UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 2, 2021April 1, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number - 001-34045
ColfaxEnovis Corporation
(Exact name of registrant as specified in its charter)
Delaware 54-1887631
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
2711 Centerville Road,Suite 400 
Wilmington,Delaware19808
(Address of principal executive offices) (Zip Code)
(302)252-9160
(Registrant’s telephone number, including area code)
420 National Business Parkway,5th FloorColfax Corporation
Annapolis Junction,Maryland, 20701
(Former name, former address and former fiscal year, if changed since last report)report

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareCFXNew York Stock Exchange
5.75% Tangible Equity UnitsCFXAENOVNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer
Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of July 2, 2021,April 18, 2022, there were 142,341,64654,030,880 shares of the registrant’s common stock, par value $.001 per share, outstanding.



TABLE OF CONTENTS
 Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
            Condensed Consolidated Statements of Operations
            Condensed Consolidated Statements of Comprehensive Income (Loss)
            Condensed Consolidated Balance Sheets
            Condensed Consolidated Statements of Equity
            Condensed Consolidated Statements of Cash Flows
            Notes to Condensed Consolidated Financial Statements
                 Note 1. General
                 Note 2. Recently Issued Accounting Pronouncements
                 Note 3. Discontinued Operations
                 Note 4. Acquisitions and Investments
                 Note 5. Revenue
                 Note 6. Net Income (Loss) Per Share from Continuing Operations
                 Note 7. Income Taxes
                 Note 8. Equity
                 Note 9. Inventories, Net
                 Note 10. Debt
                 Note 11. Accrued Liabilities
                 Note 12. Financial Instruments and Fair Value Measurements
                 Note 13. Commitments and Contingencies
                 Note 14. Segment Information
Note 15. Subsequent Events
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
SIGNATURES

1


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements


COLFAXENOVIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Dollars in thousands, except per share amounts
(Unaudited)
Three Months EndedSix Months EndedThree Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020April 1, 2022April 2, 2021
Net salesNet sales$985,928 $620,360 $1,865,139 $1,436,716 Net sales$1,023,368 $879,211 
Cost of salesCost of sales566,944 379,274 1,075,078 847,416 Cost of sales593,137 508,134 
Gross profitGross profit418,984 241,086 790,061 589,300 Gross profit430,231 371,077 
Selling, general and administrative expenseSelling, general and administrative expense337,563 235,727 643,287 527,924 Selling, general and administrative expense369,390 305,724 
Restructuring and other related chargesRestructuring and other related charges5,480 10,280 9,526 19,460 Restructuring and other related charges7,723 4,046 
Operating income (loss)75,941 (4,921)137,248 41,916 
Pension settlement gain(11,208)(11,208)
Operating incomeOperating income53,118 61,307 
Interest expense, netInterest expense, net17,805 28,284 43,465 53,080 Interest expense, net15,099 25,660 
Debt extinguishment charges29,870 29,870 
Income (loss) from continuing operations before income taxes39,474 (33,205)75,121 (11,164)
Income tax expense (benefit)8,155 (30,063)16,072 (16,890)
Net income (loss) from continuing operations31,319 (3,142)59,049 5,726 
Income from continuing operations before income taxesIncome from continuing operations before income taxes38,019 35,647 
Income tax expenseIncome tax expense18,660 7,917 
Net income from continuing operationsNet income from continuing operations19,359 27,730 
Loss from discontinued operations, net of taxesLoss from discontinued operations, net of taxes(1,617)(4,905)(9,107)(8,265)Loss from discontinued operations, net of taxes(3,058)(7,490)
Net income (loss)29,702 (8,047)49,942 (2,539)
Net incomeNet income16,301 20,240 
Less: income attributable to noncontrolling interest, net of taxesLess: income attributable to noncontrolling interest, net of taxes1,060 427 2,226 1,454 Less: income attributable to noncontrolling interest, net of taxes1,233 1,166 
Net income (loss) attributable to Colfax Corporation$28,642 $(8,474)$47,716 $(3,993)
Net income attributable to Enovis CorporationNet income attributable to Enovis Corporation$15,068 $19,074 
Net income (loss) per share - basicNet income (loss) per share - basicNet income (loss) per share - basic
Continuing operationsContinuing operations$0.20 $(0.03)$0.39 $0.03 Continuing operations$0.34 $0.57 
Discontinued operationsDiscontinued operations$(0.01)$(0.04)$(0.06)$(0.06)Discontinued operations$(0.06)$(0.16)
Consolidated operationsConsolidated operations$0.19 $(0.06)$0.33 $(0.03)Consolidated operations$0.28 $0.41 
Net income (loss) per share - dilutedNet income (loss) per share - dilutedNet income (loss) per share - diluted
Continuing operationsContinuing operations$0.19 $(0.03)$0.38 $0.03 Continuing operations$0.33 $0.56 
Discontinued operationsDiscontinued operations$(0.01)$(0.04)$(0.06)$(0.06)Discontinued operations$(0.06)$(0.16)
Consolidated operationsConsolidated operations$0.18 $(0.06)$0.32 $(0.03)Consolidated operations$0.28 $0.40 
    

See Notes to Condensed Consolidated Financial Statements.

2


COLFAXENOVIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Dollars in thousands
(Unaudited)
Three Months EndedSix Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020
Net income (loss)$29,702 $(8,047)$49,942 $(2,539)
Other comprehensive income (loss):
Foreign currency translation, net of tax expense (benefit) of $896, $(125), $3,176 and $3948,784 71,866 (44,397)(100,926)
Unrealized gain (loss) on hedging activities, net of tax expense (benefit) of $(737), $(3,977), $3,506 and $(104)(2,150)(11,660)10,231 (624)
Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $314, $185, $631 and $4371,045 796 2,100 1,662 
Other comprehensive income (loss)7,679 61,002 (32,066)(99,888)
Comprehensive income (loss)37,381 52,955 17,876 (102,427)
Less: comprehensive income (loss) attributable to noncontrolling interest(369)772 673 (795)
Comprehensive income (loss) attributable to Colfax Corporation$37,750 $52,183 $17,203 $(101,632)
Three Months Ended
April 1, 2022April 2, 2021
Net income$16,301 $20,240 
Other comprehensive income (loss):
Foreign currency translation, net of tax expense of $338 and $2,280(53,461)(53,181)
Unrealized gain on hedging activities, net of tax expense of $2,711 and $4,2439,028 12,381 
Amounts reclassified from Accumulated other comprehensive loss:
Amortization of pension and other post-retirement net actuarial gain, net of tax expense of $199 and $317629 1,055 
Other comprehensive loss(43,804)(39,745)
Comprehensive loss(27,503)(19,505)
Less: comprehensive income attributable to noncontrolling interest895 1,042 
Comprehensive loss attributable to Enovis Corporation$(28,398)$(20,547)


See Notes to Condensed Consolidated Financial Statements.

3


COLFAXENOVIS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in thousands, except share amounts
(Unaudited)
July 2, 2021December 31, 2020April 1, 2022December 31, 2021
ASSETSASSETSASSETS
CURRENT ASSETS:CURRENT ASSETS:CURRENT ASSETS:
Cash and cash equivalentsCash and cash equivalents$62,309 $97,068 Cash and cash equivalents$661,504 $719,370 
Trade receivables, less allowance for credit losses of $34,211 and $37,666599,877 517,006 
Trade receivables, less allowance for credit losses of $37,871 and $32,501Trade receivables, less allowance for credit losses of $37,871 and $32,501657,056 638,700 
Inventories, netInventories, net663,540 564,822 Inventories, net852,814 776,295 
Prepaid expensesPrepaid expenses77,500 69,515 Prepaid expenses84,816 78,186 
Other current assetsOther current assets75,746 113,418 Other current assets91,547 90,728 
Total current assetsTotal current assets1,478,972 1,361,829 Total current assets2,347,737 2,303,279 
Property, plant and equipment, netProperty, plant and equipment, net480,119 486,960 Property, plant and equipment, net504,583 521,391 
GoodwillGoodwill3,399,030 3,314,541 Goodwill3,440,615 3,467,295 
Intangible assets, netIntangible assets, net1,678,421 1,663,446 Intangible assets, net1,637,257 1,675,462 
Lease asset - right of useLease asset - right of use162,778 173,942 Lease asset - right of use178,643 184,429 
Other assetsOther assets360,176 350,831 Other assets374,816 363,489 
Total assetsTotal assets$7,559,496 $7,351,549 Total assets$8,483,651 $8,515,345 
LIABILITIES AND EQUITYLIABILITIES AND EQUITYLIABILITIES AND EQUITY
CURRENT LIABILITIES:CURRENT LIABILITIES:CURRENT LIABILITIES:
Current portion of long-term debtCurrent portion of long-term debt$20,480 $27,074 Current portion of long-term debt$422,289 $8,314 
Accounts payableAccounts payable453,716 330,251 Accounts payable537,676 504,173 
Accrued liabilitiesAccrued liabilities425,223 454,333 Accrued liabilities490,050 511,097 
Total current liabilitiesTotal current liabilities899,419 811,658 Total current liabilities1,450,015 1,023,584 
Long-term debt, less current portionLong-term debt, less current portion1,576,517 2,204,169 Long-term debt, less current portion1,647,870 2,078,679 
Non-current lease liabilityNon-current lease liability131,541 139,230 Non-current lease liability140,704 145,326 
Other liabilitiesOther liabilities600,059 608,618 Other liabilities601,017 606,323 
Total liabilitiesTotal liabilities3,207,536 3,763,675 Total liabilities3,839,606 3,853,912 
Equity:Equity:Equity:
Common stock, $0.001 par value; 400,000,000 shares authorized; 142,341,646 and 118,496,687 issued and outstanding as of July 2, 2021 and December 31, 2020, respectively142 118 
Common stock, $0.001 par value; 133,333,333 shares authorized; 54,030,880 and 52,083,078 shares issued and outstanding as of April 1, 2022 and December 31, 2021, respectivelyCommon stock, $0.001 par value; 133,333,333 shares authorized; 54,030,880 and 52,083,078 shares issued and outstanding as of April 1, 2022 and December 31, 2021, respectively54 52 
Additional paid-in capitalAdditional paid-in capital4,225,248 3,478,008 Additional paid-in capital4,555,369 4,544,315 
Retained earningsRetained earnings565,083 517,367 Retained earnings604,092 589,024 
Accumulated other comprehensive lossAccumulated other comprehensive loss(482,619)(452,106)Accumulated other comprehensive loss(559,479)(516,013)
Total Colfax Corporation equity4,307,854 3,543,387 
Total Enovis Corporation equityTotal Enovis Corporation equity4,600,036 4,617,378 
Noncontrolling interestNoncontrolling interest44,106 44,487 Noncontrolling interest44,009 44,055 
Total equityTotal equity4,351,960 3,587,874 Total equity4,644,045 4,661,433 
Total liabilities and equityTotal liabilities and equity$7,559,496 $7,351,549 Total liabilities and equity$8,483,651 $8,515,345 


See Notes to Condensed Consolidated Financial Statements.

