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What changed in Enovis CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Enovis CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+276 added−274 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-22)

Top changes in Enovis CORP's 2024 10-K

276 paragraphs added · 274 removed · 205 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changePrevention & Recovery Our Prevention & Recovery segment includes products that are used by orthopedic specialists, surgeons, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers and other healthcare professionals to treat patients with musculoskeletal conditions resulting from degenerative diseases, deformities, traumatic events and sports-related injuries.
Biggest changeWe reach a diverse customer base through multiple distribution channels, that include both independent distributors and direct salespeople, and provide a wide range of medical devices and related products to orthopedic specialists and other healthcare professionals operating in a variety of patient treatment settings and to retail consumers. 4 Prevention & Recovery Our Prevention & Recovery segment includes products that are used by orthopedic specialists, surgeons, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers and other healthcare professionals to treat patients with musculoskeletal conditions resulting from degenerative diseases, deformities, traumatic events and sports-related injuries.
The False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of themselves and the federal government alleging violations of the statute and to share in any monetary recovery. 12 • The U.S. civil monetary penalties statute prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state healthcare program, subject to certain exceptions. • The U.S.
The False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of themselves and the federal government alleging violations of the statute and to share in any monetary recovery. • The U.S. civil monetary penalties statute prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state healthcare program, subject to certain exceptions. 12 • The U.S.
Reportable Segments We report our operations through the Prevention & Recovery and Reconstructive segments. We develop, manufacture and 4 distribute high-quality medical devices and services across the continuum of patient care from injury prevention to joint replacement to rehabilitation after surgery, injury or from degenerative disease, enabling people to regain or maintain their natural motion.
Reportable Segments We report our operations through the Prevention & Recovery and Reconstructive segments. We develop, manufacture and distribute high-quality medical devices and services across the continuum of patient care from injury prevention to joint replacement to rehabilitation after surgery, injury or from degenerative disease, enabling people to regain or maintain their natural motion.
Directive 2006/114/EC concerning misleading and comparative advertising and Directive 2005/29/EC on 9 unfair commercial practices, while not specific to the advertising of medical devices, also apply to the advertising thereof and contain general rules, for example, requiring that advertisements are evidenced, balanced and not misleading. Specific requirements are defined at a national level.
Directive 2006/114/EC concerning misleading and comparative advertising and Directive 2005/29/EC on unfair commercial practices, while not specific to the advertising of medical devices, also apply to the advertising thereof and contain general rules, for example, requiring that advertisements are evidenced, balanced and not misleading. Specific requirements are defined at a national level.
Reconstructive Our Reconstructive segment is an innovation-driven leader offering a comprehensive suite of reconstructive joint products for the hip, knee, shoulder, elbow, foot, ankle, and finger and surgical productivity tools. The following discussion includes information that is common to both of our reportable segments, unless indicated otherwise.
Reconstructive Our Reconstructive segment is an innovation-driven leader offering a comprehensive suite of reconstructive joint products for the hip, knee, shoulder, elbow, foot, ankle, and surgical productivity tools. The following discussion includes information that is common to both of our reportable segments, unless indicated otherwise.
If the states in which we conduct our business are more protective, we may have to comply with the stricter provisions. 13 The legislative and regulatory landscape for privacy and data security continues to evolve, and there has been an increasing focus on privacy and data security issues with the potential to affect our business.
If the states in which we conduct our business are more protective, we may have to comply with the stricter provisions. The legislative and regulatory landscape for privacy and data security continues to evolve, and there has been an increasing focus on privacy and data security issues with the potential to affect our business.
All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s Investigational Device Exemption (“IDE”) regulations, which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.
All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s Investigational Device Exemption (“IDE”) regulations, which govern investigational device labeling, prohibit promotion of the 7 investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.
Our failure to maintain compliance with FDA regulatory requirements could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products, which would have a material adverse effect on our business. 8 The FDA has broad regulatory compliance and enforcement powers.
Our failure to maintain compliance with FDA regulatory requirements could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products, which would have a material adverse effect on our business. The FDA has broad regulatory compliance and enforcement powers.
Patient 11 Protection and Affordable Care Act (“ACA”), enacted in 2010, was a sweeping measure generally designed to expand access to affordable health insurance, control health care spending, and improve health care quality. Several ACA provisions specifically affect the medical equipment industry.
Patient Protection and Affordable Care Act (“ACA”), enacted in 2010, was a sweeping measure generally designed to expand access to affordable health insurance, control health care spending, and improve health care quality. Several ACA provisions specifically affect the medical equipment industry.
The FDA will approve the device for commercial distribution if it determines that the data and information in the PMA application 7 constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s).
The FDA will approve the device for commercial distribution if it determines that the data and information in the PMA application constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s).
A November 2020 California ballot initiative introduced amendments to the CCPA and established and funded a dedicated privacy regulator, the California Privacy Protection Agency (the “CPPA”). These amendments became effective in January 2023, and we expect the CPPA to introduce implementing regulations.
A November 2020 California ballot initiative 13 introduced amendments to the CCPA and established and funded a dedicated privacy regulator, the California Privacy Protection Agency (the “CPPA”). These amendments became effective in January 2023, and we expect the CPPA to introduce implementing regulations.
Under the FDCA, medical devices are classified into either Class I, Class II or Class III, depending on the degree of associated 6 risk and the extent of manufacturer and regulatory control needed to ensure safety and effectiveness.
Under the FDCA, medical devices are classified into either Class I, Class II or Class III, depending on the degree of associated risk and the extent of manufacturer and regulatory control needed to ensure safety and effectiveness.
We believe the principal elements of competition are innovation to create better patient outcomes, product quality, product reliability, brand names, and price. Key competitors for our Prevention & Recovery segment include Össur and Breg, Inc. Our Reconstructive segment generates approximately 68% of its revenues in the U.S. and the majority of the remaining balance in Europe.
We believe the principal elements of competition are innovation to create better patient outcomes, product quality, product reliability, brand names, and price. Key competitors for our Prevention & Recovery segment include Össur and Breg, Inc. Our Reconstructive segment generates approximately 50% of its revenues in the U.S. and the majority of the remaining balance in Europe.
Failure to comply with regulatory requirements (as applicable) could require time and resources to respond to the regulatory authorities’ observations and to implement corrective and preventive actions, as appropriate.
Failure to 9 comply with regulatory requirements (as applicable) could require time and resources to respond to the regulatory authorities’ observations and to implement corrective and preventive actions, as appropriate.
We divested our remaining 10% ownership stake in ESAB on November 18, 2022 by exchanging with a lender under the Company’s Credit Agreement, dated as of April 4, 2022 (the “Enovis Credit Agreement”), ESAB common stock for $230.5 million of the $450.0 million term loan outstanding under our Credit Agreement.
We divested our remaining 10% ownership stake in ESAB on November 18, 2022 by exchanging with a lender under the Company’s Credit Agreement, dated as of April 4, 2022 (the “Credit Agreement”), ESAB common stock for $230.5 million of the $450.0 million term loan outstanding under our Credit Agreement.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties, unanticipated expenditures to address or defend such actions, customer notifications or repair, replacement, refunds, recall, detention or seizure of our products, operating restrictions, partial suspension or total shutdown of production, refusing or delaying our requests for regulatory approvals or clearances of new products or modified products, withdrawing a PMA that has already been granted, refusal to grant export approval for our products, or criminal prosecution.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties, unanticipated expenditures to address or defend such actions, customer notifications or repair, replacement, refunds, recall, detention or seizure of our products, operating restrictions, partial suspension or total shutdown of production, refusing or delaying our requests for regulatory approvals or clearances of new products or modified products, withdrawing a PMA that has already been granted, refusal to grant export approval for our products, or criminal prosecution. 8 Regulation of Medical Devices in the EU In the EU, our products generally are regulated as medical devices.
Food and Drug Administration Regulation In the United States, our products generally are subject to regulation by the Food and Drug Administration (the “FDA”) as medical devices pursuant to the Federal Food Drug and Cosmetic Act (the “FDCA”).
Regulatory Environment U.S. Food and Drug Administration Regulation In the United States, our products generally are subject to regulation by the Food and Drug Administration (the “FDA”) as medical devices pursuant to the Federal Food Drug and Cosmetic Act (the “FDCA”).
For the year ended December 31, 2023, approximately 32% of our Net sales were derived from operations outside the U.S., the majority of which is in Europe with the remaining portion mostly in the Asia-Pacific region. Our international operations subject us to certain risks. See Part I. Item 1A.
For the year ended December 31, 2024, approximately 41% of our Net sales were derived from operations outside the U.S., the majority of which is in Europe with the remaining portion mostly in the Asia-Pacific region. Our international operations subject us to certain risks. See Part I. Item 1A. “Risk Factors — Risks Related to Our Business and Operations”.
During the year ended December 31, 2023, we completed three acquisitions within our Reconstructive segment and two investments within our Prevention & Recovery segment. See Note 5, “Acquisitions and Investments”, for further information. Our business management system, EGX, is integral to our operations. EGX is our culture and incorporates our values and drives our behaviors.
During the year ended December 31, 2024, we completed two acquisitions within our Reconstructive segment and one acquisition within our Prevention & Recovery segment. See Note 5 “Acquisitions” for further information. Our business management system, EGX, is integral to our operations. EGX is our culture and incorporates our values and drives our behaviors.
“Risk Factors — Risks Related to Our Business and Operations”. 5 Research and Development Our research and development activities vary by operating segment, focusing on innovation; developing new products, software and services, as well as the enhancement of existing products with the latest technology and updated designs; creating new applications for existing products; lowering the cost of manufacturing our existing products; and redesigning existing product lines to increase efficiency, improve durability, enhance performance and usability.
Research and Development Our research and development activities vary by operating segment, focusing on innovation; developing new products, software and services, as well as the enhancement of existing products with the latest technology and updated designs; creating new applications for existing products; lowering the cost of manufacturing our existing products; and redesigning existing product lines to increase efficiency, improve durability, enhance performance and usability. 5 We receive new product and invention ideas from orthopedic surgeons and other healthcare professionals.
Culture and associate development are critical to our success. We are a diverse team of associates around the world. We empower our associates through our culture that is centered on our corporate purpose – “Creating Better Together,” which means we are committed to attracting and developing great talent and rewarding our associates to build and sustain our company.
We empower our associates through our culture that is centered on our corporate purpose – “Creating Better Together,” which means we are committed to attracting and developing great talent and rewarding our associates to build and sustain our company.
Among other things, the ACA established enhanced Medicare and Medicaid program integrity provisions, including expanded documentation requirements for Medicare DMEPOS orders, more stringent procedures for screening Medicare and Medicaid DMEPOS suppliers, and new disclosure requirements regarding manufacturer payments to physicians and teaching hospitals, along with broader expansion of federal fraud and abuse authorities.
Among other things, the ACA established enhanced Medicare and Medicaid program integrity provisions, including expanded documentation requirements for Medicare DMEPOS orders, more stringent procedures for screening Medicare and Medicaid DMEPOS suppliers, and new disclosure requirements regarding manufacturer payments to physicians and teaching hospitals, along with broader expansion of federal fraud and abuse authorities. 11 Some of the ACA’s provisions, or its implementing regulations, have been subject to judicial challenges as well as efforts to modify them or alter their interpretation or implementation.
We believe our sources of raw materials are adequate for our needs for the foreseeable future and the loss of any one supplier would not have a material adverse effect on our business or results of operations.
We believe our sources of raw materials are adequate for our needs for the foreseeable future and the loss of any one supplier would not have a material adverse effect on our business or results of operations. Seasonality Our sales typically peak in the fourth quarter; however, general economic conditions and other factors may impact future seasonal variations.
Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA to ensure safety and effectiveness. Special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents.
Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA to ensure safety and effectiveness.
While most Class I devices are exempt from 510(k) premarket notification, most Class II device manufacturers must submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission for commercial distribution. Permission for commercial distribution subject to a 510(k) premarket notification is generally known as 510(k) clearance.
Special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents. 6 While most Class I devices are exempt from 510(k) premarket notification, most Class II device manufacturers must submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission for commercial distribution.
The UKCA marking is a UK product marking used for certain goods, including medical devices, being placed on the UK market.
The UKCA marking is a UK product marking used for certain goods, including medical devices, being placed on the UK market. For the purposes of the UKCA marking, a UK Approved Body must be used in cases where third party conformity assessment is required.
Unlike directives, regulations are directly applicable in all EU member states without the need for member states to implement into national law. [Most of our current certificates have been granted under the MDD].
Until May 25, 2021, medical devices were regulated by the Medical Devices Directive (93/42/EEC) (“MDD”) which has been repealed and replaced by Regulation (EU) No 2017/745 (“MDR”). Unlike directives, regulations are directly applicable in all EU member states without the need for member states to implement into national law. Most of our current certificates have been granted under the MDD.
We have not experienced any work stoppages or strikes that have had a material adverse impact on operations. We consider our relations with our associates to be good. At Enovis, we believe that the best team wins. Our growth model is focused in part on acquiring good companies, empowering our talent and using EGX to make them great.
At Enovis, we believe that the best team wins. Our growth model is focused in part on acquiring good companies, empowering our talent and using EGX to make them great. Culture and associate development are critical to our success. We are a diverse team of associates around the world.
Our principal raw materials and components for our Reconstructive segment are cobalt-chromium alloy, stainless steel alloys, titanium alloy and ultra-high molecular weight polyethylene for our surgical implant products.
Our principal raw materials and components for our Reconstructive segment are cobalt-chromium alloy, stainless steel alloys, titanium alloy and ultra-high molecular weight polyethylene for our surgical implant products. We generally use more than one supplier which helps to mitigate any risk of shortages or delays in the global supply chain.
For the purposes of the UKCA marking, a UK Approved Body must be used in cases where third party conformity assessment is required. 10 Other Healthcare Laws Third-party Coverage and Reimbursement Sales of our medical device products depend largely on whether there is coverage and adequate reimbursement by government healthcare programs, such as Medicare and Medicaid, and by private payors.
Other Healthcare Laws Third-party Coverage and Reimbursement Sales of our medical device products depend largely on whether there is coverage and adequate reimbursement by government healthcare programs, such as Medicare and Medicaid, and by private payors. 10 Third-party payors review their coverage policies carefully and can, without notice, reduce or eliminate reimbursement.
