Enovis CORP

Previous wording

•any impairment in the value of our intangible assets or goodwill, because of a sustained decline, including but not limited to, operating performance at one or more our business units or the market price of our common stock;

Current wording

•any impairment in the value of our intangible assets or goodwill, because of a sustained decline in, including but not limited to, operating performance at one or more our business units or the market price of our common stock;

Previous wording

The comparability of our operating results for the three and six months ended June 28, 2024 to the prior periods in 2023 is affected by the following significant items:

Current wording

The comparability of our operating results for the three and nine months ended September 27, 2024 to the prior periods in 2023 is affected by the following significant items:

Previous wording

On January 3, 2024, the Company acquired Lima, a privately held global orthopedic company focused on restoring motion through digital innovation and customized hardware for total fair value consideration of $866.5 million, net of acquired cash. The fair value total consideration includes a fixed number contingently issuable shares of Enovis stock valued at $107.9 million, which is dependent on the non-occurrence of certain future events and is expected to be settled within one year of the acquisition closing. Subsequent to the end of the second quarter of 2024, the first tranche of the Contingent Acquisition Shares of 971,343 shares were issued to the sellers on July 16, 2024. This acquisition expands and complements our current product offerings internationally within our Recon segment.

Current wording

On January 3, 2024, the Company acquired Lima, a privately held global orthopedic company focused on restoring motion through digital innovation and customized hardware for total fair value consideration of $865.6 million, net of acquired cash. The fair value total consideration includes 1,942,686 contingently issuable shares of Enovis common stock, as determined based upon a €100 million value divided by the thirty-day volume weighted average price of Enovis common stock as of the close of business on September 21, 2023 (the “Contingent Acquisition Shares”), which issuance is dependent on the non-occurrence of certain future events and is expected to be settled within one year of the acquisition closing. The Contingent Acquisition Shares are issuable in two equal tranches. The first tranche of 971,343 Contingent Acquisition Shares was issued to the sellers on July 16, 2024. We currently expect the second tranche of Contingent Acquisition Shares to be issued in the first quarter of 2025. This acquisition expands and complements our current product offerings internationally within our Recon segment.

Previous wording

During the three and six months ended June 28, 2024, approximately 41% and 42% of our sales, respectively, were derived from operations outside the United States, the majority of which are in Europe, with the remaining portion primarily in the Asia-Pacific region. Accordingly, we can be affected by market demand, economic and political factors in countries in Europe and the Asia-Pacific region, and significant movements in foreign exchange rates. Our ability to grow and our financial performance will be affected by our ability to address challenges and opportunities that are a consequence of expanding our global operations through our recent acquisitions, including efficiently utilizing our international sales channels, manufacturing and distribution capabilities, participating in the expansion of market opportunities, successfully completing global acquisitions and engineering innovative new product applications to create better patient outcomes.

Current wording

During the three and nine months ended September 27, 2024, approximately 39% and 41% of our sales, respectively, were derived from operations outside the United States, the majority of which are in Europe, with the remaining portion primarily in the Asia-Pacific region. Accordingly, we can be affected by market demand, economic and political factors in countries in Europe and the Asia-Pacific region, and significant movements in foreign exchange rates. Our ability to grow and our financial performance will be affected by our ability to address challenges and opportunities that are a consequence of expanding our global operations through our recent acquisitions, including efficiently utilizing our international sales channels, manufacturing and distribution capabilities, participating in the expansion of market opportunities, successfully completing global acquisitions and engineering innovative new product applications to create better patient outcomes.

Previous wording

The majority of our Net sales derived from operations outside the United States are denominated in currencies other than the U.S. Dollar. Similar portions of our manufacturing and employee costs are also outside the United States and denominated in currencies other than the U.S. Dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant. For the three months ended June 28, 2024 compared to the three months ended June 30, 2023, fluctuations in foreign currencies decreased Net sales by 0.3%, decreased Gross profit by approximately 0.6%, and decreased operating expense by approximately 0.3%. For the six months ended June 28, 2024 compared to the six months ended June 30, 2023, fluctuations in foreign currencies had immaterial impact on Net sales, decreased Gross profit by approximately 0.4%, and increased operating expenses by approximately 0.1%.

