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What changed in Enovis CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Enovis CORP's 2024 and 2025 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 2025 report.

+353 added−355 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-26)

Top changes in Enovis CORP's 2025 10-K

353 paragraphs added · 355 removed · 257 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

52 edited+17 added−28 removed99 unchanged
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.
Biggest changePrevention & Recovery Our P&R 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 Federal Trade Commission (the “FTC”) also sets expectations for failing to take appropriate steps to keep consumers’ personal information secure, or failing to provide a level of security commensurate to promises made to individual about the security of their personal information (such as in a privacy notice) may constitute unfair or deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act (the “FTC Act”).
Federal Trade Commission (the “FTC”) also sets expectations for failing to take appropriate steps to keep consumers’ personal information secure, or failing to provide a level of security commensurate to promises made to individual about the security of their personal information (such as in a privacy notice) may constitute unfair or deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act (the “FTC Act”).
Physician Payments Sunshine Act imposes reporting and disclosure requirements on device manufacturers with respect to ownership and investment interests by physicians and members of their immediate family as well as certain payments or other “transfers of value” made to physicians, certain non-physician practitioners and teaching hospitals. • State and foreign equivalents of each of the health care laws described above, among others, some of which may be broader in scope including, without limitation, state anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving health care items or services reimbursed by non-governmental third party payors, including private insurers, or that apply regardless of payor; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other health care providers, marketing expenditures; and state and local laws requiring the registration of device sales and medical representatives.
Physician Payments Sunshine Act imposes reporting and disclosure requirements on device manufacturers with respect to ownership and investment interests by physicians and members of their immediate family as well as certain payments or other “transfers of value” made to physicians, certain non-physician practitioners and teaching hospitals. 12 • State and foreign equivalents of each of the health care laws described above, among others, some of which may be broader in scope including, without limitation, state anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving health care items or services reimbursed by non-governmental third party payors, including private insurers, or that apply regardless of payor; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other health care providers, marketing expenditures; and state and local laws requiring the registration of device sales and medical representatives.
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.
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. • The U.S.
You may also request a copy of these filings, at no cost, by writing or telephoning us at: Investor Relations, Enovis Corporation, 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808, telephone (302) 252-9160. Information contained on our website is not incorporated by reference in this report and any references to our website are intended as inactive textual references only.
You may also request a copy of these 14 filings, at no cost, by writing or telephoning us at: Investor Relations, Enovis Corporation, 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808, telephone (302) 252-9160. Information contained on our website is not incorporated by reference in this report and any references to our website are intended as inactive textual references only.
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.
We believe our sources of raw materials and components 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.
An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. An IDE will automatically become effective 30 days after the FDA’s receipt unless the FDA notifies the company that the investigation may not begin.
An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. An IDE will automatically become effective 30 days after the FDA’s receipt 7 unless the FDA notifies the company that the investigation may not begin.
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.
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. Third-party payors review their coverage policies carefully and can, without notice, reduce or eliminate reimbursement.
Although we highlight recent additions to our patent portfolio as part of our marketing efforts, we do not consider any one patent or trademark or any group thereof essential to our business as a whole or to any of our business operations. We also rely on proprietary product knowledge and manufacturing processes in our operations.
Although we highlight recent additions to our patent portfolio as part of our marketing efforts, we do not consider any one patent or 5 trademark or any group thereof essential to our business as a whole or to any of our business operations. We also rely on proprietary product knowledge and manufacturing processes in our operations.
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.
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.
For example, the California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act (“CPRA”), contains disclosure obligations for businesses that collect personal information about California residents and affords those individuals new rights relating to their personal information that may affect our ability to use personal information.
For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (“CCPA”), contains disclosure obligations for businesses that collect personal information about California residents and affords those individuals new rights relating to their personal information that may affect our ability to use personal information.
Some pre-amendment devices are unclassified but subject to FDA’s premarket notification and clearance process in order to be commercially distributed. 510(k) Clearance Marketing Pathway Many of our current products are subject to premarket notification and clearance.
Some pre-amendment devices are unclassified but subject to FDA’s premarket notification and clearance process in order to be commercially distributed. 6 510(k) Clearance Marketing Pathway Many of our current products are subject to premarket notification and clearance.
Additionally, the SEC maintains an Internet site that contains our reports, proxy statements and other information that we electronically file with, or furnish to, the SEC at www.sec.gov. 15
Additionally, the SEC maintains an Internet site that contains our reports, proxy statements and other information that we electronically file with, or furnish to, the SEC at www.sec.gov.
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.
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 48% of its revenues in the U.S. and the majority of the remaining balance in Europe.
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.
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.
With respect to privacy, the FTC also sets expectations that companies honor the privacy promises made to individuals about how the company handles consumers’ personal information; any failure to honor promises, such as the statements made in a privacy policy or on a website, may also constitute unfair or deceptive acts or practices in violation of the FTC Act.
With respect to privacy, the FTC also sets expectations that companies honor the privacy promises made to individuals about how the company handles 13 consumers’ personal information; failure to honor promises, such as the statements made in a privacy policy or on a website, may also constitute unfair or deceptive acts or practices in violation of the FTC Act.
Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief or statutory or actual damages. In addition, California residents have the right to bring a private right of action in connection with certain types of incidents. These claims may result in significant liability and potential damages.
Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief or statutory or actual damages. In addition, California residents have the right to bring a private right of action in connection with certain types of data security incidents. These claims may result in significant liability and potential damages.
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.
Reportable Segments We report our operations through the Prevention & Recovery (“P&R”) and Reconstructive segments (“Recon”). 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.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. The FTC regards individually identifiable health information as sensitive data that merits stronger safeguards.
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.
Approximately 23.5% 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. 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.
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.
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.
Refer to the Risk Factor captioned “We are dependent on the availability of raw materials, as well as parts and components used in our products,” for more information on this risk.
Refer to the Risk Factor captioned “We are dependent on the availability of raw materials, as well as parts and components used in our products” for more information on this risk.
Business General Enovis Corporation (the “Company”, “Enovis”, “we” or “us”, and previously “Colfax Corporation” or “Colfax”) is a medical technology company focused on developing clinically differentiated solutions that generate measurably better patient outcomes and transform workflows by manufacturing, and distributing high-quality medical devices with a broad range of products used for reconstructive surgery, rehabilitation, pain management and physical therapy.
Item 1. Business General Enovis Corporation (the “Company”, “Enovis”, “we” or “us”) is a medical technology company focused on developing clinically differentiated solutions that generate measurably better patient outcomes and transform workflows by manufacturing, and distributing high-quality medical devices with a broad range of products used for reconstructive surgery, rehabilitation, pain management and physical therapy.
Our internal human capital management programs center on the following processes and objectives: (i) identifying, attracting, developing and enabling talent, (ii) promoting associate engagement and an open feedback culture to foster continuous improvement, (iii) offering competitive compensation and benefit programs to motivate associates and reward performance, (iv) building and supporting inclusion, diversity, and equity initiatives, and (v) protecting the health and safety of all of our associates across the world.
Our internal human capital management programs center on the following processes and objectives: (i) identifying, attracting, developing and enabling talent, (ii) promoting associate engagement and an open feedback culture to foster continuous improvement, (iii) offering competitive compensation and benefit programs to motivate associates and reward performance, and (iv) protecting the health and safety of all of our associates across the world.
Other states have enacted similar privacy laws that impose new obligations or limitations in areas affecting our business and we continue to assess the impact of these state legislation, on our business as additional information and guidance becomes available. Efforts at the federal level to enact similar laws are ongoing.
We have implemented processes to manage compliance with the CCPA. Other states have enacted similar privacy laws that impose new obligations and limitations in areas affecting our business and we continue to assess the impact of these state laws, on our business as additional information and guidance becomes available. Efforts at the federal level to enact similar laws are ongoing.
The MHRA has introduced legislation which provides that CE marked medical devices may be placed on the Great Britain market along following timelines: • general medical devices compliant with the (EU) MDD or (EU) AIMDD with a valid declaration and CE marking can be placed on the Great Britain market up until the sooner of the expiration of the certificate or June 30, 2028; and • general medical devices, including custom-made devices, compliant with the (EU) MDR can be placed on the Great Britain market up until June 30, 2030.
However, certain CE marked medical devices may be placed on the Great Britain market along the following timelines: • general medical devices compliant with the (EU) MDD or (EU) AIMDD with a valid declaration and CE marking can be placed on the Great Britain market up until the sooner of the expiration of the certificate or June 30, 2028; and • general medical devices, including custom-made devices, compliant with the (EU) MDR can be placed on the Great Britain market up until June 30, 2030.
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.
Human Capital Management As of December 31, 2025, we employed approximately 7,802 persons, of whom approximately 2,107 were employed in the United States and approximately 5,695 were employed outside of the United States. None of our associates are covered by collective bargaining agreements with U.S. trade unions.
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”.
For the year ended December 31, 2025, approximately 42% 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.
The regulations on medical devices in Great Britain continue to be based largely on the MDD and Active Implantable Medical Devices Directive (“AIMDD”), which preceded the (EU) MDR, as implemented into national law by the Medical Devices Regulations 2002 (“SI 2002 No 618”, as amended).
England, Wales and Scotland). The regulations on medical devices in Great Britain continue to be based largely on the MDD and Active Implantable Medical Devices Directive (“AIMDD”), which preceded the (EU) MDR, as implemented into national law by the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) (“UK Medical Devices Regulations”).
EGX was referred to as Colfax Business Systems, or CBS, prior to the Separation. Each year, Enovis associates in every business develop strategic and operating plans that are based on the principle of the Voice of the Customer . In these plans, we are clear about our market realities, our threats, our risks, our opportunities and, most importantly, our vision.
Each year, Enovis associates in every business develop strategic and operating plans that are based on the principle of the Voice of the Customer . In these plans, we are clear about our market realities, our threats, our risks, our opportunities and, most importantly, our vision.
In particular, there will be a new audit by the notified body before it will renew the relevant certificate(s). The MDR became effective on May 26, 2021.