4


COLFAXENOVIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Dollars in thousands, except share amounts and as noted
(Unaudited)
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal
SharesAmount
Balance at December 31, 2020118,496,687 $118 $3,478,008 $517,367 $(452,106)$44,487 $3,587,874 
Net income— — — 19,074 — 1,166 20,240 
Distributions to noncontrolling owners— — — — — (1,054)(1,054)
Other comprehensive loss, net of tax of $6,840— — — — (39,621)(124)(39,745)
Conversion of tangible equity units into common stock344,412 — — — — — — 
Common stock repurchases(21,082)— (971)— — — (971)
Common stock offering, net of issuance costs16,100,000 16 711,305 — — — 711,321 
Common stock-based award activity677,314 13,403 — — — 13,404 
Balance at April 2, 2021135,597,331 135 4,201,745 536,441 (491,727)44,475 4,291,069 
Net income— — — 28,642 — 1,060 29,702 
Other comprehensive income, net of tax of $473— — — — 9,108 (1,429)7,679 
Conversion of tangible equity units into common stock6,174,000 (6)— — — — 
Common stock repurchases(710)— (32)— — — (32)
Common stock-based award activity571,025 23,541 — — — 23,542 
Balance at July 2, 2021142,341,646 $142 $4,225,248 $565,083 $(482,619)$44,106 $4,351,960 
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal
SharesAmount
Balance at December 31, 202152,083,078 $52 $4,544,315 $589,024 $(516,013)$44,055 $4,661,433 
Net income— — — 15,068 — 1,233 16,301 
Distributions to noncontrolling owners— — — — — (941)(941)
Other comprehensive loss, net of tax of $3,248— — — — (43,466)(338)(43,804)
Conversion of tangible equity units into common stock1,691,845 (2)— — — — 
Common stock-based award activity255,957 — 11,056 — — — 11,056 
Balance at April 1, 202254,030,880 $54 $4,555,369 $604,092 $(559,479)$44,009 $4,644,045 

Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal
SharesAmount
Balance at December 31, 2019118,059,082 $118 $3,445,597 $479,560 $(483,845)$48,198 $3,489,628 
Cumulative effect of accounting change— — — (4,818)— — (4,818)
Net income— — — 4,481 — 1,027 5,508 
Distributions to noncontrolling owners— — — — — (8)(8)
Other comprehensive loss, net of tax of $4,644— — — — (158,297)(2,593)(160,890)
Common stock-based award activity268,323 — 8,344 — — — 8,344 
Balance at April 3, 2020118,327,405 118 3,453,941 479,223 (642,142)46,624 3,337,764 
Net income (loss)— — — (8,474)— 427 (8,047)
Distributions to noncontrolling owners— — — — — (3,734)(3,734)
Other comprehensive income, net of tax of $(3,917)— — — — 60,658 344 61,002 
Common stock-based award activity61,608 — 8,591 — — — 8,591 
Balance at July 3, 2020118,389,013 $118 $3,462,532 $470,749 $(581,484)$43,661 $3,395,576 


Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal
SharesAmount
Balance at December 31, 202039,498,896 $40 $3,478,086 $517,367 $(452,106)$44,487 $3,587,874 
Net income— — — 19,074 — 1,166 20,240 
Distributions to noncontrolling owners— — — — — (1,054)(1,054)
Other comprehensive loss, net of tax of $6,840— — — — (39,621)(124)(39,745)
Conversion of tangible equity units into common stock114,804 — — — — — — 
Common stock offering, net of issuance costs5,366,666 711,316 — — — 711,321 
Common stock-based award activity218,744 — 12,433 — — — 12,433 
Balance at April 2, 202145,199,110 $45 $4,201,835 $536,441 $(491,727)$44,475 $4,291,069 


See Notes to Condensed Consolidated Financial Statements.


5


COLFAXENOVIS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in thousands
(Unaudited)
Six Months EndedThree Months Ended
July 2, 2021July 3, 2020April 1, 2022April 2, 2021
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net income (loss)$49,942 $(2,539)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net incomeNet income$16,301 $20,240 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation, amortization and other impairment chargesDepreciation, amortization and other impairment charges128,721 120,038 Depreciation, amortization and other impairment charges66,026 62,785 
Stock-based compensation expenseStock-based compensation expense17,262 14,685 Stock-based compensation expense9,857 7,807 
Non-cash interest expenseNon-cash interest expense2,676 2,743 Non-cash interest expense978 1,537 
Deferred income tax benefit(3,865)(19,857)
Gain on sale of property, plant and equipment(1,437)(3,400)
Deferred income tax expense (benefit)Deferred income tax expense (benefit)2,232 (3,614)
Loss on sale of property, plant and equipmentLoss on sale of property, plant and equipment352 257 
Loss on debt extinguishment29,870 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Trade receivables, netTrade receivables, net(83,458)89,231 Trade receivables, net(20,690)(39,950)
Inventories, netInventories, net(79,338)352 Inventories, net(70,830)(32,743)
Accounts payableAccounts payable124,354 (47,436)Accounts payable24,713 83,442 
Other operating assets and liabilitiesOther operating assets and liabilities(21,975)(60,603)Other operating assets and liabilities(43,362)(15,379)
Net cash provided by operating activities162,752 93,214 
Net cash (used in) provided by operating activitiesNet cash (used in) provided by operating activities(14,423)84,382 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Purchases of property, plant and equipment(44,641)(50,426)
Purchases of property, plant and equipment and intangiblesPurchases of property, plant and equipment and intangibles(24,089)(24,537)
Proceeds from sale of property, plant and equipmentProceeds from sale of property, plant and equipment3,191 4,996 Proceeds from sale of property, plant and equipment2,746 — 
Acquisitions, net of cash received, and investmentsAcquisitions, net of cash received, and investments(230,650)(7,548)Acquisitions, net of cash received, and investments(13,823)(103,475)
Net cash used in investing activitiesNet cash used in investing activities(272,100)(52,978)Net cash used in investing activities(35,166)(128,012)
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Proceeds from borrowings on revolving credit facilities and otherProceeds from borrowings on revolving credit facilities and other455,641 635,678 Proceeds from borrowings on revolving credit facilities and other— 179,367 
Repayments of borrowings on revolving credit facilities and otherRepayments of borrowings on revolving credit facilities and other(383,384)(698,910)Repayments of borrowings on revolving credit facilities and other(7,428)(185,643)
Repayments of borrowings on senior notes(700,000)
Proceeds from issuance of common stock, netProceeds from issuance of common stock, net730,002 2,250 Proceeds from issuance of common stock, net1,199 716,632 
Payment of debt extinguishment costs(24,375)
Deferred consideration payments and otherDeferred consideration payments and other(6,201)(16,431)Deferred consideration payments and other(4,590)(2,704)
Net cash provided by (used in) financing activities71,683 (77,413)
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities(10,819)707,652 
Effect of foreign exchange rates on Cash and cash equivalents and Restricted cash(1,095)(6,059)
Effect of foreign exchange rates on Cash and cash equivalents and Restricted CashEffect of foreign exchange rates on Cash and cash equivalents and Restricted Cash2,542 (1,438)
Decrease in Cash and cash equivalents and Restricted cash(38,760)(43,236)
(Decrease) increase in Cash and cash equivalents and Restricted cash(Decrease) increase in Cash and cash equivalents and Restricted cash(57,866)662,584 
Cash and cash equivalents and Restricted Cash, beginning of periodCash and cash equivalents and Restricted Cash, beginning of period101,069 109,632 Cash and cash equivalents and Restricted Cash, beginning of period719,370 101,069 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$62,309 $66,396 Cash and cash equivalents, end of period$661,504 $763,653 


See Notes to Condensed Consolidated Financial Statements.
6

COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1. General
ColfaxEnovis Corporation (the “Company” or “Colfax”“Enovis”) iswas previously Colfax Corporation (“Colfax”) until its separation into 2 differentiated, independent, and publicly traded companies on April 4, 2022, as discussed further below. Colfax was a leading diversified technology company that providesprovided fabrication technology and medical device products and services to customers around the world, principally under the ESAB and DJO brands. The Company conductsconducted its operations through two2 operating segments, “Fabrication Technology”, which incorporatesincorporated the operations of ESAB and its related brands, and “Medical Technology”, which incorporatesincorporated the operations of DJO and its related brands.

On MarchApril 4, 2021,2022 (the “Distribution Date”), the Company announced its intention to separatecompleted the separation of its fabrication technology and specialty medical technology businesses into two differentiated, independent, and publicly traded companies.business (the “Separation”) through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB Corporation (“ESAB Corp”) to Colfax stockholders. To affect the Separation, Colfax distributed to its stockholders 1 share of ESAB Corp common stock for every three shares of Colfax common stock held at the close of business on March 22, 2022, with the Company retaining 10% of the shares of ESAB Corp common stock immediately following the Separation. The currentCompany intends to divest its 10% retained shares in ESAB Corp in a tax-efficient exchange for its outstanding debt no later than 12 months after the Distribution Date. Upon completion of the Separation, Colfax, entity will retainwhich retained the Company’s specialty medical technology business, changed its name to Enovis Corporation. On April 5, 2022, the Company began trading under the stock symbol “ENOV” on the New York Stock Exchange. For further information on the Separation, refer to Note 15, “Subsequent Events”.

In connection with the Separation, ESAB Corp issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to Enovis upon Separation. The distribution proceeds were used by Enovis in conjunction with $450 million of borrowings on a term loan under the new name, whileEnovis credit facility, as discussed below, and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest on its Credit Facility, $302.8 million of outstanding debt and accrued interest on its 2026 Notes, as well as a redemption premium at 103.188% of the principal amount of the 2026 Notes, and other fees and expenses due at closing. Additionally, on April 7, 2022, the Company also completed the redemption of its Euro Senior Notes representing all of its outstanding €350 million principal 3.250% Senior Notes due 2025 at a redemption price of 100.813% of the principal amount. For further information on the Separation, refer to Note 15, “Subsequent Events”.

Immediately following the Separation, the Company effected a one-for-three reverse stock split of all issued and outstanding shares of Enovis common stock. As a result of the reverse stock split, all share and per share figures contained in the accompanying Condensed Consolidated Financial Statements have been retroactively restated as if the reverse stock split occurred at the beginning of the periods presented.

Since the disposition occurred in the second quarter of 2022, Enovis will classify its fabrication technology business will operate independently under the existing ESAB brand name. The separation is intended to be structuredas a discontinued operation in a tax-free manner and is targeted to be completedits historical financial statements beginning in the firstsecond 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 Condensed Consolidated Financial Statements.

The Condensed Consolidated Financial Statements included in this quarterly report have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements. Certain prior period amounts have been reclassified to conform to the current period presentation. The Condensed Consolidated Balance Sheet as of December 31, 20202021 is derived from the Company’s audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the SEC’s rules and regulations for interim financial statements. The Condensed Consolidated Financial Statements included herein should be read in conjunction with the audited financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202021 (the “2020“2021 Form 10-K”), filed with the SEC on February 18, 2021.22, 2022.

The Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations as of and for the periods indicated. Intercompany transactions and accounts are eliminated in consolidation.

The Company makes certain estimates and assumptions in preparing its Condensed Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from those estimates.
7

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)




In the normal course of business, the Company incurs research and development costs related to new product development which are expensed as incurred and included in Selling, general and administrative expense on the Company’s Condensed Consolidated Statements of Operations. Research and development costs were $21.3 million and $41.2 million during the three and six months ended July 2, 2021, respectively, and $14.1 million and $32.6 million during the three and six months ended July 3, 2020, respectively.

During the three months ended July 2, 2021, the Company used the proceeds from its March 2021 equity offering to redeem all $600 million of its 2024 senior notes and $100 million of outstanding principal on its 2026 senior notes. The Company paid an early redemption premium of $24.4 million and recorded a loss on the extinguishment of $29.9 million. Additionally,$19.9 million during the three months ended JulyApril 1, 2022 and April 2, 2021, a pension settlement gain of $11.2 million was recognized when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.respectively.

The results of operations for the three and six months ended July 2, 2021April 1, 2022 are not necessarily indicative of the results of operations that may be achieved for the full year. Quarterly results are affected by seasonal variations in the Company’s businesses and European operations typically experience a slowdown during the July, August and December holiday seasons.as Medical Technology sales typically peak in the fourth quarter. General economic conditions may, however, impact future seasonal variations.

In December 2019, a novel coronavirus disease (“COVID-19”) was first reported in China. On March 11, 2020, due to worldwide spread of the virus, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 global
7

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



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. InThese impacts lessened in 2021 these impacts continuedue to be observed, though to a lesser extent than 2020, primarily as a result of broadening access to COVID-19 vaccines and gradual relaxing of some government-mandated restrictions. However, a surge of COVID-19 cases due to the emergence of certain COVID-19 variants in the third quarter of 2021 led to the reinstatement of restrictions in certain jurisdictions, slowing the overall economic recovery. Some of these restrictions have been lifted as of the end of the first quarter of 2022. The COVID-19 outbreak has caused increased uncertainty in estimates and assumptions affecting the reported amounts of assets and liabilities in the Condensed Consolidated Financial Statements as the extent and period of recovery from the COVID-19 outbreak and related economic disruption are difficult to forecast. Furthermore, the historical seasonality trends have been disrupted by the commercial impacts caused by the COVID-19 pandemic.