Current wording

The majority of our Net sales derived from operations outside the United States are denominated in currencies other than the U.S. Dollar. Similar portions of our manufacturing and employee costs are also outside the United States and denominated in currencies other than the U.S. Dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant. For the three months ended September 27, 2024 compared to the three months ended September 29, 2023, fluctuations in foreign currencies increased Net sales by 0.4%, increased Gross profit by approximately 0.8%, and increased operating expense by approximately 0.2%. For the nine months ended September 27, 2024 compared to the nine months ended September 29, 2023, fluctuations in foreign currencies increased Net sales by 0.2%, had an immaterial impact on Gross profit, and increased operating expenses by approximately 0.2%.

Previous wording

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP or prepared in accordance with Regulation S-X. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. The following tables set forth a reconciliation of net income (loss) from continuing operations, the most directly comparable financial statement measure, to Adjusted EBITDA, for the three and six months ended June 28, 2024 and June 30, 2023, respectively.

Current wording

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP or prepared in accordance with Regulation S-X. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. The following tables set forth a reconciliation of net income (loss) from continuing operations, the most directly comparable financial statement measure, to Adjusted EBITDA, for the three and nine months ended September 27, 2024 and September 29, 2023, respectively.

Previous wording

The following table summarizes our sales for the three and six months ended June 28, 2024, respectively.

Current wording

The following table summarizes our sales for the three and nine months ended September 27, 2024, respectively.

Previous wording

Net sales for the three months ended June 28, 2024 increased from the prior year by $96.7 million, or 22.6% primarily attributable to an increase in sales from the Lima Acquisition and to a lesser extent the Novastep acquisition and growth in existing businesses. Recon sales increased by $92.4 million, or 59.6%, of which $90.1 million was attributable to the Lima and the Novastep acquisitions. Recon sales were negatively impacted by a $2.2 million decrease from the discontinuance of certain non-core product lines. P&R increased by $4.3 million, or 1.6%, which was negatively impacted by a $3.8 million decrease in sales from divesting a minor product line. For the three months ended June 30, 2023, U.S. GAAP basis net sales were $428.5 million. The Comparable sales were $501.8 million for the same period. In 2023, Lima and Novastep would have contributed $79.2 million to Comparable sales, offset by the impact of the divestiture and discontinuance of certain non-core product lines of $5.9 million. Comparable sales growth for Recon was driven by approximately 7.1% increases in volume and market share gains, offset by unfavorable currency translation of 0.5%. Comparable sales growth for P&R was driven by approximately 3.3% organic growth in volumes, offset by 0.3% unfavorable foreign currency translation. The strengthening of the U.S. Dollar relative to other currencies resulted in $2.0 million, or 0.4%, of unfavorable foreign currency translation impacts on total net sales for the three months ended June 28, 2024 from the prior year period.

Current wording

$4.0 million, or 1.5%, which was negatively impacted by a $3.7 million decrease in sales from divesting a minor product line. For the three months ended September 29, 2023, U.S. GAAP basis net sales were $417.5 million. The Comparable Sales were $478.1 million for the same period. In 2023, Lima have contributed $65.5 million to Comparable Sales, offset by the impact of the divestiture and discontinuance of certain non-core product lines of $4.9 million. Comparable Sales Growth for Recon was driven by approximately 8.6% increases in volume and market share gains and favorable foreign currency translation of 0.6%. Comparable Sales Growth for P&R was driven by approximately 2.6% organic growth in volumes and favorable foreign currency translation of 0.3%. The weakening of the U.S. Dollar relative to other currencies resulted in $2.1 million, or 0.4%, of favorable foreign currency translation impacts on total net sales for the three months ended September 27, 2024 from the prior year period.