In particular, there will be a new audit by the notified body before it will renew the relevant certificate(s).
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.
“Risk Factors — Risks Related to Our Business and Operations.” 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.
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.
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.
Industry and Competition Our Prevention & Recovery segment generates approximately 67% of its revenues in the U.S. and the majority of the remaining balance in Europe. The markets in which our Prevention & Recovery segment competes are highly competitive and fragmented.
The following discussion includes information that is common to both of our reportable segments, unless indicated otherwise. Industry and Competition Our Prevention & Recovery segment generates approximately 67% of its revenues in the U.S. and the majority of the remaining balance in Europe. The markets in which our Prevention & Recovery segment competes are highly competitive and fragmented.
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.
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.
We seek to leverage our Enovis Growth eXcellence business system (“EGX”), a set of tools, processes, and culture, to continuously improve our ability to enable great patient outcomes and to drive and fuel growth.
We seek to leverage our Enovis Growth Excellence business system (“EGX”), a set of tools, processes, and culture, to continuously improve our ability to enable great patient outcomes and to drive and fuel growth. During the year ended December 31, 2025, we completed four acquisitions within our Reconstructive segment and three acquisitions within our Prevention & Recovery segment.
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.
We generally use more than one supplier, which helps to mitigate any risk of shortages or delays in the global supply chain. Tariffs may 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 could result in higher input costs for our products.
These cuts could adversely affect payment for any products we may commercialize in the future. Many states have adopted or are considering policies to reduce Medicaid spending as a result of state budgetary shortfalls, which in some cases include reduced reimbursement for DMEPOS items and/or other Medicaid coverage restrictions.
Many states have adopted or are considering policies to reduce Medicaid spending as a result of state budgetary shortfalls, which in some cases include reduced reimbursement for DMEPOS items and/or other Medicaid coverage restrictions. 11 Additionally, changes in federal laws, regulations, and guidance can affect state policy.
In accordance with its recently extended transitional provisions, both (i) devices lawfully placed on the market pursuant to the MDD prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the MDR transitional provisions may generally continue to be made available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled and in particular, no substantial change must be made to the device.
In accordance with the MDR’s recently extended transitional provisions, both (i) devices lawfully placed on the market pursuant to the MDD prior to May 26, 2021 and (ii) legacy devices lawfully placed on the EU market after May 26, 2021 in accordance with the MDR transitional provisions may generally continue to be made available on the market or put into service, provided that the requirements of the transitional provisions are fulfilled. 8 However, even in this case, economic operators, such as manufacturers, must comply with a number of new or reinforced requirements set forth in the MDR with regard to registration of economic operators and of devices, post-market surveillance and vigilance requirements.
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.
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.
Regulation of Medical Devices in the United Kingdom Since January 1, 2021, the United Kingdom (“UK”) Medicines and Healthcare Products Regulatory Agency (“MHRA”) has been the sovereign regulatory authority responsible for the medical device market in Great Britain (i.e. England, Wales and Scotland).
The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”) which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland. 9 Regulation of Medical Devices in the United Kingdom Since January 1, 2021, the United Kingdom (“UK”) Medicines and Healthcare Products Regulatory Agency (“MHRA”) has been the sovereign regulatory authority responsible for the medical device market in Great Britain (i.e.
Additionally, changes in federal laws, regulations, and guidance can affect state policy. For instance, the 21st Century Cures Act prohibits federal financial participation payments to states for certain Medicaid DME spending that exceeds what Medicare would have paid for such items.
For instance, the 21st Century Cures Act prohibits federal financial participation payments to states for certain Medicaid DME spending that exceeds what Medicare would have paid for such items. Any modification or repeal of any provisions of the ACA, or its implementing regulations, may require states to modify their own laws and regulations.
Only those suppliers selected through the competitive bidding process within each designated competitive bidding area are eligible to have their products reimbursed by Medicare. The Centers for Medicare & Medicaid Services also has adopted regulations to adjust national DMEPOS fee schedules to take into account competitive bidding pricing.
Only those suppliers selected through the competitive bidding process within each designated competitive bidding area are eligible to have their products reimbursed by Medicare.
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.
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 a practice of entering into contractual arrangements with such third parties to ensure that they process personal data only according to our instructions, and that they have instituted adequate security measures. Where personal data is being transferred outside the EEA (or the UK), our policy is that it is done so in compliance with applicable data export requirements.
We depend on third parties in relation to provision of our services, a number of which process personal data on our behalf. We have a practice of entering into contractual arrangements with such third parties to ensure that they process personal data only according to our instructions, and that they have instituted adequate security measures.
In addition, many of our non-surgical medical devices and related accessories are used by athletes and patients for injury prevention and at-home physical therapy treatment.
In addition, many of our non-surgical medical devices and related accessories are used by athletes and patients for injury prevention and at-home physical therapy treatment. Our P&R product lines include rigid and soft orthopedic bracing, hot and cold therapy, bone growth stimulators, vascular therapy systems and compression garments, electrical stimulators used for pain management and physical therapy products.
Each payor has a unique process for determining whether to cover a device for a particular indication and how to set reimbursement rates for the device.
The Centers for Medicare & Medicaid Services also has adopted regulations to adjust national DMEPOS fee schedules to take into account competitive bidding pricing. 10 Each payor has a unique process for determining whether to cover a device for a particular indication and how to set reimbursement rates for the device.
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.
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.
All medical devices must be registered with the UK Medicines and Healthcare Products Regulatory Agency (“MHRA”) before being placed on the UK market, and must conform to the UK MDR 2002 in order to be registered with the MHRA.
All medical devices must be registered with the MHRA before being placed on the UK market, and must conform to the UK Medical Devices Regulations in order to be registered with the MHRA. In addition, manufacturers based outside the UK will need to appoint a UK Responsible Person to register devices with the MHRA.
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.
These small acquisitions added complementary prevention & recovery product offerings, expanded distribution partners for the Company’s surgical implant products in Europe, and added a complementary surgical product technology. See Note 5 “Acquisitions and Divestitures” 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.
Raw Materials We obtain raw materials, component parts and supplies from a variety of global sources, generally each from more than one supplier. Our principal raw materials and components for our Prevention & Recovery segment are ethylene-vinyl acetate copolymer form for our bracing and vascular products.
Raw Materials We obtain raw materials, component parts, and supplies from a variety of global sources. Our principal raw materials include foam ethylene-vinyl-acetate copolymer used in our bracing and vascular products within P&R, and cobalt-chromium alloys, stainless-steel alloys, titanium alloys, and ultra-high-molecular-weight polyethylene used in our Recon surgical implant products.
However, under the terms of the Protocol on Ireland/Northern Ireland, the (EU) MDR applies to Northern Ireland. On June 26, 2022, the MHRA published its response to a 10-week consultation on the post-Brexit regulatory framework for medical devices and diagnostics.
However, under the terms of the Protocol on Ireland/Northern Ireland, the (EU) MDR applies to Northern Ireland. On June 16, 2025, an amendment to the UK Medical Devices Regulations came into force intended to clarify and strengthen the post-market surveillance requirements for medical devices in Great Britain.
Removed
On April 4, 2022, we completed the separation of the last of our industrial businesses, the fabrication technology business, through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB Corporation (“ESAB”) to Colfax stockholders.
Added
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.
Removed
Prior to the Separation, we were a leading diversified technology company that provided fabrication technology and medical device products and services to customers around the world, principally under the ESAB and DJO brands.
Added
Reconstructive Our Recon segment is a global medical technology business focused on developing, manufacturing, marketing, and distributing innovative surgical solutions that restore mobility and improve patient outcomes. Our portfolio includes a broad range of differentiated implants, instrumentation, and enabling technologies used in elective and non-elective joint replacement, limb reconstruction, and foot & ankle procedures.
Removed
To affect the Separation, we distributed to our stockholders one share of ESAB common stock for every three shares of Colfax common stock held at the close of business on March 22, 2022, with the Company retaining 10% of the shares of ESAB common stock immediately following the Separation.
Added
We serve orthopedic surgeons and healthcare systems worldwide with products for shoulder, hip, knee, and extremity reconstruction and fixation, including both primary and revision procedures. 4 Our offerings are supported by proprietary surgical techniques, surgeon education, and digital tools that enhance preoperative planning, intraoperative precision, and postoperative recovery.
Removed
Upon completion of the Separation, Colfax, which retained the Company’s specialty medical technology business, changed its name to Enovis Corporation and began trading under the stock symbol “ENOV” on the New York Stock Exchange on April 5, 2022. Immediately following the Separation, the Company effected a one-for-three reverse stock split of all issued and outstanding shares of Enovis common stock.
Added
Our strategy is focused on accelerating growth through innovation, expanding market presence in both established and emerging markets, and delivering exceptional clinical and economic value to our customers. Backed by a strong commitment to research and development, surgeon collaboration, and commercial execution, Enovis Reconstructive is positioned as a leading partner in advancing the future of reconstructive surgery.
Removed
Following the completion of the Separation, the Company revised its reporting structure and conducts its business through two operating segments, “Prevention & Recovery” and “Reconstructive”.
Added
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.
Removed
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.
Added
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” or (EU) MDR).
Removed
Our Prevention & Recovery product lines include rigid and soft orthopedic bracing, hot and cold therapy, bone growth stimulators, vascular therapy systems and compression garments, therapeutic shoes and inserts, electrical stimulators used for pain management and physical therapy products.
Added
In addition, the MHRA launched a consultation between November 14, 2024 and January 5, 2025 on proposals to update the pre-market requirements for medical devices in Great Britain.
Removed
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.
Added
On July 22, 2025, the MHRA published a response to the consultation confirming that it will incorporate the results of this consultation into new UK legislation on pre-market requirements for medical devices in Great Britain. A draft of the new legislation is expected this year.
Removed
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.
Added
The MHRA has introduced legislation which provides that certain medical devices need to be “UKCA” certified by a UK approved body in order to be lawfully placed on the Great Britain market.
Removed
Permission for commercial distribution subject to a 510(k) premarket notification is generally known as 510(k) clearance.