2. Recently Issued Accounting Pronouncements

Accounting Guidance Implemented in 2021The Company has not adopted any new accounting standards during the three months ended April 1, 2022. There are no recently issued accounting pronouncements that are expected to have a material effect on the Company’s financial position, results of operations or cash flows.
StandardDescriptionEffective Date
ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit PlansThe ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

January 1, 2021
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income TaxesThe ASU eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of accounting for income taxes. The Company adopted this ASU as of January 1, 2021 on a prospective basis, and the adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements.January 1, 2021

3. Discontinued Operations

The Company retained certain asbestos-related contingencies and insurance coverages from divested businesses for which it did not retain an interest in the ongoing operations subject to the contingencies. In conjunction with the Separation, all asbestos-related contingencies and insurance coverages from its industrial businesses were transferred fully to ESAB Corp. The Company has classified asbestos-related selling, general and administrative activity in its Condensed Consolidated Statements of Operations as part of Loss from discontinued operations, net of taxes. Asbestos-related costs, net of taxes were $1.6$2.5 million and $2.5$0.9 million during the three and six months ended JulyApril 1, 2022 and April 2, 2021, respectively, and $1.4 million and $2.8 million during the three and six months ended July 3, 2020, respectively. respectively. See Note 13, “Commitments and Contingencies” for further information.

The Company also recorded Loss from discontinued operations, net of taxes of $0.1$0.6 million and $6.6 million during the three and six months ended JulyApril 1, 2022 and April 2, 2021, respectively, and $3.5 million and $5.5 million during the three and six months ended July 3, 2020, respectively, related to its divested air and gas handling business, including a settlement executed in the first quarter of 2021, as well as certain professional, legal, and consulting fees in 2020.2021.

Cash used in operating activities related to discontinued operations for the sixthree months ended JulyApril 1, 2022 and April 2, 2021 and July 3, 2020 was $4.6$5.8 million and $7.9$7.3 million, respectively.

4. Acquisitions and Investments

The Medical Technology segment completed 3 transactions during the three months ended April 1, 2022 for $13.8 million, 1 of which is carried at cost as the investment does not have a readily determinable fair value, while the other 2 are accounted for as asset purchases. The 3 investments broaden the platform’s product offering and distribution network.

During the three months ended April 2, 2021, the Company completed 1 acquisition in its Fabrication Technology segment and 32 acquisitions in its Medical Technology segment for aggregate net cash consideration of $88.7 million. The
8

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



acquisitions are accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the respective acquisition date. The Medical Technology segment’s acquisitions in the first quarter of 2021 included Trilliant Surgical (“Trilliant”), a national provider of foot and ankle orthopedic implants, which was acquired for net cash consideration of $79.6 million. The purchase accounting for all acquisitions made in the first quarter of 2021 has been completed. The Company also made two investments in medical technology businesses during the sixthree months ended JulyApril 2, 2021 for a total of $14.8 million. Both investments are carried at cost, as they do not have a readily determinable fair value.

During the year ended December 31, 2021, the Company completed 1 acquisition in its Fabrication Technology segment and 5 acquisitions in its Medical Technology segment for aggregate net cash consideration net of cash received,$206.5 million and equity consideration of $215.9$285.7 million. The acquisitions are accounted for under the acquisition method of accounting, and accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the respective acquisition date. The Condensed Consolidated Balance Sheet as of July 2, 2021 reflects our preliminary estimates of fair value and are subject to adjustment. The Company also made 2 investmentspurchase accounting for the Mathys AG Bettlach acquisition which was completed in medical technology businesses during the six months ended July 2, 2021 for a total of $14.8 million. Both investments are carried at cost, as they do not have a readily determinable fair value.
8

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



In the firstthird quarter of 2021 has yet to be finalized.
For further information on prior year acquisitions and investments, refer to Note 5. “Acquisitions” in the Medical Technology segment acquired Trilliant Surgical (“Trilliant”), a national provider of foot and ankle orthopedic implants. The product technologies of Trilliant supportNotes to the Medical Technology segment’s focused expansion intoConsolidated Financial Statements in the adjacent foot and ankle market. Trilliant has a broad product portfolio that coversCompany’s 2021 Form 10-K. There have been no material changes to purchase accounting estimates for the full universe of foot reconstructive and fixation procedures, and includesprior year acquisitions since the novel Arsenal Foot Plating System, designed for greater flexibility and speed of implant placement. In the second quarter of 2021, the Medical Technology segment acquired MedShape, Inc.
(“MedShape”), a provider of innovative surgical solutions for foot and ankle surgeons using its patented superelastic nickel titanium (NiTiNOL) and shape memory polymer technologies. This acquisition further expands the Company's foot and ankle platform. These 2 acquisitions were completed for total consideration, net of cash received, of $205.4 million, subject to certain adjustments. Net working capital and intangible assets acquired represent 9% and 47%issuance of the total consideration paid for these 2 acquisitions, respectively, with the residual amount primarily attributable to Goodwill. The Goodwill acquired in the Trilliant acquisition is expected to be deductible for income tax purposes. The estimated proforma annual revenues, as if the Trilliant and MedShape acquisitions occurred on January 1,Company’s 2021 are approximately 1% of Colfax’s consolidated revenues.

In addition, on June 7, 2021, the Company entered a definitive agreement to acquire Mathys AG Bettlach (“Mathys”) for total acquisition consideration of approximately $285 million, expected to be financed with Colfax common stock. Mathys, a Switzerland-based company, develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions, and sports medicine. The acquisition expands the Medical Technology segment’s reconstructive product portfolio with Mathys’ complimentary surgical solutions and international customer base. The transaction is expected to close on July 28, 2021 subsequent to the filing of this Form 10-Q, subject to the satisfaction of closing conditions.10-K.

5. Revenue

The Company’s Fabrication Technology segment formulates, develops, manufactures and supplies consumable welding and cutting products and equipment, as well as gas control equipment. Substantially all revenue from the Fabrication Technology business is recognized at a point in time. The Company disaggregates its Fabrication Technology revenue into the following product groups:
Three Months EndedSix Months EndedThree Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020April 1, 2022April 2, 2021
(In thousands)(In thousands)
EquipmentEquipment$198,856 $129,033 $372,606 $285,833 Equipment$188,348 $173,750 
ConsumablesConsumables430,948 285,334 825,326 654,071 Consumables459,563 394,378 
TotalTotal$629,804 $414,367 $1,197,932 $939,904 Total$647,911 $568,128 

Contracts with customers in theThe consumables product grouping generally have ahas less production complexity and shorter fulfillment periodproduction cycles than equipment contracts.

products.

The Company’s Medical Technology segment provides orthopedic solutions, including products and services spanning the orthopedicfull continuum of patient care, from injury prevention to rehabilitation. While the Company’s Medical Technology sales are primarily derived from 3 sales channels including dealers and distributors, insurance, and direct to consumers and hospitals, substantially all its revenue is recognized at a point in time.

The Company disaggregates its Medical Technology revenue into the following product groups:
Three Months EndedSix Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020
(In thousands)
Prevention & Recovery(1)
$269,968 $159,851 $505,206 $383,636 
Reconstructive86,156 46,142 162,001 113,176 
Total$356,124 $205,993 $667,207 $496,812 

(1) For the periods presented, the Prevention & Recovery product group includes bone growth stimulation products, which were previously classified as part of the Reconstructive product group.
Three Months Ended
April 1, 2022April 2, 2021
(In thousands)
Prevention & Recovery$244,835 $235,238 
Reconstructive130,622 75,845 
Total$375,457 $311,083 

9

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Given the nature of the Fabrication Technology and Medical Technology businesses, the total amount of unsatisfied performance obligations with an original contract duration of greater than one year as of July 2, 2021April 1, 2022 is immaterial.

9

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



The nature of the Company’s contracts gives rise to certain types of variable consideration, including rebates, implicit price concessions, and other discounts. The Company includes estimated amounts of variable consideration in the transaction price to the extent that it is probable there will not be a significant reversal of revenue.

In some circumstances, customers are billed in advance of revenue recognition, resulting in contract liabilities. As of December 31, 20202021 and 2019,2020, total contract liabilities were $36.6$31.5 million and $14.8$36.6 million, respectively. During the three and six months ended JulyApril 1, 2022 and April 2, 2021, revenue recognized that was included in the contract liability balance at the beginning of the year was $5.1$12.8 million and $19.4 million, respectively. During the three and six months ended July 3, 2020, revenue recognized that was included in the contract liability balance at the beginning of the year was $3.8 million and $8.7$14.3 million, respectively. As of JulyApril 1, 2022 and April 2, 2021, and July 3, 2020, total contract liabilities were $33.5$31.4 million and $33.1$40.0 million, respectively, and were included in Accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. The contract liabilities as of July 2, 2021April 1, 2022 and December 31, 2020 include $9.92021 included $2.0 million and $11.8$4.9 million, respectively, of certain one-time advance payments in the Medical Technology business, respectively.business.

Allowance for Credit Losses

The Company’s estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. In calculating and applying its current expected credit losses, the Company disaggregates trade receivables into business segments due to risk characteristics unique to each segment given the individual lines of business and market. The business segments are further disaggregated based on either geography or product type.

The Company uses a loss rate methodology in calculating its current expected credit losses, leveraging historical write-offs over a defined lookback period in deriving a historical loss rate. The expected credit loss model further considers current conditions and reasonable and supportable forecasts using an adjustment for current and projected macroeconomic factors. Management identified appropriate macroeconomic indicators based on tangible correlation to historical losses considering the location and risks associated with the Company.

A summary of the activity in the Company’s allowance for credit losses included within Trade receivables in the Condensed Consolidated Balance Sheets is as follows:
Six Months Ended July 2, 2021
Balance at
Beginning
of Period
Charged to Expense, netWrite-Offs and DeductionsForeign
Currency
Translation
Balance at
End of
Period
(In thousands)
Allowance for credit losses$37,666 $579 $(3,440)$(594)$34,211 
Three Months Ended April 1, 2022
Balance at
Beginning
of Period
Charged to Expense, netWrite-Offs, Deductions and Other, netForeign
Currency
Translation
Balance at
End of
Period
(In thousands)
Allowance for credit losses$32,501 $5,206 $141 $23 $37,871 

6. Net Income Per Share from Continuing Operations

Net income per share from continuing operations was computed as follows:
Three Months Ended
April 1, 2022April 2, 2021
(In thousands, except share and per share data)
Computation of Net income per share from continuing operations - basic:
Net income from continuing operations attributable to Enovis Corporation(1)
$18,126 $26,564 
Weighted-average shares of Common stock outstanding – basic53,872,007 46,534,463 
Net income per share from continuing operations – basic$0.34 $0.57 
Computation of Net income per share from continuing operations - diluted:
Net income from continuing operations attributable to Enovis Corporation(1)
$18,126 $26,564 
Weighted-average shares of Common stock outstanding – basic53,872,007 46,534,463 
Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units536,967 722,639 
Weighted-average shares of Common stock outstanding – diluted54,408,974 47,257,102 
Net income per share from continuing operations – diluted$0.33 $0.56 
(1)Net income from continuing operations attributable to Enovis Corporation for the respective periods is calculated using Net income from continuing operations less the income attributable to noncontrolling interest, net of taxes, of $1.2 million for the three months ended April 1, 2022 and April 2, 2021.
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COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)




6. Net Income (Loss) Per Share from Continuing Operations

Net incomeAs a result of the reverse stock split, all share and per share from continuing operations was computedfigures contained in the Condensed Consolidated Financial Statements have been retroactively restated as follows:
Three Months EndedSix Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020
(In thousands, except share and per share data)
Computation of Net income (loss) per share from continuing operations - basic:
Net income (loss) from continuing operations attributable to Colfax Corporation (1)
$30,259 $(3,569)$56,823 $4,272 
Weighted-average shares of Common stock outstanding – basic153,875,957 136,756,449 146,708,649 136,677,521 
Net income (loss) per share from continuing operations – basic$0.20 $(0.03)$0.39 $0.03 
Computation of Net income (loss) per share from continuing operations - diluted:
Net income (loss) from continuing operations attributable to Colfax Corporation (1)
$30,259 $(3,569)$56,823 $4,272 
Weighted-average shares of Common stock outstanding – basic153,875,957 136,756,449 146,708,649 136,677,521 
Net effect of potentially dilutive securities - stock options, restricted stock units and tangible equity units1,987,368 2,077,643 2,880,841 
Weighted-average shares of Common stock outstanding – diluted155,863,325 136,756,449 148,786,292 139,558,362 
Net income (loss) per share from continuing operations – diluted$0.19 $(0.03)$0.38 $0.03 
(1)Net income (loss) from continuing operations attributable to Colfax Corporation forif the respectivereverse stock split occurred at the beginning of the periods is calculated using Net income (loss) from continuing operations less the income attributable to noncontrolling interest, net of taxes, of $1.1 million and $2.2 million for the three and six months ended July 2, 2021, respectively, and $0.4 million and $1.5 million for the three and six months ended July 3, 2020, respectively.presented.

