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Item 1. Business

2023-03-01 compared with 2022-02-22 · 271 added, 125 removed, 49 unchanged (89% of the section changed)

Colfax Corporation (the “Company”, “Colfax”, “we” or “us”) is a leading diversified technology company that provides fabrication technology and medical device products and services to customers around the world, principally under the ESAB and DJO brands.

The Company has been built through a series of acquisitions, as well as organic growth, since its founding in 1995.

We seek to build an enduring premier global enterprise by applying the Colfax Business System (“CBS”) to continuously improve our Company and pursue growth in revenues and improvements in profit and cash flow.

On March 4, 2021, the Company announced its intention to separate its fabrication technology and specialty medical technology businesses into two differentiated, independent, and publicly traded companies.

The current Colfax entity will retain the specialty medical technology business under a new name, Enovis Corporation.

The fabrication technology business will operate independently under the existing ESAB brand name.

The separation is intended to be structured in a tax-free manner and is targeted to be completed near the end of the first quarter of 2022.

The assets, liabilities, revenues and expenses of the fabrication technology businesses are included in continuing operations of the Company in the accompanying Consolidated Financial Statements.

On January 13, 2012, we completed the acquisition of Charter International plc (“Charter”), which transformed Colfax from its historical roots as a fluid handling business into a diversified industrial enterprise with a broad global footprint.

This acquisition provided a growth platform in the fragmented fabrication technology sector, while broadening the scope of our fluid handling platform to include air and gas handling products.

Following the Charter acquisition, we strengthened and expanded the fluid handling and air & gas handling operations through acquisitions and the application of CBS before divesting the platforms in December 2017 and September 2019, respectively.

On February 22, 2019, we completed the acquisition of DJO Global, Inc.

(“DJO”) for a net purchase price of $ 3.15 billion .

DJO is a global developer, manufacturer and distributor of high-quality medical devices with a broad range of products used for orthopedic bracing, reconstructive implants, rehabilitation, pain management and physical therapy.

DJO products address the continuum of patient care from injury prevention to rehabilitation from injury or degenerative disease, enabling people to regain or maintain their natural motion.

The DJO acquisition is part of our strategic evolution creating a new growth platform in the high-margin orthopedic solutions market.

On September 30, 2019, we completed the divestiture of our Air and Gas Handling business for an aggregate purchase price of $ 1.8 billion, including $ 1.67 billion of cash paid at closing and the assumption of certain liabilities and minority interests.

We used the cash proceeds, net of transaction expenses and estimated taxes, to pay down approximately $1.6 billion of debt that was incurred through the DJO acquisition.

During the year ended December 31, 2020, we completed five acquisitions and three investments, all within our Medical Technology segment.

During the year ended December 31, 2021, we completed five acquisitions and three investments within our Medical Technology segment, and one acquisition within our Fabrication Technology segment.

Enovis Corporation (the “Company”, “Enovis”, “we” or “us”, and previously “Colfax Corporation” or “Colfax”) is a medical technology company focused on developing clinically differentiated solutions that generate measurably better patient outcomes and transform workflows by manufacturing, and distributing high-quality medical devices with a broad range of products used for reconstructive surgery, rehabilitation, pain management and physical therapy.

Our products address the continuum of patient care from injury prevention to rehabilitation after surgery or injury or from degenerative disease, enabling people to regain or maintain their natural motion.

We seek to leverage our Enovis Growth eXcellence business system (“EGX”), a set of tools, processes, and culture, to continuously improve our ability to enable great patient outcomes and to drive and fuel growth.

On April 4, 2022, we completed the separation of the last of our industrial businesses, the fabrication technology business, through a tax-free, pro-rata distribution of 90 % of the outstanding common stock of ESAB Corporation (“ESAB”) to Colfax stockholders.

Prior to the Separation, we were a leading diversified technology company that provided fabrication technology and medical device products and services to customers around the world, principally under the ESAB and DJO Brands.

To affect the Separation, we distributed to our stockholders one share of ESAB common stock for every three shares of Colfax common stock held at the close of business on March 22, 2022, with the Company retaining 10 % of the shares of ESAB common stock immediately following the Separation.

Upon completion of the Separation, Colfax, which retained the Company’s specialty medical technology business, changed its name to Enovis Corporation and began trading under the stock symbol “ENOV” on the New York Stock Exchange on April 5, 2022.

Immediately following the Separation, the Company effected a one-for-three reverse stock split of all issued and outstanding shares of Enovis common stock.

Following the the completion of the Separation, the Company revised its reporting structure and conducts its business through two operating segments, “Prevention & Recovery” and “Reconstructive”.

We divested our remaining 10% ownership stake in ESAB on November 18, 2022 by exchanging with a lender under the Company’s Credit Agreement, dated as of April 4, 2022 (the “Enovis Credit Agreement”), ESAB common stock for $ 230.5 million of the $ 450.0 million term loan outstanding under our Credit Agreement.

During the year ended December 31, 2022, we completed four acquisitions and one investment within our Prevention & Recovery segment, and two acquisitions within our Reconstructive segment.

See Note 5, “Acquisitions”, for further information.

Our business management system, CBS, is integral to our operations.

CBS consists of a comprehensive set of tools and repeatable, teachable processes that are designed to drive continuous improvement and create superior value for our customers, shareholders and associates.

Rooted in our core values, it is our culture.

We believe that our management team’s access to, and experience in, the application of the CBS methodology is one of our primary competitive strengths.

Each year, Colfax associates in every business develop strategic and operating plans which are based on the Voice of the Customer .

Our business management system, EGX, is integral to our operations.

EGX is our culture and incorporates our values and drives our behaviors.

EGX consists of a comprehensive set of tools, and repeatable, teachable processes that we use to drive continuous improvement and create superior value for our customers, shareholders and associates.

We believe that our management team’s access to, and experience in, the application of the EGX methodology is one of our primary competitive strengths.

EGX was referred to as Colfax Business Systems, or CBS, prior to the Separation.

Each year, Enovis associates in every business develop strategic and operating plans that are based on the principle of the Voice of the Customer .

In these plans, we are clear about our market realities, our threats, our risks, our opportunities and, most importantly, our vision.