Previous wording

Net sales for the six months ended June 28, 2024 increased from the prior year by $206.8 million, or 24.8% primarily attributable to an increase in sales from the Lima Acquisition and to a lesser extent the Novastep acquisition and growth in existing businesses. Recon sales increased by $194.2 million, or 62.6%, of which $183.7 million was attributable to the Lima and the Novastep acquisitions. Recon sales were negatively impacted by a $4.6 million decrease from the discontinuance of certain non-core product lines. P&R sales increased by $12.6 million, or 2.4%, which was negatively impacted by a $3.2 million decrease from divesting a minor product line. For the six months ended June 28, 2024, U.S. GAAP basis net sales were $1,041.4 million. The Comparable sales were $1,036.6 million for the same period. For the six months ended June 28, 2024, the sales attributable to the non-core product lines, which were divested or discontinued, were $4.8 million. For the six months ended June 30, 2023, U.S. GAAP basis net sales were $834.7 million. The Comparable sales were $986.2 million for the same period. In 2023, Lima and Novastep would have contributed $164.2 million to Comparable sales, offset by the impact of the divestiture and discontinuance of certain non-core product lines of $12.6 million. Comparable sales growth for Recon was driven by approximately 7.0% increases in volume and market share gains and favorable foreign currency translation of 0.4%. Comparable sales growth for P&R was driven by approximately 3.1% organic growth in volumes, offset by 0.1% unfavorable foreign currency translation. The weakening of the U.S. Dollar relative to other currencies resulted in $1.4 million, or 0.1%, of favorable foreign currency translation impacts on total net sales for the six months ended June 28, 2024 from the prior year period.

Current wording

Net sales for the nine months ended September 27, 2024 increased from the prior year by $294.5 million, or 23.5% primarily attributable to an increase in sales from the Lima Acquisition and to a lesser extent the Novastep acquisition and growth in existing businesses. Recon sales increased by $278.0 million, or 60.7%, of which $252.0 million was attributable to the Lima and the Novastep acquisitions. Recon sales were negatively impacted by a $5.9 million decrease from the discontinuance of certain non-core product lines. P&R sales increased by $16.5 million, or 2.1%, which was negatively impacted by a $6.9 million decrease from divesting a minor product line. For the nine months ended September 27, 2024, U.S. GAAP basis net sales were $1,546.6 million. The Comparable Sales were $1,541.8 million for the same period. For the nine months ended September 27, 2024, the sales attributable to the non-core product lines, which were divested or discontinued, were $4.8 million. For the nine months ended September 29, 2023, U.S. GAAP basis net sales were $1,252.2 million. The Comparable Sales were $1,464.3 million for the same period. In 2023, Lima and Novastep would have contributed $229.6 million to Comparable Sales, offset by the impact of the divestiture and discontinuance of certain non-core product lines of $17.6 million. Comparable Sales Growth for Recon was driven by approximately 7.5% increases in volume and market share gains and favorable foreign currency translation of 0.5%. Comparable Sales Growth for P&R was driven by approximately 2.9% organic growth in volumes and favorable foreign currency translation of 0.1%. The weakening of the U.S. Dollar relative to other currencies resulted in $3.5 million, or 0.2%, of favorable foreign currency translation impacts on total net sales for the nine months ended September 27, 2024 from the prior year period.

Previous wording

Gross profit increased in the six months ended June 28, 2024 compared with the prior year period due to a $94.9 million increase in our Recon segment and a $8.2 million increase in our P&R segment. The Gross profit increase was attributable to increased sales from the Lima and Novastep acquisitions, offset by an increase of $28.8 million in inventory fair value step-up amortization charges. Gross profit margin decreased by 1.6% due to the aforementioned increase in inventory fair value step-up amortization charges.

Current wording

Gross profit increased in the three months ended September 27, 2024 compared with the prior year period due to a $43.8 million increase in our Recon segment, slightly offset by a $0.3 million decrease in our P&R segment. The Gross profit increase was attributable to increased sales from the Lima acquisition, offset by an increase of $8.4 million in inventory fair value step-up amortization charges. Gross profit margin decreased by 1.5% due to the aforementioned increase in inventory fair value step-up amortization charges.

Previous wording

Selling, general and administrative expense increased $104.8 million in the six months ended June 28, 2024 compared to the prior year period, primarily due to increased commissions on increased sales and increased selling, general and administrative costs from the Lima Acquisition. Research and development costs also increased compared to the prior year period, primarily due to the Lima Acquisition and increased spend within recently acquired businesses in our Recon segment, which is investing in surgical productivity solutions and computer-assisted surgery technologies. Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to the Lima Acquisition.