We maintain contractual relationships with orthopedic surgeons who assist us in developing our products and may also provide consulting services in connection with our products.
We seek to obtain rights to ideas we consider promising from a clinical and commercial perspective through entering into either assignment or licensing agreements. We maintain contractual relationships with orthopedic surgeons who assist us in developing our products and may also provide consulting services in connection with our products.
Any failure by us or third parties to follow these policies or practices, or otherwise comply with applicable data laws, could lead to a security or privacy breach, regulatory enforcement, or regulatory or financial harm. 14 Human Capital Management As of December 31, 2023, we employed approximately 6,550 persons, of whom approximately 2,175 were employed in the United States and approximately 4,375 were employed outside of the United States.
Any failure by us or third parties to follow these policies or practices, or otherwise comply with applicable data laws, could lead to a security or privacy breach, regulatory enforcement, or regulatory or financial harm.
None of our associates are covered by collective bargaining agreements with U.S. trade unions. Approximately 19.5% of our associates are represented by foreign trade unions and work councils in Europe, Africa, and Australia, which could subject us to arrangements very similar to collective bargaining agreements.
Approximately 21.4% of our associates are represented by foreign trade unions and work councils in Europe, Africa, and Australia, which could subject us to arrangements very similar to 14 collective bargaining agreements. We have not experienced any work stoppages or strikes that have had a material adverse impact on operations. We consider our relations with our associates to be good.
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The COVID-19 pandemic, actions taken in response to it, as well as other market dynamics caused economic disruptions impacting the results of operations in 2021 and 2022. The emergence of variants and outbreaks caused some volatility which slowed the pace of recovery in 2022.
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Tariffs may also increase the cost of and impair sourcing flexibility for raw materials, component parts and supplies, and further trade restrictions, retaliatory trade measures, or additional tariffs implemented could result in higher input costs to our products.
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We also experienced cost inflation, supply chain challenges, such as logistics delays in 2022, as well as staffing shortages experienced by our customers (healthcare providers) that reduced capacity and procedures. The actions taken to mitigate impacts to our supply chain, including purchasing and producing additional inventory helped to protect our ability to meet customer demand during this time.
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Permission for commercial distribution subject to a 510(k) premarket notification is generally known as 510(k) clearance.
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We reach a diverse customer base through multiple distribution channels, that include both independent distributors and direct salespeople, and provide a wide range of medical devices and related products to orthopedic specialists and other healthcare professionals operating in a variety of patient treatment settings and to retail consumers.
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Human Capital Management As of December 31, 2024, we employed approximately 7,367 persons, of whom approximately 2,076 were employed in the United States and approximately 5,291 were employed outside of the United States. None of our associates are covered by collective bargaining agreements with U.S. trade unions.
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We receive new product and invention ideas from orthopedic surgeons and other healthcare professionals. We seek to obtain rights to ideas we consider promising from a clinical and commercial perspective through entering into either assignment or licensing agreements.
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Recent global supply chain issues have created challenges in acquiring certain raw materials, component parts and supplies; however, our general use of more than one supplier for these helps to mitigate the risk of shortages or delays in the global supply chain.
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Seasonality Our sales typically peak in the fourth quarter; however, the business impact caused by the COVID-19 pandemic has distorted the effects of historical seasonality patterns. Regulatory Environment U.S.
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Regulation of Medical Devices in the EU In the EU, our products generally are regulated as medical devices. Until May 25, 2021, medical devices were regulated by the Medical Devices Directive (93/42/EEC) (“MDD”) which has been repealed and replaced by Regulation (EU) No 2017/745 (“MDR”).
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Third-party payors review their coverage policies carefully and can, without notice, reduce or eliminate reimbursement.
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Some of the ACA’s provisions, or its implementing regulations, have been subject to judicial challenges as well as efforts to modify them or alter their interpretation or implementation.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

54 edited+19 added−9 removed211 unchanged
Biggest changeIf future operating performance at one or more of our business units were to fall significantly below current levels, if competing or alternative technologies emerge, or if market conditions for an acquired business decline, we could incur, under current applicable accounting rules, a non-cash charge to operating earnings for Goodwill impairment.
Biggest changeSee “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Goodwill and Intangible Assets .” If future operating performance at either of our reporting units were to fall significantly below current levels, if competing or alternative technologies emerge, if market conditions for an acquired business decline, or if there is a sustained decrease in our market capitalization, among other things, we could incur, under current applicable accounting rules, additional non-cash charges to operating earnings for Goodwill impairment, which could be material and may adversely affect our reported earnings.
Upon a default by an option counterparty, we may also suffer adverse tax consequences and/or more dilution than we currently anticipate with respect to our common stock. We can provide no assurance as to the financial stability or viability of the option counterparties. 17 Our restructuring activities may subject us to additional uncertainty in our operating results.
Upon a default by an option counterparty, we may also suffer adverse tax consequences and/or 17 more dilution than we currently anticipate with respect to our common stock. We can provide no assurance as to the financial stability or viability of the option counterparties. Our restructuring activities may subject us to additional uncertainty in our operating results.
Moreover, industry associations closely monitor the activities of their member companies. If these organizations or national authorities were to name us as having breached our obligations under their laws, regulations, 26 rules or standards, our reputation would suffer and our business, financial condition, operating results, cash flows and prospects could be adversely affected.
Moreover, industry associations closely monitor the activities of their member companies. If these organizations or national authorities were to name us as having breached our obligations under their laws, regulations, rules or standards, our reputation would suffer and our business, financial condition, operating results, cash flows and prospects could be adversely affected.
Additionally, in order to fund a portion of the cash consideration for the Lima Acquisition, on October 24, 2023, we issued $460.0 million aggregate principal amount of the 2028 Notes (as defined herein), which are convertible by the holders into shares of Company common stock at their election under certain conditions.
Additionally, in order to fund a portion of the cash consideration for the Lima Acquisition, on October 24, 2023, we issued $460 million aggregate principal amount of the 2028 Notes (as defined herein), which are convertible by the holders into shares of Company common stock at their election under certain conditions.
However, if the FDA determines that our educational and promotional activities or training constitutes promotion of an off-label use, it could request 22 that we modify our training or promotional materials or subject us to regulatory or enforcement actions, as discussed in “Regulatory Environment – Medical Device Regulation” in Part I, Item 1.
However, if the FDA determines that our educational and promotional activities or training constitutes promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, as discussed in “Regulatory Environment – Medical Device Regulation” in Part I, Item 1.
While we do not intend to engage in unfair or deceptive acts or practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may be result in FTC enforcement. Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions.
While we do not intend to engage in unfair or deceptive acts or practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may result in FTC enforcement. Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions.
In addition, our Board of Directors has the right to issue Preferred stock without stockholder approval, which our Board of Directors could use to affect a rights plan or “poison pill” that could dilute the stock ownership of a potential hostile acquirer and may have the effect of delaying, discouraging or preventing an acquisition of Enovis.
In addition, our Board of Directors has the right to issue Preferred stock without stockholder approval, which our Board of Directors could use to affect a rights plan or “poison pill” that could dilute the stock ownership of a potential hostile acquirer and may have the effect of delaying, discouraging or preventing an acquisition of Enovis. 31
Additionally, the Enovis Credit Agreement, which governs our term loan and revolving credit facility, contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit the Company’s ability to incur debt or liens, merge or consolidate with others, dispose of assets, or make investments or pay dividends.
Additionally, the Credit Agreement, which governs our term loan and revolving credit facility, contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit the Company’s ability to incur debt or liens, merge or consolidate with others, dispose of assets, or make investments or pay dividends.
Actual or alleged violations could result in substantial fines, sanctions, civil or criminal penalties, debarment from government contracts, curtailment of operations in certain jurisdictions, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations, financial condition or strategic objectives.
Actual or alleged violations could result in substantial fines, sanctions, civil or criminal penalties, 29 debarment from government contracts, curtailment of operations in certain jurisdictions, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations, financial condition or strategic objectives.
The Enovis Credit Agreement also contains financial covenants requiring the Company to satisfy and maintain compliance with a total leverage ratio and an interest coverage ratio. Upon an event of default, the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding.
The Credit Agreement also contains financial covenants requiring the Company to satisfy and maintain compliance with a total leverage ratio and an interest coverage ratio. Upon an event of default, the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding.
Private payors may conduct similar reviews and audits. Additionally, we participate in the government’s Federal Supply Schedule program for medical equipment, whereby we contract with the government to supply certain of our medical products. Participation in this program requires us to follow certain pricing practices and other contract requirements.
Private payors may conduct similar reviews and audits. 25 Additionally, we participate in the government’s Federal Supply Schedule program for medical equipment, whereby we contract with the government to supply certain of our medical products. Participation in this program requires us to follow certain pricing practices and other contract requirements.
Failure to comply with these laws and regulations may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual damages. There can be no assurance that the processes we have implemented to manage compliance with these laws and regulations will be successful.
Failure to comply with these laws and regulations may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual 27 damages. There can be no assurance that the processes we have implemented to manage compliance with these laws and regulations will be successful.
In addition, the FDA may change clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis.
In addition, the FDA may change clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our 23 currently cleared products on a timely basis.
In addition, such breaches in security could result in litigation, regulatory action and potential liability, including liability under federal or state laws that protect the privacy of personal information, such as HIPAA, as well as the costs and operational consequences of implementing further data protection measures.
In addition, such breaches in security could result in litigation, regulatory action and potential liability, including liability under federal or state laws that 28 protect the privacy of personal information, such as HIPAA, as well as the costs and operational consequences of implementing further data protection measures.
For devices covered by CE Certificates of Conformity issued under the EU MDD, no significant 21 changes in design or intended purpose are allowed. If changes are anticipated, new certificates must be obtained under the MDR.
For devices covered by CE Certificates of Conformity issued under the EU MDD, no significant changes in design or intended purpose are allowed. If changes are anticipated, new certificates must be obtained under the MDR.
If the terms on which the additional capital is available are unsatisfactory, if the additional capital is not available at all or if we are not able to fully access credit under our Enovis Credit Agreement, we may not be able to pursue our growth strategy.
If the terms on which the additional capital is available are unsatisfactory, if the additional capital is not available at all or if we are not able to fully access credit under our Credit Agreement, we may not be able to pursue our growth strategy.
Furthermore, governments in the United States, United Kingdom and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia, and Russia has imposed counter-sanctions in response.
Furthermore, governments in the United States, United Kingdom and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia, and Russia has imposed counter- 30 sanctions in response.
Success in pre-clinical studies and early clinical trials does not ensure that later clinical trial 23 success, and we cannot be sure that later trials will replicate the results of prior trials and pre-clinical studies.
Success in pre-clinical studies and early clinical trials does not ensure later clinical trial success, and we cannot be sure that later trials will replicate the results of prior trials and pre-clinical studies.
These enforcement actions include, for the EU, the suspension or withdrawal of CE Certificate of Conformity in the EU and the refusal or delay in CE certification and CE marking or new products or modified products.
These enforcement actions include, for the EU, the suspension or withdrawal of CE Certificate of Conformity in the EU and the refusal or delay in CE certification and CE 24 marking or new products or modified products.
The Organization for Economic Co-operation and Development (“OECD”), has proposed a global minimum tax of 15% of reported profits (Pillar 2) that has been agreed upon in principle by over 140 countries. During 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws.
The Organization for Economic Co-operation and Development (“OECD”), has proposed a global minimum tax of 15% of reported profits (Pillar 2) 20 that has been agreed upon in principle by over 140 countries. During 2023 and 2024, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws.
We also may issue a significant number of additional shares, either into the marketplace through an existing shelf registration statement or through other mechanisms. Additional shares issued, including the Lima Shares and the shares issuable upon conversion of the 2028 Notes, could have a dilutive effect on our earnings per share.
We also may issue a significant number of additional shares, either into the marketplace through an existing shelf registration statement or through other mechanisms. Additional shares issued, including the shares issuable upon conversion of the 2028 Notes, could have a dilutive effect on our earnings per share.
For example, as a result of the COVID-19 pandemic, we experienced adverse impacts on sales in 2020 and 2021, as well as material delays and periodic cancellations of elective medical procedures, orthopedic clinics and physical therapy centers operating at reduced levels, and periodic cancellation of sports programs impacting our business.
For example, as a result of the COVID-19 pandemic, we experienced adverse impacts on sales, as well as material delays and periodic cancellations of elective medical procedures, orthopedic clinics and physical therapy centers operating at reduced levels, and periodic cancellation of sports programs impacting our business.
Contagious diseases, such as the COVID-19 pandemic, terrorist activity, man-made or natural disasters and war, as well as the spread or fear of the spread of contagious diseases, could cause a decline in the demand for our products, which may adversely affect our financial condition and operating performance.
Contagious diseases, terrorist activity, man-made or natural disasters and war, as well as the spread or fear of the spread of contagious diseases, could cause a decline in the demand for our products, which may adversely affect our financial condition and operating performance.
The issuances of additional common and preferred stock may adversely affect the market price of our Common stock. Under our Amended and Restated Certificate of Incorporation, there are additional authorized shares of our common stock. Furthermore, we may issue a significant number of additional shares, in connection with acquisitions or otherwise.
The issuances of additional common and preferred stock may adversely affect the market price of our Common stock. Under our Amended and Restated Certificate of Incorporation, there are additional authorized shares of our common stock. We may issue additional shares in connection with acquisitions or otherwise.
During the year ended December 31, 2023, approximately 32% of our sales were derived from operations outside the United States, which percentage is expected to increase as a result of the Lima Acquisition.
During the year ended December 31, 2024, approximately 41% of our sales were derived from operations outside the United States, which percentage is expected to increase as a result of the Lima Acquisition.
It may be particularly difficult to enforce our intellectual property rights in countries where such rights are not highly developed or protected. Any action we take to protect or enforce our intellectual property rights could be costly and could absorb significant management time and attention. As a result of any such litigation, we could lose our proprietary rights.
It may be particularly difficult to enforce our intellectual property rights in countries where such rights are not highly developed or protected. Any action we take to protect or enforce our intellectual property rights could be costly and could absorb significant management time and attention.