For all periods presented, the weighted-average shares of Common stock outstanding - basic includes the impact of 18.4 millionthe shares related to the issuance of Colfax’sthe tangible equity units. During the three and six months ended July 2, 2021,April 1, 2022, conversions of the Company’s tangible equity units resulted in the issuance of approximately 6.2 million and 6.51.7 million shares of ColfaxCompany common stock. All issuances of Company common stock respectively.related to the tangible equity units were converted at the minimum settlement rate of 1.33 shares of common stock for each purchase contract as a result of the Company’s share price. The issued shares are included in the Common stock issued and outstanding as July 2, 2021. For the six months ended July 3, 2020, the weighted-average shares of Common stock outstanding - diluted includes the impact of an additional 1.9 million potentially issuable dilutive shares related to Colfax’s tangible equity units as a result of the Company’s share price in March 2020.April 1, 2022. See Note 8, “Equity” for details.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three and six months ended JulyApril 1, 2022 and April 2, 2021 excludes 1.60.5 million and 1.3 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three and six months ended July 3, 2020 excludes 4.9 million and 4.2 million, respectively, of outstanding stock-based compensation awards as their inclusion would be anti-dilutive.

7. Income Taxes

During the three months ended April 1, 2022, Income from continuing operations before income taxes was $38.0 million, while income tax expense was $18.7 million. The effective tax rate was 49.1% for the three months ended April 1, 2022. The effective tax rate for the three months ended April 1, 2022 differed from the 2021 U.S. federal statutory rate of 21% mainly due to withholding taxes, taxable foreign exchange gains, U.S. taxation of international operations, other non-deductible expenses, and various items expensed discretely to the quarter.

During the three months ended April 2, 2021, Income from continuing operations before income taxes was $35.6 million, while income tax expense was $7.9 million. The effective tax rate was 22.2% for the three months ended April 2, 2021. The effective tax rate for the three months ended April 2, 2021 differed from the 2021 U.S. federal statutory rate of 21% mainly due to withholding taxes, taxable foreign exchange gains and other non-deductible expenses partially offset by the benefit of U.S. tax credits.
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COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



7. Income Taxes

During the three and six months ended July 2, 2021, Income from continuing operations before income taxes was $39.5 million and $75.1 million, respectively, while the income tax expense was $8.2 million and $16.1 million, respectively. The effective tax rates were 20.7% and 21.4% for the three and six months ended July 2, 2021, respectively, which both differed slightly from the 2021 U.S. federal statutory rate of 21% mainly due to the effective settlements on uncertain tax positions and U.S. tax credits, offset by withholding taxes, U.S. tax on international operations, and other non-deductible expenses.

During the three and six months ended July 3, 2020, Loss from continuing operations before income taxes was $33.2 million and $11.2 million, respectively, while the income tax benefit was $30.1 million and $16.9 million, respectively. The effective tax rates were 90.5% and 151.3% for the three and six months ended July 3, 2020, respectively. The effective tax rate for the three months ended July 3, 2020 differed from the 2020 U.S. federal statutory rate of 21% mainly due to the net impact of U.S. tax credits and state taxes on the forecasted rate and a $6.8 million discrete tax benefit associated with the filing of timely elected changes to U.S. Federal tax returns to credit rather than to deduct foreign taxes and the realization of tax benefits associated with effective settlements on uncertain tax positions. These favorable impacts were partially offset by the impact of additional U.S. tax on international operations and taxable foreign exchange gains. The effective tax rate for the six months ended July 3, 2020 differed from the 2020 U.S. federal statutory rate of 21% mainly due to the net impact of U.S. tax credits and state taxes on the forecasted rate and the previously mentioned discrete tax benefit associated with the filing of timely elected changes to U.S. Federal tax returns to credit rather than to deduct foreign taxes, the impact of an enacted law change in India, and the realization of tax benefits associated with effective settlements on uncertain tax positions. These favorable impacts were partially offset by the impact of additional U.S. tax on international operations and taxable foreign exchange gains. Income taxes for the six months ended July 3, 2020 were calculated forecasting an estimated annual effective tax rate for the full year. Income taxes for the three months ended July 3, 2020 were calculated forecasting an estimated annual effective tax rate for the full year less the income tax expense for the period ended April 3, 2020. In conjunction with the filing of the timely elected changes to credit rather than to deduct foreign taxes, the Company obtained additional foreign tax credit carryforwards. The Company evaluated all positive and negative evidence in determining the realizability of these deferred tax assets and based on such evidence, concluded a full valuation allowance was needed.
12

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



8. Equity

Common Stock

On March 19, 2021, the Company completed the underwritten public offering of 16.1 million shares of Colfax Common stock at a price to the public of $46.00 per share, resulting in net proceeds of approximately $711.3 million, after deducting offering expenses and underwriters’ discount and commissions.

Share Repurchase Program

In 2018, the Company’s Board of Directors authorized the repurchase of shares of the Company’s Common stock from time-to-time on the open market or in privately negotiated transactions. No repurchases of the Company’s Common stock have been made under this plan since the third quarter of 2018. As of July 2, 2021,April 1, 2022, the remaining stock repurchase authorization provided by the Board of Directors was $100 million. The timing, amount and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors. There is no term associated with the remaining repurchase authorization.

Accumulated Other Comprehensive Loss

The following tables present the changes in the balances of each component of Accumulated other comprehensive loss including reclassifications out of Accumulated other comprehensive loss for the sixthree months ended JulyApril 1, 2022 and April 2, 2021 and July 3, 2020.2021. All amounts are net of tax and noncontrolling interest, if any.
Accumulated Other Comprehensive Loss ComponentsAccumulated Other Comprehensive Loss Components
Net Unrecognized Pension and Other Post-Retirement Benefit CostForeign Currency Translation AdjustmentUnrealized Gain on Hedging ActivitiesTotalNet Unrecognized Pension and Other Post-Retirement Benefit CostForeign Currency Translation AdjustmentUnrealized Gain on Hedging ActivitiesTotal
(In thousands)(In thousands)
Balance at January 1, 2021$(112,783)$(360,977)$21,654 $(452,106)
Balance at January 1, 2022Balance at January 1, 2022$(85,559)$(475,125)$44,671 $(516,013)
Other comprehensive income (loss) before reclassifications:Other comprehensive income (loss) before reclassifications:Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustmentForeign currency translation adjustment583 (71,276)(2,076)(72,769)Foreign currency translation adjustment470 (38,333)— (37,863)
Gain on long-term intra-entity foreign currency transactions29,925 29,925 
Loss on long-term intra-entity foreign currency transactionsLoss on long-term intra-entity foreign currency transactions— (15,260)0(15,260)
Gain on net investment hedgesGain on net investment hedges10,231 10,231 Gain on net investment hedges— — 9,028 9,028 
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications583 (41,351)8,155 (32,613)Other comprehensive income (loss) before reclassifications470 (53,593)9,028 (44,095)
Amounts reclassified from Accumulated other comprehensive lossAmounts reclassified from Accumulated other comprehensive loss2,100 2,100 Amounts reclassified from Accumulated other comprehensive loss629 — — 629 
Net Other comprehensive income (loss)Net Other comprehensive income (loss)2,683 (41,351)8,155 (30,513)Net Other comprehensive income (loss)1,099 (53,593)9,028 (43,466)
Balance at July 2, 2021$(110,100)$(402,328)$29,809 $(482,619)
Balance at April 1, 2022Balance at April 1, 2022$(84,460)$(528,718)$53,699 $(559,479)


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COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Accumulated Other Comprehensive Loss ComponentsAccumulated Other Comprehensive Loss Components
Net Unrecognized Pension and Other Post-Retirement Benefit CostForeign Currency Translation AdjustmentUnrealized Gain on Hedging ActivitiesTotalNet Unrecognized Pension and Other Post-Retirement Benefit CostForeign Currency Translation AdjustmentUnrealized Gain on Hedging ActivitiesTotal
(In thousands)(In thousands)
Balance at January 1, 2020$(106,500)$(421,889)$44,544 $(483,845)
Balance at January 1, 2021Balance at January 1, 2021$(112,783)$(360,977)$21,654 $(452,106)
Other comprehensive income (loss) before reclassifications:Other comprehensive income (loss) before reclassifications:Other comprehensive income (loss) before reclassifications:
Foreign currency translation adjustmentForeign currency translation adjustment554 (68,494)(1,276)(69,216)Foreign currency translation adjustment709 (82,663)(2,201)(84,155)
Loss on long-term intra-entity foreign currency transactions(31,841)(31,841)
Gain on long-term intra-entity foreign currency transactionsGain on long-term intra-entity foreign currency transactions— 31,098 — 31,098 
Gain on net investment hedgesGain on net investment hedges1,756 1,756 Gain on net investment hedges— — 12,381 12,381 
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications554 (100,335)480 (99,301)Other comprehensive income (loss) before reclassifications709 (51,565)10,180 (40,676)
Amounts reclassified from Accumulated other comprehensive lossAmounts reclassified from Accumulated other comprehensive loss1,662 1,662 Amounts reclassified from Accumulated other comprehensive loss1,055 — — 1,055 
Net Other comprehensive income (loss)Net Other comprehensive income (loss)2,216 (100,335)480 (97,639)Net Other comprehensive income (loss)1,764 (51,565)10,180 (39,621)
Balance at July 3, 2020$(104,284)$(522,224)$45,024 $(581,484)
Balance at April 2, 2021Balance at April 2, 2021$(111,019)$(412,542)$31,834 $(491,727)

Tangible equity unit (“TEU”) offering

On January 11, 2019, the Company issued 4.6 million TEUsin Tangible Equity Units (“TEUs”) at the stated amount of $100 per unit. Net cash of $447.7 million was received upon closing. A portion of theThe gross proceeds and deferred finance costs from the issuance of the TEUs were allocated initially84.4% to equity (the “TEU prepaid stock purchase contract”contracts”) and 15.6% to debt (the “TEU amortizing notes”) based on the relative fair value of the respective components of each TEU. See Note 10, “Debt ”“Debt” for furtheradditional information regardingon the TEU amortizing notes.
The TEU prepaid stock purchase contracts
were mandatorily converted into shares of Company common stock
Unlesson January 15, 2022, unless previously settled at the holder’s option, for eachoption. All the TEU prepaid stock purchase contractcontracts converted at the Company will deliver to holders on January 15, 2022 (subject to postponement in certain limited circumstances, the “mandatory settlement date”) a number of shares of common stock. The number of shares of common stock issuable upon settlement of each purchase contract (the “settlement rate”) will be determined using the arithmetic average of the volume average weighted price for the 20 consecutive trading days beginning on, and including, the 21st scheduled trading day immediately preceding January 15, 2022 (“the Applicable Market Value”) with reference to the following settlement rates:

if the Applicable Market Value of the common stock is greater than the threshold appreciation price of $25.00, the holder will receive 4.0000 shares of common stock for each purchase contract (the ���minimum settlement rate”);
rate. if the Applicable Market Value of the common stock is greater than or equal to the reference price of $20.81, but less than or equal to the threshold appreciation price of $25.00, the holder will receive a number of shares of common stock for each purchase contract having a value, based on the Applicable Market Value, equal to $100;Approximately 1.3 million and
if the Applicable Market Value of the common stock is less than the reference price of $20.81, the holder will receive 4.8054 shares of common stock for each purchase contract (the “maximum settlement rate”).

Earnings per share

Unless the 0.1 million TEU prepaid stock purchase contracts are redeemed bywere settled into approximately 1.7 million and 0.1 million shares of Company common stock as adjusted for the Company or settled earlier atreverse split, during the unit holder’s option, they arethree months ended April 1, 2022 and April 2, 2021, respectively. Since the 4.6 million TEU prepaid stock purchase contracts were mandatorily convertible into shares of ColfaxCompany common stock at not less than 4.0 shares per purchase contractthe minimum settlement rate or more than 4.8054 shares per purchase contract on January 15, 2022. This corresponds to not less than 18.4greater, 6.1 million shares, and not more than 22.1 million shares atas adjusted for the maximum. The 18.4 million minimum sharesreverse split, are included in basic net income per share calculations for all periods presented. See Note 6, “Net Income Per Share from Continuing Operations” for additional information.

