Enovis CORP

Previous wording

Post-Separation, Enovis conducts its operations through two operating segments: Prevention & Recovery (“P&R”) and Reconstructive (“Recon”).

Current wording

Enovis conducts its operations through two operating segments: Prevention & Recovery (“P&R”) and Reconstructive (“Recon”).

Previous wording

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.

Current wording

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.

Previous wording

During 2023, approximately 32% of our sales are derived from operations outside the U.S., the majority of which is in Europe with the remaining portion mostly in the Asia-Pacific region. Accordingly, we can be affected by market demand, economic and political factors in countries in Europe and the Asia-Pacific region, and significant movements in foreign exchange rates. Our ability to grow and our financial performance will be affected by our ability to address challenges and opportunities that are a consequence of expanding our global operations through our recent acquisitions, including efficiently utilizing our international sales channels, manufacturing and distribution capabilities, participating in the expansion of market opportunities, successfully completing global acquisitions and engineering innovative new product applications to create better patient outcomes.

Current wording

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

Previous wording

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. For the year ended December 31, 2023 compared to 2022, fluctuations in foreign currencies increased net sales by 0.4%, decreased gross profit by 0.3%, and increased operating expenses by 0.5%. The unfavorable impact on gross profits is due to the Mexican peso strengthening and its effect on costs at one of our primary manufacturing facilities.

Current wording

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. For the year ended December 31, 2024 compared to 2023, fluctuations in foreign currencies increased Net sales by 0.1%, had an immaterial impact on Gross profit, and increased operating expenses by approximately 0.1%.

Previous wording

On April 4, 2022, we completed the Separation through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to our stockholders. We initially retained 10% of the shares of ESAB common stock immediately following the Separation. On November 18, 2022, we completed an exchange with a lender under our Enovis Credit Agreement of 6,003,431 shares of common stock of ESAB, representing all of our retained shares, for $230.5 million in term loan outstanding under our Enovis Credit Agreement. We recorded a gain of $102.7 million on the exchange of the shares representing the excess of fair value, less cost to sell, over our cost basis in the investment.

Current wording

On April 4, 2022, we completed the Separation through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to our stockholders. We initially retained 10% of the shares of ESAB common stock immediately following the Separation. On November 18, 2022, we completed an exchange with our lenders of 6,003,431 shares of common stock of ESAB, representing all of our retained shares, for $230.5 million in term loan outstanding under our previous credit agreement. We recorded a gain of $102.7 million on the exchange of the shares representing the excess of fair value, less cost to sell, over our cost basis in the investment.

Previous wording

Once the Separation was completed in the second quarter of 2022, we began classifying the results from the fabrication technology business for the comparable periods presented as a discontinued operation in our financial statements. Accordingly, the results of our fabrication technology businesses in our financial statements prior to its spin-off as a separate public company are excluded from continuing operations in the accompanying financials for the years ended December 31, 2022 and 2021.

Current wording

Once the Separation was completed in the second quarter of 2022, we began classifying the results from the fabrication technology business for the comparable periods presented as a discontinued operation in our financial statements. Accordingly, the results of our fabrication technology businesses in our financial statements prior to its spin-off as a separate public company are excluded from continuing operations in the accompanying financials for the year ended December 31, 2022.

Previous wording

Although sales in P&R and Recon typically peak in the fourth quarter, these historical seasonality trends were disrupted by the commercial impacts caused by the COVID-19 pandemic. General economic conditions may, however, impact future seasonal variations.

Current wording

Sales in P&R and Recon typically peak in the fourth quarter. General economic conditions may, however, impact future seasonal variations.