Current wording

Selling, general and administrative expense increased $45.7 million in the three months ended September 27, 2024 compared to the prior year period, primarily due to increased commissions on increased sales and increased selling, general and administrative costs from the Lima Acquisition. Research and development costs increased slightly compared to prior year period as increases due to the Lima Acquisition were offset by phasing of other R&D spending. Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to the Lima Acquisition.

Previous wording

The effective tax rate for Net loss from continuing operations during the three months ended June 28, 2024 was 32.6%, which was higher than the 2024 U.S. federal statutory tax rate of 21%, primarily due to tax credits for research and development, non-U.S. income taxed at lower rates and non-taxable fair value gain on contingent acquisition shares. This was partially offset by an increase in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S. taxation on international operations. The effective tax rate for Net loss from continuing operations during the three months ended June 30, 2023 was 24.4%, which was higher than the 2023 U.S. federal statutory tax rate of 21%, primarily due to non-U.S. income being taxed at lower rates, the release of a valuation allowance on non-U.S. attributes, tax credits for research and development, and release of uncertain tax positions. This was partially offset by other non-deductible expenses and the U.S. taxation on international operations.

Current wording

The effective tax rate for Net loss from continuing operations during the three months ended September 27, 2024 was 21.4%, which was higher than the 2024 U.S. federal statutory tax rate of 21%, primarily due to tax credits for research and development, non-U.S. income taxed at lower rates, non-taxable fair value gain on Contingent Acquisition Shares, and release of uncertain tax positions. This was partially offset by an increase in valuation allowance on interest limitation carryforwards, non-deductible expenses, and U.S. taxation on international operations. The effective tax rate for Net loss from continuing operations during the three months ended September 29, 2023 was 23.7%, which was higher than the 2023 U.S. federal statutory tax rate of 21%, primarily due to non-U.S. income being taxed at lower rates, the release of a valuation allowance on non-U.S. attributes, tax credits for research and development, and release of uncertain tax positions. This was partially offset by other non-deductible expenses and the U.S. taxation on international operations.

Previous wording

Net loss from continuing operations increased in the three months ended June 28, 2024 compared with the prior year period, primarily due to a $17.3 million increase in strategic transactions costs from Lima integration activities, a $12.9 million increase in interest expense, net, and $8.7 million increase in amortization of acquired intangibles, offset by a $33.5 million mark-to-market gain on the Contingent Acquisition Shares liability. Adjusted EBITDA and aEBITDA margin increased due to the Lima Acquisition.

Current wording

Net loss from continuing operations increased in the three months ended September 27, 2024 compared with the prior year period, primarily due to the increase in Gross Profit from the Lima Acquisition, partially offset by a $10.9 million increase in strategic transactions costs from Lima integration activities, a $5.3 million increase in interest expense, net, and $8.8 million increase in amortization of acquired intangibles, and an increase in depreciation and inventory step-up charges. Adjusted EBITDA and Adjusted EBITDA margin increased due to the Lima Acquisition.

Previous wording

Gross profit increased in the three months ended June 28, 2024 compared with the prior year period due to a $36.6 million increase in our Recon segment and a $3.9 million increase in our P&R segment. The Gross profit increase was attributable to increased sales from the Lima and Novastep acquisitions, offset by an increase of $23.9 million in inventory fair value step-up amortization charges. Gross profit margin decreased by (3.0)% due to the aforementioned increase in inventory fair value step-up amortization charges.

Current wording

Gross profit increased in the nine months ended September 27, 2024 compared with the prior year period due to a $138.6 million increase in our Recon segment and a $8.0 million increase in our P&R segment. The Gross profit increase was attributable to increased sales from the Lima, offset by an increase of $37.2 million in inventory fair value step-up amortization charges. Gross profit margin decreased by 1.5% due to the aforementioned increase in inventory fair value step-up amortization charges.