Our belief is that when we use the tools of CBS to drive the implementation of these plans, we are able to uniquely provide customers with the world-class quality, delivery, cost and innovation they require.

We believe that performance ultimately helps our customers and Colfax sustainably grow and succeed.

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.

While these impacts lessened in the first half of 2021 due to broadening access to COVID-19 vaccines and gradual relaxing of some government-mandated restrictions, the surge of COVID-19 virus variants in the second half of 2021 has led to the reinstatement of restrictions in certain jurisdictions, disrupting the supply chains and slowing economic recovery.

The COVID-19 outbreak has caused increased uncertainty in estimates and assumptions affecting the reported amounts of assets and liabilities in the Consolidated Financial Statements as the extent and period of recovery from the COVID-19 outbreak and related economic disruption can be difficult to forecast.

Furthermore, the historical seasonality trends have been disrupted by the commercial impacts caused by the COVID-19 pandemic and, more recently, supply chain disruptions.

Our belief is that when we use the tools of EGX to drive the implementation of these plans, we are able to uniquely provide customers with the world-class quality, delivery, cost and innovation they require.

We believe that performance ultimately helps our customers and Enovis sustainably grow and succeed.

The COVID-19 pandemic has caused economic disruptions since its emergence in 2020.

The emergence of variants and outbreaks have continued to cause some volatility which slowed the pace of recovery in 2022.

The pandemic and actions taken in response to it, as well as other market dynamics in recent periods, have had a variety of impacts on our results of operations during the periods presented, including adverse impacts on sales levels.

We continue to experience cost inflation, supply chain challenges, such as logistics delays, as well as staffing shortages experienced by our customers (healthcare providers) that continue to reduce capacity and procedures.

We are taking actions in an effort to mitigate impacts to our supply chain, including purchasing and producing additional inventory to protect our ability to meet customer demand;

however, we expect these pressures to continue.

In addition, there may be developments outside our control that require us to further adjust our operations.

Given the potential dynamic nature of this situation, including the rise, prevalence and severity of variants of the

virus, we cannot reasonably estimate the full impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.

Reportable Segments

We report our operations through the Fabrication Technology and Medical Technology segments.

Fabrication Technology

We formulate, develop, manufacture and supply consumable products and equipment for use in cutting, joining and automated welding, as well as gas control equipment.

For the year ended December 31, 2021, welding consumables represented approximately 69% of our Fabrication Technology segment’s total Net sales.

Our fabrication technology products are marketed under several brand names, most notably ESAB, which we believe is well known in the international welding industry.

ESAB’s comprehensive range of welding consumables includes electrodes, cored and solid wires and fluxes using a wide range of specialty and other materials, and cutting consumables including electrodes, nozzles, shields and tips.

ESAB’s fabrication technology equipment ranges from portable welding machines to large customized automated cutting and welding systems.

ESAB also offers a range of digital software and solutions to help its customers increase their productivity, remotely monitor their welding operations and digitize their documentation.

Products are sold into a wide range of global end markets, including general industry, construction, infrastructure, transportation, energy, renewable energy, and medical & life sciences.

Our sales channels include both independent distributors and direct salespeople who, depending on geography and end market, sell our products to our end users.

Medical Technology

We report our operations through the Prevention & Recovery and Reconstructive segments.

We develop, manufacture and distribute high-quality medical devices and services across the continuum of patient care from injury prevention to joint replacement to rehabilitation after surgery, injury or from degenerative disease, enabling people to regain or maintain their natural motion.

We serve the following two markets where we maintain leading positions in most of their product categories:

Prevention & Recovery and Reconstructive.

Our products are used by orthopedic specialists, surgeons, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers and other healthcare professionals to treat patients with musculoskeletal conditions resulting from degenerative diseases, deformities, traumatic events and sports-related injuries.

We reach a diverse customer base through multiple distribution channels, that include both independent distributors and direct salespeople, and provide a wide range of medical devices and related products to orthopedic specialists and other healthcare professionals operating in a variety of patient treatment settings and to retail consumers.

Prevention & Recovery

Our Prevention & Recovery segment includes products that are used by orthopedic specialists, surgeons, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers and other healthcare professionals to treat patients with musculoskeletal conditions resulting from degenerative diseases, deformities, traumatic events and sports-related injuries.

In addition, many of our non-surgical medical devices and related accessories are used by athletes and patients for injury prevention and at-home physical therapy treatment.

Our product lines include rigid and soft orthopedic bracing, hot and cold therapy, bone growth stimulators, vascular therapy systems and compression garments, therapeutic shoes and inserts, electrical stimulators used for pain management and physical therapy products.

Our surgical implant business offers a comprehensive suite of reconstructive joint products for the hip, knee, shoulder, elbow, foot, ankle,

We reach a diverse customer base through multiple distribution channels, including both independent distributors and direct salespeople, and provide a wide range of medical devices and related products to orthopedic specialists and other healthcare professionals operating in a variety of patient treatment settings and to retail consumers.

The following discussions of Industry and Competition , International Operations , Research and Development, Intellectual Property, Raw Materials, Seasonality, Working Capital, Regulatory Environment, Human Capital Management, and Company Information and Access to SEC Reports include information that is common to both of our reportable segments, unless indicated otherwise.

Our Prevention & Recovery product lines include rigid and soft orthopedic bracing, hot and cold therapy, bone growth stimulators, vascular therapy systems and compression garments, therapeutic shoes and inserts, electrical stimulators used for pain management and physical therapy products.

Reconstructive

Our Reconstructive segment is an innovation-driven leader offering a comprehensive suite of reconstructive joint products for the hip, knee, shoulder, elbow, foot, ankle, and finger and surgical productivity tools.

The following discussion includes information that is common to both of our reportable segments, unless indicated otherwise.

Industry and Competition

Our Fabrication Technology segment products and services are marketed worldwide and the markets we serve are fragmented and competitive.

Because we compete in selected niches of these markets and due to the diversity of our products and services, no single company competes directly with us across all our markets.

We encounter a wide variety of competitors that differ by product line, including well-established regional competitors, competitors with greater specialization in particular markets, as well as larger competitors.

The markets that our Fabrication Technology segment competes in are also served by Lincoln Electric and the welding business within Illinois Tool Works, Inc.