Added
The MHRA has confirmed that it intends to launch a consultation regarding the indefinite recognition of such medical devices in Great Britain. Medical devices also need to bear a physical UK Conformity Assessment (“UKCA”) mark in order to be lawfully placed on the Great Britain market.
Removed
However, as of May 26, 2021, some of the MDR requirements apply in place of the corresponding requirements of the MDD with regard to registration of economic operators and of devices, post-market surveillance and vigilance requirements.
Added
However, the MHRA has confirmed in its response to the consultation on pre-market requirements for medical devices in Great Britain that it intends to remove the requirement for a medical device and its labeling (i.e., packaging and instructions for use) in Great Britain to bear a physical UKCA mark.
Removed
However, even in this case, manufacturers must comply with a number of new or reinforced requirements set forth in the MDR, in particular the obligations described below.
Added
Instead of requiring a medical device and its labeling to bear a UKCA mark, manufacturers will be required to assign a unique design identification (“UDI”) to a medical device and register the UDI in a publicly accessible database before the medical device is placed on the Great Britain market.
Removed
The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”) which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland.
Added
If this change is implemented, we will no longer be required to affix the physical UKCA mark to our medical devices, but we will need to assign and affix a UDI and register the UDI in a publicly accessible database.
Removed
The MHRA seeks to amend the Medical Devices Regulations 2002, in particular to create a new access pathway to support innovation, create an innovative framework for regulating software and artificial intelligence as medical devices, reform in-vitro diagnostic medical device regulation and foster sustainability through the reuse and remanufacture of medical devices.
Added
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

78 edited+14 added−10 removed196 unchanged
Biggest changeWe are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, could cause or contribute to a death or serious injury.
Biggest changeThe discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us, and failure to report adverse medical events or failures or malfunctions to the FDA as required would subject us to sanctions that could harm our reputation, business, financial condition and results of operations. 21 We are subject to the FDA’s medical device reporting regulations and similar foreign regulations, which require us to report to the FDA when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, could cause or contribute to a death or serious injury.
Further, restructuring efforts are inherently risky, and we may not be able to predict the cost and timing of such actions accurately or properly estimate their impact. Any impairment in the value of our intangible assets, including Goodwill, would negatively affect our operating results and total capitalization. Our Total assets reflect substantial intangible assets, primarily Goodwill.
Further, restructuring efforts are inherently risky, and we may not be able to predict the cost and timing of such actions accurately or properly estimate their impact. Any further impairment in the value of our intangible assets, including Goodwill, would negatively affect our operating results and total capitalization. Our total assets reflect substantial intangible assets, primarily Goodwill.
In addition, the initiation and completion of any of clinical studies may be prevented, delayed, or halted for numerous reasons. We may experience delays in our ongoing clinical trials for a number of reasons, which could adversely affect the costs, timing or successful completion of our clinical trials.
In addition, the initiation and completion of any clinical studies may be prevented, delayed, or halted for numerous reasons. We may experience delays in our ongoing clinical trials for a number of reasons, which could adversely affect the costs, timing or successful completion of our clinical trials.
It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws or consumer protection laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.
It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws or consumer protection laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative 22 penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.
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.
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 and 2024, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws.
While we believe we have implemented appropriate policies and procedures to mitigate risk of non-compliance with the FCPA and other applicable anti-bribery laws by the Company and persons or entities acting on our behalf, we cannot assure that such policies, procedures, and training will always protect us from violations by our employees, distributors or other agents.
While we 28 believe we have implemented appropriate policies and procedures to mitigate risk of non-compliance with the FCPA and other applicable anti-bribery laws by the Company and persons or entities acting on our behalf, we cannot assure that such policies, procedures, and training will always protect us from violations by our employees, distributors or other agents.
The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all. In the EU, our notified body issues the certificates that allow CE marking for the sale of our products.
The 20 process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all. In the EU, our notified body issues the certificates that allow CE marking for the sale of our products.
Failure to attract, develop, engage, and retain qualified employees, whether as a result of an insufficient number of qualified applicants, difficulty in recruiting new employees, or inadequate resources to train, integrate, and retain qualified employees, could impair our ability to execute our business strategy and could have a material adverse effect on our business, financial condition and results of operations.
Failure to attract, develop, engage, and retain qualified employees, whether as a result of an insufficient number of qualified applicants, difficulty in recruiting new employees, or inadequate resources to 30 train, integrate, and retain qualified employees, could impair our ability to execute our business strategy and could have a material adverse effect on our business, financial condition and results of operations.
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
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.
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.
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.
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.
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.
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.
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.
In order to comply with the Sarbanes-Oxley Act, we will need to implement or enhance internal control over financial reporting at any company we acquire, and we may identify control deficiencies that require remediation as part of our evaluation and testing of internal controls.
In order to comply with the Sarbanes-Oxley Act, we will need to 15 implement or enhance internal control over financial reporting at any company we acquire, and we may identify control deficiencies that require remediation as part of our evaluation and testing of internal controls.
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, 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, 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.
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.
Further, we may be subject to foreign currency translation losses depending upon whether foreign nations devalue their currencies. We are dependent on the availability of raw materials, as well as parts and components used in our products.
Further, we may be subject to foreign currency translation losses depending upon whether foreign nations devalue their currencies. 18 We are dependent on the availability of raw materials, as well as parts and components used in our products.
If we fail to achieve any of these steps, our growth strategy may not be successful. For example, we completed the acquisition of Lima. If the Lima Acquisition is not successfully integrated into our existing operations, our business and financial results may be adversely affected.
If we fail to achieve any of these steps, our growth strategy may not be successful. For example, if the Lima Acquisition is not successfully integrated into our existing operations, our business and financial results may be adversely affected.
Risks Related to the Separation We could incur significant liability if the separation and distribution of ESAB is determined to be a taxable transaction.
Risks Related to the Separation We could incur significant liability if the separation and distribution of ESAB Corporation is determined to be a taxable transaction.
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 Corporation (“ESAB”) as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code.
As explained in greater detail in “ Regulatory Environment” in Part I, Item 1, the 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.
As explained in greater detail in “Regulatory Environment” in Part I, Item 1, the 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.
To continue to place products on the market in the EU and United Kingdom after expiry of our existing notified body certificate[s], we will need to apply for their certification under the MDR and UK MDR.
To continue to place products on the market in the EU and United Kingdom after expiry of our existing notified body certificate(s), we will need to apply for their certification under the MDR and UK Medical Device Regulations.
If we are unable to identify suitable acquisition candidates, complete any proposed acquisitions or successfully integrate the businesses we acquire, our growth strategy may not succeed and we may not realize the anticipated benefits of our acquisitions. We intend to seek acquisition opportunities both to expand into new markets and to enhance our position in our existing markets.
If we are unable to identify suitable acquisition candidates, complet e any proposed acquisitions or successfully integrate the businesses we acquire, our growth strategy may not succeed and we may not realize the anticipated benefits of our acquisitions. We intend to seek strategic acquisition opportunities both to expand into new markets and to enhance our position in our existing markets.
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.
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 cannot avoid the requirements.
Many risks affect more than one category, and the risks are not in order of significance or probability of occurrence because they have been grouped by categories. Risks Related to Our Business and Operations Acquisitions have formed a significant part of our growth strategy in the past and are expected to continue to do so.
Many risks affect more than one category, and the risks are not in order of significance or probability of occurrence because they have been grouped by categories. Risks Related to Our Business and Operations Acquisitions have formed a significant part of our growth strategy.
Once a device is on the EEA market, manufacturers must comply with certain vigilance requirements, such as reporting serious incidents and fielding safety corrective actions. Noncompliance could lead to penalties and a suspension or withdrawal of our CE Certificate of Conformity.
Once a device is on the market in the EU and/or United Kingdom, manufacturers must comply with certain vigilance requirements, such as reporting serious incidents and fielding safety corrective actions. Noncompliance could lead to penalties and a suspension or withdrawal of our CE Certificate of Conformity.
Although we have no direct operations in Russia or Ukraine or government-imposed sanctions on our products currently, we could experience the impact of sanctions in the future and/or shortages in materials, increased costs for raw material and other supply chain issues due in part to the negative impact of the Russia-Ukraine military conflict on the global economy.
Although we have no direct operations in the Middle East or in Russia or Ukraine or government-imposed sanctions on our products currently, we could experience the impact of sanctions in the future and/or shortages in materials, increased costs for raw material and other supply chain issues due in part to the negative impact these and other armed conflicts on the global economy.
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.
We may require additional capital to finance our operating needs and to finance our growth. 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.
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.
During the year ended December 31, 2025, approximately 42% of our sales were derived from operations outside the United States, which percentage is expected to continue to increase as a result of the Lima Acquisition.
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 and UK Medical Device Regulations provide 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.
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.
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.
See “ 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.
See “ 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 further sustained decrease in our publicly reported stock price and 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 and may impact our ability to designate our Swiss-Franc cross-currency swaps as net investment hedges.
Any one or more of these events may reduce the overall demand for our products which could adversely affect our results of operations, financial condition, and business Significant movements in foreign currency exchange rates may harm our financial results. We are exposed to fluctuations in currency exchange rates.
Any one or more of these events could adversely affect our results of operations, financial condition, and business Significant movements in foreign currency exchange rates may harm our financial results. We are exposed to fluctuations in currency exchange rates.
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.
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.
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.
Furthermore, in connection with the armed conflict between Russia and Ukraine, 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.
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.
Further escalation of geopolitical tensions related to these armed conflicts, including increased trade barriers or restrictions on global trade, which could affect Russia’s allies and other countries, such as China, 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.
Any failure to implement and maintain effective internal control over financial reporting could result in material weaknesses or significant deficiencies in our internal controls, and could result in a material misstatement of our financial statements or otherwise cause us to fail to meet our financial reporting obligations, which could have an adverse effect on our results of operations, financial condition, and business. 16 We may require additional capital to finance our operating needs and to finance our growth, including acquisitions.
