Enovis CORP 10-Q

Item 1. Financial Statements ENOVIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Dollars in thousands, except per share amounts (Unaudited) Three Months Ended April 1, 2022 April 2, 2021 Net sales $ 1,023,368 $ 879,211 Cost of sales 593,137 508,134 Gross profit 430,231 371,077 Selling, general and administrative expense 369,390 305,724 Restructuring and other related charges 7,723 4,046 Operating income 53,118 61,307 Interest expense, net 15,099 25,660 Income from continuing operations before income taxes 38,019 35,647 Income tax expense 18,660 7,917 Net income from continuing operations 19,359 27,730 Loss from discontinued operations, net of taxes ( 3,058 ) ( 7,490 ) Net income 16,301 20,240 Less: income attributable to noncontrolling interest, net of taxes 1,233 1,166 Net income attributable to Enovis Corporation $ 15,068 $ 19,074 Net income (loss) per share - basic Continuing operations $ 0.34 $ 0.57 Discontinued operations $ ( 0.06 ) $ ( 0.16 ) Consolidated operations $ 0.28 $ 0.41 Net income (loss) per share - diluted Continuing operations $ 0.33 $ 0.56 Discontinued operations $ ( 0.06 ) $ ( 0.16 ) Consolidated operations $ 0.28 $ 0.40 See Notes to Condensed Consolidated Financial Statements. 2 ENOVIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Dollars in thousands (Unaudited) Three Months Ended April 1, 2022 April 2, 2021 Net income $ 16,301 $ 20,240 Other comprehensive income (loss): Foreign currency translation, net of tax expense of $ 338 and $ 2,280 ( 53,461 ) ( 53,181 ) Unrealized gain on hedging activities, net of tax expense of $ 2,711 and $ 4,243 9,028 12,381 Amounts reclassified from Accumulated other comprehensive loss: Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $ 199 and $ 317 629 1,055 Other comprehensive loss ( 43,804 ) ( 39,745 ) Comprehensive loss ( 27,503 ) ( 19,505 ) Less: comprehensive income attributable to noncontrolling interest 895 1,042 Comprehensive loss attributable to Enovis Corporation $ ( 28,398 ) $ ( 20,547 ) See Notes to Condensed Consolidated Financial Statements. 3 ENOVIS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS Dollars in thousands, except share amounts (Unaudited) April 1, 2022 December 31, 2021 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 661,504 $ 719,370 Trade receivables, less allowance for credit losses of $ 37,871 and $ 32,501 657,056 638,700 Inventories, net 852,814 776,295 Prepaid expenses 84,816 78,186 Other current assets 91,547 90,728 Total current assets 2,347,737 2,303,279 Property, plant and equipment, net 504,583 521,391 Goodwill 3,440,615 3,467,295 Intangible assets, net 1,637,257 1,675,462 Lease asset - right of use 178,643 184,429 Other assets 374,816 363,489 Total assets $ 8,483,651 $ 8,515,345 LIABILITIES AND EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 422,289 $ 8,314 Accounts payable 537,676 504,173 Accrued liabilities 490,050 511,097 Total current liabilities 1,450,015 1,023,584 Long-term debt, less current portion 1,647,870 2,078,679 Non-current lease liability 140,704 145,326 Other liabilities 601,017 606,323 Total liabilities 3,839,606 3,853,912 Equity: Common stock, $ 0.001 par value; 133,333,333 shares authorized; 54,030,880 and 52,083,078 shares issued and outstanding as of April 1, 2022 and December 31, 2021, respectively 54 52 Additional paid-in capital 4,555,369 4,544,315 Retained earnings 604,092 589,024 Accumulated other comprehensive loss ( 559,479 ) ( 516,013 ) Total Enovis Corporation equity 4,600,036 4,617,378 Noncontrolling interest 44,009 44,055 Total equity 4,644,045 4,661,433 Total liabilities and equity $ 8,483,651 $ 8,515,345 See Notes to Condensed Consolidated Financial Statements. 4 ENOVIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EQUITY Dollars in thousands, except share amounts (Unaudited) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Shares Amount Balance at December 31, 2021 52,083,078 $ 52 $ 4,544,315 $ 589,024 $ ( 516,013 ) $ 44,055 $ 4,661,433 Net income — — — 15,068 — 1,233 16,301 Distributions to noncontrolling owners — — — — — ( 941 ) ( 941 ) Other comprehensive loss, net of tax of $ 3,248 — — — — ( 43,466 ) ( 338 ) ( 43,804 ) Conversion of tangible equity units into common stock 1,691,845 2 ( 2 ) — — — — Common stock-based award activity 255,957 — 11,056 — — — 11,056 Balance at April 1, 2022 54,030,880 $ 54 $ 4,555,369 $ 604,092 $ ( 559,479 ) $ 44,009 $ 4,644,045 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Shares Amount Balance at December 31, 2020 39,498,896 $ 40 $ 3,478,086 $ 517,367 $ ( 452,106 ) $ 44,487 $ 3,587,874 Net income — — — 19,074 — 1,166 20,240 Distributions to noncontrolling owners — — — — — ( 1,054 ) ( 1,054 ) Other comprehensive loss, net of tax of $ 6,840 — — — — ( 39,621 ) ( 124 ) ( 39,745 ) Conversion of tangible equity units into common stock 114,804 — — — — — — Common stock offering, net of issuance costs 5,366,666 5 711,316 — — — 711,321 Common stock-based award activity 218,744 — 12,433 — — — 12,433 Balance at April 2, 2021 45,199,110 $ 45 $ 4,201,835 $ 536,441 $ ( 491,727 ) $ 44,475 $ 4,291,069 See Notes to Condensed Consolidated Financial Statements. 5 ENOVIS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Dollars in thousands (Unaudited) Three Months Ended April 1, 2022 April 2, 2021 Cash flows from operating activities: Net income $ 16,301 $ 20,240 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation, amortization and other impairment charges 66,026 62,785 Stock-based compensation expense 9,857 7,807 Non-cash interest expense 978 1,537 Deferred income tax expense (benefit) 2,232 ( 3,614 ) Loss on sale of property, plant and equipment 352 257 Changes in operating assets and liabilities: Trade receivables, net ( 20,690 ) ( 39,950 ) Inventories, net ( 70,830 ) ( 32,743 ) Accounts payable 24,713 83,442 Other operating assets and liabilities ( 43,362 ) ( 15,379 ) Net cash (used in) provided by operating activities ( 14,423 ) 84,382 Cash flows from investing activities: Purchases of property, plant and equipment and intangibles ( 24,089 ) ( 24,537 ) Proceeds from sale of property, plant and equipment 2,746 — Acquisitions, net of cash received, and investments ( 13,823 ) ( 103,475 ) Net cash used in investing activities ( 35,166 ) ( 128,012 ) Cash flows from financing activities: Proceeds from borrowings on revolving credit facilities and other — 179,367 Repayments of borrowings on revolving credit facilities and other ( 7,428 ) ( 185,643 ) Proceeds from issuance of common stock, net 1,199 716,632 Deferred consideration payments and other ( 4,590 ) ( 2,704 ) Net cash (used in) provided by financing activities ( 10,819 ) 707,652 Effect of foreign exchange rates on Cash and cash equivalents and Restricted Cash 2,542 ( 1,438 ) (Decrease) increase in Cash and cash equivalents and Restricted cash ( 57,866 ) 662,584 Cash and cash equivalents and Restricted Cash, beginning of period 719,370 101,069 Cash and cash equivalents, end of period $ 661,504 $ 763,653 See Notes to Condensed Consolidated Financial Statements. 