For example, in connection with the Lima Acquisition, as part of the consideration paid to the seller, we agreed to issue to the seller 1,942,686 shares of Company common stock (the “Lima Shares”).
For example, in connection with the Lima Acquisition, as part of the consideration paid to the seller, we issued to the seller 1,942,686 shares of Company common stock.
If we or our employees, agents, independent contractors, consultants, commercial partners and vendors violate these laws, we may be subject to investigations, enforcement actions and/or significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal health care programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other health care laws and regulations. 26 If we or our employees, agents, independent contractors, consultants, commercial partners and vendors violate these laws, we may be subject to investigations, enforcement actions and/or significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal health care programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
We could incur significant liability if the separation and distribution of ESAB is determined to be a taxable transaction. 29 We have received (i) a private letter ruling from the IRS and (ii) an opinion from outside tax counsel regarding the qualification of the separation and distribution of ESAB as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code.
We have received (i) a private letter ruling from the IRS and (ii) an opinion from outside tax counsel regarding the qualification of the separation and distribution of ESAB as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code.
We also could be subject to criminal and civil penalties, disgorgement, substantial expenditures related to remedial actions, and reputational harm. 28 We are also subject to U.S. export controls and economic sanctions laws, regulations and other legal requirements, including the Export Administration Regulations and economic sanctions administered and enforced by the Office of Foreign Assets Control, as well as other laws and regulations that limit our ability to market, sell, distribute or otherwise transfer our products or technology directly or indirectly to restricted persons and prohibited countries or regions.
We are also subject to U.S. export controls and economic sanctions laws, regulations and other legal requirements, including the Export Administration Regulations and economic sanctions administered and enforced by the Office of Foreign Assets Control, as well as other laws and regulations that limit our ability to market, sell, distribute or otherwise transfer our products or technology directly or indirectly to restricted persons and prohibited countries or regions.
In addition, third parties may claim that we or our customers are infringing upon their intellectual property rights. Claims of intellectual property infringement and litigation regarding patent and other intellectual property rights are commonplace in the medical technology industry.
As a result of any such litigation, we could lose our proprietary rights. 18 In addition, third parties may claim that we or our customers are infringing upon their intellectual property rights. Claims of intellectual property infringement and litigation regarding patent and other intellectual property rights are commonplace in the medical technology industry.
We may not be able to continue to place our devices on the market in the EU and/or United Kingdom for any current use if we cannot obtain certification for their current use under the MDR or under the UK MDR 2002 when required, if we are unable to do so before the current certificates for our products expire, or if our technical documentation does not meet the new (and more stringent) requirements under the MDR.
We may not be able to continue to place our devices on the market in the EU and/or United Kingdom for any current use if we cannot obtain certification for their current use under the MDR or under the UK MDR 2002 when required, if we are unable to do so before the current certificates for our products expire, or if our technical documentation does not meet the new (and more stringent) requirements under the MDR. 21 Tariffs and other trade measures could adversely affect our business, results of operations, financial position and cash flows.
The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. 18 Risks relating to contagious diseases, such as the COVID-19 pandemic, terrorist activity, man-made or natural disasters and war could reduce the demand for our products and have an adverse effect on our results of operations, financial condition, and business.
Risks relating to contagious diseases, terrorist activity, man-made or natural disasters and war could reduce the demand for our products and have an adverse effect on our results of operations, financial condition, and business.
If we fail to comply with our reporting obligations, the FDA could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance or approval, seizure of our products or delay in clearance or approval of future products.
If we fail to comply with our reporting obligations, the FDA could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance or approval, seizure of our products or delay in clearance or approval of future products. 22 We also are required to comply with strict post-marketing obligations for our CE marked medical devices in the EU.
Our business operates in highly fragmented and competitive markets. In order to maintain and enhance our competitive position, we intend to, among other things, continue investing in manufacturing quality, marketing, customer service and support, distribution networks, and research and development.
If we are unable to respond successfully to this competition, this could reduce our sales and operating margins. Our business operates in highly fragmented and competitive markets. In order to maintain and enhance our competitive position, we intend to, among other things, continue investing in manufacturing quality, marketing, customer service and support, distribution networks, and research and development.
Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response. Based on initial evaluations and available safe harbors we do not expect to have material consequences of Pillar 2 in 2024.
Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response. Based on the currently enacted laws and available safe harbors there are no material consequences of Pillar 2 in 2024.
Further escalation of geopolitical tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, additional supply disruptions, lower consumer demand and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain. 30 The loss of key leadership or the inability to attract, develop, engage, and retain qualified employees could have a material adverse effect on our ability to run our business.
Further escalation of geopolitical tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, additional supply disruptions, lower consumer demand and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain.
The loss of key leadership or the inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our business, financial condition and results of operations.
We are highly dependent on our senior leadership team as a result of their expertise in our industry and our business. The loss of key leadership or the inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our business, financial condition and results of operations.
They are also influenced by import duties and tariffs speculative action, world supply and demand balances, inventory levels, availability of substitute materials, currency exchange rates, anticipated or perceived shortages, geopolitical tensions, government trade practices and regulations and other factors. Further, the labor market for skilled manufacturing remains tight and our labor costs have increased as a result.
They are also influenced by import duties and tariffs speculative action, world supply and demand balances, inventory levels, availability of substitute materials, currency exchange rates, anticipated or perceived shortages, geopolitical tensions, government trade practices and regulations and other factors.
If these information technology systems suffer severe damage, disruption or shutdown and business continuity plans do not effectively resolve the issues in a timely manner, our business, financial condition, results of operations, and liquidity could be materially adversely affected. 27 Our information technology networks and systems are subject to security threats and sophisticated cyber-based attacks, including, but not limited to, denial-of-service attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, software-based misconfigurations, “bugs” and other security vulnerabilities, employee or insider error, malfeasance, social engineering, or physical breaches, that can cause deliberate or unintentional damage, destruction or misuse, manipulation, denial of access to or disclosure of confidential or important information by our employees, suppliers or third-party service providers.
Our information technology networks and systems are subject to security threats and sophisticated cyber-based attacks, including, but not limited to, denial-of-service attacks, hacking, “phishing” attacks, computer viruses, ransomware, malware, software-based misconfigurations, “bugs” and other security vulnerabilities, employee or insider error, malfeasance, social engineering, or physical breaches, that can cause deliberate or unintentional damage, destruction or misuse, manipulation, denial of access to or disclosure of confidential or important information by our employees, suppliers or third-party service providers.
Given the unpredictability of these possible changes, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our long-term financial results. 20 In addition, the amount of income taxes we pay is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities.
Given the unpredictability of these possible changes, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our long-term financial results.
Additionally, political and economic instability and changes in government regulations in China and other parts of Asia or any health emergencies could affect our ability to continue to receive materials from suppliers in those locations or affected by those emergencies.
Any significant change in the supply of, or price for, these raw materials, parts or components could materially affect our business, financial condition and results of operations. 19 Additionally, political and economic instability and changes in government regulations in China and other parts of Asia or any health emergencies could affect our ability to continue to receive materials from suppliers in those locations or affected by those emergencies.
Medicare payment for DMEPOS also can be impacted by the DMEPOS competitive bidding program, under which Medicare rates are based on bid amounts for certain products in designated geographic areas, rather than the Medicare fee 24 schedule amount.
Reduced reimbursement rates will also lower our margins on product sales and could adversely impact the profitability and viability of the affected products. Medicare payment for DMEPOS also can be impacted by the DMEPOS competitive bidding program, under which Medicare rates are based on bid amounts for certain products in designated geographic areas, rather than the Medicare fee schedule amount.
We also are required to comply with strict post-marketing obligations for our CE marked medical devices in the EU. The MDR provides various requirements relating to post-market surveillance and vigilance, including the obligation for manufacturers to implement a post-market surveillance system, in a manner proportionate to the risk class and appropriate for the type of device.
The MDR provides various requirements relating to post-market surveillance and vigilance, including the obligation for manufacturers to implement a post-market surveillance system, in a manner proportionate to the risk class and appropriate for the type of device.
The Goodwill results from our acquisitions, representing the excess of cost over the fair value of the net assets we have acquired. We assess at least annually whether there has been impairment in the value of our Goodwill.
The Goodwill results from our acquisitions, representing the excess of cost over the fair value of the net assets we have acquired.
Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the United States, exclusion from participation in government healthcare programs, including Medicare, Medicaid and Veterans Administration health programs. 25 Greater scrutiny of marketing practices in the medical device industry has resulted in numerous government investigations, and this enforcement activity is expected to continue.
Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the United States, exclusion from participation in government healthcare programs, including Medicare, Medicaid and Veterans Administration health programs.
Energy, commodity, raw material energy, labor and other cost inflation has impacted and could continue to impact our results of operations, financial condition and cash flows. The markets we serve are highly competitive and some of our competitors may have superior resources. If we are unable to respond successfully to this competition, this could reduce our sales and operating margins.
Further, the labor market for skilled manufacturing remains tight and our labor costs have increased as a result. Energy, commodity, raw material energy, labor and other cost inflation has impacted and could continue to impact our results of operations, financial condition and cash flows. The markets we serve are highly competitive and some of our competitors may have superior resources.
We are vulnerable to raw material, energy and labor price fluctuations and supply shortages, which have impacted and could continue to impact our results of operations, financial condition and cash flows. 19 In the normal course of our business, we are exposed to market risks related to the availability of and price fluctuations in the purchase of raw materials, energy and commodities used in the manufacturing of our products.
We are vulnerable to raw material, energy and labor price fluctuations and supply shortages, which have impacted and could continue to impact our results of operations, financial condition and cash flows.
If these audits result in assessments different from amounts recorded, our future financial results may include unfavorable tax adjustments. We rely on a variety of distribution methods to market and sell our medical device products and if we fail to effectively manage the distribution of such products, our results of operations and future growth could be adversely impacted.
We rely on a variety of distribution methods to market and sell our medical device products and if we fail to effectively manage the distribution of such products, our results of operations and future growth could be adversely impacted. We use a variety of distribution methods to market and sell our medical device products, each of which has distinct risks.
The Lima Acquisition will introduce us into a number of new geographic markets, subjecting us to additional non-U.S. laws, regulations and policies which do not currently apply to us, and will increase our exposure to certain other geographic markets as well as their laws and regulations.
The Lima Acquisition has introduced us into a number of new geographic markets, subjecting us to additional non-U.S. laws, regulations and policies which may not have applied to us in the past, and which increases our exposure to other geographic markets’ laws and regulations.
Any determination requiring the write-off of a significant portion of intangible assets would adversely affect our business, financial condition, results of operations and total capitalization, the effect of which could be material. A material disruption at any of our manufacturing facilities could adversely affect our ability to generate sales and meet customer demand.
A material disruption at any of our manufacturing facilities could adversely affect our ability to generate sales and meet customer demand.
It is also possible that others will independently develop technology that will compete with our patented or unpatented technology.
It is also possible that others will independently develop technology that will compete with our patented or unpatented technology. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
Efforts to ensure that our business arrangements will comply with applicable health care laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other health care laws and regulations.
Efforts to ensure that our business arrangements will comply with applicable health care laws may involve substantial costs.
We may be adversely affected if we lose members of our senior leadership. We are highly dependent on our senior leadership team as a result of their expertise in our industry and our business.
The loss of key leadership or the inability to attract, develop, engage, and retain qualified employees could have a material adverse effect on our ability to run our business. We may be adversely affected if we lose members of our senior leadership.
Removed
These challenges continue to impact us to varying degrees, and it is uncertain when and to what extent lingering conditions will completely subside.
Added
We may elect the one year scope exception provided by the Exchange Act and the applicable SEC rules and regulations concerning business combinations as we did for the Lima acquisition, but we can not avoid the requirements.
Removed
Any significant change in the supply of, or price for, these raw materials, parts or components could materially affect our business, financial condition and results of operations.
Added
We assess annually, or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount, in order to determine whether there has been impairment in the value of our Goodwill.
Removed
We use a variety of distribution methods to market and sell our medical device products, each of which has distinct risks.
Added
For the year ended December 31, 2024, we recognized a non-cash Goodwill impairment charge of $645 million ($330 million for the Reconstructive reporting unit and $315 million for the Prevention & Recovery reporting unit) as part of our annual Goodwill impairment testing.
Removed
Reduced reimbursement rates will also lower our margins on product sales and could adversely impact the profitability and viability of the affected products.
Added
In the normal course of our business, we are exposed to market risks related to the availability of and price fluctuations in the purchase of raw materials, energy and commodities used in the manufacturing of our products.
Removed
Risks Related to the Separation We may not achieve some or all of the expected benefits of the Separation, and the Separation may adversely affect our businesses. We may not be able to achieve the full strategic and financial benefits from the Separation that were expected, or such benefits may be delayed or not occur at all.
Added
For example, the introduction of new tariffs or trade restrictions, such as the tariffs announced by the new U.S. administration in February 2025 and any retaliatory trade measures could also increase the cost of or impair sourcing flexibility for raw materials and other inputs used in the manufacturing of our products.
Removed
The following benefits, among others, were expected to result from the Separation: • the Separation is expected to allow investors to value the Company based on its distinct investment identity, and enable investors to evaluate the merits, performance and future prospects of the Company’s businesses based on their distinct characteristics; • the Separation is expected to facilitate incentive compensation structures for employees more directly tied to the performance of the Company’s businesses, and may enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives; and • the Separation is expected to allow us to more effectively pursue our operating priorities and strategies, and enable management to focus on unique opportunities for long-term growth and profitability.
Added
In addition, the amount of income taxes we pay is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in assessments different from amounts recorded, our future financial results may include unfavorable tax adjustments.
Removed
We may not achieve these and other anticipated benefits for a variety of reasons, including, among others: • certain costs and liabilities that were otherwise less significant to the Company prior to the Separation will be more significant for us as a separate company after the Separation • we may be more susceptible to market fluctuations and other adverse events than we were prior to the Separation; and • following the Separation, our businesses are less diversified than they were prior to the Separation.
Added
Changes in international trade policy can also have a substantial adverse effect on our business, results of operations, financial position and cash flows.