Any failure to implement and maintain effective internal control over financial reporting could result in material weaknesses or significant deficiencies in our internal controls, and could result in a material misstatement of our financial statements or otherwise cause us to fail to meet our financial reporting obligations, which could have an adverse effect on our results of operations, financial condition, and business.
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.
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.
Obtaining new clearances and approvals can be a time-consuming process, and delays in obtaining required future clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which could harm our future growth.
Further notification may be required under the UK Medical Device Regulations Obtaining new clearances and approvals can be a time-consuming process, and delays in obtaining required future clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which could harm our future growth.
The success of our medical device products depends heavily on acceptance by healthcare professionals who prescribe and recommend these products, and our failure to maintain relationships with key healthcare professionals or maintain a high level of confidence by key healthcare professionals in our products could adversely affect our business.
The success of our medical device products depends heavily on acceptance by healthcare professionals who prescribe and recommend these products, and our failure to maintain relationships with key healthcare professionals or maintain a high level of confidence by key healthcare professionals in our products could adversely affect our business. 19 We may not be able to compete successfully with our existing competitors or with new competitors.
Our future effective income tax rates could be unfavorably affected by various factors, including, among others, changes in the tax rates, rules and regulations in jurisdictions in which we generate income.
Changes in our tax rates or exposure to additional income tax liabilities could adversely affect our financial results. Our future effective income tax rates could be unfavorably affected by various factors, including, among others, changes in the tax rates, rules and regulations in jurisdictions in which we generate income.
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.
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.
In addition, the market price of our common stock could be affected by sales of our common stock by investors who view the 2028 Notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity involving our common stock.
In addition, the market price of our common stock could be affected by sales of our common stock by investors who view the 2028 Notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity involving our common stock. 16 In connection with the pricing of the 2028 Notes, we entered into capped call transactions with the option counterparties.
Changes in international trade policy can also have a substantial adverse effect on our business, results of operations, financial position and cash flows.
Tariffs and other trade measures could adversely affect our business, results of operations, financial position and cash flows. Changes in international trade policy could have a substantial adverse effect on our business, results of operations, financial position and cash flows.
Any recovery under our property damage and business interruption insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations, which could adversely affect our business, financial condition and results of operations.
Any recovery under our property damage and business interruption insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations, which could adversely affect our business, financial condition and results of operations. 17 Failure to maintain and protect our intellectual property rights or challenges to these rights by third parties may affect our operations and financial performance.
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.
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.
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.
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.
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 spread or fear of spread of contagious diseases, terrorist activity, man-made or natural disasters, actual or threatened war, political unrest, civil strife and other geopolitical uncertainty could cause a decline in the demand for our products, which may adversely affect our financial condition, growth strategy and operating performance.
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.
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 Medical Device Regulations 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 or under the UK Medical Device Regulations.
We have implemented, and plan to continue to implement, restructuring programs designed to facilitate key strategic initiatives and maintain long-term sustainable growth. As such, we have incurred and expect to continue to incur expenses relating to restructuring activities. We may not achieve or sustain the anticipated benefits, including any anticipated savings, of these restructuring programs or initiatives.
As such, we have incurred and expect to continue to incur expenses relating to restructuring activities. We may not achieve or sustain the anticipated benefits, including any anticipated savings, of these restructuring programs or initiatives.
These laws and regulations, among other things, constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements we have with hospitals, physicians or other potential purchasers of our products, including marketing and consulting arrangements, payment of royalties for product development, and our OfficeCare consignment stock and bill program.
These laws and regulations, among other things, constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements we have with hospitals, physicians or other potential purchasers of our products, including marketing and consulting arrangements, payment of royalties for product development, and our OfficeCare consignment stock and bill program. 25 Because of the breadth of these laws and the narrowness of available statutory exceptions and regulatory safe harbors, our business, marketing and other promotional activities could be subject to challenge under one or more of such laws.
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.
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.
In connection with the pricing of the 2028 Notes, we entered into capped call transactions with the option counterparties. The option counterparties and/or their respective affiliates may modify their hedge positions, which could cause an increase or decrease in the market price of our common stock.
The option counterparties and/or their respective affiliates may modify their hedge positions, which could cause an increase or decrease in the market price of our common stock. In addition, any or all of the option counterparties might default under the capped call transactions.
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.
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.
Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine. The global economy has been negatively impacted by the military conflict between Russia and Ukraine.
Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by geopolitical uncertainty, political instability, and conflicts, such as the armed conflicts between Russia and Ukraine and in the Middle East. The global economy has been negatively impacted by the armed conflicts in the Middle East and between Russia and Ukraine.
If the separation and distribution of ESAB are determined to be taxable for U.S. federal income tax purposes, our stockholders that received the distribution and are subject to U.S. federal income tax and we could be subject to significant U.S. federal income tax liabilities.
If the separation and distribution of ESAB are determined to be taxable for U.S. federal income tax purposes, our stockholders that received the distribution and are subject to U.S. federal income tax and we could be subject to significant U.S. federal income tax liabilities. 29 Potential indemnification liabilities to ESAB pursuant to the separation agreement could materially and adversely affect our businesses, financial condition, results of operations and cash flows.
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.
Risks relating to contagious diseases, terrorist activity, man-made or natural disasters and war have adversely impacted, and may, either alone or in combination with other risks, in the future have an adverse effect on our results of operations, financial condition, and business.
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.
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. Further, any impact on CE certification or marking in the EU could adversely impact our ability to market our products in the United Kingdom.
In addition, the landscape of laws regulating personal data is constantly evolving, compliance requires a flexible privacy framework and substantial resources, and compliance efforts will likely be an increasing and substantial cost in the future.
In addition, the landscape of laws regulating personal data is constantly evolving, compliance requires a flexible privacy framework and substantial resources, and compliance efforts will likely be an increasing and substantial cost in the future. Our information technology infrastructure and information are vulnerable to service interruptions, data corruption, cyber-based attacks, or network security breaches.
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.
Additionally, in connection with our annual assessment for the year ended December 31, 2024, we recognized a non-cash Goodwill impairment charge of $645.0 million ($315.0 million for the P&R reporting unit and $330.0 million for the Recon reporting unit).
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.
Energy, commodity, raw material, 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.
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.
For example, the introduction of new tariffs or trade restrictions 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. Further, the labor market for skilled manufacturing remains tight and our labor costs have increased as a result.
Although some of these state laws exempt manufacturers’ representatives, others do not. Such laws could reduce the number of potential customers by restricting our sales representatives’ activities in those jurisdictions or reduce demand for our products by reducing the number of professionals who fit and sell them.
Such laws could reduce the number of potential customers by restricting our sales representatives’ activities in those jurisdictions or reduce demand for our products by reducing the number of professionals who fit and sell them. 24 Audits or denials of claims by government agencies could reduce our revenues or profits.
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.
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. 26 Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations and financial condition.
We have experienced, and expect to continue to confront, efforts by hackers and other third parties to gain unauthorized access or deny access to, or otherwise disrupt, our information technology systems and networks. Any such future attacks could have a material adverse effect on our business, financial condition, results of operations or liquidity.
We have experienced, and expect to continue to confront, efforts by hackers and other third parties to gain unauthorized access or deny access to, or otherwise disrupt, our information technology systems and networks.
Our failure to comply with U.S. federal, state and foreign governmental regulations, including in the EU, could lead to the issuance of warning letters or untitled letters, the imposition of injunctions, suspensions or loss of regulatory clearance, certificates or approvals, product recalls, termination of distribution, product seizures, civil penalties, and in extreme cases, criminal sanctions or closure of manufacturing facilities.
Our failure to comply with U.S. federal, state and foreign governmental regulations, including in the EU and United Kingdom, could lead to the issuance of warning letters or untitled letters, the imposition of injunctions, suspensions or loss of regulatory clearance, certificates or approvals, product recalls, termination of distribution, product seizures, civil penalties, and in extreme cases, criminal sanctions or closure of manufacturing facilities. 23 Any product for which we obtain clearance or approval, and the manufacturing processes, post-market surveillance, post-approval clinical data and promotional activities for such product will be subject to continued regulatory review, oversight, requirements, and periodic inspections by the FDA and other domestic and foreign regulatory bodies.
Other countries have enacted or are enacting data localization laws that require data to stay within their borders. All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time. We are subject to anti-bribery laws such as the U.S.
Other countries have enacted or are enacting data localization laws that require data to stay within their borders. All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time. Our use of artificial intelligence and machine‑learning technologies may expose us to operational, regulatory, and reputational risks.
We may not be able to compete successfully with our existing competitors or with new competitors. If we fail to compete successfully, the failure may have a material adverse effect on our business, financial condition and results of operations. Please see Part I, Item 1.
If we fail to compete successfully, the failure may have a material adverse effect on our business, financial condition and results of operations. Please see Part I, Item 1. “Business - Industry and Competition” for additional information about the competitive markets in which we operate.
Therefore, we are subject to extensive government regulation, including detailed requirements for submitting reimbursement claims under appropriate codes and maintaining certain documentation to support our claims. Medicare contractors and Medicaid agencies periodically conduct pre- and post-payment reviews and other audits of claims and are under increasing pressure to more closely scrutinize healthcare claims and supporting documentation.
Medicare contractors and Medicaid agencies periodically conduct pre- and post-payment reviews and other audits of claims and are under increasing pressure to more closely scrutinize healthcare claims and supporting documentation.
These agreements provide for specific indemnity and liability obligations of each party and could lead to disputes between us. If we are required to indemnify ESAB under the circumstances set forth in these agreements, we may be subject to substantial liabilities.
If we are required to indemnify ESAB under the circumstances set forth in these agreements, we may be subject to substantial liabilities.
Foreign Corrupt Practices Act as well as export controls, economic sanctions, and other trade laws, the violation of which could lead to serious adverse consequences. We are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K.
If these technologies do not perform as expected, are misused, or are not appropriately governed, our operations, compliance efforts, and reputation could be adversely affected. We are subject to anti-bribery laws such as the U.S. Foreign Corrupt Practices Act as well as export controls, economic sanctions, and other trade laws, the violation of which could lead to serious adverse consequences.