Our customer base is broadly diversified across many sectors of the economy, and we believe customers place a premium on quality, reliability, availability, innovation, and application engineering support.

We believe the principal elements of competition in our served markets are the ability to improve customer productivity and solve their technical challenges, reliably and timely supply high-quality products that represent a good value, and offer outstanding aftermarket support including application expertise and engineering capabilities.

Our management believes that we are a leading competitor in each of our markets with leading and well-recognized brands.

Our Medical Technology segment generates approximately 72% of its revenues in the United States and the majority of the remaining balance in Europe.

The markets in which our Medical Technology segment competes are highly competitive and fragmented.

Our Prevention & Recovery segment generates approximately 67% of its revenues in the U.S.

and the majority of the remaining balance in Europe.

The markets in which our Prevention & Recovery segment competes are highly competitive and fragmented.

We believe the principal elements of competition are innovation to create better patient outcomes, product quality, product reliability, brand names, and price.

We compete with large, diversified corporations and companies which are part of corporate groups that have significantly greater financial, marketing and other resources than we do, as well as numerous smaller niche companies.

The markets in which our Medical Technology segment competes are also served by Stryker and DePuy Synthes, the medical device business within Johnson & Johnson.

Given our history of product development and the experience of our management team, we are capable of effectively competing in our markets.

Key competitors for our Prevention & Recovery segment include Össur and Breg, Inc.

Our Reconstructive segment generates approximately 69% of its revenues in the U.S.

and the majority of the remaining balance in Europe.

The markets in which our Reconstructive segment competes are highly competitive and fragmented.

We believe the principal elements of competition are innovation to create better patient outcomes, product quality, product reliability, brand names, and price.

We compete in the Reconstructive segment with large companies that have significantly greater financial, marketing and other resources than we do, as well as numerous smaller niche companies.

Key competitors competitors for our Reconstructive segment include Stryker, Zimmer Biomet, and DePuy Synthes, the medical device business within Johnson & Johnson.

Given our history of innovation and the experience of our management team, we are capable of effectively competing in our markets.

The comprehensive range of products we offer enables us to reach a diverse customer base through multiple distribution channels with numerous opportunities to increase our growth across our markets.

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International Operations

Our Fabrication Technology segment products and services are available worldwide.

We believe this geographic diversity allows us to draw on the skills of a global workforce, provides stability to our operations, allows us to drive economies of scale, provides revenue streams that may offset economic trends in individual economies, and offers an opportunity to access new markets for products.

In addition, we believe that our exposure to developing economies will provide additional opportunities for growth in the future.

Our Medical Technology segment sells its products internationally through a network of wholly owned subsidiaries and independent distributors.

In Europe, we use sales forces of direct and independent salespersons and a network of independent distributors who call on healthcare professionals, as well as consumer retail stores and pharmacies, to sell our products.

We intend to continue to expand our direct and indirect distribution capabilities in attractive foreign markets.

Our principal markets for our Fabrication Technology segment outside the U.S.

are Europe, Asia, South America, and the Middle East, while our principal market for our Medical Technology segment outside the U.S.

For our company as a whole for the year ended December 31, 2021, approximately 60% of our Net sales were shipped to locations outside of the U.S., with approximately 32% shipped to locations outside North America and Europe.

Our principal market for our Prevention & Recovery and Reconstructive segments outside the U.S.

For the year ended December 31, 2022, approximately 32% of our Net sales were derived from operations outside the U.S., the majority of which is in Europe with the remaining portion mostly in the Asia-Pacific region.

Our international operations subject us to certain risks.

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and redesigning existing product lines to increase efficiency, improve durability, enhance performance and usability.

Additionally, in our Medical Technology segment, we receive new product and invention ideas from orthopedic surgeons and other healthcare professionals.

We receive new product and invention ideas from orthopedic surgeons and other healthcare professionals.

We seek to obtain rights to ideas we consider promising from a clinical and commercial perspective through entering into either assignment or licensing agreements.

We maintain contractual relationships with orthopedic surgeons who assist us in developing our products and may also provide consulting services in connection with our products.

Research and development expense was $ 88.8 million, $ 68.6 million and $ 61.8 million in 2021, 2020 and 2019, respectively.

These amounts do not include development and application engineering costs incurred in conjunction with fulfilling customer orders and executing customer projects, nor do they include costs related to securing third party product rights.

We expect to continue making significant expenditures for research and development to maintain and improve our competitive positions.

Intellectual Property

We rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secrets and contractual provisions to protect our intellectual property both in the U.S.

and around the world for both our Fabrication Technology and Medical Technology segments.

and around the world for both segments.

Although we highlight recent additions to our patent portfolio as part of our marketing efforts, we do not consider any one patent or trademark or any group thereof essential to our business as a whole or to any of our business operations.

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We obtain raw materials, component parts and supplies from a variety of global sources, generally each from more than one supplier.

Our principal raw materials and components for our Fabrication Technology segment are steel, iron, copper and aluminum.

Our principal raw materials and components for our Medical Technologies segment are ethylene-vinyl acetate copolymer form for our bracing and vascular products and cobalt-chromium alloy, stainless steel alloys, titanium alloy and ultra-high molecular weight polyethylene for our surgical implant products.

Our principal raw materials and components for our Prevention & Recovery segment are ethylene-vinyl acetate copolymer form for our bracing and vascular products.

Our principal raw materials and components for our Reconstructive segment are cobalt-chromium alloy, stainless steel alloys, titanium alloy and ultra-high molecular weight polyethylene for our surgical implant products.

Recent global supply chain issues have created challenges in acquiring certain raw materials, component parts and supplies;

however, the use of more than one supplier for these helps to mitigate the risk of shortages or delays in the global supply chain.

however, our general use of more than one supplier for these helps to mitigate the risk of shortages or delays in the global supply chain.

Refer to the Risk Factor captioned “We are dependent on the availability of raw materials, as well as parts and components used in our products,” for more information on this risk.

We believe our sources of raw materials are adequate for our needs for the foreseeable future and the loss of any one supplier would not have a material adverse effect on our business or results of operations.

Our European operations typically experience a slowdown during the July, August and December vacation seasons for our Fabrication Technology segment.

Sales in our Medical Technology segment typically peak in the fourth quarter.