9. Inventories, Net

Inventories, net consisted of the calculationfollowing:
April 1, 2022December 31, 2021
(In thousands)
Raw materials$233,031 $215,200 
Work in process76,208 69,101 
Finished goods626,911 567,281 
936,150 851,582 
LIFO reserve797 1,129 
Less: allowance for excess, slow-moving and obsolete inventory(84,133)(76,416)
$852,814 $776,295 
The valuation of weighted-average sharesLIFO inventories is made at the end of Common stock outstanding - basic. The difference between the minimumyear based on inventory levels and maximum shares represents potentially dilutive securities. The Company includes them in its calculationcosts at the time. At April 1, 2022 and December 31, 2021, approximately 17.4% and 18.3% of weighted-average shares of Common stock outstanding - diluted on a pro rata basis tototal inventories, respectively, were valued using the extent the effect is not anti-dilutive and the average Applicable Market Value is higher than the reference price but is less than the threshold appreciation price. During the three and six months ended July 2,LIFO method.



1413

COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



2021, 1.5 million and 1.6 million stock purchase contracts were converted into approximately 6.2 million and 6.5 million shares of Colfax common stock, respectively, at a conversion rate of 4.0 shares per contract.

9. Inventories, Net

Inventories, net consisted of the following:
July 2, 2021December 31, 2020
(In thousands)
Raw materials$133,447 $110,848 
Work in process46,800 40,517 
Finished goods541,800 476,297 
722,047 627,662 
Less: allowance for excess, slow-moving and obsolete inventory(58,507)(62,840)
Inventories, net$663,540 $564,822 

10. Debt

Long-term debt consisted of the following:
July 2, 2021December 31, 2020April 1, 2022December 31, 2021
(In thousands)(In thousands)
Term loanTerm loan$781,976 $781,557 Term loan$782,653 $782,435 
Euro senior notesEuro senior notes411,659 425,045 Euro senior notes383,997 395,552 
2024 and 2026 notes297,668 991,319 
2026 notes2026 notes298,034 297,906 
TEU amortizing notesTEU amortizing notes19,120 31,251 TEU amortizing notes— 6,501 
Revolving credit facilities and otherRevolving credit facilities and other86,574 2,071 Revolving credit facilities and other605,475 604,599 
Total debtTotal debt1,596,997 2,231,243 Total debt2,070,159 2,086,993 
Less: current portionLess: current portion(20,480)(27,074)Less: current portion(422,289)(8,314)
Long-term debtLong-term debt$1,576,517 $2,204,169 Long-term debt$1,647,870 $2,078,679 
    
Subsequent Event Debt Redemptions

In conjunction with the Separation which occurred on April 4, 2022, the Company repaid its Term loan and Revolver (each as defined below) and entered into a new credit agreement with its banking partners. Additionally, on March 7, 2022, the Company announced a conditional redemption of its 3.25% Euro Senior Notes due 2025 and its 6.375% Senior Notes due 2026. The Euro Senior Notes and 2026 Notes were redeemed on April 7, 2022 after the completion of the Separation. In accordance with the redemption notices and subsequent redemption of the debt described above, $421.3 million has been reclassified from long-term debt to current maturities. The amount reflects the debt retired that was not refinanced on a long-term basis. Refer to Note 15, “Subsequent Events” for further detail of ongoing financing arrangements.

Term Loan and Revolving Credit Facility

The Company’s credit agreement (the “Credit Facility”) by and among, which was legally extinguished in conjunction with the Company, as the borrower, certain U.S. subsidiaries of the Company, as guarantors, each of the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citizens Bank, N.A., as syndication agent, and the co-documentation agents named therein consistsSeparation on April 4, 2022, consisted of a $975 million revolving credit facility (the “Revolver”) and a Term A-1 loan with an initial aggregate principal amount of $825 million (the “Term Loan”), each with a maturity date of December 6, 2024. The Revolver containscontained a $50 million swing line loan sub-facility. Certain U.S. subsidiaries of the Company guarantee the obligations under the Credit Facility.

The Credit Facility containscontained customary covenants limiting the ability of Colfax and its subsidiariesthe Company to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments or pay dividends. In addition, the Credit Facility contains financial covenants requiring Colfax to maintain (subject to certain exceptions) (i) acontained maximum total leverage ratio calculated as the ratio of Consolidated Net Debt (as defined in the Credit Facility) to EBITDA (as defined in the Credit Facility) of 5.25:1.00 for the quarter ending June 30, 2021, 4.50:1.00 for the quarter ending September 30, 2021, 4.25:1.00 for the quarters ending December 31, 2021 and March 31, 2022, 4.00:1.00 for the quarters ending June 30, 2022 and September 30, 2022, and 3.50:1.00 as of December 31, 2022 and for each fiscal quarter ending thereafter, and (ii) a minimum interest coverage ratio financial covenants. For further description of 2.75:1.00 for each fiscal quarter until June 30, 2021, and then 3.00:1.00 for the quarters ending September 30, 2021 and thereafter. The Credit Facility also includes a “springing” collateral provision (based upon the Gross Leverage RatioCompany’s financial covenants as definedof April 1, 2022, refer to Note 13, “Debt” in the AmendmentNotes to the Credit Facility) which requires the obligations under the Amendment to the Credit Facility to be secured by substantially all personal property of Colfax and its U.S. subsidiaries and the equity of its first tier foreign subsidiaries, subject to customary exceptions,Consolidated Financial Statements in the event Colfax’s gross leverage ratio underCompany’s 2021 Form 10-K. As of April 1, 2022, the Credit Facility is greater than 5.00:1.00 as of the last day of any fiscal quarter. The Credit Facility contains various events of default (including failure to complyCompany was in compliance with the covenants under the Credit Facility.

As of April 1, 2022, the weighted-average interest rate of borrowings under the Credit Facility was 1.74%, excluding accretion of original issue discount and related agreements)deferred financing fees, and uponthere was$375 million available on the Revolver.

Euro Senior Notes

The Company had senior unsecured notes with an eventaggregate principal amount of default€350 million due in May 2025, with an interest rate of 3.25% (the “Euro Senior Notes”). The Euro Senior Notes were redeemed on April 7, 2022 after the lenderscompletion of the Separation.

TEU Amortizing Notes

The Company had 6.50% TEU amortizing notes at an initial principal amount of $15.6099 per note with equal quarterly cash installments of $1.4375 per note representing a payment of interest and partial payment of principal. The final installment payment was made on January 15, 2022. The Company paid $6.5 million and $6.1 million of principal on the TEU amortizing notes in the three months ended April 1, 2022 and April 2, 2021, respectively.


1514

COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Term Loan and the Revolver. As of July 2, 2021, the Company was in compliance with the covenants under the Credit Facility.

As of July 2, 2021, the weighted-average interest rate of borrowings under the Credit Facility was 1.84%, excluding accretion of original issue discount and deferred financing fees, and there was$890 million available on the Revolver.

Euro Senior Notes

The Company has senior unsecured notes with an aggregate principal amount of €350 million (the “Euro Notes”). The Euro Notes are due in April 2025, have an interest rate of 3.25% and are guaranteed by certain of our domestic subsidiaries (the “Guarantees”). The Euro Notes and the Guarantees have not been, and will not be, registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction.

TEU Amortizing Notes

Each TEU amortizing note has an initial principal amount of $15.6099, bears interest at a rate of 6.50% per annum, and has equal quarterly cash installments of $1.4375 per TEU amortizing note with a final installment payment date of January 15, 2022. The quarterly cash installment constitutes a payment of interest and a partial repayment of principal. The Company paid $12.3 million and $11.5 million of principal on the TEU amortizing notes in the six months ended July 2, 2021 and July 3, 2020, respectively. The TEU amortizing notes are the direct, unsecured and unsubordinated obligations of the Company and rank equally with all of the existing and future other unsecured and unsubordinated indebtedness of the Company. For more information on the TEUs, refer to Note 8, “Equity.”

2024 Notes and 2026 Notes

The Company had senior notes with an initial aggregatea remaining principal amount of $600$300 million (the “2024“2026 Notes”), which were due on February 15, 20242026 and had an interest rate of 6.0%. The Company has senior notes with an aggregate initial principal amount of $400 million (the “2026 Notes”), which are due on February 15, 2026 and have an interest rate of 6.375%. The 2026 Notes are guaranteed by certain domestic subsidiarieswere redeemed on April 7, 2022 after the completion of the Company.

On April 24, 2021, the Company redeemed all $600 million outstanding principal amount of its 2024 Notes and $100 million of the outstanding principal amount of its 2026 Notes for $724.4 million. The 2024 Notes were redeemed at a redemption price of 103.000% of their principal amount and the 2026 Notes were redeemed at a redemption price of 106.375% of their principal amount, plus, in each case, accrued and unpaid interest through the date of redemption. In the second quarter of 2021, a net loss on the early extinguishment of debt of $29.9 million was recorded and included $24.4 million of call premium on the retired debt.Separation.

Other Indebtedness

In addition to the debt agreements discussed above, the Company is party to various bilateral credit facilities with a borrowing capacity of $192.6$168.2 million. As of July 2, 2021,April 1, 2022, there were no outstanding borrowings under these facilities. Subsequent to the end of the first quarter of 2022, the bilateral credit facilities are no longer available to Enovis due to the completion of the Separation as they relate to ESAB Corp or expired.

The Company is party to letter of credit facilities with an aggregate capacity of $339.8$211.9 million. Total letters of credit of $70.1$40.2 million were outstanding as of July 2, 2021.April 1, 2022. Subsequent to the end of the first quarter of 2022, substantially all of the letter of credit facilities are no longer available to Enovis due to the completion of the Separation as they relate to ESAB Corp.

Deferred Financing Fees

In total, the Company had deferred financing fees, related toincluding the Company’s debt activities were $14.4original issue discount, of $11.3 million included in its Condensed Consolidated Balance Sheet as of July 2, 2021,April 1, 2022, which willwould be charged to Interest expense, net, primarily using the effective interest method, over the life of the applicable debt agreements. In conjunction with the Separation and debt redemptions in the second quarter of 2022, the Company expects a net loss on the early extinguishment of debt of approximately $17 million, including approximately $13 million of redemption premiums on the retired debt instruments and $4 million of noncash write-offs of original issue discount and deferred financing fees on the Euro Senior Notes and Senior Notes. The Company also expects additional charges of approximately $7 million in conjunction with entering into the new Enovis Credit Facility and the extinguishment of the prior Credit Facility, which is subject to finalization.


11. Accrued Liabilities

Accrued liabilities in the Condensed Consolidated Balance Sheets consisted of the following:
April 1, 2022December 31, 2021
(In thousands)
Accrued compensation and related benefits$122,172 $142,203 
Accrued taxes70,152 72,276 
Accrued asbestos-related liability34,494 30,572 
Warranty liability19,331 17,457 
Accrued restructuring liability - current portion9,546 10,221 
Accrued third-party commissions34,119 38,492 
Customer advances and billings in excess of costs incurred31,440 31,468 
Lease liability - current portion39,939 42,403 
Accrued interest9,586 11,065 
Other119,271 114,940 
$490,050 $511,097 
16
15

COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



11. Accrued Liabilities

Accrued liabilities in the Condensed Consolidated Balance Sheets consisted of the following:
July 2, 2021December 31, 2020
(In thousands)
Accrued compensation and related benefits$108,835 $98,455 
Accrued taxes38,152 57,286 
Accrued asbestos-related liability45,640 41,626 
Warranty liability - current portion17,203 15,543 
Accrued restructuring liability - current portion6,005 7,889 
Accrued third-party commissions29,574 25,480 
Customer advances and billings in excess of costs incurred33,463 36,737 
Lease liability - current portion36,236 39,695 
Accrued interest10,230 27,153 
Other99,885 104,469 
Accrued liabilities$425,223 $454,333 

Warranty Liability
The activity in the Company’s warranty liability consisted of the following:
Six Months Ended
July 2, 2021July 3, 2020
(In thousands)
Warranty liability, beginning of period$15,543 $15,528 
Accrued warranty expense5,085 3,256 
Changes in estimates related to pre-existing warranties1,062 528 
Cost of warranty service work performed(4,699)(4,547)
Acquisition-related liability321 
Foreign exchange translation effect(109)(453)
Warranty liability, end of period$17,203 $14,312 
17

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Three Months Ended
April 1, 2022April 2, 2021
(In thousands)
Warranty liability, beginning of period$17,457 $15,543 
Accrued warranty expense2,129 2,042 
Changes in estimates related to pre-existing warranties836 589 
Cost of warranty service work performed(1,112)(2,472)
Acquisition-related liability— 321 
Foreign exchange translation effect21 (224)
Warranty liability, end of period$19,331 $15,799 