Previous wording

Our principal raw materials and components are foam ethylene vinyl acetate, copolymer for our bracing and vascular products in P&R and cobalt chromium alloy, stainless steel alloys, titanium alloy and ultra high molecular weight polyethylene in Recon. Prices for raw materials, energy and commodities are subject to volatility and are influenced by worldwide economic conditions. Input cost inflation historically has not been a material factor to our gross margin; however, inflation effects have increased since 2021 and are expected to continue to remain elevated for at least the near term. In response, we have been enacting tactical price increases to certain products, mainly in P&R. Although we seek to proactively manage inflation risk, future changes in component and raw material costs may adversely impact earnings or our margins. 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.

Current wording

Our principal raw materials and components are foam ethylene vinyl acetate, copolymer for our bracing and vascular products in P&R and cobalt chromium alloy, stainless steel alloys, titanium alloy and ultra high molecular weight polyethylene in Recon. Prices for raw materials, energy and commodities are subject to volatility and are influenced by worldwide economic conditions. Input cost inflation historically has not been a material factor to our gross margin; however, inflation effects have increased since 2021 and are expected to continue to remain elevated for at least the near term. In response, we have been enacting tactical price increases to certain products, mainly in P&R. Although we seek to proactively manage inflation risk, future changes in component and raw material costs may adversely impact earnings or our margins. 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. 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.

Previous wording

(1)The change in mix from the year ended December 31, 2021 to 2023 reflects the impact from acquisitions and double-digit growth in Recon. With the acquisition of Lima in Recon on January 3, 2024, the sales mix is expected to further increase in Recon.

Current wording

(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.

Previous wording

Adjusted EBITDA and Adjusted EBITDA margin, two non-GAAP performance measures, are included in this report because they are key metrics used by our management to assess our operating performance. Adjusted EBITDA excludes from Net income (loss) from continuing operations the effect of income tax expense (benefit); Other income, net;, non-operating (gain) loss on investments; debt extinguishment charges; interest expense, net; restructuring and other charges; Medical Device Regulation (“MDR”) fees and other costs; strategic transaction costs; stock-based compensation; depreciation and other amortization; acquisition-related intangible asset amortization; insurance settlement (gain) loss; and fair value charges on acquired inventory. We also present Adjusted EBITDA and Adjusted EBITDA margin by operating segment, which are subject to the same adjustments. Operating income (loss), adjusted EBITDA and adjusted EBITDA margins at the operating segment level also include allocations of certain central function expenses not directly attributable to either operating segment. Adjusted EBITDA assists 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. Our management also believes that presenting these measures allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.

Current wording

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. We also present Adjusted EBITDA and Adjusted EBITDA margin by operating segment, which are subject to the same adjustments. Operating income (loss), adjusted EBITDA and adjusted EBITDA margins at the operating segment level also include allocations of certain central function expenses not directly attributable to either operating segment. Adjusted EBITDA assists 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.

Previous wording

Net sales increased by $144.1 million or 9.2% to $1.7 billion for the year ended December 31, 2023 compared with the prior year period. The following table presents the components of changes in our consolidated Net sales for the years ended December 31, 2023 and 2022.

Current wording

Net sales increased by $400.4 million or 23.5% to $2,107.6 million for the year ended December 31, 2024 compared with the prior year period. The following table presents the components of changes in our consolidated Net sales for the years ended December 31, 2024 and 2023.

Previous wording

Net sales increased during 2023 as compared to 2022 primarily due to an increase in sales from existing businesses across both of our segments and to a lesser extent sales from acquired businesses in Recon and favorable foreign currency translation. In Recon, existing business sales increased $76.7 million, or 14.3% due to significantly higher sales volumes than the prior year across all product lines driven by market outperformance and new product launches. In P&R, existing business sales increased $47.1 million, or 4.6% due to improved sales volumes and inflation-related pricing increases. Net sales from acquisitions increased during 2023 primarily due to the Novastep and 360 Med Care acquisitions in Recon that closed in 2023 and 2022, respectively. Lastly, the weakening of the U.S. dollar relative to other currencies, most notably the Swiss Franc and Euro, caused a $6.1 million favorable currency translation impact.