However, the business impact caused by the COVID-19 pandemic, as well as general economic conditions, including recent supply chain disruptions, have distorted and may continue to distort the effects of historical seasonality patterns and impact future seasonal variations.

Working Capital

We maintain an adequate level of working capital to support our business needs.

There are no unusual industry practices or requirements related to working capital items.

Our sales typically peak in the fourth quarter;

however, the business impact caused by the COVID-19 pandemic has distorted the effects of historical seasonality patterns.

Regulatory Environment

Our medical device products are subject to extensive regulation by the U.S Food and Drug Administration (the “FDA”) and numerous other federal, state and foreign governmental authorities.

The FDA, for example, regulates virtually all aspects of a medical device’s development, design, pre-clinical testing, clinical trials, manufacturing, packaging, storage, premarket approval, recordkeeping, reporting, labeling, promotion, distribution, sale and marketing, as well as modifications to existing products and the marketing of existing products for new indications.

The process of obtaining regulatory approvals to market these products can be costly and time consuming and approvals might not be granted for future products on a timely basis, if at all.

Additionally, modifications to our existing products may require new regulatory approvals and we may be required to cease marketing or to recall any modified product until we obtain clearance or approval.

Both before and after a product is commercially released, we have ongoing responsibilities under FDA regulations and other local, state and foreign requirements.

Compliance with these requirements, including the FDA’s Quality System Regulation, recordkeeping regulations, labeling and promotional requirements and adverse event reporting regulations, is subject to continual review and is monitored rigorously through periodic inspections by the FDA and other regulators, which may result in observations (such as on Form 483), and in some cases warning letters, that require corrective action, or other forms of enforcement.

If the FDA or another regulator were to conclude that we are not in compliance with applicable laws or regulations, or that any of our products are ineffective or pose an unreasonable health risk, they could ban such products, detain or seize adulterated or misbranded products, order a recall, repair, replacement, or refund of payment of such products, refuse to grant pending premarket approval applications, refuse to provide certificates for exports, and/or require us to notify healthcare professionals and others that the products present unreasonable risks of substantial harm to the public health.

The FDA or other regulators may also impose operating restrictions, including a ceasing of operations at one or more facilities, enjoin and restrain certain violations of applicable law pertaining to our products and assess civil or criminal penalties against our officers, employees or us.

The FDA or other regulators could also issue a corporate warning letter, a recidivist warning letter, a consent decree of permanent injunction, and/or recommend prosecution.

DJO has received FDA warning letters in the past, and we cannot assure you that the FDA will not take further action in the future.

Governmental regulations outside the United States have and may continue to become increasingly stringent and complex.

In the EU, for example, the Medical Device Regulation (the “MDR”) was published in 2017 which, when it entered into full force in 2021, includes significant additional premarket and post-market requirements.

In complying with the requirements of this regulation, we have incurred and will need to incur additional costs to comply, which may be significant.

If we fail to meet the requirements of the new regulation, or are delayed in doing so, it could adversely impact our business in the EU and other regions that tie their product registrations to the EU requirements.

Additionally, the FDA regulates the export of medical devices from the United States to foreign countries and certain foreign countries may require FDA certification that our medical device products are in compliance with U.S.

Failure to obtain or maintain export certificates required for the export of our products could materially adversely impact revenues and growth.

Our Medical Technology business is also subject to various federal, state and foreign laws and regulations pertaining to healthcare fraud and abuse, including the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government, the federal Stark law, which prohibits a physician from making a referral for certain designated health services covered by the Medicare or Medicaid program, if the physician has a financial relationship with the entity providing the designated health services, the federal Physician Payments Sunshine Act, Health Insurance Portability and Accountability Act (“HIPAA”), which created additional federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters, and similar state and foreign laws.

These laws and regulations, among other things, constrain our business, marketing and other promotional activities by limiting the kinds of financial arrangements, including royalty, marketing and consulting arrangements, and sales programs we may have with hospitals, physicians or other potential purchasers of our products or individuals or entities who recommend our products, and consignment stock and bill arrangements, such as our OfficeCare program.

Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions or safe harbors, it is possible that some of our activities could be subject to challenge under one or more of such laws.

Moreover, the federal government has significantly increased investigations of and enforcement activity involving medical device manufacturers with regard to alleged kickbacks and other forms of remuneration to physicians and other healthcare professionals who use and prescribe their products, as well as financial relationships with other third-party entities in a position to increase utilization of the products.

Food and Drug Administration Regulation

In the United States, our products generally are subject to regulation by the FDA as medical devices pursuant to the Federal Food Drug and Cosmetic Act (the “FDCA”).

The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.

FDA Premarket Clearance and Approval Requirements

Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, grant of a de novo application, or approval of a premarket approval (“PMA”).

Under the FDCA, medical devices are classified into either Class I, Class II or Class III, depending on the degree of associated risk and the extent of manufacturer and regulatory control needed to ensure safety and effectiveness.

Class I includes devices with the lowest patient risk and are those for which safety and effectiveness can be assured by adherence to the FDA’s general controls for medical devices, including compliance with applicable portions of the Quality System Regulation (“QSR”) facility registration and product listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials.

Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA to ensure safety and effectiveness.

Special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents.

While most Class I devices are exempt from 510(k) premarket notification, most Class II device manufacturers must submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission for commercial distribution.

Permission for commercial distribution subject to a 510(k) premarket notification is generally known as 510(k) clearance.

Devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices, devices that have a new intended use, or that use advanced technology not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA.

Some pre-amendment devices are unclassified but subject to FDA’s premarket notification and clearance process in order to be commercially distributed.

510(k) Clearance Marketing Pathway

Many of our current products are subject to premarket notification and clearance.

To obtain 510(k) clearance, we must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent” to a predicate marketed device.

A predicate device is a legally marketed device not subject to PMA, i.e.

, that (i) was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, (ii) has been reclassified from Class III to Class II or I, or (iii) was found substantially equivalent through the 510(k) process.

The FDA’s 510(k) clearance process usually takes from three to twelve months, but often takes longer.

The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.

In addition, the FDA collects user fees for certain medical device submissions and annual fees for medical device establishments.

If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device.

If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III device.