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.
Furthermore, if other countries, including the United States, become further involved in these or other conflicts, we could face significant adverse effects to our business and financial condition. 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.
In addition, any or all of the option counterparties might default under the capped call transactions. Global economic conditions have resulted in the actual or perceived failure or financial difficulties of several financial institutions and could adversely impact the option counterparties’ performance under the capped call transactions.
Global economic conditions have resulted in the actual or perceived failure or financial difficulties of several financial institutions and could adversely impact the option counterparties’ performance under the capped call transactions. 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.
Efforts to ensure that our business arrangements will comply with applicable health care laws may involve substantial costs.
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.
Potential indemnification liabilities to ESAB pursuant to the separation agreement could materially and adversely affect our businesses, financial condition, results of operations and cash flows. We entered into a separation and distribution agreement and related agreements with ESAB to govern the separation and distribution of ESAB and the relationship between the two companies going forward.
We entered into a separation and distribution agreement and related agreements with ESAB to govern the separation and distribution of ESAB and the relationship between the two companies going forward. These agreements provide for specific indemnity and liability obligations of each party and could lead to disputes between us.
Audits or denials of claims by government agencies could reduce our revenues or profits. We submit claims on behalf of patients directly to, and receive payments directly from, the Medicare and Medicaid programs and private payors.
We submit claims on behalf of patients directly to, and receive payments directly from, the Medicare and Medicaid programs and private payors. Therefore, we are subject to extensive government regulation, including detailed requirements for submitting reimbursement claims under appropriate codes and maintaining certain documentation to support our claims.
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.
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. We have implemented, and plan to continue to implement, restructuring programs designed to facilitate key strategic initiatives and maintain long-term sustainable growth.
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).
The U.S. government has shifted U.S. trade policy under the current administration, renegotiating or terminating existing trade agreements and imposing or threatening to impose tariffs on imported goods from Canada, China, Mexico and many other countries. In response, certain countries have imposed or threatened to impose retaliatory tariffs.
The effect of the COVID-19 pandemic on the global economy resulted in a number of additional challenges for our business, including cost inflation, supply chain challenges such as logistics delays, and healthcare provider staffing shortages, all of which are attributable in some part to the pandemic.
In addition, pandemics and public health emergencies, and government measures in response to such emergencies, have in the past and could in the future result in additional challenges for our business, including disruptions or delays to our supply chain and distribution channels, cost inflation, and healthcare provider staffing shortages.
Removed
Failure to maintain and protect our intellectual property rights or challenges to these rights by third parties may affect our operations and financial performance.
Added
In the quarter ended December 31, 2025, we recognized a non-cash Goodwill impairment charge associated with a sustained decrease in our publicly quoted share price and market capitalization relative to the carrying value of our reporting units of $501.0 million as of December 31, 2025 ($157.6 million for the P&R reporting unit and $343.4 million for the Recon reporting unit).

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
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.
Biggest changeAs of December 31, 2025, our Prevention & Recovery segment had a total of five facilities used in production, distribution and warehousing in the U.S., representing a total 241,000 square feet of leased space and eleven facilities used in production, distribution and warehousing outside the U.S., representing a total of 925,000 square feet of leased space in nine countries in North America, Africa, Europe, Asia, and Australia.
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.
As of December 31, 2025, 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 four facilities used in production, distribution and warehousing outside the U.S., representing a total of 268,000 and 18,000 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

5 edited+8 added−8 removed10 unchanged
Biggest changeBerry 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.
Biggest changeBerry 47 Senior Vice President and Chief Financial Officer Oliver Engert 61 Chief Administrative Officer Bradley J. Tandy 67 Senior Vice President and Chief Legal Officer Patricia Lang 62 Senior Vice President and Chief Human Resources Officer Terry D.
Lang holds a business degree with a concentration in information technology and management from Duquesne University. Additionally, she holds various certifications in human capital management, mergers and acquisitions, global employee benefits including C.E.B.S, as well as complex project management, lean manufacturing business systems and the Toyota production system. Terry D.
Lang holds a business degree with a concentration in information technology and management from Duquesne University. Additionally, she holds various certifications in human 34 capital management, mergers and acquisitions, global employee benefits including C.E.B.S, as well as complex project management, lean manufacturing business systems and the Toyota production system. Terry D.
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.
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.
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.
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 Damien McDonald 61 Chief Executive Officer and Director Phillip B.
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.
Tandy has been Senior Vice President and Chief Legal Officer since February 2019, having previously served as Executive Vice President, General Counsel and Secretary of DJO since May 2016. 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.
Removed
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.
Added
Ross 56 Group President, Prevention & Recovery Louis Vogt 45 Group President, Reconstructive Damien McDonald has been Chief Executive Officer since March 2025. Prior to joining the Company, Mr.
Removed
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.
Added
McDonald served as Chief Executive Officer and as an executive director of LivaNova from January 2017 to April 2023, having previously served as its Chief Operating Officer from October through December 2016. Prior to joining LivaNova, Mr.
Removed
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.
Added
McDonald was a Group Executive with Danaher Corporation, a global manufacturer of medical, industrial and commercial products, where he was Group President, Professional Consumables (2013 to 2016). From 2011 to 2013, Mr.
Removed
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.
Added
McDonald served as Group President of Kerr Corporation, a subsidiary of Danaher, where he was responsible for a dental consumable business with operations in the US, Mexico, Switzerland, Italy and the Czech Republic. In 2010, Mr. McDonald undertook special projects for Danaher. From 2007 to 2010, Mr.
Removed
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.
Added
McDonald was President, Zimmer Spine at Zimmer Holdings, where he was responsible for divisions in the US and France. From 1999 to 2007, Mr. McDonald had various roles with Johnson and Johnson. Mr.
Removed
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.
Added
McDonald holds bachelor’s degrees in pharmacy and economics from the University of Queensland in Australia, a master’s degree in international economics from the University of Wales, and an M.B.A. from the Institute for Management Development in Lausanne. Phillip B. Berry has been Chief Financial Officer since January 1, 2023.
Removed
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.
Added
Oliver Engert was appointed Chief Administrative Officer in January 2026. Prior to joining the Company, Mr. Engert spent more than 30 years at McKinsey and Company, serving in various senior leadership positions and finishing his tenure with the firm as Senior Partner Emeritus. During his time at McKinsey, Mr.
Removed
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. 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.
Added
Engert gained extensive experience advising CEOs, other C-suite executives, and boards of directors on strategy, transformations, mergers and acquisitions, organizational design, and performance improvement to deliver significant shareholder value. Mr. Engert holds a bachelor’s degree in economics from the Wharton School, University of Pennsylvania, and an MBA from the Amos Tuck School of Business, Dartmouth College. Bradley J.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−3 removed2 unchanged
Biggest changePerformance Graph The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return of the Standard & Poor’s (“S&P”) 500 Index, S&P 500 Healthcare Equipment & Supply Industry Index, the S&P 400 Industrial Index, and the S&P Industrial Machinery Index.
Biggest changePerformance Graph The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return of the Standard & Poor’s (“S&P”) 500 Index and the S&P 500 Healthcare Equipment & Supply Industry Index. The cumulative total return for each such index is presented in the graph below as required by Item 201(e)(4) of Regulation S-K.
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.
There have been no repurchases under the program since 2018. As of December 31, 2025, there is a remaining authorization of $100 million of shares that may be repurchased under the program.
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.
The graph assumes that $100 was invested on December 31, 2020 in our common stock, 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.
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.
As of February 20, 2026, there were 421 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.
Period 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.
Period 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) 10/4/25 - 11/1/25 — $ — — $ 99,997,744 11/2/25 - 11/29/25 — — — 99,997,744 11/30/25 - 12/31/25 — — — 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.
Removed
As a result of the Separation in April 2022, fiscal year 2023 was the first full fiscal year following the Separation in which we operated as a standalone specialty medical technology business without ESAB’s fabrication technology business.
Removed
Accordingly, beginning in fiscal year 2023, we are using the S&P 500 Index, replacing the S&P 400 Industrial Index, as the broad market index and the S&P 500 Healthcare Equipment & Supply Industry Index, as the included industry or line-of-business index for the purposes of the following performance graph.
Removed
Following the Separation, we believe the S&P 500 Index represents a more appropriate broad market index for us and the S&P 500 Healthcare Equipment & Supply Industry Index represents a more appropriate industry index. The cumulative total return for each such index is presented in the graph below as required by Item 201(e)(4) of Regulation S-K.

Item 7. Management's Discussion & Analysis

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

106 edited+57 added−48 removed61 unchanged
Biggest change(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.
Biggest changeThe following tables set forth a reconciliation of net loss to Adjusted EBITDA for the years ended December 31, 2025, 2024 and 2023. 41 Year Ended December 31, 2025 P&R Recon Total (Dollars in millions) Net Loss (GAAP) (1) $ (1,183.6) Net Loss margin (GAAP) (52.7) % Loss from discontinued operations, net of taxes 1.9 Income tax expense 22.3 Other expense, net 0.4 Interest expense, net 34.8 Operating loss (GAAP) $ (374.1) $ (750.2) (1,124.2) Operating loss margin (32.9) % (67.5) % (50.0) % Adjusted to add: Restructuring and other charges (2)(3) 5.2 10.0 15.1 MDR and other costs (3)(4) 5.7 4.7 10.4 Strategic transaction costs (3)(5) 9.5 50.8 60.4 Stock-based compensation (3) 18.6 14.7 33.3 Depreciation and other amortization 18.8 101.9 120.7 Amortization of acquired intangibles 91.5 82.1 173.6 Goodwill impairment charge 387.8 662.0 1,049.8 Purchase of royalty interest — 45.8 45.8 Inventory step-up (6) — 18.1 18.1 Adjusted EBITDA (non-GAAP) $ 163.1 $ 239.9 $ 403.0 Adjusted EBITDA margin (non-GAAP) 14.3 % 21.6 % 17.9 % (1) Non-operating components of Net loss are not allocated to the segments.