Removed
If we fail to achieve some or all of the benefits we expected to result from the Separation, or if such benefits are delayed, our businesses, operating results and financial condition could be adversely affected.
Added
Steps taken by governments to implement local content requirements or apply or consider applying additional or new tariffs on imports or exports have the potential to disrupt existing supply chains, impose additional costs on our business, and could lead to other countries attempting to retaliate by imposing tariffs, which would make our products more expensive for customers, and, in turn, could make our products less competitive.
Removed
The Lima Shares are expected to be issued within eighteen months following the closing of the Lima Acquisition, subject to certain adjustments and conditions as provided for in the Lima Acquisition purchase agreement.
Added
For example, the U.S. government has recently signaled its intention to change U.S. trade policy, including potentially renegotiating or terminating existing trade agreements and leveraging tariffs. In February 2025, the U.S. government imposed additional tariffs on imports from China and announced and subsequently paused implementation of tariffs on imports from Mexico (and Canada).
Added
These additional tariffs, rapid changes in government policies toward tariffs and trade, as well as the adoption or prospect of adoption by governments of “buy national” policies or retaliation by another government against such tariffs or policies have introduced significant uncertainty into the market and may affect the prices of and demand for the Company’s products, and, in turn, could adversely affect our business, results of operations, financial position and cash flows to the extent that we are unable to mitigate the impacts of such tariffs.
Added
Recently, government policies on tariffs and trade have evolved rapidly.
Added
Accordingly, we do not know when or if such tariffs will take effect or how long any of these tariffs will last, and we do not know if tariffs will apply to all goods at the same rate, or if healthcare products may be subject to a different rate or be exempted.
Added
The ultimate impact of any tariffs will depend on various factors, including if any tariffs are ultimately implemented, the timing of implementation, and the amount, scope, and nature of the tariffs.
Added
Greater scrutiny of marketing practices in the medical device industry has resulted in numerous government investigations, and this enforcement activity is expected to continue.
Added
We have received, and in the future may receive, subpoenas and other requests for information from state and federal governmental agencies, including, among others, the U.S. Department of Justice and the Office of Inspector General of the Department of Health and Human Services.
Added
The requests and/or subpoenas we have received relate primarily to financial arrangements with health care providers, regulatory compliance and sale and/or product promotional practices. We have cooperated with these subpoenas and other requests for information and expect to continue to do so in the future.
Added
If these information technology systems suffer severe damage, disruption or shutdown and business continuity plans do not effectively resolve the issues in a timely manner, our business, financial condition, results of operations, and liquidity could be materially adversely affected.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

1 edited+0 added−0 removed10 unchanged
Biggest changeSee “ Risk Factors – Our information technology infrastructure could be subject to service interruptions, data corruption, cyber-based attacks, or network security breaches, which could result in the disruption of operations or the loss of data confidentiality .” Cybersecurity Governance Our Board considers cybersecurity risk as critical to the enterprise and delegates the cybersecurity risk oversight function to the Audit Committee.
Biggest changeSee “ Risk Factors – Risks Related to Government Regulation and Litigation — Our information technology infrastructure and information are vulnerable to service interruptions, data corruption, cyber-based attacks, or network security breaches, which could result in the disruption of operations or the loss of data confidentiality.” Cybersecurity Governance Our Board considers cybersecurity risk as critical to the enterprise and delegates the cybersecurity risk oversight function to the Audit Committee.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeAs of December 31, 2023, our Prevention & Recovery segment had a total of seven facilities used in production, distribution and warehousing in the U.S., representing a total of 115,000 and 256,000 square feet of owned and leased space, respectively, and fifteen facilities used in production, distribution and warehousing outside the U.S., representing a total of 1,088,000 square feet of leased space in nine countries in North America, Africa, Europe and Asia.
Biggest changeAs of December 31, 2024, our Prevention & Recovery segment had a total of five facilities used in production, distribution and warehousing in the U.S., representing a total of 236,000 square feet of leased space and thirteen facilities used in production, distribution and warehousing outside the U.S., representing a total of 1,000,000 square feet of leased space in nine countries in North America, Africa, Europe, Asia, and Australia.
As of December 31, 2023, our Reconstructive segment had a total of four facilities used in production, distribution and warehousing in the U.S., representing a total of 213,000 square feet of leased space, and three facilities used in production, distribution and warehousing outside the U.S., representing a total of 84,000 and 15,000 square feet of owned and leased space, respectively, in two countries in Europe.
As of December 31, 2024, our Reconstructive segment had a total of four facilities used in production, distribution and warehousing in the U.S., representing a total of 213,000 square feet of leased space, and five facilities used in production, distribution and warehousing outside the U.S., representing a total of 268,000 and 33,000 square feet of owned and leased space, respectively, in three countries in Europe.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

14 edited+1 added−3 removed8 unchanged
Biggest changePryor earned his M.B.A. from Harvard Business School and his Bachelor of Arts in Economics from Williams College. Bradley J. Tandy has been Senior Vice President and Chief Legal Officer since December 2023, and served as Senior Vice President and General Counsel from July 2019 through November 2023.
Biggest changeTandy has been Senior Vice President and Chief Legal Officer since December 2023, and served as Senior Vice President and General Counsel from July 2019 through November 2023. From February 2019 through June 2019, he served as our interim general counsel. From February 2020 to April 2022, he served as our Corporate Secretary. Mr.
Lang was the Chief People Officer for Diebold Nixdorf and was responsible for managing employee-focused initiatives across the organization. Prior to joining Diebold Nixdorf, Ms. Lang held a number of human resource and operations leadership positions at companies such as Mylan Pharmaceuticals, Consol Energy, Mercer Consulting and Cigna. Ms.
Lang was the Chief People Officer for Diebold Nixdorf and was responsible for managing employee-focused initiatives across the organization. Prior to joining Diebold 34 Nixdorf, Ms. Lang held a number of human resource and operations leadership positions at companies such as Mylan Pharmaceuticals, Consol Energy, Mercer Consulting and Cigna. Ms.
Previously, Mr. Trerotola was Group Executive for Product Identification from 2009 to 2012, and President of the Videojet business from 2007 to 2009. While at McKinsey & Company from 1995 to 1999, Mr. Trerotola focused primarily on helping industrial companies accelerate growth. Mr.
Trerotola was Group Executive for Product Identification from 2009 to 2012, and President of the Videojet business from 2007 to 2009. While at McKinsey & Company from 1995 to 1999, Mr. Trerotola focused primarily on helping industrial companies accelerate growth. Mr.
Item 4. Mine Safety Disclosures None. 33 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Set forth below are the names, ages, positions and experience of our executive officers. All of our executive officers hold office at the pleasure of our Board of Directors. Name Age Position Matthew L. Trerotola 56 Chief Executive Officer and Chair of the Board of Directors Brady R.
Item 4. Mine Safety Disclosures None. 33 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Set forth below are the names, ages, positions and experience of our executive officers. All of our executive officers hold office at the pleasure of our Board of Directors. Name Age Position Matthew L. Trerotola 57 Chief Executive Officer and Chair of the Board of Directors Phillip B.
Tandy served as Senior Vice President, General Counsel and Secretary of Biomet, Inc. from 2006 through 2014. Prior to serving as General Counsel, Mr. Tandy served as Vice President, Assistant General Counsel and Chief Compliance Officer of Biomet from 1999 through 2006. He joined Biomet as Assistant General Counsel in 1992. Prior to his employment at Biomet, Mr.
Tandy served as Vice President, Assistant General Counsel and Chief Compliance Officer of Biomet from 1999 through 2006. He joined Biomet as Assistant General Counsel in 1992. Prior to his employment at Biomet, Mr.
Trerotola also had corporate responsibility for DuPont’s Asia-Pacific business. Many of Mr. Trerotola’s roles at DuPont involved applying innovation to improve margins and accelerate organic growth in global businesses. Prior to rejoining DuPont in 2013, Mr. Trerotola had served in leadership roles at Danaher Corporation since 2007, and was most recently Vice President and Group Executive for Life Sciences.
Trerotola’s roles at DuPont involved applying innovation to improve margins and accelerate organic growth in global businesses. Prior to rejoining DuPont in 2013, Mr. Trerotola had served in leadership roles at Danaher Corporation since 2007, and was most recently Vice President and Group Executive for Life Sciences. Previously, Mr.
Trerotola earned his Masters of Business Administration (“M.B.A.”) from Harvard Business School and his Bachelor of Science in Chemical Engineering from the University of Virginia. Mr. Trerotola is a director of AptarGroup, Inc. Brady R. Shirley has been President and Chief Operating Officer, and has served as a director of the Company, since April 2022. Prior to this, Mr.
Trerotola earned his Masters of Business Administration (“M.B.A.”) from Harvard Business School and his Bachelor of Science in Chemical Engineering from the University of Virginia. Mr. Trerotola is a director of AptarGroup, Inc. Phillip B. Berry has been Chief Financial Officer since January 1, 2023.
Ross 54 Group President, Prevention & Recovery Louis Vogt 43 Group President, Reconstructive Matthew L. Trerotola has been Chief Executive Officer since July 2015. Prior to joining Enovis, Mr. Trerotola was an Executive Vice President and a member of DuPont’s Office of the Chief Executive, responsible for DuPont’s Electronics & Communications and Safety & Protection segments. Mr.
Trerotola has been Chief Executive Officer since July 2015. Prior to joining Enovis, Mr. Trerotola was an Executive Vice President and a member of DuPont’s Office of the Chief Executive, responsible for DuPont’s Electronics & Communications and Safety & Protection segments. Mr. Trerotola also had corporate responsibility for DuPont’s Asia-Pacific business. Many of Mr.
From February 2019 through June 2019, he served as our interim general counsel. From February 2020 to April 2022, he served as our Corporate Secretary. Mr. Tandy also served in 34 his capacity as Executive Vice President, General Counsel and Secretary of DJO. Prior to joining DJO, Mr.
Tandy also served in his capacity as Executive Vice President, General Counsel and Secretary of DJO. Prior to joining DJO, Mr. Tandy served as Senior Vice President, General Counsel and Secretary of Biomet, Inc. from 2006 through 2014. Prior to serving as General Counsel, Mr.
Pryor was Senior Vice President, Strategy and Business Development from January 2011 through July 2013. Prior to joining Enovis‚ he was a Partner and Managing Director with The Carlyle Group‚ a global alternative asset manager, where he focused on industrial leveraged buyouts and led numerous portfolio company and follow-on acquisitions.
Prior to joining Enovis‚ he was a Partner and Managing Director with The Carlyle Group‚ a global alternative asset manager, where he focused on industrial leveraged buyouts and led numerous portfolio company and follow-on acquisitions. While at The Carlyle Group, he served on the boards of portfolio companies Veyance Technologies, Inc., John Maneely Co., and HD Supply Inc.
Shirley 58 President, Chief Operating Officer and Director Phillip B. Berry 45 Senior Vice President and Chief Financial Officer Daniel A. Pryor 55 Executive Vice President, Strategy and Business Development Bradley J. Tandy 65 Senior Vice President and General Counsel Patricia Lang 60 Senior Vice President and Chief Human Resources Officer Terry D.
Berry 46 Senior Vice President and Chief Financial Officer Daniel A. Pryor 56 Executive Vice President, Strategy and Business Development Bradley J. Tandy 66 Senior Vice President and Chief Legal Officer Patricia Lang 61 Senior Vice President and Chief Human Resources Officer Terry D. Ross 55 Group President, Prevention & Recovery Louis Vogt 44 Group President, Reconstructive Matthew L.
During his tenure at Alcon, Mr. Berry served in finance leadership roles of increasing responsibility in strategy, operations and business process improvement. Mr. Berry holds a master’s degree in business administration from Kennesaw State University. Daniel A. Pryor has been Executive Vice President‚ Strategy and Business Development since July 2013. Mr.
Previously, he spent 18 years in the medical technologies sector with Novartis/Alcon, which included its launch of Alcon as an independent public company in 2019. During his tenure at Alcon, Mr. Berry served in finance leadership roles of increasing responsibility in strategy, operations and business process improvement. Mr. Berry holds a master’s degree in business administration from Kennesaw State University.
While at The Carlyle Group, he served on the boards of portfolio companies Veyance Technologies, Inc., John Maneely Co., and HD Supply Inc. Prior to The Carlyle Group, he spent 11 years at Danaher Corporation in roles of increasing responsibility most recently as Vice President - Strategic Development. Mr.
Prior to The Carlyle Group, he spent 11 years at Danaher Corporation in roles of increasing responsibility most recently as Vice President - Strategic Development. Mr. Pryor earned his M.B.A. from Harvard Business School and his Bachelor of Arts in Economics from Williams College. Bradley J.
He joined the Company in 2020, initially serving as chief financial officer of the Company’s medical technology segment, and serving as chief financial officer of those business units following the Separation. Previously, he spent 18 years in the medical technologies sector with Novartis/Alcon, which included its launch of Alcon as an independent public company in 2019.
He joined the Company (then known as Colfax) in 2020, initially serving as chief financial officer of the medical technology segment, and serving as chief financial officer of the Recon and P&R segments following the Separation.
Removed
Shirley was DJO Chief Executive Officer from 2016 to 2022 and served as the President of the DJO Surgical business, a position he was appointed to in March of 2014. From 2009 to 2013, Mr.
Added
Daniel A. Pryor has been Executive Vice President‚ Strategy and Business Development since July 2013. Mr. Pryor was Senior Vice President, Strategy and Business Development from January 2011 through July 2013.
Removed
Shirley was the CEO and Director of Innovative Medical Device Solutions (“IMDS”), a company that provides comprehensive product development, manufacturing and supply chain management solutions for medical device companies within the orthopedic medical device industry. At IMDS, Mr. Shirley managed the integration of four companies, consolidated the capital structure and led a successful sale of the business in 2013.