The device sponsor must then fulfill more rigorous PMA requirements, or a risk-based classification determination can be requested for the device in accordance with the “de novo” process, a route to market for novel medical devices that are low to moderate risk and not substantially equivalent to a predicate.

After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require either a new clearance or PMA approval.

The FDA requires each manufacturer to determine whether a proposed change requires submission of a 510(k) or a PMA in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination.

If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until clearance or PMA approval is obtained.

The manufacturer may also be subject to significant regulatory fines or penalties.

De Novo Classification

Devices of a new type that FDA has not previously classified based on risk are automatically classified into Class III, regardless of the level of risk they pose.

To avoid requiring PMA review of low- to moderate-risk devices classified in Class III by operation of law, Congress enacted a provision allowing FDA to classify a low- to moderate-risk device not previously classified into Class I or II.

After de novo authorization, an authorized device may be used as a predicate for future devices going through the 510(k) process.

PMA Approval Pathway

Class III devices require approval of a PMA before they can be marketed, although some pre-amendment Class III devices for which the FDA has not yet required a PMA are cleared through the 510(k) process.

The PMA process is more demanding than the 510(k) process.

In a PMA application, the manufacturer must demonstrate that the device is safe and effective, and the PMA application must be supported by extensive data, including data from preclinical studies and human clinical trials.

The FDA will approve the device for commercial distribution if it determines that the data and information in the PMA application constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s).

Clinical Trials

Clinical trials are almost always required to support a PMA and are sometimes required to support a 510(k) submission.

All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s Investigational Device Exemption (“IDE”) regulations, which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.

If the device presents a “significant risk” to human health, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.

A significant risk device is one that presents a potential for serious risk to patient health, safety, or welfare and is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.

An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.

An IDE will automatically become effective 30 days after the FDA’s receipt unless the FDA notifies the company that the investigation may not begin.

If the FDA finds deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.

During a study, the sponsor must comply with applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring Institutional Review Board (“IRB”) review, adverse event reporting, record keeping, and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.

The clinical investigators are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.

Additionally, after a trial begins, we, the FDA, or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that risks outweigh anticipated benefits.

Post-market Regulation

After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply.

These include:

• establishment registration and device listing with the FDA;

• QSR requirements, which require manufacturers to follow stringent design, testing, control, documentation and other quality assurance procedures during the design and manufacturing process;

• labeling regulations and FDA prohibitions against the promotion of investigational products, or the promotion of “off-label” uses of cleared or approved products;

• requirements related to promotional activities;

• clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of cleared devices, or approval of certain modifications to PMA-approved devices;

• medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;

• correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health or to remedy a violation of the FDCA that may present a risk to health;

• the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that violates governing laws and regulations;

• post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.

Our failure to maintain compliance with FDA regulatory requirements could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products, which would have a material adverse effect on our business.

The FDA has broad regulatory compliance and enforcement powers.

If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties, unanticipated expenditures to address or defend such actions, customer notifications or repair, replacement, refunds, recall, detention or seizure of our products, operating restrictions, partial suspension or total shutdown of production, refusing or delaying our requests for regulatory approvals or clearances of new products or modified products, withdrawing a PMA that has already been granted, refusal to grant export approval for our products, or criminal prosecution.

Regulation of Medical Devices in the EU

In the EU, our products generally are regulated as medical devices under Regulation (EU) 2017/745 (“MDR”), which as of May 2021 repealed and replaced the Medical Devices Directive (93/42/EEC) (“MDD”).

Each EU Member State enforces the MDR’s requirements against manufacturers, importers, authorized representatives and distributors, among others, that place or make medical devices available in the EU market.

The MDR also includes provisions for national authorities to inform other competent authorities, the European Commission (the “EC”), and certain other bodies of certain non-compliance.

Under the MDR, a medical device placed on the EU market must meet applicable General Safety and Performance Requirements (“GSPRs”), including that the device’s risks to patient condition or safety or to the safety and health of others must not outweigh its benefits.

Other GSPRs include requirements that the device must achieve the manufacturer’s intended performance and be designed, manufactured and packaged in a suitable manner, and that the manufacturer must establish, implement, document and maintain a risk management plan.

To demonstrate GSPR compliance, manufacturers must undergo a conformity assessment procedure that varies by medical device type and classification.

These procedures require an assessment of available clinical evidence, literature data, and post-market experience in respect of similar marketed products.

For all devices other than low risk devices, a conformity assessment procedure requires the involvement of a notified body to audit and examine technical documentation and the manufacturer’s quality management system.

If satisfied that the product conforms to the relevant GSPR and the company has an MDR-compliant quality management system meeting, the notified body issues a CE Certificate of Conformity, which the manufacturer uses as a basis for its own declaration of conformity.

The manufacturer may then affix the CE mark to the device, which affirms conformity with applicable requirements and allows the device to be placed on the market throughout the EU.

Once a device is placed on the market in the EU, strict post-marketing obligations apply, including requirements to maintain post-market surveillance and vigilance systems, to report serious incidents and field safety corrective actions, and to submit periodic safety update reports or post-market surveillance reports.

Authorities in the EU closely monitor the marketing programs implemented by device companies.

The MDR prohibits making misleading claims, including promoting the product for or suggesting a use that is not part of its intended purpose.

Although the MDR now applies in the EU, transitional provisions apply to legacy devices CE marked under the MDD.

During a transitional period, certificates issued for medical devices under the MDD before May 26, 2021 remain valid until the earlier of the expiry date indicated on the Certificate of Conformity and May 27, 2024.

So long as there are no significant changes in the design and intended purpose of these devices, and provided that the manufacturer comply with MDR provisions regarding vigilance, post-market surveillance and registration of economic operators and medical devices, such devices can continue to be marketed in the EU until a revised EU MDR deadline in 2026.

We are actively working toward being MDR-compliant and interactions with our notified body are underway.

Because of the permitted transitional periods, our medical devices will require recertification prior to the dates on which the Certificates of Conformity under the MDD become void.

Regulation of Medical Devices in the United Kingdom

In the United Kingdom, medical devices are regulated under the largely MDD-derived Medical Devices Regulations 2002 (“UK MDR 2002”).