Previous wording

Selling, general and administrative expense increased $56.2 million in the three months ended June 28, 2024 compared to the prior year period, primarily due to increased commissions on increased sales and increased selling, general and administrative costs from the Lima Acquisition. Research and development costs also increased compared to the prior year period, primarily due to the Lima Acquisition and increased spend within recently acquired businesses in our Recon segment, which is investing in surgical productivity solutions and computer-assisted surgery technologies. Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to the Lima Acquisition.

Current wording

Selling, general and administrative expense increased $150.3 million in the nine months ended September 27, 2024 compared to the prior year period, primarily due to increased commissions on increased sales and increased selling, general and administrative costs from the Lima Acquisition. Research and development costs also increased compared to the prior year period, primarily due to the Lima Acquisition and increased spend within recently acquired businesses in our Recon segment, which is investing in surgical productivity solutions and computer-assisted surgery technologies. Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to the Lima Acquisition.

Previous wording

Interest expense, net increased in the six months ended June 28, 2024 compared to the prior year period due to an increase in debt to finance the Lima Acquisition.

Current wording

Interest expense, net increased in the nine months ended September 27, 2024 compared to the prior year period due to an increase in debt to finance the Lima Acquisition.

Previous wording

The effective tax rate for Net loss from continuing operations during the six months ended June 28, 2024 was 15.3%, which was lower than the 2024 U.S. federal statutory tax rate of 21%, primarily due to an increase in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S. taxation on international operations. This was partially offset by tax credits for research and development, non-U.S. income taxed at lower rates and non-taxable fair value gain on contingent acquisition shares. The effective tax rate for Net income from continuing operations during the six months ended June 30, 2023 was 24.0%, which was higher than the 2023 U.S. federal statutory tax rate of 21%, primarily due to non-U.S. income being taxed at lower rates, the release of a valuation allowance on non-U.S. attributes, tax credits for research and development, and release of uncertain tax positions. This was partially offset by other non-deductible expenses and the U.S. taxation on international operations.

Current wording

The effective tax rate for Net loss from continuing operations during the nine months ended September 27, 2024 was 17.0%, which was lower than the 2024 U.S. federal statutory tax rate of 21%, primarily due to an increase in valuation allowance on interest limitation carryforwards, non-deductible expenses, and U.S. taxation on international operations. This was partially offset by tax credits for research and development, non-U.S. income taxed at lower rates, and non-taxable fair value gain on Contingent Acquisition Shares. The effective tax rate for Net income from continuing operations during the nine months ended September 29, 2023 was 23.9%, which was higher than the 2023 U.S. federal statutory tax rate of 21%, primarily due to non-U.S. income being taxed at lower rates, the release of a valuation allowance on non-U.S. attributes, tax credits for research and development, and release of uncertain tax positions. This was partially offset by other non-deductible expenses and the U.S. taxation on international operations.

Previous wording

Net loss from continuing operations increased in the six months ended June 28, 2024 compared with the prior year period by $52.8 million, primarily due to the $27.3 million increase in interest expense, net, a $37.2 million net increase in strategic transaction and restructuring costs driven by Lima activities, a loss of $11.1 million on the non-designated forward currency contracts for the Lima Acquisition, offset by a $20.1 million mark-to-market gain on the Contingent Acquisition Shares liability. Adjusted EBITDA and aEBITDA margin increased due to the Lima Acquisition.

Current wording

Net loss from continuing operations increased in the nine months ended September 27, 2024 compared with the prior year period by $66.9 million, primarily due to the $32.5 million increase in interest expense, net, a $50.7 million net increase in strategic transaction and restructuring costs driven by Lima activities, a loss of $11.1 million on the non-designated forward currency contracts for the Lima Acquisition, offset by a $19.9 million mark-to-market gain on the Contingent Acquisition Shares liability. Adjusted EBITDA Adjusted EBITDA margin increased due to the Lima Acquisition.

Previous wording

Net sales increased $4.3 million, or 1.6%, in the three months ended June 28, 2024 compared with the prior year period, which was negatively impacted by a $3.8 million decrease from divesting a minor product line. Comparable sales growth for P&R was driven by approximately 3.3% organic growth in volumes, offset by 0.3% unfavorable foreign currency translation. Gross profit increased $3.9 million and Gross profit margin increased by 60 basis points over the prior period due to operational efficiencies and improved mix due to the divestiture. Selling, general and administrative expense decreased slightly and decreased as a percentage of net sales due to a reduction of EU MDR spending. Operating income increased by $6.9 million due to the aforementioned gross profit increase and reduction of EU MDR spending, as well as lower depreciation and amortization. Adjusted EBITDA and Adjusted EBITDA margin increased due to the aforementioned gross profit increase.