Removed
From December 1992 to August 2009, Mr. Shirley had several key leadership positions with Stryker Corporation, including President of Stryker Communications and Senior Vice President of Stryker Endoscopy. Mr. Shirley received a Bachelor of Business Administration in Finance from the University of Texas, Austin. Phillip B. Berry has been Chief Financial Officer since January 1, 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed6 unchanged
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (1) 09/30/23 - 10/27/23 — $ — — $ 99,997,744 10/28/23 - 11/24/23 — — — 99,997,744 11/25/23 - 12/31/23 — — — 99,997,744 Total — $ — — $ 99,997,744 (1) Represents the repurchase program limit authorized by the Board of Directors of $300 million less the value of purchases made under the repurchase program.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (1) 09/28/24 - 10/25/24 — $ — — $ 99,997,744 10/26/24 - 11/22/24 — — — 99,997,744 11/23/24 - 12/31/24 — — — 99,997,744 Total — $ — — $ 99,997,744 (1) Represents the repurchase program limit authorized by the Board of Directors of $300 million less the value of purchases made under the repurchase program.
The graph assumes that $100 was invested on December 31, 2018 in our common stock, the S&P 400 Industrial Index, the S&P Industrial Machinery Index, the S&P 500 Index, and the S&P 500 Healthcare Equipment & Supply Industry Index, and that all dividends were reinvested. 36 Issuer Repurchase of Equity Securities In 2018, the Company’s Board of Directors authorized the repurchase of the Company’s common stock from time-to-time on the open market or in privately negotiated transactions.
The graph assumes that $100 was invested on December 31, 2019 in our common stock, the S&P 400 Industrial Index, the S&P Industrial Machinery Index, the S&P 500 Index, and the S&P 500 Healthcare Equipment & Supply Industry Index, and that all dividends were reinvested. 36 Issuer Repurchase of Equity Securities In 2018, the Company’s Board of Directors authorized the repurchase of the Company’s common stock from time-to-time on the open market or in privately negotiated transactions.
There have been no repurchases under the program since 2018. As of December 31, 2023, there is a remaining authorization of $100 million of shares that may be repurchased under the program.
There have been no repurchases under the program since 2018. As of December 31, 2024, there is a remaining authorization of $100 million of shares that may be repurchased under the program.
As of February 16, 2024, there were 1,267 holders of record of our common stock. The number of holders of record is based upon the actual number of holders registered at such date and does not include holders of shares in “street name” or persons, partnerships, associates, corporations or other entities identified in security position listings maintained by depositories.
As of February 21, 2025, there were 1,177 holders of record of our common stock. The number of holders of record is based upon the actual number of holders registered at such date and does not include holders of shares in “street name” or persons, partnerships, associates, corporations or other entities identified in security position listings maintained by depositories.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

92 edited+48 added−48 removed75 unchanged
Biggest changeYear Ended December 31, 2023 2022 2021 (Dollars in millions) Gross profit $ 990.8 $ 869.4 $ 777.7 Gross profit margin 58.0 % 55.6 % 54.5 % Selling, general and administrative expense $ 830.3 $ 772.9 $ 665.8 Research and development expense $ 75.3 $ 60.8 $ 49.1 Operating loss $ (65.7) $ (71.2) $ (62.8) Operating loss margin (3.8) % (4.6) % (4.4) % Net loss from continuing operations $ (53.8) $ (38.2) $ (102.3) Net loss margin from continuing operations (GAAP) (3.2) % (2.4) % (7.2) % Adjusted EBITDA (non-GAAP) $ 269.2 $ 236.1 $ 206.0 Adjusted EBITDA margin (non-GAAP) 15.8 % 15.1 % 14.4 % Items excluded from Adjusted EBITDA: Restructuring and other charges (1) $ 20.0 $ 19.0 $ 13.9 MDR and other costs $ 27.4 $ 16.7 $ 7.9 Strategic transaction costs $ 38.3 $ 61.0 $ 23.4 Stock-based compensation $ 32.1 $ 31.5 $ 25.7 Depreciation and other amortization $ 83.6 $ 76.7 $ 70.1 Amortization of acquired intangibles $ 133.5 $ 126.3 $ 116.9 Insurance settlement gain $ — $ (36.7) $ — Inventory step-up $ 0.1 $ 12.8 $ 10.8 Interest expense, net $ 19.7 $ 24.1 $ 29.1 Debt extinguishment charges $ 7.3 $ 20.4 $ 29.9 Other income, net $ (25.7) $ (2.1) $ — Income tax expense (benefit) $ (13.3) $ 36.1 $ (19.5) (1) Restructuring and other charges includes $2.6 million, $1.7 million and $5.2 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021, respectively. 2023 Compared to 2022 Gross profit increased $121.4 million during 2023 in comparison to 2022 due to a $82.1 million increase in Recon and a $39.3 million increase in P&R.
Biggest changeYear Ended December 31, 2024 2023 2022 (Dollars in millions) Gross profit $ 1,180.8 $ 990.8 $ 869.4 Gross profit margin 56.0 % 58.0 % 55.6 % Selling, general and administrative expense $ 1,027.4 $ 830.3 $ 772.9 Research and development expense $ 91.3 $ 75.3 $ 60.8 Operating loss $ (775.7) $ (65.7) $ (71.2) Operating loss margin (36.8) % (3.8) % (4.6) % Net loss from continuing operations $ (827.4) $ (53.8) $ (38.2) Net loss from continuing operations margin (GAAP) (39.3) % (3.2) % (2.4) % Adjusted EBITDA (non-GAAP) $ 376.5 $ 269.2 $ 236.1 Adjusted EBITDA margin (non-GAAP) 17.9 % 15.8 % 15.1 % Items excluded from Adjusted EBITDA: Restructuring and other charges (1) $ 45.2 $ 20.0 $ 19.0 MDR and other costs $ 19.5 $ 27.4 $ 16.7 Strategic transaction costs $ 78.3 $ 38.3 $ 61.0 Stock-based compensation $ 29.7 $ 32.1 $ 31.5 Depreciation and other amortization $ 117.3 $ 83.6 $ 76.7 Amortization of acquired intangibles $ 165.5 $ 133.5 $ 126.3 Insurance settlement gain $ — $ — $ (36.7) Goodwill impairment charge $ 645.0 $ — $ — Inventory step-up $ 51.7 $ 0.1 $ 12.8 Interest expense, net $ 57.1 $ 19.7 $ 24.1 Debt extinguishment charges $ — $ 7.3 $ 20.4 Other income net $ (9.9) $ (25.7) $ (2.1) Income tax expense (benefit) $ 4.5 $ (13.3) $ 36.1 (1) Restructuring and other charges includes $17.9 million, $2.6 million and $1.7 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022, respectively. 2024 Compared to 2023 Gross profit increased $190.0 million during 2024 in comparison to 2023 due to a $179.1 million increase in Recon and a $10.9 million increase in P&R.
Year Ended December 31, 2023 P&R Recon Total (Dollars in millions) Net loss from continuing operations (GAAP) (1) $ (53.8) Income tax benefit (13.3) Other income, net (25.7) Debt extinguishment charges 7.3 Interest expense, net 19.8 Operating loss (GAAP) $ (24.7) $ (41.0) (65.7) Operating loss margin (2.3) % (6.5) % (3.8) % Adjusted to add: Restructuring and other charges (2) 13.5 6.4 20.0 MDR and other costs 14.5 12.9 27.4 Strategic transaction costs (3) 13.2 25.1 38.3 Stock-based compensation (3) 20.2 11.8 32.1 Depreciation and other amortization 22.2 61.4 83.6 Amortization of acquired intangibles 93.6 40.0 133.5 Inventory step-up — 0.1 0.1 Adjusted EBITDA (non-GAAP) $ 152.5 $ 116.7 $ 269.2 Adjusted EBITDA margin (non-GAAP) 14.2 % 18.5 % 15.8 % (1) Non-operating components of Net loss from continuing operations are not allocated to the segments.
Year Ended December 31, 2023 P&R Recon Total (Dollars in millions) Net loss from continuing operations (GAAP) (1) $ (53.8) Income tax benefit (13.3) Other income, net (25.7) Debt extinguishment charges 7.3 Interest expense, net 19.8 Operating loss (GAAP) $ (24.7) $ (41.0) (65.7) Operating loss margin (2.3) % (6.5) % (3.8) % Adjusted to add: Restructuring and other charges (2)(3) 13.5 6.4 20.0 MDR and other costs (3) 14.5 12.9 27.4 Strategic transaction costs (3) 13.2 25.1 38.3 Stock-based compensation (3) 20.2 11.8 32.1 Depreciation and other amortization 22.2 61.4 83.6 Amortization of acquired intangibles 93.6 40.0 133.5 Inventory step-up — 0.1 0.1 Adjusted EBITDA (non-GAAP) 152.5 116.7 269.2 Adjusted EBITDA margin (non-GAAP) 14.2 % 18.5 % 15.8 % (1) Non-operating components of Net loss from continuing operations are not allocated to the segments.
Selling, general and administrative expense increased $3.8 million, which included an increase of $30.5 million, or 7%, primarily due to investment to support growth in the business, spending on MDR and other costs, largely offset by a reduction of in allocated Strategic transaction costs of $26.7 million which were higher in 2022 due to the Separation.
Selling, general and administrative expense increased $3.8 million which included an increase of $30.5 million, or 7%, primarily due to investment to support growth in the business, spending on MDR and other costs, largely offset by a reduction in allocated Strategic transaction costs of $26.7 million which were higher in 2022 due to the Separation.
See section Enovis Term Loan and Revolving Credit Facility in Note 13, “Debt” in the accompanying Notes to Consolidated Financial Statements for more detail on the new Enovis Credit Agreement.
See section Enovis Term Loan and Revolving Credit Facility in Note 13, “Debt” in the accompanying Notes to Consolidated Financial Statements for more detail on the new Credit 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 that was outstanding at that time under the Enovis Credit Agreement, net of cost to sell.
On November 18, 2022, the Company completed an exchange with a lender under the 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 that was outstanding at that time under the Credit Agreement, net of cost to sell.
Pursuant to the Amendment, effective as of January 3, 2024, the date of consummation of the Lima Acquisition, (i) all facilities under the Enovis Credit Agreement (including the Term Loan Facility) became secured by certain personal property of the Company and certain of its subsidiaries, subject to limitations and exclusions; (ii) the financial covenant under the Enovis Credit Agreement was be adjusted from total leverage ratio to senior secured leverage ratio and requires the senior secured leverage ratio to be no more than 3.75:1.00 with a step down to 3.50:1.00 commencing with the fiscal quarter ending June 30, 2024; (iii) certain changes to the negative covenants became effective (including restrictions on repayments of junior financing and amendments to junior financing documents); and (iv) certain additional changes were implemented (including the removal of the guaranty fallaway provision).
Pursuant to the Amendment, effective as of January 3, 2024, the date of consummation of the Lima Acquisition, (i) all facilities under the Credit Agreement (including the Term Loan Facility) became secured by certain personal property of the Company and certain of its subsidiaries, subject to limitations and exclusions; (ii) the financial covenant under the Credit Agreement was adjusted from total leverage ratio to senior secured leverage ratio and requires the senior secured leverage ratio to be no more than 3.75:1.00 with a step down to 3.50:1.00 commencing with the fiscal quarter ending June 30, 2024; (iii) certain changes to the negative covenants became effective (including restrictions on repayments of junior financing and amendments to junior financing documents); and (iv) certain additional changes were implemented (including the removal of the guaranty fallaway provision).
We used the distribution proceeds in conjunction with $450 million of borrowings on a term loan under our Enovis Credit Agreement and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest on our prior 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.
We used the distribution proceeds in conjunction with $450 million of borrowings on a term loan under our Credit Agreement and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest on our prior 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.
(3) Certain amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment. 41 Year Ended December 31, 2022 P&R Recon Total (Dollars in millions) Net loss from continuing operations (GAAP) (1) $ (38.2) Income tax expense 36.1 Other income, net (2.1) Gain on cost basis investment (8.8) Gain on investment in ESAB Corporation (102.7) Debt extinguishment charges 20.4 Interest expense, net 24.1 Operating loss (GAAP) $ (18.2) $ (52.9) (71.2) Operating loss margin (1.8) % (9.9) % (4.6) % Adjusted to add (deduct): Restructuring and other charges (2) 9.6 9.4 19.0 MDR and other costs 9.8 6.9 16.7 Strategic transaction costs (3) 39.9 21.2 61.0 Stock-based compensation (3) 20.2 11.3 31.5 Depreciation and other amortization 24.4 52.3 76.7 Amortization of acquired intangibles 80.1 46.2 126.3 Insurance settlement gain (3) (24.4) (12.3) (36.7) Inventory step-up — 12.8 12.8 Adjusted EBITDA (non-GAAP) 141.3 94.7 236.1 Adjusted EBITDA margin (non-GAAP) 13.8 % 17.7 % 15.1 % (1) Non-operating components of Net loss from continuing operations are not allocated to the segments.
(3) Certain amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment. 42 Year Ended December 31, 2022 P&R Recon Total (Dollars in millions) Net loss from continuing operations (GAAP) (1) $ (38.2) Income tax expense 36.1 Other income, net (2.1) Gain on cost basis investment (8.8) Gain on investment in ESAB Corporation (102.7) Debt extinguishment charges 20.4 Interest expense, net 24.1 Operating loss (GAAP) $ (18.2) $ (52.9) (71.2) Operating loss margin (1.8) % (9.9) % (4.6) % Adjusted to add (deduct): Restructuring and other charges (2)(3) 9.6 9.4 19.0 MDR and other costs (3) 9.8 6.9 16.7 Strategic transaction costs (3) 39.9 21.2 61.0 Stock-based compensation (3) 20.2 11.3 31.5 Depreciation and other amortization 24.4 52.3 76.7 Amortization of acquired intangibles 80.1 46.2 126.3 Insurance settlement gain (3) (24.4) (12.3) (36.7) Inventory step-up — 12.8 12.8 Adjusted EBITDA (non-GAAP) $ 141.4 $ 94.7 $ 236.1 Adjusted EBITDA margin (non-GAAP) 13.8 % 17.7 % 15.1 % (1) Non-operating components of Net loss from continuing operations are not allocated to the segments.
Gross profit increased $39.3 million due to the improved sales, offset by the effect of unfavorable foreign currency and inflation of supply chain, logistics, and other costs. Gross profit margin increased 140 basis points due to improved sales mix and inflation-related customer pricing, partially offset by the effect of unfavorable foreign currency in a primary manufacturing facility.