6 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. General Enovis Corporation (the “Company” or “Enovis”) was previously Colfax Corporation (“Colfax”) until its separation into two differentiated, independent, and publicly traded companies on April 4, 2022, as discussed further below. Colfax was a leading diversified technology company that provided fabrication technology and medical device products and services to customers around the world, principally under the ESAB and DJO brands. The Company conducted its operations through two operating segments, “Fabrication Technology”, which incorporated the operations of ESAB and its related brands, and “Medical Technology”, which incorporated the operations of DJO and its related brands. On April 4, 2022 (the “Distribution Date”), the Company completed the separation of its fabrication technology business (the “Separation”) through a tax-free, pro-rata distribution of 90 % of the outstanding common stock of ESAB Corporation (“ESAB Corp”) to Colfax stockholders. To affect the Separation, Colfax distributed to its stockholders one share of ESAB Corp common stock for every three shares of Colfax common stock held at the close of business on March 22, 2022, with the Company retaining 10 % of the shares of ESAB Corp common stock immediately following the Separation. The Company intends to divest its 10 % retained shares in ESAB Corp in a tax-efficient exchange for its outstanding debt no later than 12 months after the Distribution Date. Upon completion of the Separation, Colfax, which retained the Company’s specialty medical technology business, changed its name to Enovis Corporation. On April 5, 2022, the Company began trading under the stock symbol “ENOV” on the New York Stock Exchange. For further information on the Separation, refer to Note 15, “Subsequent Events”. In connection with the Separation, ESAB Corp issued $ 1.2 billion of new debt securities, the proceeds from which were used to fund a $ 1.2 billion cash distribution to Enovis upon Separation. The distribution proceeds were used by Enovis in conjunction with $ 450 million of borrowings on a term loan under the new Enovis credit facility, as discussed below, and $ 52.3 million of cash on hand to repay $ 1.4 billion of outstanding debt and accrued interest on its Credit Facility, $ 302.8 million of outstanding debt and accrued interest on its 2026 Notes, as well as a redemption premium at 103.188 % of the principal amount of the 2026 Notes, and other fees and expenses due at closing. Additionally, on April 7, 2022, the Company also completed the redemption of its Euro Senior Notes representing all of its outstanding € 350 million principal 3.250 % Senior Notes due 2025 at a redemption price of 100.813 % of the principal amount. For further information on the Separation, refer to Note 15, “Subsequent Events”. Immediately following the Separation, the Company effected a one-for-three reverse stock split of all issued and outstanding shares of Enovis common stock. As a result of the reverse stock split, all share and per share figures contained in the accompanying Condensed Consolidated Financial Statements have been retroactively restated as if the reverse stock split occurred at the beginning of the periods presented. Since the disposition occurred in the second quarter of 2022, Enovis will classify its fabrication technology business as a discontinued operation in its historical financial statements beginning in the second quarter of 2022. The assets, liabilities, revenues and expenses of the fabrication technology businesses are included in continuing operations in the accompanying Condensed Consolidated Financial Statements. The Condensed Consolidated Financial Statements included in this quarterly report have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements. Certain prior period amounts have been reclassified to conform to the current period presentation. The Condensed Consolidated Balance Sheet as of December 31, 2021 is derived from the Company’s audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the SEC’s rules and regulations for interim financial statements. The Condensed Consolidated Financial Statements included herein should be read in conjunction with the audited financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”), filed with the SEC on February 22, 2022. The Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations as of and for the periods indicated. Intercompany transactions and accounts are eliminated in consolidation. The Company makes certain estimates and assumptions in preparing its Condensed Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from those estimates. 7 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) In the normal course of business, the Company incurs research and development costs related to new product development which are expensed as incurred and included in Selling, general and administrative expense on the Company’s Condensed Consolidated Statements of Operations. Research and development costs were $ 24.4 million and $ 19.9 million during the three months ended April 1, 2022 and April 2, 2021, respectively. The results of operations for the three months ended April 1, 2022 are not necessarily indicative of the results of operations that may be achieved for the full year. Quarterly results are affected by seasonal variations in the Company’s businesses as Medical Technology sales typically peak in the fourth quarter. General economic conditions may, however, impact future seasonal variations. In December 2019, a novel coronavirus disease (“COVID-19”) was first reported in China. On March 11, 2020, due to worldwide spread of the virus, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 global pandemic has resulted in a widespread health crisis, and the resulting impact on governments, businesses and individuals and actions taken by them in response to the situation have resulted in widespread economic disruptions, significantly affecting broader economies, financial markets, and overall demand for the Company’s products. These impacts lessened in 2021 due to broadening access to COVID-19 vaccines and gradual relaxing of some government-mandated restrictions. However, a surge of COVID-19 cases due to the emergence of certain COVID-19 variants in the third quarter of 2021 led to the reinstatement of restrictions in certain jurisdictions, slowing the overall economic recovery. Some of these restrictions have been lifted as of the end of the first quarter of 2022. The COVID-19 outbreak has caused increased uncertainty in estimates and assumptions affecting the reported amounts of assets and liabilities in the Condensed Consolidated Financial Statements as the extent and period of recovery from the COVID-19 outbreak and related economic disruption are difficult to forecast. Furthermore, the historical seasonality trends have been disrupted by the commercial impacts caused by the COVID-19 pandemic. 