What changed in this filing

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Item 1A. Risk Factors

2025-02-26 compared with 2024-02-22 · 58 added, 50 removed, 393 unchanged (22% of the section changed)

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(2) Risks Related to Government Regulation and Litigation;

(3) Risks Related to the Separation;

and (4) General and Other Risks.

(3) Risks Related to the Separation and (4) General and Other Risks.

Many risks affect more than one category, and the risks are not in order of significance or probability of occurrence because they have been grouped by categories.

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Further, we are required to assess the effectiveness of the internal control over financial reporting for companies we acquire pursuant to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”).

We may elect the one year scope exception provided by the Exchange Act and the applicable SEC rules and regulations concerning business combinations as we did for the Lima acquisition, but we can not avoid the requirements.

In order to comply with the Sarbanes-Oxley Act, we will need to implement or enhance internal control over financial reporting at any company we acquire, and we may identify control deficiencies that require remediation as part of our evaluation and testing of internal controls.

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We may require additional capital to finance our operating needs and to finance our growth, including acquisitions.

If the terms on which the additional capital is available are unsatisfactory, if the additional capital is not available at all or if we are not able to fully access credit under our Enovis Credit Agreement, we may not be able to pursue our growth strategy.

If the terms on which the additional capital is available are unsatisfactory, if the additional capital is not available at all or if we are not able to fully access credit under our Credit Agreement, we may not be able to pursue our growth strategy.

Our growth strategy will require additional capital investment to complete acquisitions, integrate the completed acquisitions into our existing operations and expand into new markets.

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In addition, our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory, and other factors, some of which are beyond our control.

Additionally, the Enovis Credit Agreement, which governs our term loan and revolving credit facility, contains various covenants that limit our ability to engage in specified types of transactions.

Additionally, the Credit Agreement, which governs our term loan and revolving credit facility, contains various covenants that limit our ability to engage in specified types of transactions.

These covenants limit the Company’s ability to incur debt or liens, merge or consolidate with others, dispose of assets, or make investments or pay dividends.

The Enovis Credit Agreement also contains financial covenants requiring the Company to satisfy and maintain compliance with a total leverage ratio and an interest coverage ratio.

The Credit Agreement also contains financial covenants requiring the Company to satisfy and maintain compliance with a total leverage ratio and an interest coverage ratio.

Upon an event of default, the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding.

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Global economic conditions have resulted in the actual or perceived failure or financial difficulties of several financial institutions and could adversely impact the option counterparties’ performance under the capped call transactions.

Upon a default by an option counterparty, we may also suffer adverse tax consequences and/or more dilution than we currently anticipate with respect to our common stock.

Upon a default by an option counterparty, we may also suffer adverse tax consequences and/or

more dilution than we currently anticipate with respect to our common stock.

We can provide no assurance as to the financial stability or viability of the option counterparties.

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The Goodwill results from our acquisitions, representing the excess of cost over the fair value of the net assets we have acquired.

We assess at least annually whether there has been impairment in the value of our Goodwill.

If future operating performance at one or more of our business units were to fall significantly below current levels, if competing or alternative technologies emerge, or if market conditions for an acquired business decline, we could incur, under current applicable accounting rules, a non-cash charge to operating earnings for Goodwill impairment.

Any determination requiring the write-off of a significant portion of intangible assets would adversely affect our business, financial condition, results of operations and total capitalization, the effect of which could be material.

We assess annually, or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount, in order to determine whether there has been impairment in the value of our Goodwill.

For the year ended December 31, 2024, we recognized a non-cash Goodwill impairment charge of $645 million ($330 million for the Reconstructive reporting unit and $315 million for the Prevention & Recovery reporting unit) as part of our annual Goodwill impairment testing.

See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Goodwill and Intangible Assets .”

If future operating performance at either of our reporting units were to fall significantly below current levels, if competing or alternative technologies emerge, if market conditions for an acquired business decline, or if there is a sustained decrease in our market capitalization, among other things, we could incur, under current applicable accounting rules, additional non-cash charges to operating earnings for Goodwill impairment, which could be material and may adversely affect our reported earnings.

A material disruption at any of our manufacturing facilities could adversely affect our ability to generate sales and meet customer demand.

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The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Risks relating to contagious diseases, such as the COVID-19 pandemic, terrorist activity, man-made or natural disasters and war could reduce the demand for our products and have an adverse effect on our results of operations, financial condition, and business.