Current wording

Net sales increased during 2023 as compared to 2022 primarily due to an increase in sales from existing businesses across both of our segments and to a lesser extent sales from acquired businesses in Recon and favorable foreign currency translation. Recon sales increased by $94.9 million, or 17.7%, of which $76.7 million was due to significantly higher sales volumes than the prior year across all product lines driven by market outperformance and new product launches. P&R sales increased $49.2 million, or 4.8%, of which $47.1 million was due to improved sales volumes and inflation-related pricing increases. Net sales from acquisitions increased during 2023 primarily due to the Novastep and 360 Med Care acquisitions in Recon that closed in 2023 and 2022, respectively. Lastly, the weakening of the U.S. dollar relative to other currencies, most notably the Swiss Franc and Euro, caused a $6.1 million favorable currency translation impact.

Previous wording

(1)Restructuring and other charges includes $2.6 million, $1.7 million and $5.2 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021, respectively.

Current wording

(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.

Previous wording

Other income, net increased primarily due to the gain on the foreign currency forward contract to manage the exposure to currency exchange rate risk related to the Euro-denominated purchase price of Lima.

Current wording

Other income, net decreased primarily due to the loss in 2024 and the gain in 2023 on the foreign currency forward contract to manage the exposure to currency exchange rate risk related to the Euro-denominated purchase price of Lima, partially offset by the gain on fair value adjustments for the Lima Acquisition Contingent Shares liability.

Previous wording

The effective tax rate for Net income from continuing operations during 2022 was (1,745.8)% on a loss from continuing operations before income taxes, which was different than the 2022 U.S. federal statutory tax rate of 21% mainly due to the net impact of U.S. tax on non-deductible costs and capital gains on current year transactions. These were partially offset by the reduction of valuation allowances on U.S. and German net operating losses, and interest limitation carryforwards. The effective tax rate for 2021 was 16.0% on a loss from continuing operations before income taxes, which was lower than the 2021 U.S. federal statutory tax rate of 21% mainly due to the impact of additional U.S. tax on international operations and certain non-deductible expenses. These were offset by the net impact of reduction of valuation allowance on U.S. federal net operating losses.

Current wording

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. This was offset by tax credits for research and development, the non-taxable gain on shares related to the contingent acquisition liability and non-U.S. income taxed at lower rates. 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. 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.

Previous wording

Gross profit increased $121.4 million during 2023 in comparison to 2022 due to a $82.1 million increase in Recon and a $39.3 million increase in P&R. The Gross profit increase was attributable to increased sales in our existing businesses from volume and inflation-related pricing increases, improved operating cost leverage, and the benefit of a decrease of $12.7 million in inventory fair value step-up amortization charges, partially offset by unfavorable foreign currency translation and inflation in supply chain, logistics, and other costs. Gross profit margin increased due to the aforementioned factors.

Current wording

Gross profit increased $121.4 million during 2023 in comparison to 2022 due to an $82.1 million increase in Recon and a $39.3 million increase in P&R. The Gross profit increase was attributable to increased sales in our existing businesses from volume and inflation-related pricing increases, improved operating cost leverage, and the benefit of a decrease of $12.7 million in inventory fair value step-up amortization charges, partially offset by unfavorable foreign currency translation and inflation in supply chain, logistics, and other costs. Gross profit margin increased due to the aforementioned factors.

Previous wording

Interest expense, net decreased $4.4 million during 2023 in comparison to 2022 due to a reduction in debt balances as a result of the Separation-related debt redemptions at the beginning of the second quarter of 2022, the extinguishment of the outstanding balance of the Enovis Term Loan, and interest savings from $7.3 million interest received on the Swiss Franc cross-currency swap agreements.