2. Recently Issued Accounting Pronouncements The Company has not adopted any new accounting standards during the three months ended April 1, 2022. There are no recently issued accounting pronouncements that are expected to have a material effect on the Company’s financial position, results of operations or cash flows. 3. Discontinued Operations The Company retained certain asbestos-related contingencies and insurance coverages from divested businesses for which it did not retain an interest in the ongoing operations subject to the contingencies. In conjunction with the Separation, all asbestos-related contingencies and insurance coverages from its industrial businesses were transferred fully to ESAB Corp. The Company has classified asbestos-related selling, general and administrative activity in its Condensed Consolidated Statements of Operations as part of Loss from discontinued operations, net of taxes. Asbestos-related costs, net of taxes were $ 2.5 million and $ 0.9 million during the three months ended April 1, 2022 and April 2, 2021, respectively. See Note 13, “Commitments and Contingencies” for further information. The Company also recorded Loss from discontinued operations, net of taxes of $ 0.6 million and $ 6.6 million during the three months ended April 1, 2022 and April 2, 2021, respectively, related to its divested air and gas handling business, including a settlement executed in the first quarter of 2021. Cash used in operating activities related to discontinued operations for the three months ended April 1, 2022 and April 2, 2021 was $ 5.8 million and $ 7.3 million, respectively. 4. Acquisitions and Investments The Medical Technology segment completed three transactions during the three months ended April 1, 2022 for $ 13.8 million, one of which is carried at cost as the investment does not have a readily determinable fair value, while the other two are accounted for as asset purchases. The three investments broaden the platform’s product offering and distribution network. During the three months ended April 2, 2021, the Company completed one acquisition in its Fabrication Technology segment and two acquisitions in its Medical Technology segment for aggregate net cash consideration of $ 88.7 million. The 8 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) acquisitions are accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the respective acquisition date. The Medical Technology segment’s acquisitions in the first quarter of 2021 included Trilliant Surgical (“Trilliant”), a national provider of foot and ankle orthopedic implants, which was acquired for net cash consideration of $ 79.6 million. The purchase accounting for all acquisitions made in the first quarter of 2021 has been completed. The Company also made two investments in medical technology businesses during the three months ended April 2, 2021 for a total of $ 14.8 million. Both investments are carried at cost, as they do not have a readily determinable fair value. During the year ended December 31, 2021, the Company completed one acquisition in its Fabrication Technology segment and five acquisitions in its Medical Technology segment for aggregate net cash consideration of $ 206.5 million and equity consideration of $ 285.7 million. The acquisitions are accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the respective acquisition date. The purchase accounting for the Mathys AG Bettlach acquisition which was completed in the third quarter of 2021 has yet to be finalized. For further information on prior year acquisitions and investments, refer to Note 5. “Acquisitions” in the Notes to the Consolidated Financial Statements in the Company’s 2021 Form 10-K. There have been no material changes to purchase accounting estimates for the prior year acquisitions since the issuance of the Company’s 2021 Form 10-K . 5. Revenue The Company’s Fabrication Technology segment develops, manufactures and supplies consumable welding and cutting products and equipment, as well as gas control equipment. Substantially all revenue from the Fabrication Technology business is recognized at a point in time. The Company disaggregates its Fabrication Technology revenue into the following product groups: Three Months Ended April 1, 2022 April 2, 2021 (In thousands) Equipment $ 188,348 $ 173,750 Consumables 459,563 394,378 Total $ 647,911 $ 568,128 The consumables product grouping generally has less production complexity and shorter production cycles than equipment products. The Company’s Medical Technology segment provides orthopedic solutions, including products and services spanning the full continuum of patient care, from injury prevention to rehabilitation. While the Company’s Medical Technology sales are primarily derived from three sales channels including dealers and distributors, insurance, and direct to consumers and hospitals, substantially all its revenue is recognized at a point in time. The Company disaggregates its Medical Technology revenue into the following product groups: Three Months Ended April 1, 2022 April 2, 2021 (In thousands) Prevention & Recovery $ 244,835 $ 235,238 Reconstructive 130,622 75,845 Total $ 375,457 $ 311,083 Given the nature of the Fabrication Technology and Medical Technology businesses, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of April 1, 2022 is immaterial. 