The Contingent Acquisition Shares were issuable in two equal tranches within six and twelve months of the acquisition date upon non-occurrence of certain future events, in each case subject to certain adjustments and conditions as provided for in the purchase agreement..
The Contingent Acquisition Shares were issuable in two equal tranches within six and twelve months of the acquisition date upon the non-occurrence of certain future events, in each case subject to certain adjustments and conditions as provided for in the purchase agreement..
In 2024, we also completed one asset acquisition in our Reconstructive segment and one business acquisition in our Prevention & Recovery segment for aggregate purchase consideration of $4.0 million. During the year ended December 31, 2023, we completed one business combination and two asset acquisitions in Recon.
In 2024, we also completed one asset acquisition in our Reconstructive segment and one business acquisition in our Prevention & Recovery segment for aggregate purchase consideration of $4.0 million. During the year ended December 31, 2023, we completed one business combination and two asset acquisitions in our Recon segment.
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.
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. Accounting Standards Codification 740, “Income Taxes” prescribes a recognition threshold and measurement attribute for a position taken in a tax return.
Prices for raw materials, energy and commodities are also influenced by import duties and tariffs, 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.
Prices for raw materials, components, energy, and commodities are also influenced by import duties and tariffs, 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.
Many of our medical devices and related accessories are used by athletes and other patients for injury prevention and at-home physical therapy treatments. We reach a diverse customer base through multiple distribution channels, including independent distributors, direct salespeople, and directly to patients.
Many of our medical devices and related accessories are used by athletes and other patients for injury prevention and at-home physical therapy treatments. We reach a diverse customer base through multiple distribution channels, including independent distributors, direct salespeople, and direct to patients.
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 or 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 along with surgical productivity tools.
Net loss from continuing operations increased $773.6 million during 2024 in comparison to 2023, primarily due to a Goodwill impairment charge of $645.0 million, a $65.2 million increase in strategic transactions costs from Lima integration activities, a $37.4 million increase in interest expense, net, a $32.0 million increase in amortization of acquired intangibles, and an increase in depreciation and inventory step-up charges, partially offset by an increase in Gross Profit from the Lima Acquisition.
Net loss from continuing operations increased $773.6 million during 2024 in comparison to 2023, primarily due to a Goodwill impairment charge of $645.0 million, a $65.2 million increase in strategic transactions costs from Lima integration activities, a $37.3 million increase in interest expense, net, a $32.0 million increase in amortization of acquired intangibles, and an increase in depreciation and inventory step-up charges, partially offset by an increase in Gross Profit from the Lima Acquisition.
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.
No stock repurchases have been made under this plan since the third quarter of 2018. As of December 31, 2025, 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.
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.
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 million (the “2022 Term Loan”) which was fully extinguished during the first quarter of 2023.
We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures, restructuring cash outflows, and interest and principal repayments on our term loan and amounts drawn on our revolving credit facility.
We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures, strategic initiatives and restructuring cash outflows, and interest and principal repayments on our term loan and amounts drawn on our revolving credit facility.
P&R products are marketed under several brand names, most notably DJO, to orthopedic specialists, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers, and other healthcare professionals who treat patients with a variety of treatment needs including musculoskeletal conditions resulting from degenerative diseases, deformities, traumatic events and sports-related injuries.
P&R products are marketed under several brand names, most notably DonJoy, Aircast, and Chattanooga, to orthopedic specialists, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers, and other healthcare professionals who treat patients with a variety of treatment needs including musculoskeletal conditions resulting from degenerative diseases, deformities, traumatic events and sports-related injuries.
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.
For the year ended December 31, 2023, 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 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.
On March 1, 2023, the Company extinguished the remaining outstanding balance under the 2022 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 dividends.
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.
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.
The comparability of our operating results for the year ended December 31, 2024 to the comparable periods is affected by the following additional significant items: Strategic Acquisitions We complement our organic growth plans with strategic acquisitions and other investments.
The comparability of our operating results for the year ended December 31, 2025 to the comparable periods is affected by the following additional significant items: Strategic Acquisitions and Divestiture We complement our organic growth plans with strategic acquisitions and other investments.
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).
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). 52 On December 8, 2025, the Company entered into Amendment No. 3 to the Credit Agreement (the “Third Amendment”).
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.
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, 2025, which are estimated to be $3.7 million for the year ending December 31, 2026.
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.
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 and further amended on December 8, 2025 as discussed below.
Additionally, related to sales of our medical device products and services, we maintain provisions for estimated contractual allowances for reimbursement amounts from certain third-party payors based on negotiated contracts, historical experience for non-contracted payors, and the impact of new contract terms or modifications of existing arrangements with these customers. We report these allowances as a reduction to Net sales.
Additionally, related to sales of our medical device products and services, we maintain provisions for estimated contractual allowances for reimbursement amounts from certain third-party payors based on negotiated contracts, historical experience for non-contracted payors, and the impact of new contract terms or modifications of existing arrangements with these customers.
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.
The 48 effective tax rate for 2023 was 19.8% on a loss from continuing operations before income taxes, which was lower than 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.
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.
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 $51.9 million were outstanding as of December 31, 2025.
Adjusted EBITDA assists our management in comparing operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans and other initiatives that are fundamentally different from our ongoing productivity improvements.
Adjusted EBITDA assists our management in comparing operating performance over time because certain items are not normal recurring charges necessary to operate our business, and these items may obscure underlying business trends and make comparisons of long-term performance difficult as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans and other initiatives that are fundamentally different from our ongoing productivity improvements.
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.
Variable interest payments are estimated using a static rate of 5.23% for the Revolver, 5.17% 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.
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.
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 then outstanding under the 2022 Term Loan, net of cost to sell.
Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
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.
The mix of sales was as follows for the periods presented: Year Ended December 31, 2025 2024 2023 P&R 51 % 52 % 63 % Recon (1) 49 % 48 % 37 % (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 Adjusted EBITDA and Adjusted EBITDA margin, 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.
The majority of our Net sales derived from operations outside the U.S. are denominated in currencies other than the U.S. dollar. Similar portions of our manufacturing and employee costs are also outside the U.S. and denominated in currencies other than the U.S. dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant.
Similar portions of our manufacturing and employee costs are also outside the U.S. and denominated in currencies other than the U.S. dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant.
Selling, general and administrative expense increased by $207.6 million over the same period primarily due to increased Strategic transactions costs associated with Lima integration activities, increased commissions driven by higher sales, a general and administrative expense increase due to the Lima Acquisition, and increases in existing business investments to support growth.
Selling, general and administrative expense increased by $207.6 million compared with the prior year primarily due to increased Strategic transactions costs associated with Lima integration activities, increased commissions driven by higher sales, a general and administrative expense increase due to the Lima Acquisition, and increases in existing business investments to support growth.
In order to align each reporting unit’s fair value model with the Company’s overall market capitalization, the Company reduced long-term cash flow projections and reduced market multiples to the low end of acceptable ranges.
In order to align each reporting unit’s fair value model with the Company’s overall market capitalization, the Company reduced long-term cash flow projections, reduced market multiples to the low end of acceptable ranges, and increased the weighted average cost of capital.
Specifically, tariffs, such as the tariffs announced by the U.S. government in February 2025, may 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.
Specifically, tariffs, such as the tariffs announced by the U.S. government in early 2025 have increased input costs and may continue to increase costs 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.
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 allowance for credit losses was $25.6 million and $24.5 million as of December 31, 2025 and 2024, 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. 58
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 working capital used in 2023 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 $60.4 million, $78.3 million and $38.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Cash flows provided by financing activities in 2024 include net debt borrowings of $859.2 million, partially offset by amounts paid for common stock repurchases of $4.8 million and amounts paid for deferred consideration of $8.8 million.
Cash flows used in financing activities in 2024 include net debt borrowings of $859.2 million, partially offset by amounts paid for common stock repurchases of $4.8 million and deferred payments on acquisitions of $8.8 million.
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.
Changes in significant operating cash flow items are discussed below. • Operating cash flows used in continuing operations working capital were $42.0 million, $73.7 million, and $47.7 million for the years ended December 31, 2025, 2024 and 2023, respectively. The working capital used in 2025 is primarily associated with continued international business growth in Recon.
Our ability to grow and our financial performance will be affected by our ability to address challenges and opportunities that are a consequence of expanding our global operations through our recent acquisitions, including efficiently utilizing our international sales channels, manufacturing and distribution capabilities, participating in the expansion of market opportunities, successfully completing global acquisitions and engineering innovative new product applications to create better patient outcomes.
Our ability to grow and our financial performance will be affected by our ability to address challenges and opportunities that are a consequence of expanding our global operations through our recent acquisitions, including efficiently utilizing our international sales channels, manufacturing and distribution capabilities, participating in the expansion of market opportunities, successfully completing global acquisitions and engineering innovative new product applications to create better patient outcomes. 39 The majority of our Net sales derived from operations outside the U.S. are denominated in currencies other than the U.S. dollar.
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.
Interest Payments on Debt Based on December 31, 2025 outstanding balances we estimate future interest payments associated with our Revolver, Term Loan, and senior unsecured convertible notes of $122.0 million, $32.8 million, and $23.3 million, respectively, with $8.3 million, $35.5 million. and $18.1 million payable within 12 months.
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.
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, 2025 2024 2023 (Dollars in millions) Net cash provided by operating activities 217.3 113.5 135.0 Purchases of property, plant and equipment and intangibles (197.4) (180.7) (122.2) Proceeds from sale of property, plant and equipment — — 32.6 Payments for acquisitions, net of cash received, and investments (26.9) (769.9) (152.8) Proceeds from sale of business, net 43.3 — — Cash received (paid) for settlement of derivative 1.6 (4.8) — Net cash used in investing activities (179.4) (955.5) (242.5) Proceeds from (repayments of) borrowings, net (36.9) 859.2 217.2 Proceeds from issuance of common stock, net 1.3 1.9 1.8 Payment of capped call transactions — — (62.0) Other financing (16.8) (14.3) — (29.2) Net cash provided by (used in) financing activities (52.4) 846.8 127.8 Effect of foreign exchange rates on Cash and cash equivalents 2.7 (1.5) 0.2 Increase (decrease) in Cash and cash equivalents and restricted cash $ (11.8) $ 3.3 $ 20.5 Cash used in operating activities of discontinued operations for the years ended December 31, 2025, 2024 and 2023 was $0.4 million, $0.1 million, and $2.0 million, respectively.