Current wording

Interest expense, net decreased by $4.4 million, primarily due to a reduction in debt balances as a result of the Separation-related debt redemptions at the beginning of the second quarter of 2022, the extinguishment of the outstanding balance of our previous term loan in conjunction with the ESAB investment sale, and interest savings from $7.3 million interest received on the Swiss Franc cross-currency swap agreements.

Previous wording

The effective tax rate for Net loss from continuing operations during 2023 was 19.8%, which differed from the 2023 U.S. federal statutory tax rate of 21%, primarily due to a build in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S. taxation on international operations. 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. The effective tax rate for Net income from continuing operations during 2022 was (1,745.8)%, which differed from the 2022 U.S. federal statutory tax rate of 21% mainly due to non-taxable unrealized gain on the investment in ESAB and gain on cost basis investment, offset by non-deductible costs related to the tax-free Separation.

Current wording

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. 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. The effective tax rate for 2022 was (1,745.8)% on a loss from continuing operations before income taxes, which was lower than the 2022 U.S. federal statutory tax rate of 21% mainly due to non-taxable unrealized gain on the investment in ESAB and gain on cost basis investment, offset by non-deductible costs related to the tax-free Separation.

Previous wording

Net loss from continuing operations increased $15.6 million during 2023 in comparison to 2022, primarily due to one-time income items in the prior year period, including the Unrealized gain on investment in ESAB Corporation, Gain on cost basis investment, Insurance settlement gain, partially offset by the reduction of debt extinguishment charges and the aforementioned net impact of the Gross profit and Selling, general, and administrative increases as well as the decrease in Interest expense, net and the impact of unfavorable discrete tax items in 2022. Adjusted EBITDA increased due to organic growth. Adjusted EBITDA margin excluding the effects of recent acquisitions and foreign currency pressures increased by approximately 130 basis points. Our recent acquisitions in Recon were dilutive to the net loss margin from continuing operations and to Adjusted EBITDA margin by approximately 20 basis points and are expected to be accretive to margins in future years.

Current wording

Net loss from continuing operations increased $15.6 million during 2023 in comparison to 2022, primarily due to one-time income items in the prior year period, including the Unrealized gain on investment in ESAB Corporation, Gain on cost basis investment, Insurance settlement gain, partially offset by the reduction of debt extinguishment charges and the aforementioned net impact of the Gross profit and Selling, general, and administrative increases as well as the decrease in Interest expense, net and the impact of unfavorable discrete tax items in 2022. Adjusted EBITDA increased due to organic growth. Adjusted

Previous wording

Net sales in P&R increased $49.2 million, or 4.8%, compared with the prior year period, driven by organic growth in existing businesses which was aided by pricing increases to mitigate inflation. Gross profit increased $39.3 million due to the improved sales, offset by the effect of unfavorable foreign currency and inflation of supply chain, logistics, and other costs. Gross profit margin increased 140 basis points due to improved sales mix and inflation-related customer pricing, partially offset by the effect of unfavorable foreign currency in a primary manufacturing facility. Selling, general and administrative expense increased $3.8 million, which included an increase of $30.5 million, or 7%, primarily due to investment to support growth in the business, spending on MDR and other costs, largely offset by a reduction of in allocated Strategic transaction costs of $26.7 million which were higher in 2022 due to the Separation. Operating loss increased due to an insurance settlement gain recorded in the second quarter of 2022, an increase of $13.5 million in amortization of acquired intangibles, and the net increase in the aforementioned selling, general and administrative expenses, partially offset by the higher gross profit. 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.