Contagious diseases, such as the COVID-19 pandemic, terrorist activity, man-made or natural disasters and war, as well as the spread or fear of the spread of contagious diseases, could cause a decline in the demand for our products, which may adversely affect our financial condition and operating performance.

For example, as a result of the COVID-19 pandemic, we experienced adverse impacts on sales in 2020 and 2021, as well as material delays and periodic cancellations of elective medical procedures, orthopedic clinics and physical therapy centers operating at reduced levels, and periodic cancellation of sports programs impacting our business.

Risks relating to contagious diseases, terrorist activity, man-made or natural disasters and war could reduce the demand for our products and have an adverse effect on our results of operations, financial condition, and business.

Contagious diseases, terrorist activity, man-made or natural disasters and war, as well as the spread or fear of the spread of contagious diseases, could cause a decline in the demand for our products, which may adversely affect our financial condition and operating performance.

For example, as a result of the COVID-19 pandemic, we experienced adverse impacts on sales, as well as material delays and periodic cancellations of elective medical procedures, orthopedic clinics and physical therapy centers operating at reduced levels, and periodic cancellation of sports programs impacting our business.

The effect of the COVID-19 pandemic on the global economy resulted in a number of additional challenges for our business, including cost inflation, supply chain challenges such as logistics delays, and healthcare provider staffing shortages, all of which are attributable in some part to the pandemic.

These challenges continue to impact us to varying degrees, and it is uncertain when and to what extent lingering conditions will completely subside.

The spread or fear of spread of contagious diseases, terrorist activity, man-made or natural disasters, actual or threatened war, political unrest, civil strife and other geopolitical uncertainty could have a similar effect on our financial condition or our growth strategy.

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They are also influenced by import duties and tariffs speculative action, world supply and demand balances, inventory levels, availability of substitute materials, currency exchange rates, anticipated or perceived shortages, geopolitical tensions, government trade practices and regulations and other factors.

For example, the introduction of new tariffs or trade restrictions, such as the tariffs announced by the new U.S.

administration in February 2025 and any retaliatory trade measures could also increase the cost of or impair sourcing flexibility for raw materials and other inputs used in the manufacturing of our products.

Further, the labor market for skilled manufacturing remains tight and our labor costs have increased as a result.

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A number of countries where we do business, including the United States and many countries in the European Union, have implemented, and are considering implementing, changes in relevant tax, accounting and other laws, regulations and interpretations.

The Organization for Economic Co-operation and Development (“OECD”), has proposed a global minimum tax of 15% of reported profits (Pillar 2) that has been agreed upon in principle by over 140 countries.

During 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws.

The Organization for Economic Co-operation and Development (“OECD”), has proposed a global minimum tax of 15% of reported profits (Pillar 2)

that has been agreed upon in principle by over 140 countries.

During 2023 and 2024, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws.

Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response.

Based on initial evaluations and available safe harbors we do not expect to have material consequences of Pillar 2 in 2024.

Based on the currently enacted laws and available safe harbors there are no material consequences of Pillar 2 in 2024.

As these and other tax laws, regulations and norms change or evolve, our financial results could be materially impacted.

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We may not be able to continue to place our devices on the market in the EU and/or United Kingdom for any current use if we cannot obtain certification for their current use under the MDR or under the UK MDR 2002 when required, if we are unable to do so before the current certificates for our products expire, or if our technical documentation does not meet the new (and more stringent) requirements under the MDR.

Tariffs and other trade measures could adversely affect our business, results of operations, financial position and cash flows.

Changes in international trade policy can also have a substantial adverse effect on our business, results of operations, financial position and cash flows.

Steps taken by governments to implement local content requirements or apply or consider applying additional or new tariffs on imports or exports have the potential to disrupt existing supply chains, impose additional costs on our business, and could lead to other countries attempting to retaliate by imposing tariffs, which would make our products more expensive for customers, and, in turn, could make our products less competitive.

For example, the U.S.

government has recently signaled its intention to change U.S.

trade policy, including potentially renegotiating or terminating existing trade agreements and leveraging tariffs.

In February 2025, the U.S.

government imposed additional tariffs on imports from China and announced and subsequently paused implementation of tariffs on imports from Mexico (and Canada).

These additional tariffs, rapid changes in government policies toward tariffs and trade, as well as the adoption or prospect of adoption by governments of “buy national” policies or retaliation by another government against such tariffs or policies have introduced significant uncertainty into the market and may affect the prices of and demand for the Company’s products, and, in turn, could adversely affect our business, results of operations, financial position and cash flows to the extent that we are unable to mitigate the impacts of such tariffs.