Gross profit increased $39.3 million due to the improved sales, offset by inflation of supply chain, logistics, and other costs and unfavorable foreign currency effects. Gross profit margin increased 140 basis points due to improved sales mix and inflation-related customer pricing, partially offset by the effect of unfavorable foreign currency in a primary manufacturing facility.
Post-Separation, Enovis conducts its operations through two operating segments: Prevention & Recovery (“P&R”) and Reconstructive (“Recon”). • P&R - 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. • Recon - 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 and surgical productivity tools.
Enovis conducts its operations through two operating segments: Prevention & Recovery (“P&R”) and Reconstructive (“Recon”). • P&R - 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. • Recon - 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 and surgical productivity tools.
Adjusted EBITDA excludes from Net income (loss) from continuing operations the effect of income tax expense (benefit); Other income, net;, non-operating (gain) loss on investments; debt extinguishment charges; interest expense, net; restructuring and other charges; Medical Device Regulation (“MDR”) fees and other costs; strategic transaction costs; stock-based compensation; depreciation and other amortization; acquisition-related intangible asset amortization; insurance settlement (gain) loss; and fair value charges on acquired inventory.
Adjusted EBITDA excludes from Net income (loss) from continuing operations the effect of Income tax expense (benefit); Other income, net; non-operating (gain) loss on investments; debt extinguishment charges; interest expense, net; restructuring and other charges; Medical Device Regulation (“MDR”) fees and other costs; strategic transaction costs; stock-based compensation; depreciation and other amortization; acquisition-related intangible asset amortization; insurance settlement (gain) loss; goodwill impairment charges; and fair value charges on acquired inventory.
Adjusted EBITDA increased due to organic growth. Adjusted EBITDA margin excluding the effects of recent acquisitions and foreign currency pressures increased by approximately 130 basis points.
Adjusted EBITDA increased due to organic growth. Adjusted 47 EBITDA margin excluding the effects of recent acquisitions and foreign currency pressures increased by approximately 130 basis points.
If actual results differ from the assumptions made in the evaluation of our valuation allowance, we record a change in valuation allowance through income tax expense in the period such determination is made. 55 Accounting Standards Codification 740, “Income Taxes” prescribes a recognition threshold and measurement attribute for a position taken in a tax return.
If actual results differ from the assumptions made in the evaluation of our valuation allowance, we record a change in valuation allowance through income tax expense in the period such determination is made. 56 Accounting Standards Codification 740, “Income Taxes” prescribes a recognition threshold and measurement attribute for a position taken in a tax return.
In certain instances, we may elect to forgo the qualitative 54 assessment and proceed directly to the quantitative impairment test. If the carrying value of a reporting unit exceeds its fair value, Goodwill of that reporting unit is impaired and an impairment loss is recorded equal to the excess of the carrying value over its fair value.
In certain instances, we may elect to forgo the qualitative 55 assessment and proceed directly to the quantitative impairment test. If the carrying value of a reporting unit exceeds its fair value, Goodwill of that reporting unit is impaired and an impairment loss is recorded equal to the excess of the carrying value over its fair value.
In the second quarter of 2022, we 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.
In the second quarter of 2023, we 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.
No stock repurchases have been made under this plan since the third quarter of 2018. As of December 31, 2023, the remaining stock repurchase authorization provided by our Board of Directors was $100.0 million. The 49 timing, amount, and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors.
No stock repurchases have been made under this plan since the third quarter of 2018. As of December 31, 2024, 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.
Cash flows provided by financing activities in 2023 include net debt borrowings of $217.2 million, partially offset by amounts paid for the capped call transactions of $62.0 million and debt issuance costs of $25.7 million.
Cash flows used in financing activities in 2023 include net debt borrowings of $217.2 million, partially offset by amounts paid for the capped call transactions of $62.0 million and debt issuance costs of $25.7 million .
Gross profit increased in the year ended December 31, 2023 compared to the prior year, primarily due to increased sales in our existing businesses, improved operating cost leverage, and the benefit of a decrease of $12.7 million in inventory fair value step-up amortization charges, which also led to an increase in Gross profit margin.
Gross profit increased in the year ended December 31, 2023 compared to the prior year, by $82.1 million, primarily due to increased sales in our existing businesses, improved operating cost leverage, and the benefit of a decrease of $12.7 million in inventory fair value step-up amortization charges, which also led to an increase in Gross profit margin.
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.
On March 1, 2023, the Company extinguished the remaining outstanding balance on the Enovis Term Loan with borrowings on the Revolver. The Credit Agreement, as amended, 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 51 dividends.
Cash flows used in financing activities in 2022 includes $1.6 billion net repayment of borrowings, which included the outstanding debt on our prior credit facility, 2026 Notes and Euro Senior Notes, partially offset by borrowings on a term loan under our new credit facility.
Cash flows used in financing activities in 2022 includes $1.6 billion net repayment of borrowings, which included the outstanding debt on our prior credit facility, 2026 Notes and Euro Senior Notes, partially offset by borrowings on a term loan under our credit facility at the time.
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.
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, Adjusted EBITDA, Comparable Sales, and Comparable Sales Growth rate as defined in the “Non-GAAP Measures” section.
Purchase obligations herein exclude open purchase orders for goods or services that are provided on demand as the timing of which is not certain. We have funding requirements associated with our pension plans as of December 31, 2023, which are estimated to be $3.5 million for the year ending December 31, 2024.
Purchase obligations herein exclude open purchase orders for goods or services that are provided on demand as the timing of which is not certain. We have funding requirements associated with our pension plans as of December 31, 2024, which are estimated to be $3.4 million for the year ending December 31, 2025.
We recognize interest and penalties related to unrecognized tax benefits in the Consolidated Statements of Operations as part of Income tax benefit.
We recognize interest and penalties related to unrecognized tax benefits in the Consolidated Statements of Operations as part of Income tax expense.
As of December 31, 2023, the Company was in compliance with the covenants under the Enovis Credit Agreement. On October 23, 2023 the Company entered into an amendment to the Enovis Credit Agreement (the “Amendment”). The Amendment provided for a new term loan commitment in the aggregate amount of $400 million (the “Term Loan Facility”).
As of December 31, 2024, the Company was in compliance with the covenants under the Credit Agreement. On October 23, 2023 the Company entered into an amendment to the Credit Agreement (the “Amendment”). The Amendment provided for a new term loan commitment in the aggregate amount of $400 million.
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 Revolver.
The Credit Agreement contains various events of default (including failure to comply with the covenants under the 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 Credit Agreement.
The $62 million capped call payment was classified as equity since it meets the derivative scope exception included in ASC 815 Derivative and Hedging. Other Indebtedness In addition, we are party to various bilateral credit facilities with a borrowing capacity of $30.0 million. Total letters of credit of $11.5 million were outstanding as of December 31, 2023.
The $62 million capped call payment was classified as equity since it meets the derivative scope exception included in ASC 815 Derivative and Hedging. Other Indebtedness In addition, we are party to various bilateral credit facilities with a borrowing capacity of $30.0 million. Total letters of credit and surety bonds of $36.5 million were outstanding as of December 31, 2024.
We initially retained 10% of the shares of ESAB common stock immediately following the Separation. On November 18, 2022, we completed an exchange with a lender under our Enovis Credit Agreement of 6,003,431 shares of common stock of ESAB, representing all of our retained shares, for $230.5 million in term loan outstanding under our Enovis Credit Agreement.
We initially retained 10% of the shares of ESAB common stock immediately following the Separation. On November 18, 2022, we completed an exchange with our lenders of 6,003,431 shares of common stock of ESAB, representing all of our retained shares, for $230.5 million in term loan outstanding under our previous credit agreement.
Net liabilities for unrecognized income tax benefits, including accrued interest and penalties, were $34.1 million as of December 31, 2023 and are included in Other liabilities or as a reduction to deferred tax assets in the accompanying Consolidated Balance Sheet. Revenue Recognition We account for revenue in accordance with Topic 606, “Revenue from Contracts with Customers”.
Net liabilities for unrecognized income tax benefits, including accrued interest and penalties, were $33.4 million as of December 31, 2024 and are included in Other liabilities or as a reduction to deferred tax assets in the accompanying Consolidated Balance Sheet. Revenue Recognition We account for revenue in accordance with Topic 606, “Revenue from Contracts with Customers”.
(2) Restructuring and other charges in P&R includes $2.6 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations.
(2) Restructuring and other charges includes $2.6 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations.
The effective tax rate for Net loss from continuing operations during 2023 was 19.8%, which differed from the 2023 U.S. federal statutory tax rate of 21%, primarily due to a build in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S. taxation on international operations.
The effective tax rate for Loss from continuing operations before income taxes during 2023 was 19.8%, which differed from the 2023 U.S. federal statutory tax rate of 21% mainly due to a build in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S. taxation on international operations.
Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that provide liquidity, capital resources, market or credit risk support that expose us to any liability that is not reflected in our Consolidated Financial Statements at December 31, 2023 other than outstanding letters of credit of $11.5 million and unconditional purchase obligations with suppliers of $145.9 million.
Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that provide liquidity, capital resources, market or credit risk support that expose us to any liability that is not reflected in our Consolidated Financial Statements at December 31, 2024 other than outstanding letters of credit of $36.5 million and unconditional purchase obligations with suppliers of $130.6 million.
Recent acquisitions were dilutive to the margin by approximately 300 basis points, but are expected to be accretive to margins in future years. 48 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.
The recent acquisitions of Novastep and 360 Med Care were dilutive to the margin by approximately 70 basis points but are expected to be accretive to margins in future years. 50 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.
The allowance for credit losses was $9.7 million and $8.0 million as of December 31, 2023 and 2022, respectively. Recently Issued Accounting Pronouncements For detailed information regarding recently issued accounting pronouncements and the expected impact on our financial statements, see Note 3, “Recently Issued Accounting Pronouncements” in the accompanying Notes to Consolidated Financial Statements included in this Form 10-K. 56
The allowance for credit losses was $24.5 million and $9.7 million as of December 31, 2024 and 2023, respectively. Recently Issued Accounting Pronouncements For detailed information regarding recently issued accounting pronouncements and the expected impact on our financial statements, see Note 3 “Recently Issued Accounting Pronouncements” in the accompanying Notes to Consolidated Financial Statements included in this Form 10-K. 57
The uses in 2023 and 2022 are primarily due to business growth and increases in inventory to insulate for supply chain volatility. • Cash paid for strategic transaction costs in our continuing operations were $38.3 million, $61.0 million and $23.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The working capital uses in 2023 and 2022 are primarily due to business growth and increases in inventory to insulate for supply chain volatility. • Cash paid for strategic transaction costs in our continuing operations were $78.3 million, $38.3 million and $61.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The following table summarizes the change in Cash and cash equivalents during the periods indicated and includes cash flows related to discontinued operations: Year Ended December 31, 2023 2022 2021 (Dollars in millions) Net cash provided by (used in) operating activities $ 135.0 $ (55.9) $ 356.1 Purchases of property, plant and equipment and intangibles (122.2) (105.5) (104.2) Proceeds from sale of property, plant and equipment 32.6 2.7 7.0 Payments for acquisitions, net of cash received, and investments (152.8) (73.7) (223.3) Net cash used in investing activities (242.5) (176.4) (320.5) Proceeds from (repayments of) borrowings, net 217.2 (1,591.2) (126.0) Distribution from ESAB Corporation, net — 1,143.4 — Proceeds from issuance of common stock, net 1.8 5.8 745.2 Payment of capped call transactions (62.0) — — Payment of debt extinguishment costs — (12.7) (24.4) Other financing (29.2) (10.4) (9.9) Net cash provided by (used in) financing activities 127.8 (465.1) 584.9 Effect of foreign exchange rates on Cash and cash equivalents 0.2 2.3 (2.2) Increase (decrease) in Cash and cash equivalents and restricted cash $ 20.5 $ (695.1) $ 618.3 Cash (used in) provided by operating activities related to discontinued operations for the years ended December 31, 2023, 2022 and 2021 was $(2) million, $(27) million, and $224 million, respectively.
The following table summarizes the change in Cash and cash equivalents during the periods indicated and includes cash flows related to discontinued operations: Year Ended December 31, 2024 2023 2022 (Dollars in millions) Net cash provided by (used in) operating activities 113.5 135.0 (55.9) Purchases of property, plant and equipment and intangibles (180.7) (122.2) (105.5) Proceeds from sale of property, plant and equipment — 32.6 2.7 Payments for acquisitions, net of cash received, and investments (769.9) (152.8) (73.7) Payment for settlement of derivative (4.8) — — Net cash used in investing activities (955.5) (242.5) (176.4) Proceeds from (repayments of) borrowings, net 859.2 217.2 (1,591.2) Distribution from ESAB Corporation, net — — 1,143.4 Proceeds from issuance of common stock, net 1.9 1.8 5.8 Payment of debt extinguishment costs — — (12.7) Payment of capped call transactions — (62.0) — Other financing (14.3) (29.2) — (10.4) Net cash provided by (used in) financing activities 846.8 127.8 (465.1) Effect of foreign exchange rates on Cash and cash equivalents (1.5) 0.2 2.3 Increase (decrease) in Cash and cash equivalents and restricted cash $ 3.3 $ 20.5 $ (695.1) Cash used in operating activities of discontinued operations for the years ended December 31, 2024, 2023 and 2022 was $0.1 million, $2.0 million, and $27.0 million, respectively.
Research and development costs also increased compared to the prior year period, primarily due to increased spend within recently acquired businesses in Recon, which are investing in surgical productivity solutions and computer-assisted surgery technologies.
Research and development costs also increased compared to the prior year period, primarily due to the Lima Acquisition and increased spend within recently acquired businesses in our Recon segment, which is investing in surgical productivity solutions and computer-assisted surgery technologies.
Variable interest payments are estimated using a static rate of 3.875% for the senior unsecured convertible notes and 5.68% for the Revolver, respectively. Operating Leases The Company leases certain office space, warehouse, distribution, and production facilities, as well as vehicles and equipment.
Variable interest payments are estimated using a static rate of 6.22% for the Revolver, 6.22% for the Term Loan, and 3.875% for the senior unsecured convertible notes. Operating Leases The Company leases certain office space, warehouse, distribution, and production facilities, as well as vehicles and equipment.