Current wording

Net sales in P&R increased $49.2 million, or 4.8% in the year ended December 31, 2023 compared with the prior year period, driven by organic growth in existing businesses which was aided by pricing increases to mitigate inflation. Gross profit increased $39.3 million due to the improved sales, offset by inflation of supply chain, logistics, and other costs and unfavorable foreign currency effects. Gross profit margin increased 140 basis points due to improved sales mix and inflation-related customer pricing, partially offset by the effect of unfavorable foreign currency in a primary manufacturing facility. Selling, general and administrative expense increased $3.8 million which included an increase of $30.5 million, or 7%, primarily due to investment to support growth in the business, spending on MDR and other costs, largely offset by a reduction in allocated Strategic transaction costs of $26.7 million which were higher in 2022 due to the Separation. Operating loss increased due to an insurance settlement gain recorded in the second quarter of 2022, an increase of $13.5 million in amortization of acquired intangibles, and the net increase in the aforementioned selling, general and administrative expenses, partially offset by the higher gross profit. 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.

Previous wording

Net sales increased in Recon by $94.9 million, or 17.7%, primarily due to higher sales volumes driven by broad market strength and market outperformance. Gross profit increased in the year ended December 31, 2023 compared to the prior year, primarily due to increased sales in our existing businesses, improved operating cost leverage, and the benefit of a decrease of $12.7 million in inventory fair value step-up amortization charges, which also led to an increase in Gross profit margin. Selling, general and administrative expense increased $53.6 million, including an increase of $43.1 million, or 15%, due to the growth in Recon from increased commissions driven by higher sales, investments to support growth, spending on MDR, and cost inflation, as well as a net increase in Strategic transactions costs of $3.9 million from an increase in deal and integration costs for the Lima and Novastep acquisitions offset by a decrease of Separation costs. 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. Operating loss decreased primarily due to the aforementioned factors driving organic growth, offset by an insurance settlement gain recorded in the second quarter of 2022 and an increase of $6.2 million in amortization of acquired intangibles. Adjusted EBITDA increased primarily due to growth in existing businesses and operating leverage, partially offset by inflation of supply chain, logistics, and other costs. Without the impact of recent acquisitions, Adjusted EBITDA increased 150 basis points compared to prior year. The recent acquisitions of Novastep and 360 Med Care were dilutive to the margin by approximately 70 basis points but are expected to be accretive to margins in future years.

Current wording

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. Gross profit increased in the year ended December 31, 2023 compared to the prior year, by $82.1 million, primarily due to increased sales in our existing businesses, improved operating cost leverage, and the benefit of a decrease of $12.7 million in inventory fair value step-up amortization charges, which also led to an increase in Gross profit margin. Selling, general and administrative expense increased $53.6 million, including an increase of $43.1 million, or 15%, due to the growth in Recon from increased commissions driven by higher sales, investments to support growth, spending on MDR, and cost inflation, as well as a net increase in Strategic transactions costs of $3.9 million from an increase in deal and integration costs for the Lima and Novastep acquisitions offset by a decrease of Separation costs. 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. Operating loss decreased primarily due to the aforementioned factors driving organic growth, offset by an insurance settlement gain recorded in the second quarter of 2022 and an increase of $6.2 million in amortization of acquired intangibles. Adjusted EBITDA increased primarily due to growth in existing businesses and operating leverage, partially offset by inflation of supply chain, logistics, and other costs. Without the impact of recent acquisitions, Adjusted EBITDA increased 150 basis points compared to prior year. The recent acquisitions of Novastep and 360 Med Care were dilutive to the margin by approximately 70 basis points but are expected to be accretive to margins in future years.

Previous wording

In connection with the Separation, ESAB issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to us upon Separation. We used the distribution proceeds in conjunction with $450 million of borrowings on a term loan under our Enovis Credit Agreement and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest on our prior credit facility, $302.8 million of outstanding debt and accrued interest on our senior notes due February 15, 2026 (“2026 Notes”), as well as a redemption premium at 103.188% of the principal amount of our 2026 Notes, and other fees and expenses due at closing. Additionally, on April 7, 2022, we completed the redemption of our senior unsecured notes due April 2025 (“Euro Senior Notes”) representing all of our outstanding €350.0 million principal 3.25% Senior Notes due 2025 at a redemption price of 100.813% of the principal amount and accrued interest for $391.2 million. See section Enovis Term Loan and Revolving Credit Facilityin Note 13, “Debt” in the accompanying Notes to Consolidated Financial Statements for more detail on the new Enovis Credit Agreement.

