,694,663 
LIABILITIES
Current portion of long-term debt$613 
Accounts payable348,965 
Accrued liabilities285,706 
Total current liabilities associated with discontinued operations635,284 
Long-term debt, less current portion54 
Non-current lease liability88,777 
Deferred tax liabilities116,198 
Other liabilities368,533 
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.

10

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 EndedNine Months Ended
September 30, 2022October 1, 2021September 30, 2022October 1, 2021
(in thousands)
Net sales$ $605,968 $647,911 $1,803,900 
Cost of sales 398,973 423,580 1,178,719 
Selling, general and administrative expense527 124,313 175,191 382,037 
Restructuring and other charges 4,227 5,304 10,790 
Operating income (loss)(527)78,455 43,836 232,354 
Interest expense 9,417 8,035 34,254 
Pension settlement gain   (11,208)
Income (loss) from discontinued operations before income taxes(527)69,038 35,801 209,308 
Income tax expense 28,603 25,638 44,950 
Income (loss) from discontinued operations, net of taxes$(527)$40,435 $10,163 $164,358 

Total income attributable to noncontrolling interest related to ESAB, net of taxes was $1.0 million for the nine months ended September 30, 2022, and $0.8 million and $2.4 million for the three and nine months ended October 1, 2021, respectively.

Cash used in operating activities related to discontinued operations for the nine months ended September 30, 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 million. Cash used in investing activities related to discontinued operations for the nine months ended September 30, 2022 and October 1, 2021 was $3.2 million and $22.7 million, respectively.

Asbestos Contingencies

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



11

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



4. Acquisitions and Investments

2022 Acquisitions

During the nine months ended September 30, 2022, the Company completed four asset acquisitions, two business combinations, and one investment, which is carried at cost as it does not have a readily determinable fair value. Two of these transactions were completed by the Company’s Reconstructive segment, and the other five transactions were completed by the Prevention & Recovery segment. The asset acquisitions broaden the Company’s product offering and distribution network. Aggregate purchase consideration for the four asset acquisitions was $22.3 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.

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 million to goodwill and $18.2 million to intangible assets acquired. Purchase accounting procedures are ongoing and revisions to contingent consideration, intangible assets acquired, and adjustments for working capital true-ups may be recorded in future periods during the measurement period. The 360 Med Care acquisition broadens our customer base in Australia and adds to our overall product offerings.

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

Enovis made initial investments in Insight in 2020 and 2021, which were carried at cost. During the quarter, the Company acquired an additional 53.7% interest in Insight for $34.2 million net of cash received, and recorded contingent consideration of $5.0 million, which is the maximum payable under the agreement based on Insight’s achievement of certain milestones related to ARVIS. As of September 30, 2022, Enovis holds 99.5% interest in Insight and recognizes $0.3 million noncontrolling equity interest in its financial statements attributed to Insight.

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

Investments

As of September 30, 2022, the balance of investments held by the company without readily determinable fair values was $16.5 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 basis investments.
12

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 all its revenue is recognized at a point in time. The Company disaggregates its revenue into the following segments:

13

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Three Months EndedNine Months Ended
September 30, 2022October 1, 2021September 30, 2022October 1, 2021
(In thousands)
Prevention and Recovery$256,502 $256,229 $765,121 $757,822 
Reconstructive127,312 103,694 389,267 269,308 
Total$383,814 $359,923 $1,154,388 $1,027,130 

Given the nature of the Company’s business, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of September 30, 2022 is immaterial.

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

Allowance for Credit Losses

The Company’s estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. In calculating and applying its current expected credit losses, the Company disaggregates trade receivables into business segments due to risk characteristics unique to each segment given the individual lines of business and market. The business segments are further disaggregated based on either geography or product type. The Company uses a loss rate methodology in calculating its current expected credit losses, leveraging historical write-offs over a defined lookback period in deriving a historical loss rate. The expected credit loss model further considers current conditions and reasonable and supportable forecasts using an adjustment for current and projected macroeconomic factors.

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, netWrite-Offs, Deductions and Other, netForeign
Currency
Translation
Balance at
End of
Period
(In thousands)
Allowance for credit losses$6,589 $3,345 $(2,027)$(391)$7,516 
14

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)




6. Net Income Per Share from Continuing Operations

Net income per share from continuing operations was computed as follows:
Three Months EndedNine Months Ended
September 30, 2022October 1, 2021September 30, 2022October 1, 2021
(In thousands, except share and per share data)
Computation of Net income (loss) per share from continuing operations - basic:
Net income (loss) from continuing operations attributable to Enovis Corporation(1)
$(66,085)$(13,769)$16,114 $(88,395)
Weighted-average shares of Common stock outstanding – basic
54,136,889 53,031,128 54,025,144 50,274,020 
Net income (loss) per share from continuing operations – basic
$(1.22)$(0.26)$0.30 $(1.76)
Computation of Net income (loss) per share from continuing operations - diluted:
Net income (loss) from continuing operations attributable to Enovis Corporation(1)
$(66,085)$(13,769)$16,114 $(88,395)
Weighted-average shares of Common stock outstanding – basic
54,136,889 53,031,128 54,025,144 50,274,020 
Net effect of potentially dilutive securities - stock options and restricted stock units  434,859  
Weighted-average shares of Common stock outstanding – diluted
54,136,889 53,031,128 54,460,003 50,274,020 
Net income (loss) per share from continuing operations – diluted
$(1.22)$(0.26)$0.30 $(1.76)
(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 million and $0.5 million for the three and nine months ended September 30, 2022, respectively, and $0.2 million and $0.8 million for the three and nine months ended October 1, 2021, respectively.

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

For the three and 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 the three and nine months ended September 30, 2022 excludes 0.5 million and 0.4 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three and nine months ended October 1, 2021 excludes 0.3 million and 0.4 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.


7. Income Taxes
15

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)




During the three and nine months ended September 30, 2022, Income (loss) from continuing operations before income taxes was $(78.3) million and $0.5 million, respectively, while Income tax benefit was $12.3 million and $16.2 million, respectively. The effective tax rate was 15.8% and (3,434.4)% for the three and nine months ended September 30, 2022, both of which differed from the 2022 federal statutory rate of 21% mainly due to non-taxable unrealized gains on the investment in ESAB 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.

16

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 30, 2022, the remaining stock repurchase authorization provided by the Board of Directors was $100 million. The timing, amount and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors. There is no term associated with the remaining repurchase authorization.

Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of each component of Accumulated other comprehensive loss including reclassifications out of Accumulated other comprehensive loss for the nine months ended September 30, 2022 and October 1, 2021. All amounts are net of tax and noncontrolling interest, if any.