The effective tax rate for Net income from continuing operations during 2022 was (1,745.8)%, which differed from the 2022 U.S. federal statutory tax rate of 21% mainly due to non-taxable unrealized gain on the investment in ESAB and gain on cost basis investment, offset by non-deductible costs related to the tax-free Separation.
The effective tax rate for 2022 was (1,745.8)% on a loss from continuing operations before income taxes, which was lower than the 2022 U.S. federal statutory tax rate of 21% mainly due to non-taxable unrealized gain on the investment in ESAB and gain on cost basis investment, offset by non-deductible costs related to the tax-free Separation.
As of December 31, 2023, the weighted-average interest rate of borrowings under the Enovis Credit Agreement was 6.58%, excluding accretion of original issue discount and deferred financing fees, and there was $880.0 million available on the Revolver.
As of December 31, 2024, the weighted-average interest rate of borrowings under the Credit Agreement was 6.22%, excluding accretion of original issue discount and deferred financing fees, and there was $397.0 million available on the Revolver.
We believe that our sources of liquidity are adequate to fund our operations for the next twelve months and the foreseeable future. 51 Cash Flows As of December 31, 2023, we had $44.8 million of Cash and cash equivalents and restricted cash, an increase of $20.5 million from the $24.3 million of Cash and cash equivalents on hand as of December 31, 2022.
We believe that our sources of liquidity are adequate to fund our operations for the next twelve months and the foreseeable future. 52 Cash Flows As of December 31, 2024, we had $48.2 million of Cash and cash equivalents and restricted cash, an increase of $3.3 million from the $44.8 million of Cash and cash equivalents on hand as of December 31, 2023.
In connection with our acquisition of Novastep during the year ended December 31, 2023, we recognized Goodwill of approximately $44 million and identifiable intangible assets of approximately $52 million.
In connection with our acquisition of Novastep during the year ended December 31, 2023, we recognized Goodwill of approximately $44 million and identifiable intangible assets of approximately $52 million. In connection with our acquisition of Lima during the year ended December 31, 2024, we recognized Goodwill of approximately $320.4 million and identifiable intangible assets of approximately $363.0 million.
Our recent acquisitions were dilutive to the margin by approximately 70 basis points and are expected to be accretive to margins in future years. Business Segments As discussed further above, we report results in two reportable segments: P&R and Recon.
Our recent acquisitions in Recon were dilutive to the net loss margin from continuing operations and to Adjusted EBITDA margin by approximately 20 basis points and are expected to be accretive to margins in future years. Business Segments As discussed further above, we report results in two reportable segments: P&R and Recon.
Enovis Term Loan and Revolving Credit Facility On April 4, 2022, we entered into a new credit agreement (the “Enovis Credit Agreement”), consisting of a $900 million revolving credit facility (the “Revolver”) with an April 4, 2027 maturity date and a term loan with an initial aggregate principal amount of $450.0 million and an April 4, 2023 maturity date (the “Enovis Term Loan”).
Enovis Term Loan and Revolving Credit Facility On April 4, 2022, we entered into a new credit agreement (the “Credit Agreement”), consisting of a $900 million revolving credit facility (the “Revolver”) with an April 4, 2027 maturity date and a term loan with an initial aggregate principal amount of $450.0 million (the “2022 Term Loan”) which was fully extinguished during the first quarter of 2023.
(2) Restructuring and other charges in P&R includes $5.2 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations.
(2) Restructuring and other charges includes $1.7 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations.
In addition, the Enovis Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum total leverage ratio of not more than 3.75:1.00 commencing with the fiscal quarter ending June 30, 2023, and a step-down to 3.50:1.00 commencing with the fiscal quarter ending June 30, 2024, and (ii) a minimum interest coverage ratio of 3.00:1.00.
In addition, the Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum senior secured leverage ratio of not more than 3.50:1.00 for the fiscal quarter ending June 30, 2024 and thereafter, and (ii) a minimum interest coverage ratio of 3.00:1:00.
Contractual Obligations Debt As of December 31, 2023, the Company’s Revolver and senior unsecured convertible notes (the “2028 Notes”) had principal amounts outstanding of $20.0 million and $460.0 million, respectively. There are no required principal payments due on the Revolver within 12 months and it matures on April 4, 2027.
Contractual Obligations Debt As of December 31, 2024, our Revolver, Term Loan, and senior unsecured convertible notes (the “2028 Notes”) had principal amounts outstanding of $503.1 million, $377 million, and $449 million, respectively. There are no required principal payments due on the Revolver within 12 months and it matures on April 4, 2027.
The 2028 Notes have an interest rate of 3.875%, payable semi annually in arrears on April 15 and October 15 of each year, beginning April 15, 2024, and will mature on October 15, 2028 unless earlier repurchased, redeemed, or converted.
Our Term Loan requires quarterly principal repayments of $5 million and matures on April 4, 2027. The 2028 Notes have an interest rate of 3.875%, payable semi annually in arrears on April 15 and October 15 of each year, beginning April 15, 2024, and will mature on October 15, 2028 unless earlier repurchased, redeemed, or converted.
(3) Certain amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment. 42 Total Company Sales Net sales increased by $144.1 million or 9.2% to $1.7 billion for the year ended December 31, 2023 compared with the prior year period.
(3) Certain amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment. 43 Total Company Sales Net sales increased by $400.4 million or 23.5% to $2,107.6 million for the year ended December 31, 2024 compared with the prior year period.
In Recon, existing business sales increased $76.7 million, or 14.3% due to significantly higher sales volumes than the prior year across all product lines driven by market outperformance and new product launches. In P&R, existing business sales increased $47.1 million, or 4.6% due to improved sales volumes and inflation-related pricing increases.
Recon sales increased by $94.9 million, or 17.7%, of which $76.7 million was due to significantly higher sales volumes than the prior year across all product lines driven by market outperformance and new product launches. P&R sales increased $49.2 million, or 4.8%, of which $47.1 million was due to improved sales volumes and inflation-related pricing increases.
Accordingly, the results of our fabrication technology businesses in our financial statements prior to its spin-off as a separate public company are excluded from continuing operations in the accompanying financials for the years ended December 31, 2022 and 2021. Please see Part I. Item 1A.
Accordingly, the results of our fabrication technology businesses in our financial statements prior to its spin-off as a separate public company are excluded from continuing operations in the accompanying financials for the year ended December 31, 2022. Please see Part I. Item 1A. “Risk Factors” in this Form 10-K for further discussion of the Company’s risks relating to the Separation.
Adjusted EBITDA and Adjusted EBITDA margin increased due to improved sales mix, partially offset by unfavorable foreign currency impacts in a primary manufacturing facility during the year ended December 31, 2023 compared to the prior year. 2022 Compared to 2021 Net sales in P&R increased $1.6 million in the year ended December 31, 2022 compared with the prior year period, driven by organic growth in existing businesses which was aided by pricing increases to mitigate inflation, mostly offset by $30.9 million of currency translation pressure.
Adjusted EBITDA and Adjusted EBITDA margin increased due to improved operating scale from lower overheads, partially offset by unfavorable foreign currency impacts in a primary manufacturing facility during the year ended December 31, 2024 compared to the prior year. 2023 Compared to 2022 Net sales in P&R increased $49.2 million, or 4.8% in the year ended December 31, 2023 compared with the prior year period, driven by organic growth in existing businesses which was aided by pricing increases to mitigate inflation.
The strengthening of the U.S. dollar relative to other currencies, most notably the Euro, caused a $36.0 million unfavorable currency translation impact. 43 Operating Results The following table summarizes our results from continuing operations for the comparable three-year period.
Lastly, the weakening of the U.S. dollar relative to other currencies, most notably the Swiss Franc and Euro, caused a $6.1 million favorable currency translation impact. 45 Operating Results The following table summarizes our results from continuing operations for the comparable three-year period.
Included in these amounts is $5.9 million and $35.6 million for 2022, and 2021, respectively, related to discontinued operations. The $32.6 million proceeds from sale of property, plant and equipment in 2023 is from the sale of a facility related to our discontinued operations.
The $32.6 million proceeds from sale of property, plant and equipment in 2023 is from the sale of a facility related to our discontinued operations.
Although we seek to proactively manage inflation risk, future changes in component and raw material costs may adversely impact earnings or our margins.
In response, we have been enacting tactical price increases to certain products, mainly in P&R. Although we seek to proactively manage inflation risk, future changes in component and raw material costs may adversely impact earnings or our margins.
Changes in significant operating cash flow items are discussed below. • Operating cash flows (used in) provided by continuing operations working capital was $(47.7) million, $(116.0) million, and $8.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Changes in significant operating cash flow items are discussed below. • Operating cash flows used in continuing operations working capital was $73.7 million, $47.7 million, and $116.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. The working capital used in 2024 is primarily associated with international business growth in Recon following the Lima Acquisition.
Interest Payments on Debt Based on December 31, 2023 outstanding balances we estimate future interest payments associated with the senior unsecured convertible notes and Revolver of $83.5 million and $4.9 million, respectively, with $18.1 million and $1.2 million payable within 12 months.
Interest Payments on Debt Based on December 31, 2024 outstanding balances we estimate future interest payments associated with our Revolver, Term Loan, and senior unsecured convertible notes of $136.0 million, $51.3 million, and $59.5 million, respectively, with $31.6 million, $23.5 million. and $18.1 million payable within 12 months.
The Term Loan Facility extended to the Company under the Amendment was funded on January 3, 2024, the date the Lima Acquisition was consummated. The Term Loan Facility requires quarterly principal repayments at 1.25% of the initial aggregate principal amount and ultimately matures on April 4, 2027.
The Term Loan Facility extended to the Company under the Amendment was funded on January 3, 2024, the date the Lima Acquisition was consummated. The Term Loan Facility requires quarterly principal repayments, which is $5 million each quarter, and matures on April 4, 2027 (the “2024 Term Loan”).
The 2028 Notes will mature on October 15, 2028 unless earlier repurchased, redeemed, or converted. We also entered into privately negotiated capped call transactions with certain of the initial purchasers of the 2028 Notes.
The 2028 Notes have an interest rate of 3.875%, payable semiannually in arrears on April 15 and October 15 of each year, beginning April 15, 2024. The 2028 Notes will mature on October 15, 2028 unless earlier repurchased, redeemed, or converted. We also entered into privately negotiated capped call transactions with certain of the initial purchasers of the 2028 Notes.
Research and development costs also increased compared to the prior year period primarily due to increased spend within recently acquired businesses in Recon. Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to acquisition-related increases.
Research and development costs also increased compared to the prior year period, primarily due to increased spend within recently acquired businesses in Recon, 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.
Our Cash and cash equivalents as of December 31, 2023 include $19.4 million held in jurisdictions outside the U.S. Cash repatriation of non-U.S. cash into the U.S. may be subject to taxes, other local statutory restrictions and minority owner distributions.
The repayments were primarily funded by a $1.2 billion cash distribution from ESAB to us on separation. Our Cash and cash equivalents as of December 31, 2024 include $33.1 million held in jurisdictions outside the U.S. Cash repatriation of non-U.S. cash into the U.S. may be subject to taxes, other local statutory restrictions and minority owner distributions.
Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to business acquisitions. 44 Interest expense, net decreased $4.4 million during 2023 in comparison to 2022 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, the extinguishment of the outstanding balance of the Enovis Term Loan, and interest savings from $7.3 million interest received on the Swiss Franc cross-currency swap agreements.
Interest expense, net decreased by $4.4 million, primarily 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, the extinguishment of the outstanding balance of our previous term loan in conjunction with the ESAB investment sale, and interest savings from $7.3 million interest received on the Swiss Franc cross-currency swap agreements.
These costs were related to the Separation, business development and integration costs of recent acquisitions. • Cash paid for interest was $16.3 million, $37.1 million and $85.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. The decreases are primarily a result of the change in our capital structure due to the Separation.
These costs were primarily related to the acquisition and integration of Lima in 2024 and the Separation in 2022, as well as other business development initiatives and integration costs of recent acquisitions. • Cash paid for interest was $51.8 million, $16.3 million and $37.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Material Costs Our principal raw materials and components are foam ethylene vinyl acetate, copolymer for our bracing and vascular products in P&R and cobalt chromium alloy, stainless steel alloys, titanium alloy and ultra high molecular weight polyethylene in Recon. Prices for raw materials, energy and commodities are subject to volatility and are influenced by worldwide economic conditions.
Seasonality Sales in P&R and Recon typically peak in the fourth quarter. General economic conditions may, however, impact future seasonal variations. Material Costs Our principal raw materials and components are foam ethylene vinyl acetate, copolymer for our bracing and vascular products in P&R and cobalt chromium alloy, stainless steel alloys, titanium alloy and ultra high molecular weight polyethylene in Recon.
The following table presents the components of changes in our consolidated Net sales for the years ended December 31, 2023 and 2022.
The following table presents the components of changes in our consolidated Net sales for the years ended December 31, 2024 and 2023. Year Ended December 31, Year Ended December 31, 2024 2023 Growth Rate 2024 2023 Growth Rate GAAP Comparable Sales (1) (In millions) Prevention & Recovery: U.S.
The following table summarizes selected financial data for P&R: Year Ended December 31, 2023 2022 2021 (Dollars in millions) Net sales $ 1,076.8 $ 1,027.6 $ 1,026.0 Gross profit $ 557.5 $ 518.2 $ 516.1 Gross profit margin 51.8 % 50.4 % 50.3 % Selling, general and administrative expenses $ 442.7 $ 438.9 $ 421.9 Research and development expense $ 35.1 $ 33.5 $ 30.2 Operating loss (GAAP) $ (24.7) $ (18.2) $ (14.9) Operating loss margin (2.3) % (1.8) % (1.5) % Adjusted EBITDA (non-GAAP) $ 152.5 $ 141.3 $ 133.5 Adjusted EBITDA margin (non-GAAP) 14.2 % 13.8 % 13.0 % 46 2023 Compared to 2022 Net sales in P&R increased $49.2 million, or 4.8%, compared with the prior year period, driven by organic growth in existing businesses which was aided by pricing increases to mitigate inflation.