Current wording

Net sales increased $3.9 million, or 1.5%, in the three months ended September 27, 2024 compared with the prior year period, which was negatively impacted by a $3.7 million decrease from divesting a minor product line. Comparable Sales Growth for P&R was driven by approximately 2.6% organic growth in volumes and favorable foreign currency translation of 0.3%. Gross profit decreased $0.3 million and Gross profit margin decreased by 90 basis points primarily due to lower mix of higher margin products sales. Selling, general and administrative expense decreased slightly and decreased as a percentage of net sales due to a reduction of strategic transaction costs and EU MDR spending. Operating income increased by $1.6 million due to the reduction of strategic transaction costs and MDR spending, as well as lower depreciation and amortization. Adjusted EBITDA and Adjusted EBITDA margin decreased due to the aforementioned gross profit decrease.

Previous wording

Net sales increased $12.6 million, or 2.4%, compared with the prior year period, which was negatively impacted by a $3.2 million decrease from divesting a minor product line. Comparable sales growth for P&R was driven by approximately 3.1% organic growth in volumes, offset by 0.1% unfavorable foreign currency translation. Gross profit increased $8.2 million and Gross profit margin increased by 30 basis points over the prior period due to operational efficiencies and improved mix due to the divestiture. Selling, general and administrative expense decreased primarily due to reduction of strategic transaction costs and EU MDR spending. Operating loss decreased due to the aforementioned Selling, general and administrative expense decrease and higher gross profit. Adjusted EBITDA and Adjusted EBITDA margin increased due to improved sales mix.

Current wording

Net sales increased $16.5 million, or 2.1%, compared with the prior year period, which was negatively impacted by a $6.9 million decrease from divesting a minor product line. Comparable Sales Growth for P&R was driven by approximately 2.9% organic growth in volumes and favorable foreign currency translation of 0.1%. Gross profit increased $7.9 million and Gross profit margin decreased by 10 basis points primarily due to lower mix of higher margin products sales. Selling, general and administrative expense decreased primarily due to reduction of strategic transaction costs and EU MDR spending. Operating loss decreased due to the aforementioned Selling, general and administrative expense decrease and higher gross profit, partially offset by charges from divesting a minor product line. Adjusted EBITDA and Adjusted EBITDA margin increased slightly compared with the prior year period.

Previous wording

Net sales increased by$92.4 million, or 59.6%, in the three months ended June 28, 2024, of which$90.1 million was attributable to the Lima and Novastep acquisitions. Recon sales were negatively impacted by a $2.2 million decrease from the discontinuance of certain non-core product lines. Comparable sales growth for Recon was driven by approximately 7.1% increases in volume and market share gains, offset by unfavorable foreign currency translation of 0.5%. Gross profit increased over the same period, primarily due to higher net sales due to the Lima Acquisition, improved operating cost leverage, offset by an increase of $23.9 million in inventory fair value step-up amortization charges. Gross profit margin decreased primarily due to increased inventory fair value step-up amortization charges and product mix. Selling, general and administrative expense increased by $58.9 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. Research and development expense increased compared to the prior year period due to the Lima Acquisition and increased spending within other recently acquired businesses in our Recon segment, which are investing in surgical productivity solutions and computer-assisted surgery technologies. Operating loss increased, primarily due to a $17.1 million increase in strategic transaction costs including the deal costs for the Lima Acquisition and integration costs, and an increase in amortization of acquired intangibles and inventory fair value step-up amortization charges, offset by the aforementioned factors driving growth. Adjusted EBITDA increased primarily due to increased gross profit from the Lima Acquisition and improved operating cost leverage.