9 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) The nature of the Company’s contracts gives rise to certain types of variable consideration, including rebates, implicit price concessions, and other discounts. The Company includes estimated amounts of variable consideration in the transaction price to the extent that it is probable there will not be a significant reversal of revenue. In some circumstances, customers are billed in advance of revenue recognition, resulting in contract liabilities. As of December 31, 2021 and 2020, total contract liabilities were $ 31.5 million and $ 36.6 million, respectively. During the three months ended April 1, 2022 and April 2, 2021, revenue recognized that was included in the contract liability balance at the beginning of the year was $ 12.8 million and $ 14.3 million, respectively. As of April 1, 2022 and April 2, 2021, total contract liabilities were $ 31.4 million and $ 40.0 million, respectively, and were included in Accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. The contract liabilities as of April 1, 2022 and December 31, 2021 included $ 2.0 million and $ 4.9 million, respectively, of certain one-time advance payments in the Medical Technology business. Allowance for Credit Losses The Company’s estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. In calculating and applying its current expected credit losses, the Company disaggregates trade receivables into business segments due to risk characteristics unique to each segment given the individual lines of business and market. The business segments are further disaggregated based on either geography or product type. The Company uses a loss rate methodology in calculating its current expected credit losses, leveraging historical write-offs over a defined lookback period in deriving a historical loss rate. The expected credit loss model further considers current conditions and reasonable and supportable forecasts using an adjustment for current and projected macroeconomic factors. A summary of the activity in the Company’s allowance for credit losses included within Trade receivables in the Condensed Consolidated Balance Sheets is as follows: Three Months Ended April 1, 2022 Balance at Beginning of Period Charged to Expense, net Write-Offs, Deductions and Other, net Foreign Currency Translation Balance at End of Period (In thousands) Allowance for credit losses $ 32,501 $ 5,206 $ 141 $ 23 $ 37,871 6. Net Income Per Share from Continuing Operations Net income per share from continuing operations was computed as follows: Three Months Ended April 1, 2022 April 2, 2021 (In thousands, except share and per share data) Computation of Net income per share from continuing operations - basic: Net income from continuing operations attributable to Enovis Corporation (1) $ 18,126 $ 26,564 Weighted-average shares of Common stock outstanding – basic 53,872,007 46,534,463 Net income per share from continuing operations – basic $ 0.34 $ 0.57 Computation of Net income per share from continuing operations - diluted: Net income from continuing operations attributable to Enovis Corporation (1) $ 18,126 $ 26,564 Weighted-average shares of Common stock outstanding – basic 53,872,007 46,534,463 Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units 536,967 722,639 Weighted-average shares of Common stock outstanding – diluted 54,408,974 47,257,102 Net income per share from continuing operations – diluted $ 0.33 $ 0.56 (1) Net income from continuing operations attributable to Enovis Corporation for the respective periods is calculated using Net income from continuing operations less the income attributable to noncontrolling interest, net of taxes, of $ 1.2 million for the three months ended April 1, 2022 and April 2, 2021. 10 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) As a result of the reverse stock split, all share and per share figures contained in the Condensed Consolidated Financial Statements have been retroactively restated as if the reverse stock split occurred at the beginning of the periods presented. For all periods presented, the weighted-average shares of Common stock outstanding - basic includes the impact of the shares related to the issuance of the tangible equity units. During the three months ended April 1, 2022, conversions of the Company’s tangible equity units resulted in the issuance of approximately 1.7 million shares of Company common stock. All issuances of Company common stock related to the tangible equity units were converted at the minimum settlement rate of 1.33 shares of common stock for each purchase contract as a result of the Company’s share price. The issued shares are included in the Common stock issued and outstanding as of April 1, 2022. See Note 8, “Equity” for details. The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three months ended April 1, 2022 and April 2, 2021 excludes 0.5 million of outstanding stock-based compensation awards as their inclusion would be anti-dilutive. 7. Income Taxes During the three months ended April 1, 2022, Income from continuing operations before income taxes was $ 38.0 million, while income tax expense was $ 18.7 million. The effective tax rate was 49.1 % for the three months ended April 1, 2022. The effective tax rate for the three months ended April 1, 2022 differed from the 2021 U.S. federal statutory rate of 21% mainly due to withholding taxes, taxable foreign exchange gains, U.S. taxation of international operations, other non-deductible expenses, and various items expensed discretely to the quarter. During the three months ended April 2, 2021, Income from continuing operations before income taxes was $ 35.6 million, while income tax expense was $ 7.9 million. The effective tax rate was 22.2 % for the three months ended April 2, 2021. The effective tax rate for the three months ended April 2, 2021 differed from the 2021 U.S. federal statutory rate of 21% mainly due to withholding taxes, taxable foreign exchange gains and other non-deductible expenses partially offset by the benefit of U.S. tax credits. 11 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) 8. Equity Share Repurchase Program In 2018, the Company’s Board of Directors authorized the repurchase of shares of the Company’s Common stock from time-to-time on the open market or in privately negotiated transactions. No repurchases of the Company’s Common stock have been made under this plan since the third quarter of 2018. As of April 1, 2022, the remaining stock repurchase authorization provided by the Board of Directors was $ 100 million. The timing, amount and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors. There is no term associated with the remaining repurchase authorization. Accumulated Other Comprehensive Loss The following tables present the changes in the balances of each component of Accumulated other comprehensive loss including reclassifications out of Accumulated other comprehensive loss for the three months ended April 1, 2022 and April 2, 2021. All amounts are net of tax and noncontrolling interest, if any. Accumulated Other Comprehensive Loss Components Net Unrecognized Pension and Other Post-Retirement Benefit Cost Foreign Currency Translation Adjustment Unrealized Gain on Hedging Activities Total (In thousands) Balance at January 1, 2022 $ ( 85,559 ) $ ( 475,125 ) $ 44,671 $ ( 516,013 ) Other comprehensive income (loss) before reclassifications: Foreign currency translation adjustment 470 ( 38,333 ) — ( 37,863 ) Loss on long-term intra-entity foreign currency transactions — ( 15,260 ) ( 15,260 ) Gain on net investment hedges — — 9,028 9,028 Other comprehensive income (loss) before reclassifications 470 ( 53,593 ) 9,028 ( 44,095 ) Amounts reclassified from Accumulated other comprehensive loss 