Current wording

In connection with the Separation, ESAB issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to us upon Separation. We used the distribution proceeds in conjunction with $450 million of borrowings on a term loan under our Credit Agreement and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest on our prior credit facility, $302.8 million of outstanding debt and accrued interest on our senior notes due February 15, 2026 (“2026 Notes”), as well as a redemption premium at 103.188% of the principal amount of our 2026 Notes, and other fees and expenses due at closing. Additionally, on April 7, 2022, we completed the redemption of our senior unsecured notes due April 2025 (“Euro Senior Notes”) representing all of our outstanding €350.0 million principal 3.25% Senior Notes due 2025 at a redemption price of 100.813% of the principal amount and accrued interest for $391.2 million. See section Enovis Term Loan and Revolving Credit Facilityin Note 13, “Debt” in the accompanying Notes to Consolidated Financial Statements for more detail on the new Credit Agreement.

Previous wording

On November 18, 2022, we divested the retained ESAB shares to a lender under the Enovis Credit Agreement in a tax-efficient exchange for extinguishing $230.5 million of our outstanding term loan under the Enovis Credit Agreement.

Current wording

On November 18, 2022, we divested the retained ESAB shares to a lender under the Credit Agreement in a tax-efficient exchange for extinguishing $230.5 million of our outstanding term loan under the Credit Agreement.

Previous wording

On April 4, 2022, we entered into a new credit agreement (the “Enovis Credit Agreement”), consisting of a $900 million revolving credit facility (the “Revolver”) with an April 4, 2027 maturity date and a term loan with an initial aggregate principal amount of $450.0 million and an April 4, 2023 maturity date (the “Enovis Term Loan”). The Revolver contains a $50 million swing line loan sub-facility. Certain U.S. subsidiaries of the Company guarantee the obligations under the Enovis Credit Agreement.

Current wording

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. 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.

Previous wording

On November 18, 2022, the Company completed an exchange with a lender under the Enovis Credit Agreement of 6,003,431 shares of common stock of ESAB, representing all of the retained shares in ESAB following the Separation, for $230.5 million of the $450.0 million in Enovis Term Loan that was outstanding at that time under the Enovis Credit Agreement, net of cost to sell. On March 1, 2023, the Company extinguished the remaining outstanding balance on the Enovis Term Loan with borrowings on the Revolver.

Current wording

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 March 1, 2023, the Company extinguished the remaining outstanding balance on the Enovis Term Loan with borrowings on the Revolver.

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 total leverage ratio of not more than 3.75:1.00 commencing with the fiscal quarter ending June 30, 2023, and a step-down to 3.50:1.00 commencing with the fiscal quarter ending June 30, 2024, and (ii) a minimum interest coverage ratio of 3.00:1.00. The Enovis Credit Agreement contains various events of default (including failure to comply with the covenants under the Enovis Credit Agreement and related agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Enovis Term Loan and the Revolver. As of December 31, 2023, the Company was in compliance with the covenants under the Enovis Credit Agreement.

Current wording

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. In addition, the Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum senior secured leverage ratio of not more than 3.50:1.00 for the fiscal quarter ending June 30, 2024 and thereafter, and (ii) a minimum interest coverage ratio of 3.00:1:00. The Credit Agreement contains various events of default (including failure to comply with the covenants under the Credit Agreement and related agreements), and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Credit Agreement. As of December 31, 2024, the Company was in compliance with the covenants under the Credit Agreement.

Previous wording

On October 23, 2023 the Company entered into an amendment to the Enovis Credit Agreement (the “Amendment”). The Amendment provided for a new term loan commitment in the aggregate amount of $400 million (the “Term Loan Facility”). The Term Loan Facility extended to the Company under the Amendment was funded on January 3, 2024, the date the Lima Acquisition was consummated. The Term Loan Facility requires quarterly principal repayments at 1.25% of the initial aggregate principal amount and ultimately matures on April 4, 2027.