Current wording

Net sales increased by$83.8 million, or 56.9%, in the three months ended September 27, 2024, of which$68.4 million was attributable to the Lima acquisition. Recon sales were negatively impacted by a $1.2 million decrease from the discontinuance of certain non-core product lines. Comparable Sales Growth for Recon was driven by approximately 8.6% increases in volume and market share gains and favorable foreign currency translation of 0.6%. Gross profit increased over the same period, primarily due to higher net sales due to the Lima Acquisition, and improved operating cost leverage, offset by an increase of $8.4 million in inventory fair value step-up amortization charges. Gross profit margin decreased primarily due to increased inventory fair value step-up amortization charges and product mix. Selling, general and administrative expense increased by $47.4 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. Research and development expense increased slightly compared to prior year period as increases due to the Lima Acquisition were offset by phasing of other R&D spending. Operating loss increased, primarily due to a $11.8 million increase in strategic transaction costs including the deal costs for the Lima Acquisition and integration costs, and an increase in amortization of acquired intangibles and inventory fair value step-up amortization charges, offset by the aforementioned factors driving growth. Adjusted EBITDA increased primarily due to increased gross profit from the Lima Acquisition and improved operating cost leverage.

Previous wording

Net sales increased by$194.2 million, or 62.6%, of which$183.7 million was attributable to the Lima and the Novastep acquisitions. Recon sales were negatively impacted by a $4.6 million decrease from the discontinuance of certain non-core product lines. Comparable sales growth for Recon was driven by approximately 7.0% increases in volume and market share gains and favorable currency translation of 0.4%. Gross profit increased $95.0 millionin the six months ended June 28, 2024 compared to theprior year period, primarily due to higher net sales due to the Lima Acquisition, improved operating leverage, offset by an increase of $28.8 million in inventory fair value step-up amortization charges. The increase in inventory step-up charges led to a decrease in Gross profit margin. Selling, general and administrative expense increased by $114.1 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. Research and development expense increased compared to the prior year period due to the Lima Acquisition and increased spending within other recently acquired businesses in our Recon segment, which are investing in surgical productivity solutions and computer-assisted surgery technologies. Operating loss increased, primarily due to a $32.4 million increase in strategic transaction costs including the deal costs for the Lima Acquisition and integration costs, and an increase in amortization of acquired intangibles and inventory fair value step-up amortization charges, offset by the aforementioned factors driving growth. Adjusted EBITDA increased primarily due to increased gross profit from the Lima Acquisition and improved operating cost leverage.

Current wording

Net sales increased by$277.9 million, or 60.7%, of which$252.0 million was attributable to the Lima and the Novastep acquisitions. Recon sales were negatively impacted by a $5.9 million decrease from the discontinuance of certain non-core product lines. Comparable Sales Growth for Recon was driven by approximately 7.5% increases in volume and market share gains and favorable currency translation of 0.5%. Gross profit increased $138.7 millionin the nine months ended September 27, 2024 compared to theprior year period, primarily due to higher net sales due to the Lima Acquisition, and improved operating leverage, offset by an increase of $37.2 million in inventory fair value step-up amortization charges. The increase in inventory step-up charges led to a decrease in Gross profit margin. Selling, general and administrative expense increased by $161.5 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. Research and development expense increased compared to the prior year period due to the Lima Acquisition and increased spending within other recently acquired businesses in our Recon segment, which are investing in surgical productivity solutions and computer-assisted surgery technologies. Operating loss increased, primarily due to a $44.4 million increase in strategic transaction costs including the deal costs for the Lima Acquisition and integration costs, and an increase in amortization of acquired intangibles and inventory fair value step-up amortization charges, offset by the aforementioned factors driving growth. Adjusted EBITDA increased primarily due to increased gross profit from the Lima Acquisition and improved operating cost leverage.

Previous wording

The Enovis Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments, or pay dividends. In addition, the Enovis Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum senior secured leverage ratio of not more than 3.75:1.00 and thereafter, stepping down to 3.50:1.00 for the fiscal quarter ending June 30, 2024 and thereafter, and (ii) a minimum interest coverage ratio of 3.00:1:00. The Enovis Credit Agreement contains various events of default (including failure to comply with the covenants under the Enovis Credit Agreement and related agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Revolver.