Accrued Restructuring Liability

The Company’s restructuring programs include a series of actions to reduce the structural costs of the Company. A summary of the activity in the Company’s restructuring liability included in Accrued liabilities and Other liabilities in the Condensed Consolidated Balance Sheets is as follows:
Six Months Ended July 2, 2021Three Months Ended April 1, 2022
Balance at Beginning of PeriodProvisionsPaymentsForeign Currency Translation
Balance at End of Period(3)
Balance at Beginning of PeriodProvisionsPaymentsForeign Currency Translation
Balance at End of Period(3)
(In thousands)(In thousands)
Restructuring and other related charges:Restructuring and other related charges:Restructuring and other related charges:
Fabrication Technology:Fabrication Technology:Fabrication Technology:
Termination benefits(1)
Termination benefits(1)
$5,336 $2,551 $(3,502)$(19)$4,366 
Termination benefits(1)
$7,818 $452 $(1,861)$(26)$6,383 
Facility closure costs(2)
591 2,905 (3,264)(16)216 
Facility closure costs and other(2)
Facility closure costs and other(2)
291 4,815 (4,796)(1)309 
5,927 5,456 (6,766)(35)4,582 8,109 5,267 (6,657)(27)6,692 
Non-cash charges(2)
Non-cash charges(2)
1,108 
Non-cash charges(2)
37 
6,564 5,304 
Medical Technology:Medical Technology:Medical Technology:
Termination benefits(1)
Termination benefits(1)
1,884 1,014 (1,496)(8)1,394 
Termination benefits(1)
2,470 2,438 (1,905)(9)2,994 
Facility closure costs and other(2)
Facility closure costs and other(2)
297 1,948 (1,948)297 
Facility closure costs and other(2)
358 233 (575)— 16 
2,181 2,962 (3,444)(8)1,691 2,828 2,671 (2,480)(9)3,010 
Non-cash charges(2)
Non-cash charges(2)
— 
Non-cash charges(2)
282 
2,962 2,953 
Total Colfax Corporation:
Total:Total:
Total restructuring liability activityTotal restructuring liability activity$8,108 8,418 $(10,210)$(43)$6,273 Total restructuring liability activity$10,937 7,938 $(9,137)$(36)$9,702 
Total Non-cash chargesTotal Non-cash charges1,108 Total Non-cash charges319 
$9,526 $8,257 
(1) Includes severance and other termination benefits, including outplacement services.
(2) Includes the cost of relocating associates, relocating equipment, and lease termination expense and other costs in connection with the closure and optimization of facilities. facilities, site cost structures, and product lines. The Medical Technology segment charges include $0.5 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three months ended April 1, 2022.
(3) As of July 2, 2021, $6.0April 1, 2022, $9.5 million and $0.2 million of the Company’s restructuring liability was included in Accrued liabilities whereas less than $0.3 million of the Company’s restructuring liability was included inand Other liabilities.liabilities, respectively.


1816

COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



12. Financial Instruments and Fair Value Measurements

The carrying values of financial instruments, including Trade receivables, other receivables and Accounts payable, approximate their fair values due to their short-term maturities. The $1.6 billion and $2.3 billion estimated fair value of the Company’s debt, which was $2.1 billion as of July 2, 2021both April 1, 2022 and December 31, 2020, respectively,2021, was based on current interest rates for similar types of borrowings and is in Level Two of the fair value hierarchy. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future.

A summary of the Company’s assets and liabilities that are measured at fair value for each fair value hierarchy level for the periods presented is as follows:
July 2, 2021April 1, 2022
Level
One
Level
Two
Level
Three
TotalLevel
One
Level
Two
Level
Three
Total
(In thousands)(In thousands)
Assets:Assets:Assets:
Cash equivalents Cash equivalents$6,787 $— $— $6,787  Cash equivalents$5,875 $— $— $5,875 
Foreign currency contracts - not designated as hedges Foreign currency contracts - not designated as hedges— 1,788 — 1,788  Foreign currency contracts - not designated as hedges— 1,628 — 1,628 
Deferred compensation plans Deferred compensation plans— 12,445 — 12,445  Deferred compensation plans— 13,811 — 13,811 
$6,787 $14,233 $— $21,020 $5,875 $15,439 $— $21,314 
Liabilities:Liabilities:Liabilities:
Foreign currency contracts - not designated as hedges Foreign currency contracts - not designated as hedges$— $4,065 $— $4,065  Foreign currency contracts - not designated as hedges$— $2,984 $— $2,984 
Deferred compensation plans Deferred compensation plans— 12,445 — 12,445  Deferred compensation plans— 13,811 — 13,811 
$— $16,510 $— $16,510 $— $16,795 $— $16,795 

December 31, 2020December 31, 2021
Level
One
Level
Two
Level
Three
TotalLevel
One
Level
Two
Level
Three
Total
(In thousands)(In thousands)
Assets:Assets:Assets:
Cash equivalents Cash equivalents$7,420 $— $— $7,420  Cash equivalents$8,133 $— $— $8,133 
Foreign currency contracts - not designated as hedges Foreign currency contracts - not designated as hedges— 2,194 — 2,194  Foreign currency contracts - not designated as hedges— 2,607 — 2,607 
Deferred compensation plans Deferred compensation plans— 10,881 — 10,881  Deferred compensation plans— 11,213 — 11,213 
$7,420 $13,075 $— $20,495 $8,133 $13,820 $— $21,953 
Liabilities:Liabilities:Liabilities:
Foreign currency contracts - not designated as hedges Foreign currency contracts - not designated as hedges$— $1,781 $— $1,781  Foreign currency contracts - not designated as hedges$— $3,044 $— $3,044 
Deferred compensation plans Deferred compensation plans— 10,881 — 10,881  Deferred compensation plans— 11,213 — 11,213 
$— $12,662 $— $12,662 $— $14,257 $— $14,257 

There were no transfers in or out of Level One, Two or Three during the sixthree months ended July 2, 2021.April 1, 2022.

1917

COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Foreign Currency Contracts

As of July 2, 2021April 1, 2022 and December 31, 2020,2021, the Company had foreign currency contracts related to purchases and sales with notional values of $322.1$203.6 million and $250.4$273.2 million, respectively.

The Company recognized the following in its Condensed Consolidated Financial Statements related to its derivative instruments:
Three Months EndedSix Months EndedThree Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020April 1, 2022April 2, 2021
(In thousands)(In thousands)
Contracts Designated as Hedges:Contracts Designated as Hedges:Contracts Designated as Hedges:
Unrealized gain (loss) on net investment hedges(1)
Unrealized gain (loss) on net investment hedges(1)
$(2,150)$(10,424)$10,231 $1,756 
Unrealized gain (loss) on net investment hedges(1)
$9,028 $12,381 
Contracts Not Designated in a Hedge Relationship:Contracts Not Designated in a Hedge Relationship:Contracts Not Designated in a Hedge Relationship:
Foreign Currency Contracts
Foreign Currency Contracts:Foreign Currency Contracts:
Unrealized gain (loss) Unrealized gain (loss)(2,278)(44)(4,889)2,373  Unrealized gain (loss)(1,356)(2,611)
Realized gain (loss) Realized gain (loss)1,368 (957)1,419 (1,154) Realized gain (loss)(14,582)51 
(1) The unrealized gain (loss) on net investment hedges is attributable to the change in valuation of Euro denominated debt.

Restricted Cash

Financial instruments also include Restricted cash. Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are excluded from Cash and cash equivalents in the Condensed Consolidated Balance Sheets. The Restricted cash as of December 31, 2020 was related to an acquisition which closed in the first quarter of 2021 and was recorded as a component of Other current assets on the Condensed Consolidated Balance Sheets.

The following table summarizes the Company’s Cash and cash equivalents and Restricted cash:

July 2, 2021December 31, 2020
(In thousands)
Cash and cash equivalents$62,309 $97,068 
Restricted cash4,001 
Cash and cash equivalents and Restricted cash$62,309 $101,069 



13. Commitments and Contingencies

For further description of the Company’s litigation and contingencies, reference is made to Note 18, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements in the Company’s 20202021 Form 10-K. Since the Company did not retain an interest in the ongoing operations of its divested businesses, the retained asbestos-related activity has been classified in its Condensed Consolidated Statements of Operations as a component of Loss from discontinued operations, net of taxes. In conjunction with the Separation, all asbestos-related contingencies and insurance coverages from the divested industrial businesses were transferred fully to ESAB Corp.
20

COLFAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



Asbestos Contingencies

Asbestos-related claims activity since December 31 is as follows:
Six Months EndedThree Months Ended
July 2, 2021July 3, 2020April 1, 2022April 2, 2021
(Number of claims)(Number of claims)
Claims unresolved, beginning of periodClaims unresolved, beginning of period14,809 16,299 Claims unresolved, beginning of period14,559 14,809 
Claims filed(1)
Claims filed(1)
2,178 1,869 
Claims filed(1)
1,065 1,067 
Claims resolved(2)
Claims resolved(2)
(1,607)(1,310)
Claims resolved(2)
(779)(581)
Claims unresolved, end of periodClaims unresolved, end of period15,380 16,858 Claims unresolved, end of period14,845 15,295 
(1) Claims filed include all asbestos claims for which notification has been received or a file has been opened.
(2) Claims resolved include all asbestos claims that have been settled, dismissed or that are in the process of being settled or dismissed based upon agreements or understandings in place with counsel for the claimants.

18

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



The Company’s Condensed Consolidated Balance Sheets included the following amounts related to asbestos-related litigation:
July 2, 2021December 31, 2020April 1, 2022December 31, 2021
(In thousands)(In thousands)
Long-term asbestos insurance asset(1)
Long-term asbestos insurance asset(1)
$230,160 $232,712 
Long-term asbestos insurance asset(1)
$229,215 $231,900 
Long-term asbestos insurance receivable(1)
Long-term asbestos insurance receivable(1)
23,591 31,815 
Long-term asbestos insurance receivable(1)
17,002 15,421 
Accrued asbestos liability(2)
Accrued asbestos liability(2)
45,640 41,626 
Accrued asbestos liability(2)
34,494 30,572 
Long-term asbestos liability(3)
Long-term asbestos liability(3)
245,591 253,144 
Long-term asbestos liability(3)
254,106 261,779 
(1) Included in Other assets in the Condensed Consolidated Balance Sheets.
(2) Represents current accruals for probable and reasonably estimable asbestos-related liability costs that the Company believes the subsidiaries will pay, and unpaid legal costs related to defending themselves against asbestos-related liability claims and legal action against the Company’s insurers, which is included in Accrued liabilities in the Condensed Consolidated Balance Sheets.
(3) Included in Other liabilities in the Condensed Consolidated Balance Sheets.

Management’s analyses are based on currently known facts and assumptions. Projecting future events, such as new claims to be filed each year, the average cost of resolving each claim, coverage issues among layers of insurers, the method in which losses will be allocated to the various insurance policies, interpretation of the effect on coverage of various policy terms and limits and their interrelationships, the continuing solvency of various insurance companies, the amount of remaining insurance available, as well as the numerous uncertainties inherent in asbestos litigation could cause the actual liabilities and insurance recoveries to be higher or lower than those projected or recorded which could materially affect the Company’s financial condition, results of operations or cash flow.

General Litigation

The Company is involved in various other pending legal proceedings arising out of the ordinary course of the Company’s business. None of these legal proceedings are expected to have a material adverse effect on the financial condition, results of operations or cash flow of the Company. With respect to these proceedings and the litigation and claims described in the preceding paragraphs, management of the Company believes that it will either prevail, has adequate insurance coverage or has established appropriate accruals to cover potential liabilities. AnyLegal costs related to proceedings or claims are recorded as incurred. Other costs that management estimates may be paid related to these proceedings orthe claims are accrued when the liability is considered probable and the amount can be reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adverse to the Company, there could be a material adverse effect on the financial condition, results of operations or cash flow of the Company.

2119

COLFAXENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



14. Segment Information

The Company conducts its continuing operations through the Fabrication Technology and Medical Technology operating segments, which also represent the Company’s reportable segments.

Fabrication Technology - a leading global supplier of consumable products and equipment for use in the cutting, joining and automated welding, as well as gas control equipment, providing a wide range of products with innovative technologies to solve challenges in a wide range of industries.