629 — — 629 Net Other comprehensive income (loss) 1,099 ( 53,593 ) 9,028 ( 43,466 ) Balance at April 1, 2022 $ ( 84,460 ) $ ( 528,718 ) $ 53,699 $ ( 559,479 ) 12 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) Accumulated Other Comprehensive Loss Components Net Unrecognized Pension and Other Post-Retirement Benefit Cost Foreign Currency Translation Adjustment Unrealized Gain on Hedging Activities Total (In thousands) Balance at January 1, 2021 $ ( 112,783 ) $ ( 360,977 ) $ 21,654 $ ( 452,106 ) Other comprehensive income (loss) before reclassifications: Foreign currency translation adjustment 709 ( 82,663 ) ( 2,201 ) ( 84,155 ) Gain on long-term intra-entity foreign currency transactions — 31,098 — 31,098 Gain on net investment hedges — — 12,381 12,381 Other comprehensive income (loss) before reclassifications 709 ( 51,565 ) 10,180 ( 40,676 ) Amounts reclassified from Accumulated other comprehensive loss 1,055 — — 1,055 Net Other comprehensive income (loss) 1,764 ( 51,565 ) 10,180 ( 39,621 ) Balance at April 2, 2021 $ ( 111,019 ) $ ( 412,542 ) $ 31,834 $ ( 491,727 ) Tangible equity unit offering On January 11, 2019, the Company issued 4.6 million in Tangible Equity Units (“TEUs”) at the stated amount of $ 100 per unit. Net cash of $ 447.7 million was received upon closing. The gross proceeds and deferred finance costs from the issuance of the TEUs were allocated 84.4 % to equity (the “TEU prepaid stock purchase contracts”) and 15.6 % to debt (the “TEU amortizing notes”) based on the relative fair value of the respective components of each TEU. See Note 10, “Debt” for additional information on the TEU amortizing notes. The TEU prepaid stock purchase contracts were mandatorily converted into shares of Company common stock on January 15, 2022, unless previously settled at the holder’s option. All the TEU prepaid stock purchase contracts converted at the minimum settlement rate. Approximately 1.3 million and 0.1 million TEU prepaid stock purchase contracts were settled into approximately 1.7 million and 0.1 million shares of Company common stock as adjusted for the reverse split, during the three months ended April 1, 2022 and April 2, 2021, respectively. Since the 4.6 million TEU prepaid stock purchase contracts were mandatorily convertible into shares of Company common stock at the minimum settlement rate or greater, 6.1 million shares, as adjusted for the reverse split, are included in basic net income per share calculations for all periods presented. See Note 6, “Net Income Per Share from Continuing Operations” for additional information. 9. Inventories, Net Inventories, net consisted of the following: April 1, 2022 December 31, 2021 (In thousands) Raw materials $ 233,031 $ 215,200 Work in process 76,208 69,101 Finished goods 626,911 567,281 936,150 851,582 LIFO reserve 797 1,129 Less: allowance for excess, slow-moving and obsolete inventory ( 84,133 ) ( 76,416 ) $ 852,814 $ 776,295 The valuation of LIFO inventories is made at the end of the year based on inventory levels and costs at the time. At April 1, 2022 and December 31, 2021, approximately 17.4 % and 18.3 % of total inventories, respectively, were valued using the LIFO method. 13 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) 10. Debt Long-term debt consisted of the following: April 1, 2022 December 31, 2021 (In thousands) Term loan $ 782,653 $ 782,435 Euro senior notes 383,997 395,552 2026 notes 298,034 297,906 TEU amortizing notes — 6,501 Revolving credit facilities and other 605,475 604,599 Total debt 2,070,159 2,086,993 Less: current portion ( 422,289 ) ( 8,314 ) Long-term debt $ 1,647,870 $ 2,078,679 Subsequent Event Debt Redemptions In conjunction with the Separation which occurred on April 4, 2022, the Company repaid its Term loan and Revolver (each as defined below) and entered into a new credit agreement with its banking partners. Additionally, on March 7, 2022, the Company announced a conditional redemption of its 3.25 % Euro Senior Notes due 2025 and its 6.375 % Senior Notes due 2026. The Euro Senior Notes and 2026 Notes were redeemed on April 7, 2022 after the completion of the Separation. In accordance with the redemption notices and subsequent redemption of the debt described above, $ 421.3 million has been reclassified from long-term debt to current maturities. The amount reflects the debt retired that was not refinanced on a long-term basis. Refer to Note 15, “Subsequent Events” for further detail of ongoing financing arrangements. Term Loan and Revolving Credit Facility The Company’s credit agreement (the “Credit Facility”), which was legally extinguished in conjunction with the Separation on April 4, 2022, consisted of a $ 975 million revolving credit facility (the “Revolver”) and a Term A-1 loan with an initial aggregate principal amount of $ 825 million (the “Term Loan”), each with a maturity date of December 6, 2024. The Revolver contained a $ 50 million swing line loan sub-facility. Certain U.S. subsidiaries of the Company guarantee the obligations under the Credit Facility. The Credit Facility contained customary covenants limiting the ability of the Company 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 Facility contained maximum total leverage ratio and minimum interest coverage ratio financial covenants. For further description of the Company’s financial covenants as of April 1, 2022, refer to Note 13, “Debt” in the Notes to the Consolidated Financial Statements in the Company’s 2021 Form 10-K. As of April 1, 2022, the Company was in compliance with the covenants under the Credit Facility. As of April 1, 2022, the weighted-average interest rate of borrowings under the Credit Facility was 1.74 %, excluding accretion of original issue discount and deferred financing fees, and there was $ 375 million available on the Revolver. Euro Senior Notes The Company had senior unsecured notes with an aggregate principal amount of € 350 million due in May 2025, with an interest rate of 3.25 % (the “Euro Senior Notes”). The Euro Senior Notes were redeemed on April 7, 2022 after the completion of the Separation. TEU Amortizing Notes The Company had 6.50 % TEU amortizing notes at an initial principal amount of $ 15.6099 per note with equal quarterly cash installments of $ 1.4375 per note representing a payment of interest and partial payment of principal. The final installment payment was made on January 15, 2022. The Company paid $ 6.5 million and $ 6.1 million of principal on the TEU amortizing notes in the three months ended April 1, 2022 and April 2, 2021, respectively. 