Current wording

The Enovis Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments, or pay dividends. In addition, the Enovis Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum senior secured leverage ratio of not more than 3.50:1.00 for the fiscal quarter ending June 30, 2024 and thereafter, and (ii) a minimum interest coverage ratio of 3.00:1:00. The Enovis Credit Agreement contains various events of default (including failure to comply with the covenants under the Enovis Credit Agreement and related agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Revolver.

Previous wording

In addition, we are party to overdraft facilities with a borrowing capacity of $30.0 million. Total letters of credit and surety bonds of $34.1 million were outstanding as of June 28, 2024.

Current wording

In addition, we are party to overdraft facilities with a borrowing capacity of $30.0 million. Total letters of credit and surety bonds of $24.6 million were outstanding as of September 27, 2024.

Previous wording

As of June 28, 2024, we had $43.4 million of Cash, cash equivalents and restricted cash, a decrease of $1.4 million from the balance as of December 31, 2023 of $44.8 million. The following table summarizes the change in cash, cash equivalents and restricted cash during the periods indicated:

Current wording

As of September 27, 2024, we had $39.8 million of Cash, cash equivalents and restricted cash, a decrease of $5.0 million from the balance as of December 31, 2023 of $44.8 million. The following table summarizes the change in cash, cash equivalents and restricted cash during the periods indicated:

Previous wording

Cash flows from operating activities can fluctuate significantly from period-to-period due to changes in working capital and the timing of payments for items such as restructuring and strategic transaction costs. Cash flows from operating activities decreased $64.0 million year-over-year. This decrease includes a higher investment in working capital of $1.5 million, higher strategic transaction costs of $26.5 million, higher restructuring payments of $5.1 million and an increased cash paid for interest of $23.2 million.

Current wording

Cash flows from operating activities can fluctuate significantly from period-to-period due to changes in working capital and the timing of payments for items such as restructuring and strategic transaction costs. Cash flows from operating activities decreased $41.4 million year-over-year. This decrease includes higher strategic transaction costs of $37.4 million, higher restructuring payments of $6.3 million, and an increased cash paid for interest of $23.5 million, partly offset by $13.4 million cash from the settlement of the foreign currency forward contracts associated with the Lima Acquisition and lower overall investment in working capital of $9.3 million.

Previous wording

Cash flows used in investing activities during the six months ended June 28, 2024 were $839.2 million compared to $166.0 million in the prior year period due to higher investments in the current year driven by the Lima Acquisition for $758.6 million, net of cash received. Cash flows used in investing activities during the six months ended June 30, 2023 included the acquisition of Novastep for $96.9 million, net of cash received.

Current wording

Cash flows used in investing activities during the nine months ended September 27, 2024 were $897.6 million compared to $183.1 million in the prior year period due to the Lima Acquisition purchase price of $757.7 million, net of cash received, and overall higher capital investments in the current year driven by recent acquisitions. Cash flows used in investing activities during the nine months ended September 29, 2023 included the acquisition of Novastep for $96.9 million, net of cash received, offset by proceeds from sale of an asset previously classified as held for sale for $42.6 million.

Previous wording

Cash flows provided by financing activities during the six months ended June 28, 2024 include $878.5 million of net debt borrowings primarily used for the Lima Acquisition, capital expenditures and operations. Cash flows provided by financing activities for the six months ended June 30, 2023 include net debt borrowings of $139.0 million primarily used for the acquisition of Novastep and capital expenditures.

Current wording

Cash flows provided by financing activities during the nine months ended September 27, 2024 include $878.0 million of net debt borrowings primarily used for the Lima Acquisition, capital expenditures and operations. Cash flows provided by financing activities for the nine months ended September 29, 2023 include net debt borrowings of $133.2 million primarily used for the acquisition of Novastep and capital expenditures.

Previous wording

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on our results of operations and financial position. We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what our management anticipates, and different assumptions or estimates about the future could have a material impact on our results of operations and financial position.

Current wording

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on our results of operations and financial position. We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what our management anticipates, and different assumptions or estimates about the future could have a material impact on our results of operations and financial position. Except as noted below, there have been no significant additions or changes to the methods, estimates and judgments included in “Item 7A. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies” in our 2023 Form 10-K.