Medical Technology - a leader in orthopedic solutions, providing devices, software and services spanning the full continuum of patient care, from injury prevention to joint replacement to rehabilitation.
Certain amounts not allocated to the 2 reportable segments and intersegment eliminations are reported under the heading “Corporate and other.” The Company’s management evaluates the operating results of each of its reportable segments based upon Net sales and segment operating income (loss), which represents Operating income (loss) before Restructuring and certain other related charges and European Union Medical Devices Regulation (“MDR”) and other costs.charges.

The Company’s segment results were as follows:
Three Months EndedSix Months EndedThree Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020April 1, 2022April 2, 2021
(In thousands)(In thousands)
Net sales:Net sales:Net sales:
Fabrication Technology Fabrication Technology$629,804 $414,367 $1,197,932 $939,904  Fabrication Technology$647,911 $568,128 
Medical TechnologyMedical Technology356,124 205,993 667,207 496,812 Medical Technology375,457 311,083 
$985,928 $620,360 $1,865,139 $1,436,716 $1,023,368 $879,211 
Segment operating income (loss)(1):
Segment operating income (loss)(1):
Segment operating income (loss)(1):
Fabrication Technology Fabrication Technology$94,397 $43,609 $176,702 $112,645  Fabrication Technology$95,545 $82,305 
Medical TechnologyMedical Technology18,247 (20,796)20,409 (16,992)Medical Technology(147)2,162 
Corporate and other Corporate and other(29,304)(15,573)(46,665)(29,651) Corporate and other(31,396)(17,361)
$83,340 $7,240 $150,446 $66,002 $64,002 $67,106 
(1) FollowingThe following is a reconciliation of Income (loss) from continuing operations before income taxes to segment operating income:
Three Months EndedSix Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020
(In thousands)
Income (loss) from continuing operations before income taxes$39,474 $(33,205)$75,121 $(11,164)
Pension settlement gain(11,208)(11,208)
Interest expense, net17,805 28,284 43,465 53,080 
Debt extinguishment charges29,870 29,870 
Restructuring and other related charges(1)
5,480 11,161 9,526 22,186 
MDR and other costs(2)
1,919 1,000 3,672 1,900 
Segment operating income$83,340 $7,240 $150,446 $66,002 
Three Months Ended
April 1, 2022April 2, 2021
(In thousands)
Income from continuing operations before income taxes$38,019 $35,647 
Interest expense, net15,099 25,660 
Restructuring and other related charges(1)
8,257 4,046 
MDR and related costs(2)
2,627 1,753 
Segment operating income$64,002 $67,106 
(1) Restructuring and other related charges includes $0.9 million and $2.7$0.5 million of expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three and six months ended July 3, 2020, respectively.April 1, 2022.
(2) Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union MDR.Medical Devices Regulation. These costs are classified as Selling, general and administrative expense on the Company’sour Condensed Consolidated Statements of Operations for all periods presented.Operations.

20

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)




15. Subsequent Events

As discussed in Note 1, “General”, the Company completed the separation of its fabrication technology business on April 4, 2022 through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB Corp to the Company’s stockholders. In connection with the Separation, ESAB Corp and Enovis entered into various agreements to affect the Separation and provide a framework for Enovis’ relationship with ESAB Corp after the Separation, including a separation and distribution agreement, stockholders’ and registration rights agreement, employee matters agreement, tax matters agreement, transition services agreement, ESAB Business Excellence System (“EBS”) license agreement, and intellectual property matters agreement. These agreements will govern the Separation between Enovis and ESAB Corp of the assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) of Enovis and its subsidiaries attributable to periods prior to, at and after the Separation and will govern certain relationships between Enovis and ESAB Corp after the Separation.

In connection with the Separation, ESAB Corp issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to Enovis upon Separation. The distribution proceeds were used by Enovis in conjunction with $450 million of borrowings on a term loan under the new Enovis credit facility, as discussed below, and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest on its Credit Facility, $302.8 million of outstanding debt and accrued interest on its 2026 Notes, as well as a redemption premium at 103.188% of the principal amount of the 2026 Notes, and other fees and expenses due at closing. Additionally, on April 7, 2022, the Company completed the redemption of its Euro Senior Notes representing all of its outstanding €350 million principal 3.250% Senior Notes due 2025 consisting of $392.1 million outstanding debt and accrued interest as well as a redemption premium of 100.813% of the principal amount. In the second quarter of 2022, the Company expects a net loss on the early extinguishment of debt of approximately $17 million, including approximately $13 million of redemption premiums on the retired debt instruments and $4 million of noncash write-offs of original issue discount and deferred financing fees on the Euro Senior Notes and Senior Notes. The Company also expects additional charges of approximately $7 million in conjunction with entering into the new Enovis Credit Facility and the extinguishment of the prior Credit Facility, which is subject to finalization.

In accordance with the redemption notices and subsequent redemption of the debt described above, $421.3 million has been reclassified from long-term debt to current maturities. The amount reflects the debt retired that was not refinanced on a long-term basis.

The Company retained 10% of the shares of ESAB Corp common stock as part of the Separation. The Company intends to divest its 10% retained shares in ESAB Corp in a tax-efficient exchange for its outstanding debt under the new Enovis credit facility no later than 12 months after the Distribution Date. The retained stake in ESAB Corp, based on the initial opening share price, is approximately $300 million on a fair value basis and will be marked-to-market each reporting period.

Immediately following the Separation, the Company effected a one-for-three reverse stock split of all issued and outstanding shares of Enovis common stock. As a result of the reverse stock split, all share and per share figures contained in the accompanying Condensed Consolidated Financial Statements have been retroactively restated as if the reverse stock split occurred at the beginning of the periods presented.

On April 4, 2022, the Company entered into a new credit agreement (the “Enovis Credit Agreement”) which replaces the Company’s prior credit agreement and concurrently terminated all indebtedness of the Company outstanding thereunder being repaid on such date with proceeds of the Enovis Credit Agreement and other funds of the Company.

The Enovis Credit Agreement consists of a revolving credit facility that totals $900 million in commitments with a maturity date of April 4, 2027 (the “Enovis Revolver”) and a term loan in an aggregate amount of $450 million with a maturity date of April 4, 2023 (the “Enovis Term Loan”, and together with the Enovis Revolver, the “Enovis Credit Facilities”). The Enovis Revolver includes a $50 million swingline loan sub-facility. The Enovis Revolver will be used to provide funds for the Company’s ongoing working capital requirements and for general corporate purposes.

The Enovis Term Loan bears interest, at the election of the Company, at either the base rate (as defined in the Enovis Credit Agreement) or at the term Secured overnight financing rate (“SOFR”) plus an adjustment (as defined in the Enovis Credit Agreement), in each case, plus the applicable interest rate margin. The Enovis Revolver bears interest, at the election of the Company, at either the base rate or, in the case of loans denominated in dollars, the term SOFR rate plus an adjustment or the daily simple SOFR plus an adjustment, in the case of loans denominated in euros, the adjusted EURIBOR rate and, in the case of loans denominated in sterling, SONIA plus an adjustment (as all such rates are defined in the Enovis Credit Agreement), in each case, plus the applicable interest rate margin. Initially, the applicable interest rate margin will be 1.500% or, in the case
21

ENOVIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)



of base rate loans, 0.500%, and in future quarters it may change based upon the Company’s total leverage ratio (ranging from 1.125% to 1.750% or in the case of the base rate margin, 0.125% to 0.750%). Each swing line loan denominated in dollars will bear interest at the base rate plus the applicable interest rate margin.

Certain U.S. subsidiaries of the Company have agreed to guarantee the obligations of the Company under the Enovis Credit Agreement.

The Enovis Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments or pay dividends. In addition, the Enovis Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum total leverage ratio of not more than 4.50:1.00, with a step-down to, on the date on which the Company and its subsidiaries have transferred any retained shares of ESAB common stock to one or more unaffiliated third parties, 4.00:1.00, commencing with the fiscal quarter ending June 30, 2023, 3.75:1.00 and commencing with the fiscal quarter ending June 30, 2024, 3.50:1.00, and (ii) a minimum interest coverage ratio of 3.00:1:00. The Enovis Credit Agreement contains various events of default (including failure to comply with the covenants under the Enovis Credit Agreement and related agreements) and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Enovis Term Loan and the Enovis Revolver.
22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of ColfaxEnovis Corporation (“Colfax,Enovis,” “the Company,” “we,” “our,” and “us”) should be read in conjunction with the Condensed Consolidated Financial Statements and related footnotes included in Part I. Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q for the quarterly period ended July 2, 2021April 1, 2022 (this “Form 10-Q”) and the Consolidated Financial Statements and related footnotes included in Part II. Item 8. “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 20202021 (the “2020“2021 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 18, 2021.22, 2022.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Form 10-Q that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-Q is filed with the SEC.Securities and Exchange Commission (the “SEC”). All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including statements regarding: the intended separation of our fabrication and medical technology businesses into two differentiated, independent publicly traded companies (the “Separation”); the timing and method of the Separation; the anticipated benefits of the Separation; the expected financial and operating performance of, and future opportunities for, each company following the Separation; the tax treatment of the Separation; the leadership of each company following the Separation; the impact of the COVID-19 global pandemic, including the rise, prevalence and severity of variants of the virus, the actions by governments, businesses and individuals in response to the situation, on the global and regional economies, financial markets, and overall demand for our products; projections of revenue, profit margins, expenses, tax provisions and tax rates, earnings or losses from operations, impact of foreign exchange rates, cash flows, pension and benefit obligations and funding requirements, synergies or other financial items; plans, strategies and objectives of our management for future operations including statements relating to potential acquisitions, compensation plans or purchase commitments; developments, performance, or industry or market rankings relating to products or services; future economic conditions or performance; the outcome of outstanding claims or legal proceedings including asbestos-related liabilities and insurance coverage litigation;proceedings; potential gains and recoveries of costs; assumptions underlying any of the foregoing; and any other statements that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Forward-looking statements may be but not always, characterized by terminology such as “believe,” “anticipate,” “should,” “would,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “targets,” “aims,” “seeks,” “sees,” and similar expressions. These statements are based on assumptions and assessments made by our management as of the filing date of this Form 10-Q in light of their experience and perception of historical trends, current conditions, expected future developments and other factors we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties and actual results could differ materially due to numerous factors, including but not limited to the following:

risks related to the impact of the COVID-19 global pandemic, including the rise, prevalence and severity of variants of the virus, actions by governments, businesses and individuals in response to the situation, such as the scope and duration of the outbreak, the nature and effectiveness of government actions and restrictive measures implemented in response, delays and cancellations of medical procedures, supply chain disruptions, the impact on creditworthiness and financial viability of customers, and other impacts on ourthe Company’s business and ability to execute business continuity plans;

risks related to the proposed Separation, targeted for the first quarter of 2022, including the uncertainty of obtaining regulatory approvals and a favorable tax opinion and/or U.S. Internal Revenue Service (“IRS”) ruling, our ability to satisfactorily complete steps necessary for the Separation and related transactions for the Separation to be generally tax-free for U.S. federal income tax purposes, the ability to satisfy the necessary conditions to complete the Separation on a timely basis, or at all, our ability to realize the anticipated benefits of the Separation,Separation; the potential to incur significant liability if the separation and distribution of ESAB Corp is determined to be a taxable transaction; potential indemnification liabilities to ESAB Corp pursuant to the separation and distribution agreement and related agreements entered into in connection with the Separation; developments related to the impact of the COVID-19 pandemic on the Separation, and the financial and operating performance of each company following the Separation, and finally the approval of the Separation by our board of directors;Separation;

volatility in the commodity markets and certain commodity prices due to economic disruptions from the COVID-19 pandemic and various geopolitical events;
23


changes in the general economy, as well as the cyclical nature of the markets we serve;