Recently, government policies on tariffs and trade have evolved rapidly.

Accordingly, we do not know when or if such tariffs will take effect or how long any of these tariffs will last, and we do not know if tariffs will apply to all goods at the same rate, or if healthcare products may be subject to a different rate or be exempted.

The ultimate impact of any tariffs will depend on various factors, including if any tariffs are ultimately implemented, the timing of implementation, and the amount, scope, and nature of the tariffs.

Modifications to our products may require new regulatory clearances or approvals in the United States and EU or may require us to recall or cease marketing our products until clearances or approvals are obtained.

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In the EU, we must notify our EU notified body of significant changes to products or to our quality assurance systems affecting those products.

For devices covered by CE Certificates of Conformity issued under the EU MDD, no significant

changes in design or intended purpose are allowed.

For devices covered by CE Certificates of Conformity issued under the EU MDD, no significant changes in design or intended purpose are allowed.

If changes are anticipated, new certificates must be obtained under the MDR.

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Physicians may use our products off-label in their professional medical judgment, as the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine.

However, if the FDA determines that our educational and promotional activities or training constitutes promotion of an off-label use, it could request

that we modify our training or promotional materials or subject us to regulatory or enforcement actions, as discussed in “Regulatory Environment – Medical Device Regulation” in Part I, Item 1.

However, if the FDA determines that our educational and promotional activities or training constitutes promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, as discussed in “Regulatory Environment – Medical Device Regulation” in Part I, Item 1.

Other federal, state or foreign enforcement authorities also might take action, including, but not limited to, through a whistleblower action under the FCA, if they consider our business activities constitute promotion of an off-label use, which could result in significant penalties.

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From time to time, legislation is introduced in Congress that could significantly change the governance of the regulatory approval, manufacture and marketing of regulated products or the reimbursement thereof.

In addition, the FDA may change clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis.

currently cleared products on a timely basis.

Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of planned or future products.

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The results of our future clinical trials may not support our future product claims and the FDA may not agree with our conclusions regarding them.

Success in pre-clinical studies and early clinical trials does not ensure that later clinical trial

success, and we cannot be sure that later trials will replicate the results of prior trials and pre-clinical studies.

Success in pre-clinical studies and early clinical trials does not ensure later clinical trial success, and we cannot be sure that later trials will replicate the results of prior trials and pre-clinical studies.

The clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product candidate and may delay development of others.

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The failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any of the enforcement actions discussed in “Regulatory Environment – Medical Device Regulation” in Part I, Item 1.

These enforcement actions include, for the EU, the suspension or withdrawal of CE Certificate of Conformity in the EU and the refusal or delay in CE certification and CE marking or new products or modified products.

These enforcement actions include, for the EU, the suspension or withdrawal of CE Certificate of Conformity in the EU and the refusal or delay in CE certification and CE

marking or new products or modified products.

If any of these actions were to occur, it would harm our reputation and cause our product sales and profitability to suffer and may prevent us from generating revenue.

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Reduced reimbursement rates will also lower our margins on product sales and could adversely impact the profitability and viability of the affected products.

Medicare payment for 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.

If any of our medical device products are included in competitive bidding and we are not selected as a contract supplier (or subcontractor) in a particular region, or if contract or fee schedule prices are significantly below current Medicare fee schedule reimbursement levels, it could have an adverse impact on our sales and profitability.

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Because of the breadth of these laws and the narrowness of available statutory exceptions and regulatory safe harbors, our business, marketing and other promotional activities could be subject to challenge under one or more of such laws.

We have received, and in the future may receive, subpoenas and other requests for information from state and federal governmental agencies, including, among others, the U.S.

Department of Justice and the Office of Inspector General of the Department of Health and Human Services.

The requests and/or subpoenas we have received relate primarily to financial arrangements with health care providers, regulatory compliance and sale and/or product promotional practices.

We have cooperated with these subpoenas and other requests for information and expect to continue to do so in the future.

It is not always possible to identify and deter employee misconduct or business noncompliance, and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.

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Moreover, industry associations closely monitor the activities of their member companies.

If these organizations or national authorities were to name us as having breached our obligations under their laws, regulations,

rules or standards, our reputation would suffer and our business, financial condition, operating results, cash flows and prospects could be adversely affected.