Research and development expense increased compared to the prior year period, primarily due to increased spend within recently acquired businesses 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 increased spend within recently acquired businesses in our Recon segment, which is investing in surgical productivity solutions and computer-assisted surgery technologies.
Year 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, 2025 2024 2023 (Dollars in millions) Gross profit $ 1,345.3 $ 1,180.8 $ 990.8 Gross profit margin 59.8 % 56.0 % 58.0 % Selling, general and administrative expense $ 1,070.2 $ 1,027.4 $ 830.3 Research and development expense $ 120.3 $ 91.3 $ 75.3 Operating loss $ (1,124.2) $ (775.7) $ (65.7) Operating loss margin (50.0) % (36.8) % (3.8) % Net loss from continuing operations $ (1,181.7) $ (827.4) $ (53.8) Net loss from continuing operations margin (52.6) % (39.3) % (3.2) % Net loss (GAAP) $ (1,183.6) $ (824.8) $ (32.7) Net loss margin (GAAP) (52.7) % (39.1) % (1.9) % Adjusted EBITDA (non-GAAP) $ 403.0 $ 376.5 $ 269.2 Adjusted EBITDA margin (non-GAAP) 17.9 % 17.9 % 15.8 % Items excluded from Adjusted EBITDA: Restructuring and other charges (1) $ 15.1 $ 45.2 $ 20.0 MDR and other costs $ 10.4 $ 19.5 $ 27.4 Strategic transaction costs $ 60.4 $ 78.3 $ 38.3 Stock-based compensation $ 33.3 $ 29.7 $ 32.1 Depreciation and other amortization $ 120.7 $ 117.3 $ 83.6 Amortization of acquired intangibles $ 173.6 $ 165.5 $ 133.5 Goodwill impairment charge $ 1,049.8 $ 645.0 $ — Purchase of royalty interest $ 45.8 $ — $ — Inventory step-up $ 18.1 $ 51.7 $ 0.1 Interest expense, net $ 34.8 $ 57.1 $ 19.8 Debt extinguishment charges $ — $ — $ 7.3 Other (income) expense, net $ 0.4 $ (9.9) $ (25.7) Income tax expense (benefit) $ 22.3 $ 4.5 $ (13.3) (1) Restructuring and other charges includes $5.3 million, $17.9 million and $2.6 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations for the years ended December 31, 2025, 2024 and 2023, respectively. 2025 Compared to 2024 Gross profit increased $164.5 million during 2025 in comparison to 2024 due to a $118.9 million increase in Recon and a $45.6 million increase in P&R.
Gro ss profit increased $179.1 million in the year ended December 31, 2024 compared to the prior year period , primarily due to h igher net sales due to the Lima Acquisition, and improved operating leverage, offset by an increase of $51.6 million in inventory fair value step-up amortization charges.
Gross profit increased in the year ended December 31, 2024 compared to the prior year, by $179.1 million, primarily due to higher net sales due to the Lima Acquisition, and improved operating leverage, offset by an increase of $51.6 million in inventory fair value step-up amortization charges, which led to a decrease in Gross profit margin.
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.
As of December 31, 2025, the weighted-average interest rate of borrowings under the Credit Agreement (as amended) was 5.23%, excluding accretion of original issue discount and deferred financing fees, and there was $943.0 million available on the Revolver.
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.
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.
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 excludes from Net income (loss) the effect of Income (loss) from discontinued operations, net of taxes; Income tax expense (benefit); Other income (expense), 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; strategic purchase of economic interest on future royalty payments; goodwill impairment charges; and inventory step-up.
This was offset by a release of uncertain tax positions, tax credits for research and development and non-U.S. income taxed at lower rates.
This was partially offset by tax credits for research and development and non-U.S. income taxed at lower rates.
Selling, general and administrative expense decreased $10.5 million, primarily due to reduction of strategic transaction costs and EU MDR spending. Operating loss increased due to a Goodwill impairment charge of $315.0 million and charges from divesting a minor product line, partially offset by a Selling, general and administrative expense decrease and higher gross profit.
Operating loss increased due to a Goodwill impairment charge of $315.0 million and charges from divesting a minor product line, partially offset by a Selling, general and administrative expense decrease and higher gross profit.
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.
We believe that our sources of liquidity are adequate to fund our operations for the next twelve months and the foreseeable future. 53 Cash Flows As of December 31, 2025, we had $36.4 million of Cash and cash equivalents and restricted cash, a decrease of $11.8 million from the $48.2 million of Cash and cash equivalents on hand as of December 31, 2024.
Generally, we measure fair value of reporting units based on a present value of future discounted cash flows and a market valuation approach. The discounted cash flow models indicate the fair value of the reporting units based on the present value of the cash flows that the reporting units are expected to generate in the future.
The discounted cash flow models indicate the fair value of the reporting units based on the present value of the cash flows that the reporting units are expected to generate in the future.
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.
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.
See Note 9 “Goodwill and Intangible Assets” in the accompanying Notes to Consolidated Financial Statements for further information.
See Note 9 “Goodwill and Intangible Assets” in the accompanying Notes to Consolidated Financial Statements for the table summarizing the activity in Goodwill.
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”.
Net liabilities for unrecognized income tax benefits, including accrued interest and penalties, were $33.4 million as of December 31, 2025 and are included in Other liabilities or as a reduction to deferred tax assets in the accompanying Consolidated Balance Sheet.
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.
Since only the inventory that existed at the business combination date was stepped-up to fair value, we believe excluding the incremental expense enhances comparability between periods, allowing investors to better understand our business performance and the underlying trends relevant to our ongoing business performance. 43 Year Ended December 31, 2023 P&R Recon Total (Dollars in millions) Net Loss (GAAP) (1) $ (32.7) Net Loss margin (GAAP) (1.9) % Income from discontinued operations, net of taxes (21.1) 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 (deduct): Restructuring and other charges (2)(3) 13.5 6.4 20.0 MDR and other costs (3)(4) 14.5 12.9 27.4 Strategic transaction costs (3)(5) 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 (6) — 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 are not allocated to the segments.
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.
The effective tax rate for Loss from continuing operations before income taxes during 2024 was (0.5)%, which differed from the 2024 U.S. federal statutory tax rate of 21%, primarily due to a build in valuation allowance on interest limitation carryforwards and non-deductible goodwill impairment charges.
The Goodwill impairment charge of $645.0 million was due to the sustained decrease in the Company’s publicly quoted share price and market capitalization. See Item 7. Critical Accounting Policies for further discussion.
The Goodwill impairment charge of $645.0 million was due to the sustained decrease in the Company’s publicly quoted share price and market capitalization. See Item 7. Critical Accounting Policies for further discussion. Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to the Lima Acquisition.
Accordingly the Company performed a quantitative assessment of Goodwill as part of our annual goodwill impairment testing on the first day of the fourth quarter of 2024. We determined the fair values of the reporting units by equally weighting a discounted cash flow approach and market valuation approach.
Accordingly the Company performed a quantitative assessment of Goodwill as of the last day of the third quarter of 2025. We determined the fair values of the reporting units by equally weighting a discounted cash flow approach and market valuation approach.
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 .
Cash flows used in financing activities in 2023 includes 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. Our Cash and cash equivalents as of December 31, 2025 include $18.1 million held in jurisdictions outside the U.S.
Determining the fair value of a reporting unit requires the application of judgment and involves the use of significant estimates and assumptions which can be affected by changes in business climate, economic conditions, the competitive environment and other factors. We base these fair value estimates on assumptions our management believes to be reasonable but which are unpredictable and inherently uncertain.
Determining the fair value of a reporting unit requires the application of judgment and involves the use of significant estimates and assumptions which can be affected by changes in business climate, economic conditions, the competitive environment and other factors.
As a result, the Company 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 a result, the Company recognized a non-cash goodwill impairment charge of $501.0 million ($157.6 million for the Prevention & Recovery reporting unit and $343.4 million for the Reconstructive reporting unit).
If we determine that it is more likely than not for a reporting unit’s fair value to be less than its carrying value, a calculation of the fair value is performed and compared to the carrying value of that reporting unit.
If we determine that it is more likely than not for a reporting unit’s fair value to be less than its carrying value, a calculation of the fair value is performed and compared to the carrying value of that reporting unit. In certain instances, we may elect to forgo the qualitative assessment and proceed directly to the quantitative impairment test.
Based upon the results of the quantitative impairment test, the Company determined the carrying values of each of the Reconstructive and Prevention & Recovery reporting units exceeded their fair values as of the date of our annual impairment test.
Based on the results of the quantitative impairment test, the Company determined the carrying value of the Reconstructive and Prevention & Recovery reporting units exceeded their fair values as of December 31, 2025.
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 following table summarizes selected financial data for Recon: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Net sales $ 1,111.1 $ 1,009.7 $ 630.4 Gross profit $ 731.2 $ 612.3 $ 433.2 Gross profit margin 65.8 % 60.6 % 68.7 % Selling, general and administrative expenses $ 603.5 $ 595.2 $ 387.6 Research and development expense $ 83.3 $ 55.6 $ 40.3 Amortization of acquired intangibles $ 82.1 $ 73.2 $ 40.0 Restructuring and other charges $ 4.7 $ 12.3 $ 6.4 Purchase of royalty interest $ 45.8 $ — $ — Goodwill impairment charge $ 662.0 $ 330.0 $ — Operating loss (GAAP) $ (750.2) $ (454.0) $ (41.0) Operating loss margin (GAAP) (67.5) % (45.0) % (6.5) % Adjusted EBITDA (non-GAAP) $ 239.9 $ 216.9 $ 116.7 Adjusted EBITDA margin (non-GAAP) 21.6 % 21.5 % 18.5 % 50 2025 Compared to 2024 Net sales increased in Recon by $101.4 million, or 10%, due to strong sales volumes and favorable currency translation of 1.8%.