14 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) 2026 Notes The Company had senior notes with a remaining principal amount of $ 300 million (the “2026 Notes”), which were due on February 15, 2026 and had an interest rate of 6.375 %. The 2026 Notes were redeemed on April 7, 2022 after the completion of the Separation. Other Indebtedness In addition to the debt agreements discussed above, the Company is party to various bilateral credit facilities with a borrowing capacity of $ 168.2 million. As of April 1, 2022, there were no outstanding borrowings under these facilities. Subsequent to the end of the first quarter of 2022, the bilateral credit facilities are no longer available to Enovis due to the completion of the Separation as they relate to ESAB Corp or expired. The Company is party to letter of credit facilities with an aggregate capacity of $ 211.9 million. Total letters of credit of $ 40.2 million were outstanding as of April 1, 2022. Subsequent to the end of the first quarter of 2022, substantially all of the letter of credit facilities are no longer available to Enovis due to the completion of the Separation as they relate to ESAB Corp. Deferred Financing Fees In total, the Company had deferred financing fees, including the original issue discount, of $ 11.3 million included in its Condensed Consolidated Balance Sheet as of April 1, 2022, which would be charged to Interest expense, net, primarily using the effective interest method, over the life of the applicable debt agreements. In conjunction with the Separation and debt redemptions in the second quarter of 2022, the Company expects a net loss on the early extinguishment of debt of approximately $ 17 million, including approximately $ 13 million of redemption premiums on the retired debt instruments and $ 4 million of noncash write-offs of original issue discount and deferred financing fees on the Euro Senior Notes and Senior Notes. The Company also expects additional charges of approximately $ 7 million in conjunction with entering into the new Enovis Credit Facility and the extinguishment of the prior Credit Facility, which is subject to finalization. 11. Accrued Liabilities Accrued liabilities in the Condensed Consolidated Balance Sheets consisted of the following: April 1, 2022 December 31, 2021 (In thousands) Accrued compensation and related benefits $ 122,172 $ 142,203 Accrued taxes 70,152 72,276 Accrued asbestos-related liability 34,494 30,572 Warranty liability 19,331 17,457 Accrued restructuring liability - current portion 9,546 10,221 Accrued third-party commissions 34,119 38,492 Customer advances and billings in excess of costs incurred 31,440 31,468 Lease liability - current portion 39,939 42,403 Accrued interest 9,586 11,065 Other 119,271 114,940 $ 490,050 $ 511,097 15 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) Warranty Liability The activity in the Company’s warranty liability consisted of the following: Three Months Ended April 1, 2022 April 2, 2021 (In thousands) Warranty liability, beginning of period $ 17,457 $ 15,543 Accrued warranty expense 2,129 2,042 Changes in estimates related to pre-existing warranties 836 589 Cost of warranty service work performed ( 1,112 ) ( 2,472 ) Acquisition-related liability — 321 Foreign exchange translation effect 21 ( 224 ) Warranty liability, end of period $ 19,331 $ 15,799 Accrued Restructuring Liability The Company’s restructuring programs include a series of actions to reduce the structural costs of the Company. A summary of the activity in the Company’s restructuring liability included in Accrued liabilities and Other liabilities in the Condensed Consolidated Balance Sheets is as follows: Three Months Ended April 1, 2022 Balance at Beginning of Period Provisions Payments Foreign Currency Translation Balance at End of Period (3) (In thousands) Restructuring and other related charges: Fabrication Technology: Termination benefits (1) $ 7,818 $ 452 $ ( 1,861 ) $ ( 26 ) $ 6,383 Facility closure costs and other (2) 291 4,815 ( 4,796 ) ( 1 ) 309 8,109 5,267 ( 6,657 ) ( 27 ) 6,692 Non-cash charges (2) 37 5,304 Medical Technology: Termination benefits (1) 2,470 2,438 ( 1,905 ) ( 9 ) 2,994 Facility closure costs and other (2) 358 233 ( 575 ) — 16 2,828 2,671 ( 2,480 ) ( 9 ) 3,010 Non-cash charges (2) 282 2,953 Total: Total restructuring liability activity $ 10,937 7,938 $ ( 9,137 ) $ ( 36 ) $ 9,702 Total Non-cash charges 319 $ 8,257 (1) Includes severance and other termination benefits, including outplacement services. (2) Includes the cost of relocating associates, relocating equipment, lease termination expense and other costs in connection with the closure and optimization of facilities, site cost structures, and product lines. The Medical Technology segment charges include $ 0.5 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three months ended April 1, 2022. (3) As of April 1, 2022, $ 9.5 million and $ 0.2 million of the Company’s restructuring liability was included in Accrued liabilities and Other liabilities, respectively. 16 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) 12. Financial Instruments and Fair Value Measurements The carrying values of financial instruments, including Trade receivables, other receivables and Accounts payable, approximate their fair values due to their short-term maturities. The estimated fair value of the Company’s debt, which was $ 2.1 billion as of both April 1, 2022 and December 31, 2021, was based on current interest rates for similar types of borrowings and is in Level Two of the fair value hierarchy. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future. A summary of the Company’s assets and liabilities that are measured at fair value for each fair value hierarchy level for the periods presented is as follows: April 1, 2022 Level One Level Two Level Three Total (In thousands) Assets: Cash equivalents $ 5,875 $ — $ — $ 5,875 Foreign currency contracts - not designated as hedges — 1,628 — 1,628 Deferred compensation plans — 13,811 — 13,811 $ 5,875 $ 15,439 $ — $ 21,314 Liabilities: Foreign currency contracts - not designated as hedges $ — $ 2,984 $ — $ 2,984 Deferred compensation plans — 13,811 — 13,811 $ — $ 16,795 $ — $ 16,795 December 31, 2021 Level One Level Two Level Three Total (In thousands) Assets: Cash equivalents $ 8,133 $ — $ — $ 8,133 Foreign currency contracts - not designated as hedges — 2,607 — 2,607 Deferred compensation plans — 11,213 — 11,213 $ 8,133 $ 13,820 $ — $ 21,953 Liabilities: Foreign currency contracts - not designated as hedges $ — $ 3,044 $ — $ 3,044 Deferred compensation plans — 11,213 — 11,213 $ — $ 14,257 $ — $ 14,257 There were no transfers in or out of Level One, Two or Three during the three months ended April 1, 2022. 