Current wording

On October 23, 2023 the Company entered into an amendment to the Credit Agreement (the “Amendment”). The Amendment provided for a new term loan commitment in the aggregate amount of $400 million. The Term Loan Facility extended to the Company under the Amendment was funded on January 3, 2024, the date the Lima Acquisition was consummated. The Term Loan Facility requires quarterly principal repayments, which is $5 million each quarter, and matures on April 4, 2027 (the “2024 Term Loan”).

Previous wording

Pursuant to the Amendment, effective as of January 3, 2024, the date of consummation of the Lima Acquisition, (i) all facilities under the Enovis Credit Agreement (including the Term Loan Facility) became secured by certain personal property of the Company and certain of its subsidiaries, subject to limitations and exclusions; (ii) the financial covenant under the Enovis Credit Agreement was be adjusted from total leverage ratio to senior secured leverage ratio and requires the senior secured leverage ratio to be no more than 3.75:1.00 with a step down to 3.50:1.00 commencing with the fiscal quarter ending June 30, 2024; (iii) certain changes to the negative covenants became effective (including restrictions on repayments of junior financing and amendments to junior financing documents); and (iv) certain additional changes were implemented (including the removal of the guaranty fallaway provision).

Current wording

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).

Previous wording

As of December 31, 2023, the weighted-average interest rate of borrowings under the Enovis Credit Agreement was 6.58%, excluding accretion of original issue discount and deferred financing fees, and there was $880.0 million available on the Revolver.

Current wording

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.

Previous wording

In addition, we are party to various bilateral credit facilities with a borrowing capacity of $30.0 million. Total letters of credit of $11.5 million were outstanding as of December 31, 2023.

Current wording

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.

Previous wording

As of December 31, 2023, we had $44.8 million of Cash and cash equivalents and restricted cash, an increase of $20.5 million from the $24.3 million of Cash and cash equivalents on hand as of December 31, 2022. The following table summarizes the change in Cash and cash equivalents during the periods indicated and includes cash flows related to discontinued operations:

Current wording

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. The following table summarizes the change in Cash and cash equivalents during the periods indicated and includes cash flows related to discontinued operations:

Previous wording

•Operating cash flows (used in) provided by continuing operations working capital was $(47.7) million, $(116.0) million, and $8.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. The uses in 2023 and 2022 are primarily due to business growth and increases in inventory to insulate for supply chain volatility.

Current wording

•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. The working capital uses in 2023 and 2022 are primarily due to business growth and increases in inventory to insulate for supply chain volatility.

Previous wording

•Cash paid for strategic transaction costs in our continuing operations were $38.3 million, $61.0 million and $23.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. These costs were related to the Separation, business development and integration costs of recent acquisitions.

Current wording

•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. 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.

Previous wording

•Cash paid for interest was $16.3 million, $37.1 million and $85.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. The decreases are primarily a result of the change in our capital structure due to the Separation. At the time of the Separation, the Company’s total debt of $2.1 billion was repaid and replaced with a $450.0 million term loan that was further reduced by $230.5 million in November 2022 with the exchange of ESAB shares.

Current wording

•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 increase in 2024 is primary due to the financing for the Lima Acquisition which closed on January 3, 2024. The decrease in 2023 is primarily a result of the change in our capital structure due to the Separation. At the time of the Separation, the Company’s total debt of $2.1 billion was repaid and replaced with a $450.0 million term loan that was reduced by $230.5 million in November 2023 in a partial extinguishment through an exchange of ESAB shares.

Previous wording

•During 2023, 2022, and 2021 cash payments of $16.2 million, $18.5 million and $8.0 million, respectively, were made related to our restructuring initiatives.