The UK route to market and UK Conformity Assessed (“UKCA”) marking requirements are thus based on

the requirements derived from EU legislation, although the MDR does not apply in the UK.

All medical devices must be registered with the UK Medicines and Healthcare Products Regulatory Agency (“MHRA”) before being placed on the UK market, and must conform to the UK MDR 2002 in order to be registered with the MHRA.

In addition, devices that have been CE marked under the MDD will continue to be accepted on the UK market until June 30, 2024.

Although the MDR is not directly applicable in the UK, medical devices validly CE marked in accordance with the MDR can also be marketed in the UK.

From July 2024, devices that are placed on the Great Britain market will need to conform with UKCA marking requirements unless specific transitional provisions apply (this is likely to be the case for products CE marked in the EU according to the MDR).

The UKCA marking is a UK product marking used for certain goods, including medical devices, being placed on the UK market.

For the purposes of the UKCA marking, a UK Approved Body must be used in cases where third party conformity assessment is required.

Other Healthcare Laws

Third-party Coverage and Reimbursement

Sales of our medical device products depend largely on whether there is coverage and adequate reimbursement by government healthcare programs, such as Medicare and Medicaid, and by private payors.

Third-party payors review their coverage policies carefully and can, without notice, reduce or eliminate reimbursement.

For instance, they may attempt to control costs by (i) authorizing fewer elective surgical procedures, (ii) requiring the use of the least expensive product available, (iii) reducing the reimbursement for, or limiting the number of, authorized visits for rehabilitation procedures, (iv) bundling reimbursement for all services related to an episode of care, or (v) otherwise restricting coverage or reimbursement of our medical device products or procedures using these products.

Further, payors may require additional evidence, beyond the data required for FDA marketing authorization, to demonstrate that a device should be covered for a particular indication or reimbursed at a higher rate than other technologies.

Medicare payment for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (“DMEPOS”) also can be impacted by the DMEPOS competitive bidding program, under which Medicare rates are based on bid amounts for certain products in designated geographic areas, rather than the Medicare fee schedule amount.

Only those suppliers selected through the competitive bidding process within each designated competitive bidding area are eligible to have their products reimbursed by Medicare.

The Centers for Medicare & Medicaid Services also has adopted regulations to adjust national DMEPOS fee schedules to take into account competitive bidding pricing.

Each payor has a unique process for determining whether to cover a device for a particular indication and how to set reimbursement rates for the device.

However, because many private payors model their coverage and reimbursement policies on Medicare, other third-party payors’ coverage of, and reimbursement for, our medical device products also could be negatively impacted by legislative, regulatory or other measures that restrict Medicare coverage or reduce Medicare reimbursement.

Additionally, federal and state legislatures and regulators have periodically considered proposals to limit which orthopedic professionals can fit or sell our orthotic products or can seek reimbursement for them.

Several states have adopted legislation imposing certification or licensing requirements on the measuring, fitting, and adjusting of certain orthotic devices, and additional states may do so in the future.

Some of these state laws do not exempt manufacturers’ representatives.

In addition, legislation has been adopted, but not yet implemented, requiring certain certification or licensing for individuals and suppliers furnishing certain custom-fabricated orthotic devices as a condition of Medicare payment.

Medicare currently follows state policies in those states that require the use of an orthotist or prosthetist for furnishing of orthotics or prosthetics.

International sales of medical device products also depend in part upon the coverage and eligibility for reimbursement through government-sponsored healthcare payment systems and third-party payors, the amount of reimbursement, and the cost allocation of payments between the patient and government-sponsored healthcare payment systems and third-party payors.

Coverage and reimbursement practices vary significantly by country, with certain countries requiring products to undergo a lengthy regulatory review in order to be eligible for third-party coverage and reimbursement.

In addition, healthcare cost containment efforts similar to those we face in the United States are prevalent in many of the countries in which our products are sold, and these efforts are expected to continue in the future, possibly resulting in the adoption of more stringent reimbursement standards.

In order to obtain reimbursement in some European Economic Area (“EEA”), countries, we may be required to compile additional data comparing the cost-effectiveness of our products to other available therapies.

Health Technology Assessment (“HTA”) of both medicinal products and medical devices is becoming an increasingly common part of

pricing and reimbursement procedures in some EEA countries.

The HTA process, which is currently governed by national laws in each EEA country, is the assessment of therapeutic, economic, and societal impact of a medical product in the country.

The outcome of an HTA will often influence pricing and reimbursement status.

The extent to which pricing and reimbursement decisions are influenced by the HTA currently varies between EEA countries.

However, a new EU HTA regulation applicable to all EEA countries beginning in January 2025 aims to harmonize the clinical benefit assessment of HTA across the EEA and provides the basis for cooperation at the EEA level for joint clinical assessments.

Healthcare Reform

In the United States, there have been and continue to be legislative, regulatory, and other initiatives to contain healthcare costs or establish other policy that have affected and could adversely affect our business.

For example, the U.S.

Patient Protection and Affordable Care Act (“ACA”), enacted in 2010, was a sweeping measure generally designed to expand access to affordable health insurance, control health care spending, and improve health care quality.

Several ACA provisions specifically affect the medical equipment industry.

Among other things, the ACA established enhanced Medicare and Medicaid program integrity provisions, including expanded documentation requirements for Medicare DMEPOS orders, more stringent procedures for screening Medicare and Medicaid DMEPOS suppliers, and new disclosure requirements regarding manufacturer payments to physicians and teaching hospitals, along with broader expansion of federal fraud and abuse authorities.

Some of the ACA’s provisions, or its implementing regulations, have been subject to judicial challenges as well as efforts to modify them or alter their interpretation or implementation.

For example, the Tax Cuts and Jobs Act of 2017 eliminated the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year.

Future efforts to modify or invalidate the ACA or its implementing regulations, or portions thereof, remain possible and could affect our business.

We cannot predict what effect further changes related to the ACA would have on our business.

Other legislative changes have been proposed and adopted since the ACA was enacted.

The Budget Control Act of 2011 among other things resulted in aggregate reductions to Medicare payments to providers of, on average, 2% per fiscal year through the first half of fiscal year 2031 (with the exception of a temporary suspension from May 2020 through March 2022, and a reduction to 1% thereafter through June 2022 due to the COVID-19 pandemic).