Cash flows from operating activities can fluctuate significantly from period to period due to changes in working capital and the timing of payments for items such as restructuring, interest, income taxes and strategic transaction costs.
The activity includes maintenance and legal costs associated with previous divested businesses. See Note 4 “Discontinued Operations" for further information. Cash flows from operating activities can fluctuate significantly from period to period due to changes in working capital and the timing of payments for items such as restructuring, interest, income taxes and strategic transaction costs.
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.
As of December 31, 2025, 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 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.
Since only the inventory that existed at the business combination date was stepped-up to fair value, we believe excluding the incremental expense enhances comparability between periods, allowing investors to better understand our business performance and the underlying trends relevant to our ongoing business performance. 42 Year Ended December 31, 2024 P&R Recon Total (Dollars in millions) Net Loss (GAAP) (1) $ (824.8) Net Loss margin (GAAP) (39.1) % Income from discontinued operations, net of taxes (2.6) 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)(4) 10.1 9.4 19.5 Strategic transaction costs (3)(5) 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 (6) — 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 are not allocated to the segments.
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.
The following table summarizes selected financial data for P&R: Year Ended December 31, 2025 2024 2023 (Dollars in millions) Net sales $ 1,137.0 $ 1,098.0 $ 1,076.8 Gross profit $ 614.0 $ 568.4 $ 557.5 Gross profit margin 54.0 % 51.8 % 51.8 % Selling, general and administrative expenses $ 466.7 $ 432.2 $ 442.7 Research and development expense $ 37.1 $ 35.7 $ 35.1 Amortization of acquired intangibles $ 91.5 $ 92.3 $ 93.6 Restructuring and other charges $ 5.1 $ 15.0 $ 10.9 Goodwill impairment charge $ 387.8 $ 315.0 $ — Operating loss (GAAP) $ (374.1) $ (321.8) $ (24.7) Operating loss margin (GAAP) (32.9) % (29.3) % (2.3) % Adjusted EBITDA (non-GAAP) $ 163.1 $ 159.6 $ 152.5 Adjusted EBITDA margin (non-GAAP) 14.3 % 14.5 % 14.2 % 49 2025 Compared to 2024 Net Sales increased $39.0 million compared with the prior year, driven by solid existing business volume growth, partially offset by a $17.3 million decrease in sales from the October 2025 divestiture of our Dr Comfort Footcare Solutions product line in our P&R segment and the April 2024 divestiture of our hosiery business in our P&R segment.
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.
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, 2025 other than outstanding letters of credit of $51.9 million and unconditional purchase obligations with suppliers of $135.1 million. 55 Critical Accounting Policies The methods, estimates and judgments we use in applying our critical accounting policies have a significant impact on our results of operations and financial position.
We provide a variety of products and services to our customers. Most of our contracts consist of a single, distinct performance obligation or promise to transfer goods or services to a customer.
We report these allowances as a reduction to Net sales in the same period that the sales are recognized. We provide a variety of products and services to our customers. Most of our contracts consist of a single, distinct performance obligation or promise to transfer goods or services to a customer.
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.
While we seek to proactively manage inflation risk, future changes in raw material and component costs may adversely impact our earnings or margins.
Significant estimates in the market approach model include identifying appropriate market multiples and assessing earnings before interest, income taxes, depreciation and amortization. For the year ended December 31, 2024, the Company identified an impairment indicator associated with a sustained decrease in the Company’s publicly quoted share price and market capitalization, relative to the carrying value of our reporting units.
For the year ended December 31, 2025, the Company first identified an impairment indicator associated with a continued sustained decrease in the Company’s publicly quoted share price and market capitalization, relative to the carrying value of our reporting units in the third quarter of 2025.
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 presents the components of changes in our consolidated Net sales for the years ended December 31, 2025 and 2024.
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.
The costs in 2023 were related to the Separation, business development and integration costs of recent acquisitions. • Cash paid for interest was $27.4 million, $51.8 million and $16.3 million for the years ended December 31, 2025, 2024 and 2023, respectively. The decrease in 2025 is primarily due to the increase in interest income on the cross-currency swap derivatives.
Adjusted EBITDA increased primarily due to increased gross profit from the Lima Acquisition and improved operating cost leverage. 2023 Compared to 2022 Net sales increased for Recon in the year ended December 31, 2023 compared with the prior year, by $94.9 million, or 17.7%, primarily due to higher sales volumes driven by broad market strength and market outperformance.
Adjusted EBITDA increased primarily due to increased gross profit from the Lima Acquisition and improved operating cost leverage. 2024 Compared to 2023 Net sales increased for Recon in the year ended December 31, 2024 compared with the prior year, by $379.3 million, or 60%, of which $337.0 million was attributable to the Lima and Novastep acquisitions.
(2) Restructuring and other charges 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 $5.3 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 .
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.
Material Costs Our principal raw materials include foam ethylene-vinyl-acetate copolymer used in our bracing and vascular products within P&R, and cobalt-chromium alloys, stainless-steel alloys, titanium alloys, and ultra-high-molecular-weight polyethylene used in our Recon products. Prices for raw materials, components, energy, and commodities are subject to volatility and are influenced by worldwide economic conditions.
Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to the Lima Acquisition. 46 Interest expense, net increased $37.4 million during 2024 in comparison to 2023 due to an increase in debt to finance the Lima Acquisition.
Interest expense, net increased by $37.3 million during 2024 in comparison to 2023 due to an increase in debt to finance the Lima Acquisition.
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.
Research and development expense increased compared to the prior year period due to an increase in new product development projects and activities and spending within our recently acquired businesses, which are investing in surgical productivity solutions and computer-assisted surgery technologies.
As of December 31, 2024, the Company had fixed lease payment obligations of $80.6 million, with $21.1 million payable within 12 months. 54 Purchase Obligations As of December 31, 2024, the Company had other purchase obligations of $130.6 million, all of which was payable within 12 months.
As of December 31, 2025, the Company had fixed lease payment obligations of $97.3 million, with $24.7 million payable within 12 months. Purchase Obligations As of December 31, 2025, the Company had other purchase obligations of $135.1 million, of which $124.4 million is payable within 12 months.
We recognize revenue when control of promised goods or services is transferred to the customer. The amount of revenue recognized reflects the consideration to which we expect to be entitled in exchange for transferring the goods or services. The nature of our contracts gives rise to certain types of variable consideration, including rebates and other discounts.
Revenue Recognition We account for revenue in accordance with Topic 606, “Revenue from Contracts with Customers.” We recognize revenue when control of promised goods or services is transferred to the customer. The amount of revenue recognized reflects the 57 consideration to which we expect to be entitled in exchange for transferring the goods or services.
Recon sales were negatively impacted by a $4.3 million decrease from the discontinuance of certain non-core product lines. Comparable Sales Growth for Recon was driven by approximately 8.2% increase in volume and market share gains and favorable currency translation of 0.3%.
Existing business sales in Recon increased $40.7 million due to increase in volume and market share gains and $1.5 million due to favorable currency translation, partially offset by a $4.3 million decrease from the discontinuance of certain non-core product lines.
We include estimated amounts of variable consideration in the transaction price to the extent that it is probable there will not be a significant reversal of revenue. Estimates are based on historical or anticipated performance and represent our best judgment at the time. Any estimates are evaluated on a quarterly basis until the uncertainty is resolved.
Estimates are based on historical or anticipated performance and represent our best judgment at the time. Any estimates are evaluated on a quarterly basis until the uncertainty is resolved.

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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 changeCosts incurred and sales recorded by subsidiaries operating outside of the U.S. are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar.
Biggest changeWe also face exchange rate risk from transactions with customers in countries outside the U.S. and from intercompany transactions between affiliates. Costs incurred and sales recorded by subsidiaries operating outside of the U.S. are translated into U.S. dollars using exchange rates effective during the respective period.
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”).
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, 2025 are variable rate facilities based on Secured Overnight Financing Rate (“SOFR”).
To better match revenue and expense as well as cash needs from contractual liabilities, we may enter into foreign currency swaps and forward contracts. We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries. We have the ability to borrow in Euros under our Credit Facility.
To better match revenue and expense as well as cash needs from contractual liabilities, we may enter into foreign currency swaps and forward contracts. We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries. We have the ability to borrow in foreign currencies under our Credit Facility.
See 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
See 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. 59
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.
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, 2025 would result in a reduction in Equity of approximately $221.6 million.
We also have manufacturing operations in European countries that are not part of the Eurozone. We also have significant contractual obligations in U.S. dollars that are met with cash flows in other currencies as well as U.S. dollars.
During 2025, approximately 42% of our sales were derived from operations outside the U.S. We also have manufacturing operations in European countries that are not part of the Eurozone. We also have significant contractual obligations in U.S. dollars that are met with cash flows in other currencies as well as U.S. dollars.
Commodity Price Risk We are exposed to changes in the prices of raw materials used in our production processes. In order to manage commodity price risk, we periodically enter into fixed price contracts directly with suppliers.
As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. Commodity Price Risk We are exposed to changes in the prices of raw materials used in our production processes. In order to manage commodity price risk, we periodically enter into fixed price contracts directly with suppliers.
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.
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 2025 would have increased Interest expense on our variable-rate debt by approximately $9.2 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 2024, approximately 41% of our sales were derived from operations outside the U.S.
Exchange Rate Risk We have manufacturing sites outside the U.S. in North America, Europe, Africa, and Asia and sell our products internationally. 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.
Removed
We also face exchange rate risk from transactions with customers in countries outside the U.S. and from intercompany transactions between affiliates. Although we use the U.S. dollar as our functional currency for reporting purposes, we have manufacturing sites in Europe, Africa, and Asia, and a portion of our costs are incurred and sales are generated in foreign currencies.

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