17 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) Foreign Currency Contracts As of April 1, 2022 and December 31, 2021, the Company had foreign currency contracts related to purchases and sales with notional values of $ 203.6 million and $ 273.2 million, respectively. The Company recognized the following in its Condensed Consolidated Financial Statements related to its derivative instruments: Three Months Ended April 1, 2022 April 2, 2021 (In thousands) Contracts Designated as Hedges: Unrealized gain (loss) on net investment hedges (1) $ 9,028 $ 12,381 Contracts Not Designated in a Hedge Relationship: Foreign Currency Contracts: Unrealized gain (loss) ( 1,356 ) ( 2,611 ) Realized gain (loss) ( 14,582 ) 51 (1) The unrealized gain (loss) on net investment hedges is attributable to the change in valuation of Euro denominated debt. 13. Commitments and Contingencies For further description of the Company’s litigation and contingencies, reference is made to Note 18, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements in the Company’s 2021 Form 10-K. Since the Company did not retain an interest in the ongoing operations of its divested businesses, the retained asbestos-related activity has been classified in its Condensed Consolidated Statements of Operations as a component of Loss from discontinued operations, net of taxes. In conjunction with the Separation, all asbestos-related contingencies and insurance coverages from the divested industrial businesses were transferred fully to ESAB Corp. Asbestos Contingencies Asbestos-related claims activity since December 31 is as follows: Three Months Ended April 1, 2022 April 2, 2021 (Number of claims) Claims unresolved, beginning of period 14,559 14,809 Claims filed (1) 1,065 1,067 Claims resolved (2) ( 779 ) ( 581 ) Claims unresolved, end of period 14,845 15,295 (1) Claims filed include all asbestos claims for which notification has been received or a file has been opened. (2) Claims resolved include all asbestos claims that have been settled, dismissed or that are in the process of being settled or dismissed based upon agreements or understandings in place with counsel for the claimants. 18 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) The Company’s Condensed Consolidated Balance Sheets included the following amounts related to asbestos-related litigation: April 1, 2022 December 31, 2021 (In thousands) Long-term asbestos insurance asset (1) $ 229,215 $ 231,900 Long-term asbestos insurance receivable (1) 17,002 15,421 Accrued asbestos liability (2) 34,494 30,572 Long-term asbestos liability (3) 254,106 261,779 (1) Included in Other assets in the Condensed Consolidated Balance Sheets. (2) Represents current accruals for probable and reasonably estimable asbestos-related liability costs that the Company believes the subsidiaries will pay, and unpaid legal costs related to defending themselves against asbestos-related liability claims and legal action against the Company’s insurers, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets. (3) Included in Other liabilities in the Condensed Consolidated Balance Sheets. Management’s analyses are based on currently known facts and assumptions. Projecting future events, such as new claims to be filed each year, the average cost of resolving each claim, coverage issues among layers of insurers, the method in which losses will be allocated to the various insurance policies, interpretation of the effect on coverage of various policy terms and limits and their interrelationships, the continuing solvency of various insurance companies, the amount of remaining insurance available, as well as the numerous uncertainties inherent in asbestos litigation could cause the actual liabilities and insurance recoveries to be higher or lower than those projected or recorded which could materially affect the Company’s financial condition, results of operations or cash flow. General Litigation The Company is involved in various other pending legal proceedings arising out of the ordinary course of the Company’s business. None of these legal proceedings are expected to have a material adverse effect on the financial condition, results of operations or cash flow of the Company. With respect to these proceedings and the litigation and claims described in the preceding paragraphs, management of the Company believes that it will either prevail, has adequate insurance coverage or has established appropriate accruals to cover potential liabilities. Legal costs related to proceedings or claims are recorded as incurred. Other costs that management estimates may be paid related to the claims are accrued when the liability is considered probable and the amount can be reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adverse to the Company, there could be a material adverse effect on the financial condition, results of operations or cash flow of the Company. 19 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) 14. Segment Information The Company conducts its continuing operations through the Fabrication Technology and Medical Technology operating segments, which also represent the Company’s reportable segments. ▪ Fabrication Technology - a leading global supplier of consumable products and equipment for use in cutting, joining and automated welding, as well as gas control equipment, providing a wide range of products with innovative technologies to solve challenges in a wide range of industries. • Medical Technology - a leader in orthopedic solutions, providing devices, software and services spanning the full continuum of patient care, from injury prevention to joint replacement to rehabilitation. Certain amounts not allocated to the two reportable segments and intersegment eliminations are reported under the heading “Corporate and other.” The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and segment operating income (loss), which represents Operating income (loss) before Restructuring and certain other charges. The Company’s segment results were as follows: Three Months Ended April 1, 2022 April 2, 2021 (In thousands) Net sales: Fabrication Technology $ 647,911 $ 568,128 Medical Technology 375,457 311,083 $ 1,023,368 $ 879,211 Segment operating income (loss) (1) : Fabrication Technology $ 95,545 $ 82,305 Medical Technology ( 147 ) 2,162 Corporate and other ( 31,396 ) ( 17,361 ) $ 64,002 $ 67,106 (1) The following is a reconciliation of Income from continuing operations before income taxes to segment operating income: Three Months Ended April 1, 2022 April 2, 2021 (In thousands) Income from continuing operations before income taxes $ 38,019 $ 35,647 Interest expense, net 15,099 25,660 Restructuring and other related charges (1) 8,257 4,046 MDR and related costs (2) 2,627 1,753 Segment operating income $ 64,002 $ 67,106 (1) Restructuring and other related charges includes $ 0.5 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three months ended April 1, 2022. (2) Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union Medical Devices Regulation. These costs are classified as Selling, general and administrative expense on our Condensed Consolidated Statements of Operations. 