These cuts could adversely affect payment for any products we may commercialize in the future.

Many states have adopted or are considering policies to reduce Medicaid spending as a result of state budgetary shortfalls, which in some cases include reduced reimbursement for DMEPOS items and/or other Medicaid coverage restrictions.

Additionally, changes in federal laws, regulations, and guidance can affect state policy.

For instance, the 21st Century Cures Act prohibits federal financial participation payments to states for certain Medicaid DME spending that exceeds what Medicare would have paid for such items.

Any modification or repeal of any provisions of the ACA, or its implementing regulations, may require states to modify their own laws and regulations.

As states continue to face significant financial pressures, it is possible that states will amend existing laws and regulations or enact new laws or promulgate new regulations aimed at controlling costs or otherwise changing applicable policy, any of which could adversely affect our profitability.

Fraud and Abuse Laws

We are subject to various federal, state and foreign laws and regulations pertaining to healthcare fraud and abuse, including false claims, self-referrals, anti-kickback laws, physician payment transparency laws, and other health care laws and regulations.

In particular, the promotion, sales, and marketing of health care items and services is subject to extensive laws and regulations designed to prevent fraud, kickbacks, self-dealing and other abusive practices.

These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive and other business arrangements and include the following:

federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind to return for patient referrals or to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal health care programs.

The term “remuneration” has been broadly interpreted to include anything of value.

Although a number of statutory exceptions and regulatory safe harbors protect some common activities from prosecution, they are narrow.

Practices that may be alleged to be intended to induce purchases or recommendations, including any payments of more than fair market value, may be

subject to scrutiny if they do not qualify for an exception or safe harbor.

A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation.

federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of federal funds or knowingly making or causing to be made a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government.

The government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

The False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of themselves and the federal government alleging violations of the statute and to share in any monetary recovery.

civil monetary penalties statute prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state healthcare program, subject to certain exceptions.

Physician Self-Referral Law, commonly referred to as the Stark law, prohibits physicians from referring patients to receive certain “designated health services” payable by Medicare or Medicaid, including DMEPOS products and supplies, from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.

• The healthcare fraud provisions under the U.S.

federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) impose criminal liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, or to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property owned by, or under the custody or control of, any health care benefit program, including private third-party payors.

Similar to the federal Anti-Kickback Statute, a violation does not require actual knowledge of the statute or specific intent.

Physician Payments Sunshine Act imposes reporting and disclosure requirements on device manufacturers with respect to ownership and investment interests by physicians and members of their immediate family as well as certain payments or other “transfers of value” made to physicians, certain non-physician practitioners and teaching hospitals.

• State and foreign equivalents of each of the health care laws described above, among others, some of which may be broader in scope including, without limitation, state anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving health care items or services reimbursed by non-governmental third party payors, including private insurers, or that apply regardless of payor;

state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government;

state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other health care providers, marketing expenditures;

and state and local laws requiring the registration of device sales and medical representatives.

Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the United States, exclusion from participation in government healthcare programs, including Medicare, Medicaid and Veterans Administration health programs.

In addition, our Medical Technology business subjects us to federal privacy and transaction law and regulations.

HIPAA and the HIPAA Rules impact the transmission, maintenance, use and disclosure of protected health information (“PHI”).

As such, HIPAA and the HIPAA Rules apply to certain aspects of our Medical Technology business.

There are costs and administrative burdens associated with ongoing compliance with the HIPAA Rules and similar state law requirements.

Any failure to comply with current and applicable future requirements could adversely affect our profitability.

HIPAA establishes a set of national privacy and security standards for the protection of individually identifiable health information, including PHI by health plans, certain healthcare clearinghouses and healthcare providers that submit certain covered transactions electronically (“covered entities”), and their “business associates,” which are persons or entities that perform certain services for, or on behalf of, a covered entity that involve creating, receiving, maintaining or transmitting PHI.

Further, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information.

Refer to the Risk Factor captioned “Our relationships with customers, physicians and third-party payors are subject to federal and state health care fraud and abuse laws, false claims laws, physician payment transparency laws and other health care laws and regulations” for a more fulsome discussion of these laws.

Many European countries also have healthcare fraud and abuse laws and regulations, which may vary greatly among countries.

For example, the advertising and promotion of our products is subject to EU Directives concerning misleading and comparative advertising and unfair commercial practices, as well as other EU Member State legislation governing the advertising and promotion of medical devices.

In the EU, failure to comply with advertising and promotional laws may result in reputational damage, fines, exclusions from public tenders and actions for damages from competitors for unfair competition.

Data Privacy and Security Laws

Our business is subject to U.S.

federal privacy and security laws and regulations.

HIPAA governs the use, disclosure, and security of protected health information (“PHI”) by HIPAA “covered entities” and their “business associates.” Covered entities are health plans, health care clearinghouses and health care providers that engage in specific types of electronic transactions.

A business associate is any person or entity (other than members of a covered entity’s workforce) that performs a service for or on behalf of a covered entity that involve creating, receiving, maintaining or transmitting PHI.

Healthcare providers that prescribe our products and from which we obtain patient health information are subject to privacy and security requirements under

HIPAA, as are we in certain circumstances.

Further, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information.

These laws and regulations are not necessarily preempted by HIPAA, particularly if a state affords greater protection to individuals than HIPAA.

Where state laws are more protective, we may have to comply with the stricter provisions.

In addition, the interpretation and application of consumer, health-related, and data protection laws, especially with respect to genetic samples and data, in the United States, the EU, and elsewhere are often uncertain, contradictory, and in flux.

We operate in a number of countries outside of the United States whose laws may in some cases be more stringent than the requirements in the United States.

If the states in which we conduct our business are more protective, we may have to comply with the stricter provisions.

The legislative and regulatory landscape for privacy and data security continues to evolve, and there has been an increasing focus on privacy and data security issues with the potential to affect our business.

For example, the California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act (“CPRA”), contains disclosure obligations for businesses that collect personal information about California residents and affords those individuals new rights relating to their personal information that may affect our ability to use personal information.

A November 2020 California ballot initiative introduced amendments to the CCPA and established and funded a dedicated privacy regulator, the California Privacy Protection Agency (the “CPPA”).

