Enovis CORP 10-Q

Item 1A. Risk Factors An investment in our common stock involves a high degree of risk. In addition to risk factors included in “Part I. Item 1A. Risk Factors” in our 2021 Form 10-K, we face the following risks: We may not achieve some or all of the expected benefits of the Separation, and the Separation may adversely affect our businesses. We may not be able to achieve the full strategic and financial benefits expected to result from the Separation, or such benefits may be delayed or not occur at all. The Separation is expected to provide the following benefits, among others: • the Separation will allow investors to value the Company based on its distinct investment identity, and enable investors to evaluate the merits, performance and future prospects of the Company’s businesses based on the distinct characteristics; • the Separation will facilitate incentive compensation structures for employees more directly tied to the performance of the Company’s businesses, and may enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives; and • the Separation will allow us to more effectively pursue our operating priorities and strategies, and enable management to focus on unique opportunities for long-term growth and profitability. We may not achieve these and other anticipated benefits for a variety of reasons, including, among others: • certain costs and liabilities that were otherwise less significant to the Company prior to the Separation will be more significant for us as a separate company after the Separation; and • we may not achieve the anticipated benefits of the Separation for a variety of reasons, including, among others, (i) we may be more susceptible to market fluctuations and other adverse events than we were prior to the Separation and (ii) following the Separation, our businesses are less diversified than they were prior to the Separation. If we fail to achieve some or all of the benefits expected to result from the Separation, or if such benefits are delayed, our businesses, operating results and financial condition could be adversely affected. We could incur significant liability if the separation and distribution of ESAB Corp is determined to be a taxable transaction. We have received an opinion from outside tax counsel to the effect that the separation and distribution of ESAB Corp qualifies as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code. The opinion relies on certain facts, assumptions, representations and undertakings from ESAB and us regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, our stockholders and we may not be able to rely on the opinion of tax counsel and could be subject to significant tax liabilities. Notwithstanding the opinion of tax counsel we have received, the IRS could determine on audit that the separation and distribution are taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion. If the separation and distribution of ESAB are determined to be taxable for U.S. federal income tax purposes, our stockholders that are subject to U.S. federal income tax and we could incur significant U.S. federal income tax liabilities. Potential indemnification liabilities to ESAB Corp pursuant to the separation agreement could materially and adversely affect our businesses, financial condition, results of operations and cash flows. We entered into a separation and distribution agreement and related agreements with ESAB Corp to govern the separation and distribution of ESAB Corp and the relationship between the two companies going forward. These agreements provide for specific indemnity and liability obligations of each party and could lead to disputes between us. If we are required to indemnify ESAB Corp under the circumstances set forth in these agreements, we may be subject to substantial liabilities. In addition, with 40 respect to the liabilities for which ESAB Corp has agreed to indemnify us under these agreements, there can be no assurance that the indemnity rights we have against ESAB Corp will be sufficient to protect us against the full amount of the liabilities, or that ESAB Corp will be able to fully satisfy its indemnification obligations. Each of these risks could negatively affect our businesses, financial condition, results of operations and cash flows. Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine. The global economy has been negatively impacted by the military conflict between Russia and Ukraine. Furthermore, governments in the United States, United Kingdom and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia and Russia has imposed counter-sanctions in response. Although we have no direct operations in Russia or Ukraine or government-imposed sanctions on our products currently, we could experience sanctions in the future and/or shortages in materials, increased costs for raw material and other supply chain issues due in part to the negative impact of the Russia-Ukraine military conflict on the global economy. Further escalation of geopolitical tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, additional supply disruptions, lower consumer demand and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain. In addition, the effects of the ongoing conflict could heighten many of our known risks described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 22, 2022. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures None.