20 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) 15. Subsequent Events As discussed in Note 1, “General”, the Company completed the separation of its fabrication technology business on April 4, 2022 through a tax-free, pro-rata distribution of 90 % of the outstanding common stock of ESAB Corp to the Company’s stockholders. In connection with the Separation, ESAB Corp and Enovis entered into various agreements to affect the Separation and provide a framework for Enovis’ relationship with ESAB Corp after the Separation, including a separation and distribution agreement, stockholders’ and registration rights agreement, employee matters agreement, tax matters agreement, transition services agreement, ESAB Business Excellence System (“EBS”) license agreement, and intellectual property matters agreement. These agreements will govern the Separation between Enovis and ESAB Corp of the assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) of Enovis and its subsidiaries attributable to periods prior to, at and after the Separation and will govern certain relationships between Enovis and ESAB Corp after the Separation. In connection with the Separation, ESAB Corp issued $ 1.2 billion of new debt securities, the proceeds from which were used to fund a $ 1.2 billion cash distribution to Enovis upon Separation. The distribution proceeds were used by Enovis in conjunction with $ 450 million of borrowings on a term loan under the new Enovis credit facility, as discussed below, and $ 52.3 million of cash on hand to repay $ 1.4 billion of outstanding debt and accrued interest on its Credit Facility, $ 302.8 million of outstanding debt and accrued interest on its 2026 Notes, as well as a redemption premium at 103.188 % of the principal amount of the 2026 Notes, and other fees and expenses due at closing. Additionally, on April 7, 2022, the Company completed the redemption of its Euro Senior Notes representing all of its outstanding € 350 million principal 3.250 % Senior Notes due 2025 consisting of $ 392.1 million outstanding debt and accrued interest as well as a redemption premium of 100.813 % of the principal amount. In the second quarter of 2022, the Company expects a net loss on the early extinguishment of debt of approximately $ 17 million, including approximately $ 13 million of redemption premiums on the retired debt instruments and $ 4 million of noncash write-offs of original issue discount and deferred financing fees on the Euro Senior Notes and Senior Notes. The Company also expects additional charges of approximately $ 7 million in conjunction with entering into the new Enovis Credit Facility and the extinguishment of the prior Credit Facility, which is subject to finalization. In accordance with the redemption notices and subsequent redemption of the debt described above, $ 421.3 million has been reclassified from long-term debt to current maturities. The amount reflects the debt retired that was not refinanced on a long-term basis. The Company retained 10 % of the shares of ESAB Corp common stock as part of the Separation. The Company intends to divest its 10 % retained shares in ESAB Corp in a tax-efficient exchange for its outstanding debt under the new Enovis credit facility no later than 12 months after the Distribution Date. The retained stake in ESAB Corp, based on the initial opening share price, is approximately $ 300 million on a fair value basis and will be marked-to-market each reporting period. Immediately following the Separation, the Company effected a one-for-three reverse stock split of all issued and outstanding shares of Enovis common stock. As a result of the reverse stock split, all share and per share figures contained in the accompanying Condensed Consolidated Financial Statements have been retroactively restated as if the reverse stock split occurred at the beginning of the periods presented. On April 4, 2022, the Company entered into a new credit agreement (the “Enovis Credit Agreement”) which replaces the Company’s prior credit agreement and concurrently terminated all indebtedness of the Company outstanding thereunder being repaid on such date with proceeds of the Enovis Credit Agreement and other funds of the Company. The Enovis Credit Agreement consists of a revolving credit facility that totals $ 900 million in commitments with a maturity date of April 4, 2027 (the “Enovis Revolver”) and a term loan in an aggregate amount of $ 450 million with a maturity date of April 4, 2023 (the “Enovis Term Loan”, and together with the Enovis Revolver, the “Enovis Credit Facilities”). The Enovis Revolver includes a $ 50 million swingline loan sub-facility. The Enovis Revolver will be used to provide funds for the Company’s ongoing working capital requirements and for general corporate purposes. The Enovis Term Loan bears interest, at the election of the Company, at either the base rate (as defined in the Enovis Credit Agreement) or at the term Secured overnight financing rate (“SOFR”) plus an adjustment (as defined in the Enovis Credit Agreement), in each case, plus the applicable interest rate margin. The Enovis Revolver bears interest, at the election of the Company, at either the base rate or, in the case of loans denominated in dollars, the term SOFR rate plus an adjustment or the daily simple SOFR plus an adjustment, in the case of loans denominated in euros, the adjusted EURIBOR rate and, in the case of loans denominated in sterling, SONIA plus an adjustment (as all such rates are defined in the Enovis Credit Agreement), in each case, plus the applicable interest rate margin. Initially, the applicable interest rate margin will be 1.500 % or, in the case 21 ENOVIS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Unaudited) of base rate loans, 0.500 %, and in future quarters it may change based upon the Company’s total leverage ratio (ranging from 1.125 % to 1.750 % or in the case of the base rate margin, 0.125 % to 0.750 %). Each swing line loan denominated in dollars will bear interest at the base rate plus the applicable interest rate margin. Certain U.S. subsidiaries of the Company have agreed to guarantee the obligations of the Company under the Enovis Credit Agreement. 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 4.50 :1.00, with a step-down to, on the date on which the Company and its subsidiaries have transferred any retained shares of ESAB common stock to one or more unaffiliated third parties, 4.00 :1.00, commencing with the fiscal quarter ending June 30, 2023, 3.75 :1.00 and commencing with the fiscal quarter ending June 30, 2024, 3.50 :1.00, 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 Enovis Revolver. 22