These amendments become effective in January 2023, and we expect the CPPA to introduce implementing regulations.

Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief or statutory or actual damages.

In addition, California residents have the right to bring a private right of action in connection with certain types of incidents.

These claims may result in significant liability and potential damages.

We have implemented processes to manage compliance with the CCPA and continue to assess the impact of the CPRA on our business.

Other states have enacted similar privacy laws that impose new obligations or limitations in areas affecting our business and we continue to assess the impact of these state legislation, on our business as additional information and guidance becomes available.

Efforts at the federal level to enact similar laws are ongoing.

The Federal Trade Commission (the “FTC”) also sets expectations for failing to take appropriate steps to keep consumers’ personal information secure, or failing to provide a level of security commensurate to promises made to individual about the security of their personal information (such as in a privacy notice) may constitute unfair or deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act (the “FTC Act”).

The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

Individually identifiable health information is considered sensitive data that merits stronger safeguards.

With respect to privacy, the FTC also sets expectations that companies honor the privacy promises made to individuals about how the company handles consumers’ personal information;

any failure to honor promises, such as the statements made in a privacy policy or on a website, may also constitute unfair or deceptive acts or practices in violation of the FTC Act.

We also operate in a number of foreign countries with laws in some cases more stringent than U.S.

requirements.

EEA regulation of the processing of personal data and the free movement of such data includes the General Data Protection Regulation (“GDPR”), the E-Privacy Directive 2002/58/EC (the “E-Privacy Directive”) and national laws implementing each.

The GDPR imposes strict obligations and restrictions on the ability to collect, analyze and transfer personal data, especially sensitive personal data, such as health data from clinical investigations, and safety reporting.

We process employee and customer data, including health and medical information.

The GDPR was retained in the UK post-Brexit as the UK GDPR.

The “Data Protection and Digital Information Bill” was introduced to Parliament in July 2022, and we continue to monitor developments to assess comparability with the GDPR.

Many EEA countries have also transposed the E-Privacy Directive’s requirements and passed legislation addressing areas where the GDPR permits countries to derogate from the GDPR, leading to divergent requirements in spite of the GDPR’s stated goal of EEA-wide uniformity.

In order to process and transfer data, explicit consent to the processing (including any cross-border transfer) may be required from the person to whom the personal data relates, though in certain cases, and depending on the jurisdiction in which the data originate or are processed, such data may be processed absent explicit consent for purposes of medical diagnosis, the interest of public health (including medical device safety and efficacy) or scientific research.

The same rules currently apply to us in the UK under the UK GDPR and in relation to transfers out of the UK.

We continue to assess ongoing reform efforts for changes.

The EC and the United States announced in March 2022 agreement in principle on a new Trans-Atlantic Data Privacy Framework with respect to data transfers to the United States, and, in October 2022, President Biden signed an Executive Order that implements the new framework.

On this basis, the EC will prepare a draft adequacy decision and then launch its own adoption procedure.

We depend on third parties in relation to provision of our services, a number of which process personal data on our behalf.

We have a practice of entering into contractual arrangements with such third parties to ensure that they process personal data

only according to our instructions, and that they have instituted adequate security measures.

Where personal data is being transferred outside the EEA (or the UK), our policy is that it is done so in compliance with applicable data export requirements.

Any failure by us or third parties to follow these policies or practices, or otherwise comply with applicable data laws, could lead to a security or privacy breach, regulatory enforcement, or regulatory or financial harm.

Human Capital Management

As of December 31, 2022, we employed approximately 6,800 persons, of whom approximately 2,100 were employed in the United States and approximately 4,700 were employed outside of the United States.

Approximately 1% of associates are covered by collective bargaining agreements with U.S.

None of our associates are covered by collective bargaining agreements with U.S.

trade unions.

In addition, approximately 46% of our associates are represented by foreign trade unions and work councils in Europe, Asia, Central and South America, Canada, Africa, and Australia, which could subject us to arrangements very similar to collective bargaining agreements.

Approximately 46% of our associates are represented by foreign trade unions and work councils in Europe, Asia, Central America, and Australia, which could subject us to arrangements very similar to collective bargaining agreements.

We have not experienced any work stoppages or strikes that have had a material adverse impact on operations.

We consider our relations with our associates to be good.

At Colfax, we believe that the best team wins.

Our growth model is focused in part on acquiring good companies, empowering our talent and using Colfax Business Systems (CBS) to make them great.

At Enovis, we believe that the best team wins.

Our growth model is focused in part on acquiring good companies, empowering our talent and using EGX to make them great.

Culture and associate development are critical to our success.

We are a diverse team of associates around the world.

We empower our associates through our culture that is centered on our corporate purpose – “Creating Better Together.” We are committed to attracting and developing great talent and rewarding our associates to build and sustain our company.

We empower our associates through our culture that is centered on our corporate purpose – “Creating Better Together,” which means we are committed to attracting and developing great talent and rewarding our associates to build and sustain our company.

Our internal human capital management programs center on the following processes and objectives:

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Our principal executive offices are located at 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808, and our main telephone number at that address is (302) 252-9160.

Our corporate website address is www.colfaxcorp.com.

We make available, free of charge through our website at https://ir.colfaxcorp.com/investor-relations , our annual and quarterly reports on Form 10-K and Form 10-Q (including related filings in XBRL format), current reports on Form 8-K and any amendments to those reports as soon as practicable after filing or furnishing the material to the SEC.

Our corporate website address is www.enovis.com.

We make available, free of charge through our website at ir.enovis.com/sec-filings , our annual and quarterly reports on Form 10-K and Form 10-Q (including related filings in XBRL format), current reports on Form 8-K and any amendments to those reports as soon as practicable after filing or furnishing the material to the SEC.

You may also request a copy of these filings, at no cost, by writing or telephoning us at:

Investor Relations, Colfax Corporation, 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808, telephone (302) 252-9160.

Information contained on our website is not incorporated by reference in this report.

Investor Relations, Enovis Corporation, 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808, telephone (302) 252-9160.

Information contained on our website is not incorporated by reference in this report and any references to our website are intended as inactive textual references only.

Additionally, the SEC maintains an Internet site that contains our reports, proxy statements and other information that we electronically file with, or furnish to, the SEC at www.sec.gov.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business