If these organizations or national authorities were to name us as having breached our obligations under their laws, regulations, rules or standards, our reputation would suffer and our business, financial condition, operating results, cash flows and prospects could be adversely affected.

Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations and financial condition.

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

Failure to comply with these laws and regulations may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual damages.

Failure to comply with these laws and regulations may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual

There can be no assurance that the processes we have implemented to manage compliance with these laws and regulations will be successful.

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 individuals 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 FTC Act.

While we do not intend to engage in unfair or deceptive acts or practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may be result in FTC enforcement.

Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions.

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Any of these events in turn could adversely affect our reputation, competitive position, including loss of customers and revenue, business, results of operations and liquidity.

In addition, such breaches in security could result in litigation, regulatory action and potential liability, including liability under federal or state laws that protect the privacy of personal information, such as HIPAA, as well as the costs and operational consequences of implementing further data protection measures.

In addition, such breaches in security could result in litigation, regulatory action and potential liability, including liability under federal or state laws that

protect the privacy of personal information, such as HIPAA, as well as the costs and operational consequences of implementing further data protection measures.

Additionally, to conduct our operations, we regularly move data across national borders, and consequently we are subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection and data security.

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laws, regulations and policies could adversely affect our results of operations, financial condition or strategic objectives.

The Lima Acquisition will introduce us into a number of new geographic markets, subjecting us to additional non-U.S.

laws, regulations and policies which do not currently apply to us, and will increase our exposure to certain other geographic markets as well as their laws and regulations.

The Lima Acquisition has introduced us into a number of new geographic markets, subjecting us to additional non-U.S.

laws, regulations and policies which may not have applied to us in the past, and which increases our exposure to other geographic markets’ laws and regulations.

These laws and regulations are complex, change frequently, have become more stringent over time, could increase our cost of doing business, and could result in conflicting legal requirements.

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We will be subject to the risk that we, our employees, our agents, or our affiliated entities, or their respective officers, directors, employees and agents, may take actions determined to be in violation of any of these laws, regulations or policies, for which we might be held responsible.

Actual or alleged violations could result in substantial fines, sanctions, civil or criminal penalties, debarment from government contracts, curtailment of operations in certain jurisdictions, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations, financial condition or strategic objectives.

Actual or alleged violations could result in substantial fines, sanctions, civil or criminal penalties,

debarment from government contracts, curtailment of operations in certain jurisdictions, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations, financial condition or strategic objectives.

Risks Related to the Separation

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 from the Separation that were expected, or such benefits may be delayed or not occur at all.

The following benefits, among others, were expected to result from the Separation:

• the Separation is expected to 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 their distinct characteristics;

• the Separation is expected to 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;

• the Separation is expected to 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

• we may be more susceptible to market fluctuations and other adverse events than we were prior to the Separation;

• 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 we 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 is determined to be a taxable transaction.

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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.

sanctions in response.

Although we have no direct operations in Russia or Ukraine or government-imposed sanctions on our products currently, we could experience the impact of 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.

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Under our Amended and Restated Certificate of Incorporation, there are additional authorized shares of our common stock.

Furthermore, we may issue a significant number of additional shares, in connection with acquisitions or otherwise.

For example, in connection with the Lima Acquisition, as part of the consideration paid to the seller, we agreed to issue to the seller 1,942,686 shares of Company common stock (the “Lima Shares”).

The Lima Shares are expected to be issued within eighteen months following the closing of the Lima Acquisition, subject to certain adjustments and conditions as provided for in the Lima Acquisition purchase agreement.

We may issue additional shares in connection with acquisitions or otherwise.

For example, in connection with the Lima Acquisition, as part of the consideration paid to the seller, we issued to the seller 1,942,686 shares of Company common stock.

Additionally, in order to fund a portion of the cash consideration for the Lima Acquisition, on October 24, 2023, we issued $460 million aggregate principal amount of the 2028 Notes (as defined herein), which are convertible by the holders into shares of Company common stock at their election under certain conditions.

We also may issue a significant number of additional shares, either into the marketplace through an existing shelf registration statement or through other mechanisms.

Additional shares issued, including the Lima Shares and the shares issuable upon conversion of the 2028 Notes, could have a dilutive effect on our earnings per share.

Additional shares issued, including the shares issuable upon conversion of the 2028 Notes, could have a dilutive effect on our earnings per share.

Provisions in our governing documents and Delaware law may delay or prevent an acquisition of Enovis that may be beneficial to our stockholders.

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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 1A. Risk Factors