Current wording

•During 2024, 2023, and 2022 cash payments of $21.2 million, $16.2 million and $18.5 million, respectively, were made related to our restructuring initiatives.

Previous wording

•Cash paid for MDR and other costs were $27.4 million, $16.7 million, and $7.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Current wording

•Cash paid for MDR and other costs were $38.0 million, $27.4 million, and $16.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Previous wording

Cash flows used in investing activities for 2023, 2022 and 2021 include $152.8 million, $73.7 million, and $223.3 million, respectively, for acquisitions and investments. Refer to Note 5 “Acquisitions and Investments” in the accompanying Notes to the Consolidated Financial Statements for more information. Additionally, cash flows used in investing activities in 2023, 2022, and 2021 include $122.2 million, $105.5 million, and $104.2 million, respectively, for purchases of property, plant, equipment, and intangibles. Included in these amounts is $5.9 million and $35.6 million for 2022, and 2021, respectively, related to discontinued operations. The $32.6 million proceeds from sale of property, plant and equipment in 2023 is from the sale of a facility related to our discontinued operations.

Current wording

Cash flows used in investing activities for 2024, 2023 and 2022 include $769.9 million, $152.8 million, and $73.7 million, respectively, for acquisitions and investments. Refer to Note 5 “Acquisitions and Investments” in the accompanying Notes to the Consolidated Financial Statements for more information. Additionally, cash flows used in investing activities in 2024, 2023, and 2022 include $180.7 million, $122.2 million, and $105.5 million, respectively, for purchases of property, plant, equipment, and intangibles. Included in these amounts is $5.9 million and $35.6 million for 2023, and 2022, respectively, related to discontinued operations. The $32.6 million proceeds from sale of property, plant and equipment in 2023 is from the sale of a facility related to our discontinued operations.

Previous wording

Cash flows provided by financing activities in 2023 include net debt borrowings of $217.2 million, partially offset by amounts paid for the capped call transactions of $62.0 million and debt issuance costs of $25.7 million. Cash flows used in financing activities in 2022 includes $1.6 billion net repayment of borrowings, which included the outstanding debt on our prior credit facility, 2026 Notes and Euro Senior Notes, partially offset by borrowings on a term loan under our new credit facility. The repayments were primarily funded by a $1.2 billion cash distribution from ESAB to us upon Separation. Cash flows provided by financing activities in 2021 include $745.2 million in proceeds from the issuance of common stock, partially offset by net debt repayments of $126.0 million.

Current wording

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 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 2022 includes $1.6 billion net repayment of borrowings, which included the outstanding debt on our prior credit facility, 2026 Notes and Euro Senior Notes, partially offset by borrowings on a term loan under our credit facility at the time. The repayments were primarily funded by a $1.2 billion cash distribution from ESAB to us on separation.

Previous wording

Our Cash and cash equivalents as of December 31, 2023 include $19.4 million held in jurisdictions outside the U.S. Cash repatriation of non-U.S. cash into the U.S. may be subject to taxes, other local statutory restrictions and minority owner distributions.

Current wording

Our Cash and cash equivalents as of December 31, 2024 include $33.1 million held in jurisdictions outside the U.S. Cash repatriation of non-U.S. cash into the U.S. may be subject to taxes, other local statutory restrictions and minority owner distributions.

Previous wording

As of December 31, 2023, the Company’s Revolver and senior unsecured convertible notes (the “2028 Notes”) had principal amounts outstanding of $20.0 million and $460.0 million, respectively. There are no required principal payments due on the Revolver within 12 months and it matures on April 4, 2027. 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.

Current wording

As of December 31, 2024, our Revolver, Term Loan, and senior unsecured convertible notes (the “2028 Notes”) had principal amounts outstanding of $503.1 million, $377 million, and $449 million, respectively. There are no required principal payments due on the Revolver within 12 months and it matures on April 4, 2027. 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.