The following table summarizes selected financial data for P&R: Year Ended December 31, 2024 2023 2022 (Dollars in millions) Net sales $ 1,098.0 $ 1,076.8 $ 1,027.6 Gross profit $ 568.4 $ 557.5 $ 518.2 Gross profit margin 51.8 % 51.8 % 50.4 % Selling, general and administrative expenses $ 432.2 $ 442.7 $ 438.9 Research and development expense $ 35.7 $ 35.1 $ 33.5 Amortization of acquired intangibles $ 92.3 $ 93.6 $ 80.1 Restructuring and other charges $ 15.0 $ 10.9 $ 7.9 Goodwill impairment charge $ 315.0 $ — $ — Operating loss (GAAP) $ (321.8) $ (24.7) $ (18.2) Operating loss margin (GAAP) (29.3) % (2.3) % (1.8) % Adjusted EBITDA (non-GAAP) $ 159.6 $ 152.5 $ 141.3 Adjusted EBITDA margin (non-GAAP) 14.5 % 14.2 % 13.8 % 48 2024 Compared to 2023 Net sales in P&R increased $21.2 million, or 2.0%, compared with the prior year period, which was negatively impacted by a $11.1 million decrease from divesting a minor product line.
Other income, net increased primarily due to the gain on the foreign currency forward contract to manage the exposure to currency exchange rate risk related to the Euro-denominated purchase price of Lima.
Other income, net decreased primarily due to the loss in 2024 and the gain in 2023 on the foreign currency forward contract to manage the exposure to currency exchange rate risk related to the Euro-denominated purchase price of Lima, partially offset by the gain on fair value adjustments for the Lima Acquisition Contingent Shares liability.
The effective tax rate for 2021 was 16.0% on a loss from continuing operations before income taxes, which was lower than the 2021 U.S. federal statutory tax rate of 21% mainly due to the impact of additional U.S. tax on international operations and certain non-deductible expenses.
The effective tax rate for Loss from continuing operations before income taxes during 2023 was 19.8%, which was different than the 2023 U.S. federal statutory tax rate of 21% primarily due to a build in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S. taxation on international operations.
On November 18, 2022, we divested the retained ESAB shares to a lender under the Enovis Credit Agreement in a tax-efficient exchange for extinguishing $230.5 million of our outstanding term loan under the Enovis Credit Agreement. Equity Capital In connection with the Separation, we effected a one-for-three reverse stock split of all issued and outstanding shares of Enovis common stock.
On November 18, 2022, we divested the retained ESAB shares to a lender under the Credit Agreement in a tax-efficient exchange for extinguishing $230.5 million of our outstanding term loan under the Credit Agreement. Equity Capital In 2018, our Board of Directors authorized the repurchase of our common stock from time-to-time on the open market or in privately negotiated transactions.
At the time of the Separation, the Company’s total debt of $2.1 billion was repaid and replaced with a $450.0 million term loan that was further reduced by $230.5 million in November 2022 with the exchange of ESAB shares. • During 2023, 2022, and 2021 cash payments of $16.2 million, $18.5 million and $8.0 million, respectively, were made related to our restructuring initiatives. • Cash paid for MDR and other costs were $27.4 million, $16.7 million, and $7.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. • 2023 includes a favorable change in accrued compensation and benefits of approximately $20.0 million. • 2021 includes a one-time cash inflow from a $36.0 million U.S. federal tax refund received in the first quarter of 2021. 52 Cash flows used in investing activities for 2023, 2022 and 2021 include $152.8 million, $73.7 million, and $223.3 million, respectively, for acquisitions and investments.
At the time of the Separation, the Company’s total debt of $2.1 billion was repaid and replaced with a $450.0 million term loan that was reduced by $230.5 million in November 2023 in a partial extinguishment through an exchange of ESAB shares. • During 2024, 2023, and 2022 cash payments of $21.2 million, $16.2 million and $18.5 million, respectively, were made related to our restructuring initiatives. 53 • Cash paid for MDR and other costs were $38.0 million, $27.4 million, and $16.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Input cost inflation historically has not been a material factor to our gross margin; however, inflation effects have increased since 2021 and are expected to continue to remain elevated for at least the near term. In response, we have been enacting tactical price increases to certain products, mainly in P&R.
Prices for raw materials, energy and commodities are subject to volatility and are influenced by worldwide economic conditions. Input cost inflation historically has not been a material factor to our gross margin; however, inflation effects have increased since 2021 and are expected to continue to remain elevated for at least the near term.
The following table summarizes selected financial data for Recon: Year Ended December 31, 2023 2022 2021 (Dollars in millions) Net sales $ 630.4 $ 535.5 $ 400.2 Gross profit $ 433.2 $ 351.1 $ 261.6 Gross profit margin 68.7 % 65.6 % 65.4 % Selling, general and administrative expenses $ 387.6 $ 334.0 $ 243.8 Research and development expense $ 40.3 $ 27.4 $ 18.9 Operating loss (GAAP) $ (41.0) $ (52.9) $ (47.9) Operating loss margin (6.5) % (9.9) % (12.0) % Adjusted EBITDA (non-GAAP) $ 116.7 $ 94.7 $ 72.5 Adjusted EBITDA margin (non-GAAP) 18.5 % 17.7 % 18.1 % 47 2023 Compared to 2022 Net sal es in creased in Recon by $94.9 million, or 17.7%, primarily due to higher sales volumes driven by broad market strength and market outperformance.
The following table summarizes selected financial data for Recon: Year Ended December 31, 2024 2023 2022 (Dollars in millions) Net sales $ 1,009.7 $ 630.4 $ 535.5 Gross profit $ 612.3 $ 433.2 $ 351.1 Gross profit margin 60.6 % 68.7 % 65.6 % Selling, general and administrative expenses $ 595.2 $ 387.6 $ 334.0 Research and development expense $ 55.6 $ 40.3 $ 27.4 Amortization of acquired intangibles $ 73.2 $ 40.0 $ 46.2 Restructuring and other charges $ 12.3 $ 6.4 $ 9.4 Goodwill impairment charge $ 330.0 $ — $ — Operating loss (GAAP) $ (454.0) $ (41.0) $ (52.9) Operating loss margin (GAAP) (45.0) % (6.5) % (9.9) % Adjusted EBITDA (non-GAAP) $ 216.9 $ 116.7 $ 94.7 Adjusted EBITDA margin (non-GAAP) 21.5 % 18.5 % 17.7 % 49 2024 Compared to 2023 Net sales increased in Recon by $379.3 million, or 60%, of which $338.1 million was attributable to the Lima and Novastep acquisitions.
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 Agreement.
The Revolver contains a $50 million swing line loan sub-facility. Certain U.S. subsidiaries of the Company guarantee the obligations under the Credit Agreement. The agreement was amended on October 23, 2023, in conjunction with the financing of the Lima Acquisition as further discussed below.
Refer to Note 5 “Acquisitions and Investments” in the accompanying Notes to the Consolidated Financial Statements for more information. Additionally, cash flows used in investing activities in 2023, 2022, and 2021 include $122.2 million, $105.5 million, and $104.2 million, respectively, for purchases of property, plant, equipment, and intangibles.
Cash flows used in investing activities for 2024, 2023 and 2022 include $769.9 million, $152.8 million, and $73.7 million, respectively, for acquisitions and investments. Refer to Note 5 “Acquisitions and Investments” in the accompanying Notes to the Consolidated Financial Statements for more information.
Year Ended December 31, 2021 P&R Recon Total (Dollars in millions) Net loss from continuing operations (GAAP) (1) $ (102.3) Income tax benefit (19.5) Debt extinguishment charges 29.9 Interest expense, net 29.1 Operating loss (GAAP) $ (14.9) $ (47.9) (62.8) Operating loss margin (1.5) % (12.0) % (4.4) % Adjusted to add: Restructuring and other charges (2) 11.5 2.4 13.9 MDR and other costs 5.7 2.2 7.9 Strategic transaction costs (3) 14.8 8.6 23.4 Stock-based compensation (3) 17.8 7.9 25.7 Depreciation and other amortization 25.3 44.8 70.1 Amortization of acquired intangibles 72.6 44.3 116.9 Inventory step-up 0.7 10.1 10.8 Adjusted EBITDA (non-GAAP) $ 133.5 $ 72.5 $ 206.0 Adjusted EBITDA margin (non-GAAP) 13.0 % 18.1 % 14.4 % (1) Non-operating components of Net loss from continuing operations are not allocated to the segments.
The following tables set forth a reconciliation of net loss from continuing operations, the most directly comparable financial statement measure, to Adjusted EBITDA for the years ended December 31, 2024, 2023 and 2022. 41 Year Ended December 31, 2024 P&R Recon Total (Dollars in millions) Net loss from continuing operations (GAAP) (1) $ (827.4) Income tax expense 4.5 Other income, net (9.9) Interest expense, net 57.1 Operating loss (GAAP) $ (321.8) $ (454.0) (775.7) Operating loss margin (29.3) % (45.0) % (36.8) % Adjusted to add: Restructuring and other charges (2)(3) 20.9 24.3 45.2 MDR and other costs (3) 10.1 9.4 19.5 Strategic transaction costs (3) 4.3 74.0 78.3 Stock-based compensation (3) 18.1 11.6 29.7 Depreciation and other amortization 20.6 96.7 117.3 Amortization of acquired intangibles 92.3 73.2 165.5 Goodwill impairment charge 315.0 330.0 645.0 Inventory step-up — 51.7 51.7 Adjusted EBITDA (non-GAAP) $ 159.6 $ 216.9 $ 376.5 Adjusted EBITDA margin (non-GAAP) 14.5 % 21.5 % 17.9 % (1) Non-operating components of Net loss from continuing operations are not allocated to the segments.
Adjusted EBITDA and Adjusted EBITDA margin increased due to the reduction in central cost allocations, partially offset by inflation of supply chain, logistics, and other costs. Recon 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.
Recon 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.
(2) Restructuring and other charges in P&R includes $1.7 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations. (3) Certain amounts are allocated to the segments as a percentage of revenue as the costs or gain are not discrete to either segment.
(2) Restructuring and other charges includes $17.9 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations related to the discontinuation of certain product lines in the P&R and Recon segments .
The comparability of our operating results for the year ended December 31, 2023 to the comparable periods is affected by the following additional significant items: The Separation On April 4, 2022, we completed the Separation through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to our stockholders.
For the year ended December 31, 2024 compared to 2023, fluctuations in foreign currencies increased Net sales by 0.1%, had an immaterial impact on Gross profit, and increased operating expenses by approximately 0.1%. 39 The Separation On April 4, 2022, we completed the Separation through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to our stockholders.
With the acquisition of Lima in Recon on January 3, 2024, the sales mix is expected to further increase in Recon. 40 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.
The mix of sales was as follows for the periods presented: Year Ended December 31, 2024 2023 2022 P&R 52 % 63 % 66 % Recon (1) 48 % 37 % 34 % (1) The change in mix for the year ended December 31, 2024 from 2023 reflects the impact of the Lima acquisition in Recon, which was completed on January 3, 2024. 40 Non-GAAP Measures Adjusted EBITDA; Comparable Sales Adjusted EBITDA and Adjusted EBITDA margin, Comparable Sales, and Comparable Sales Growth rate, which are non-GAAP performance measures, are included in this report because they are key metrics used by our management to assess our operating performance.
Upon the Separation in April 2022, Goodwill was allocated on a relative fair value basis between the Company’s new reporting units Reconstructive and Prevention & Recovery. For the year ended December 31, 2023, management performed a quantitative assessment of Goodwill for the Reconstructive and Prevention & Recovery reporting units, both of which indicated no impairment existed.
For the years ended December 31, 2023 and 2022, the Company performed a quantitative assessment of Goodwill for each of the Reconstructive and Prevention & Recovery reporting units as part of our annual impairment testing on the first day of the fourth quarter, both of which indicated no impairment existed.
On September 22, 2023, the Company agreed to issue 1.9 million shares of our common stock to the seller of Lima for acquisition consideration of €100 million based on the thirty-day volume weighted average price of the Company’s common stock as of the close of business on September 21, 2023.
The fair value total consideration included 1,942,686 shares of Enovis common stock, as determined based upon a €100 million value divided by the thirty-day volume weighted average price of Enovis common stock as of the close of business on September 21, 2023 (the “Contingent Acquisition Shares”.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSee Note 17, “Financial Instruments and Fair Value Measurements” in the accompanying Notes to Consolidated Financial Statements included in this Form 10-K for additional information regarding our derivative instruments. 57
Biggest changeSee Note 17 “Financial Instruments and Fair Value Measurements” in the accompanying Notes to Consolidated Financial Statements included in this Form 10-K for additional information regarding our derivative instruments. 58
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 certain borrowing arrangements. Certain borrowings as of December 31, 2023 are variable rate facilities based on Secured Overnight Financing Rate (“SOFR”).
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 certain borrowing arrangements. Certain borrowings as of December 31, 2024 are variable rate facilities based on Secured Overnight Financing Rate (“SOFR”).
In order to mitigate our interest rate risk, we may enter into interest rate swap or collar agreements. A hypothetical increase in the interest rate of 1.00% during 2023 would have increased Interest expense on our variable-rate debt by approximately $2.8 million. Exchange Rate Risk We have manufacturing sites in Europe, Africa, and Asia and sell our products internationally.
In order to mitigate our interest rate risk, we may enter into interest rate swap or collar agreements. A hypothetical increase in the interest rate of 1.00% during 2024 would have increased Interest expense on our variable-rate debt by approximately $8.6 million. Exchange Rate Risk We have manufacturing sites in Europe, Africa, and Asia and sell our products internationally.
The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the Accumulated other comprehensive loss component of Equity. A 10% depreciation in major currencies, relative to the U.S. dollar as of December 31, 2023 would result in a reduction in Equity of approximately $110 million.
The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the Accumulated other comprehensive loss component of Equity. A 10% depreciation in major currencies, relative to the U.S. dollar as of December 31, 2024 would result in a reduction in Equity of approximately $159 million.
As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar and against the currencies of other countries in which we manufacture and sell products and services. During 2023, approximately 32% of our sales were derived from operations outside the U.S.
As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar and against the currencies of other countries in which we manufacture and sell products and services. During 2024, approximately 41% of our sales were derived from operations outside the U.S.

Other ENOV 10-K year-over-year comparisons