23

volatilitysupply chain constraints and backlogs, including risks affecting raw material, part and component availability, labor shortages and inefficiencies, freight and logistical challenges, and inflation in the commodity marketsraw material, part, component, freight and certain commodity prices, including oil and steel, due to economic disruptions from the COVID-19 pandemic and various geopolitical events;delivery costs;

our ability to identify, finance, acquire and successfully integrate attractive acquisition targets;

our exposure to unanticipated liabilities resulting from acquisitions;

our ability and the ability of our customers to access required capital at a reasonable cost;

our ability to accurately estimate the cost of or realize savings from our restructuring programs;

disruptions in the amount ofglobal economy caused by the ongoing conflict between Russia and our ability to estimate our asbestos-related liabilities;

the solvency of our insurersUkraine (including any political or economic responses and the likelihood of their payment for asbestos-related costs;counter-responses);

material disruptions at any of our manufacturing facilities;

noncompliance with various laws and regulations associated with our international operations, including anti-bribery laws, export control regulations and sanctions and embargoes;

risks associated with our international operations, including risks from trade protection measures and other changes in trade relations;

risks associated with the representation of our employees by trade unions and work councils;

our exposure to product liability claims;

potential costs and liabilities associated with environmental, health and safety laws and regulations;

failure to maintain, protect and defend our intellectual property rights;

the loss of key members of our leadership team;team, or the inability to attract, develop, engage, and retain qualified employees;

restrictions in our principal credit facility that may limit our flexibility in operating our business;

impairment in the value of intangible assets;

the funding requirements or obligations of our defined benefit pension plans and other postretirement benefit plans;

significant movements in foreign currency exchange rates;

availability and cost of raw materials, parts and components used in our products;

new regulations and customer preferences reflecting an increased focus on environmental, social and governance issues, including new regulations related to the use of conflict minerals;

service interruptions, data corruption, cyber-based attacks or network security breaches affecting our information technology infrastructure;

risks arising from changes in technology;

the competitive environment in our industries;industry;

24

changes in our tax rates, realizability of deferred tax assets, or exposure to additional income tax liabilities, including the effects of the COVID-19 global pandemic and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”);pandemic;

our ability to manage and grow our business and execution of our business and growth strategies;

the level of capital investment and expenditures by our customers in our strategic markets;

our financial performance;

24

difficulties and delays in integrating or fully realizing projected cost savings and benefits of our acquisitions; and

other risks and factors, listed in Item 1A. “Risk Factors” in Part I of our 20202021 Form 10-K and Part II. Item 1A. “Risk Factors” in this Form 10-Q.

The effects of the COVID-19 pandemic, including the rise, prevalence and severity of variants of the virus and actions by governments, businesses and individuals in response to the situation, may give rise or contribute to or amplify the risks associated with many of these factors.

Any such forward-looking statements are not guarantees of future performance and actual results, developments and business decisions may differ materially from those envisaged by such forward-looking statements. These forward-looking statements speak only as of the date this Form 10-Q is filed with the SEC. We do not assume any obligation and do not intend to update any forward-looking statement except as required by law. See Part I. Item 1A. “Risk Factors” in our 20202021 Form 10-K and Part II. Item 1A. “Risk Factors” in this Form 10-Q for a further discussion regarding some of the reasons that actual results may be materially different from those that we anticipate.


25

Overview

Please see Part I, Item 1. “Business” in our 20202021 Form 10-K for a discussion of Colfax’sthe Company’s objectives and methodologies for delivering shareholder value.

Colfax conductsPrior to the Separation on April 4, 2022, the Company conducted its operations through two operating segments: Fabrication Technology and Medical Technology.

Fabrication Technology - a leading global supplier of consumable products and equipment for use in the cutting, joining and automated welding, as well as gas control equipment, providing a wide range of products with innovative technologies to solve challenges in a wide range of industries.

Medical Technology - a leader in orthopedic solutions, providing devices, software and services spanning the full continuum of patient care, from injury prevention to joint replacement to rehabilitation.

Certain amounts not allocated to the two reportable segments and intersegment eliminations are reported under the heading “Corporate and other.”

We havePrior to the Separation, we had a global footprint, with production facilities in Europe, North America, South America, Asia, Australia and Africa. We serveAfrica, serving a global customer base across multiple markets through a combination of direct sales and third-party distribution channels. OurPrior to our Separation, our customer base iswas highly diversified in the medical and industrial end markets. Enovis, after the Separation, now serves two primary end markets in medical devices, prevention & recovery products and reconstructive surgical products, and it generates approximately 68% of its revenues in the United States and the majority of the remaining balance in Europe.

IntegralIn conjunction with the Separation, we rebranded our business management system as Enovis Growth Excellence (“EGX”). EGX is integral to our operations is Colfax Business System (“CBS”), our business management system. CBS is our culture and includes our values and behaviors, 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. EGX leverages our culture of continuous improvement to rapidly uncover and execute growth opportunities. We believe that our management team’s access to, and experience in, the application of the CBSEGX methodology is one of our primary competitive strengths.

2526

Results of Operations

The following discussion of Results of Operations addresses the comparison of the periods presented. Our management evaluates the operating results of each of its reportable segments based upon Net sales, Segment operating income, which represents Operating income before Restructuring and other related charges and European Union Medical Devices Regulation (“MDR”) costs, and Adjusted EBITA as defined in the “Non-GAAP Measures” section.

Items Affecting Comparability of Reported Results

The comparability of our operating results for the three and six months ended July 2, 2021April 1, 2022 to the comparable periodsperiod in 20202021 is affected by the following additional significant items:

Recent Events

During the second quarter of 2021, we used the proceeds from our March 2021 equity offering to redeem all $600 million of our 2024 senior notes and $100 million of outstanding principal on our 2026 senior notes. We paid an early redemption premium of $24.4 million and recorded a loss on the extinguishment of $29.9 million. Additionally, we recognized a pension settlement gain of $11.2 million when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

The Separation

On April 4, 2022 (the “Distribution Date”), we completed the Separation through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB Corp to Enovis stockholders. We currently report our operations through our Fabrication Technology and Medical Technology segments. These businesses operateretained 10% of the shares of ESAB Corp common stock immediately following the Separation. We intend to divest the 10% retained shares in distinct markets, with unique business opportunities and investment requirements. On March 4, 2021, we announcedESAB Corp in a tax-efficient exchange for outstanding debt no later than 12 months after the intention to separate these businesses into two differentiated, independent publicly traded companies (the “Separation”).Distribution Date. The Chairman of our board of directors and co-founder of Colfax, Mitchell P. Rales, is expected to serve onalso serving as Chairman of the boardsboard of directors of both companies.ESAB Corp.

Since the disposition occurred in the second quarter of 2022, we will classify our fabrication technology business as a discontinued operation in our financial statements beginning in the second quarter of 2022; the results of our fabrication technology businesses are included in continuing operations in the accompanying financials for the three months ended April 1, 2022 and April 2, 2021.

We expect that the Separation will allow each company to: (1) optimize capital allocation for internal investment, mergers and acquisitions, and return of capital to shareholders; (2) tailor investment to its specific business profile and strategic priorities in the most efficient manner possible; (3) increase operating flexibility and resources to capitalize on growth opportunities in its respective markets; and (4) improve both investor alignment with its clear value proposition and the ability for investors to value it based on its distinct strategic, operational and financial characteristics. The Separation would also provideprovides each company with an appropriately valued acquisition currency that could be used for larger, transformational transactions.

We continueRefer to make progress on the SeparationNote 10, “Debt” and are targeting its completionNote 15, “Subsequent Events” in the first quarter of 2022. Completion ofaccompanying Notes to the Separation is subject to, among other things, completion of financing and other transactions on satisfactory terms, other steps necessary to qualify the Separation as a tax-free transaction, receipt of regulatory approvals, a favorable tax opinion and/or IRS ruling and final approval from our board of directors. There can be no assuranceCondensed Consolidated Financial Statements for more information regarding the form and timing of the Separation or its completion. Details regarding the Separation will be included in our future filings with the SEC.

Please see Part II. Items 1A. “Risk Factors” in this Form 10-Q for further discussion of the Company’s risks relating to the Separation.

The COVID-19 Pandemic

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 resulted in widespread economic disruptions, in 2020, significantly affecting broader economies, financial markets, and overall demand for our products.

In an effort to protect the health and safety of our employees, we have taken actions to adopt social distancing policies at our locations around the world, including working from home, reducing the number of people in our sites at any one time, and suspending or restricting employee travel. In an effort to contain COVID-19 or slow its spread, governments around the world
26

have enacted measures throughout 2020 and into 2021, including periodically closing businesses not deemed “essential,” isolating residents to their homes, limiting access to healthcare, curtailing activities including sporting events, and practicing social distancing. However, increasedIncreased access to vaccinations throughout 2021 hassubsequently contributed to slowing the spread of COVID-19, resulting in certain jurisdictions and, consequently, some or all restrictions have beenbeing lifted in a number of jurisdictions around the world, allowing a return to more normal activity and operational levels.

During 2020, we implemented a broad rangelevels during the first half of temporary actions2021. However, the emergence and subsequent spread of COVID-19 variants in the second half of 2021 led to mitigate the effectsreinstatement of lower sales levels including temporarily reducing salaries, furloughing and laying-off employees, significantly curtailing discretionary expenses, re-phasingcertain restrictions, which slowed the pace of capital expenditures, reducing supplier purchase levels and / or prices, adjusting working capital practices and other measures. As sales volumes returned to more normal levels in 2021, these measures have been removed.recovery into the beginning of the first quarter of 2022.

As reflected in the discussions that follow, the pandemic and actions taken in response to it have had a variety of impacts on our results of operations during 20202021 and 2021. In 2020, the pandemic began to impact our financial results in March, with the most severe financial impact occurring in the second quarter. Subsequently, we observed a partial recovery in the second half of 2020. The surge in COVID-19 cases in the fourth quarter of 2020 contributed to certain jurisdictions putting further restrictions into place, which slowed recovery in the fourth quarter of 2020,2022, including sales levels, inflation and the impact continued into the beginning of the first quarter of 2021, after which sales volumes began to normalize.supply chain challenges.

We continue to monitor the evolving situation and guidance from international and domestic authorities, including national and local public health authorities, and may take additional actions based on their recommendations. In these circumstances, thereThere may be developments outside our control that require us to further adjust our operations. InGiven the first half of 2021, we observed a normalization in most countries in which we operate primarily as a result of increased access to COVID-19 vaccines and relaxing of some government-mandated restrictions. However, given the continuedpotential 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.

27

COVID-19 and other market dynamics have caused widespread supply chain challenges due to labor, raw material, and component shortages. As a result, we continue to experience supply constraints in our businesses, which have led to cost inflation and logistics delays. We are taking actions in an effort to mitigate impacts to our supply chain, however, we expect these pressures to continue.

Please see “PartPart I. Item 1A. Risk“Risk Factors” in our 20202021 Form 10-K for a further discussion of some of the risks related to the COVID-19 pandemic.

Strategic Acquisitions

We complement our organic growth plans with strategic acquisitions. Acquisitions can significantly affect our reported results, and we report the change in our Net sales between periods both from existing and acquired businesses. The change in Net sales due to acquisitions for the three and six months ended July 2, 2021April 1, 2022 presented in this filing represents the incremental sales subsequent to the beginning of the prior year periods.

WeDuring 2021, we completed one acquisition in our Fabrication Technology segment and threefive acquisitions in our Medical Technology segment during the six months ended July 2, 2021 for totalnet cash consideration net of cash received,$206.5 million and equity consideration of $215.9$285.7 million. This includes the acquisitionThe largest of among another,these acquisitions were in our Medical Technology segment, including Trilliant Surgical, a national provider of foot and ankle orthopedic implants, andimplants; MedShape, Inc., a provider of innovative surgical solutions for foot and ankle surgeons, for total consideration, net of cash received, of $205.4 million within our Medical Technology segment.

In addition, on June 7, 2021, we entered into a definitive agreement for the acquisition ofsurgeons; and Mathys AG Bettlach, (“Mathys”), a Switzerland-based company that develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions and sports medicine. We believe that the acquisition will expand our reconstructive product portfolio with Mathys’ complimentary surgical solutions and customer base. Total acquisition consideration of approximately $285 million is expected to be financed with Colfax common stock. The transaction is expected to close on July 28, 2021 subsequent to the filing of this Form 10-Q, subject to the satisfaction of closing conditions.

Foreign Currency Fluctuations

A significant portion of our Net sales, approximately 59% and 60%61% for both the three and six months ended JulyApril 1, 2022 and April 2, 2021, respectively, were derived from operations outside the U.S., with the majority of those sales denominated in currencies other than the U.S. dollar. Because much of our manufacturing and employee costs are outside the U.S., a significant portion of our costs are also denominated in currencies other than the U.S. dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant. For the sixthree months ended July 2, 2021April 1, 2022 compared to the sixthree months ended July 3, 2020,April 2, 2021, fluctuations in foreign currencies had a favorablean unfavorable impact on the change in Net sales and Gross profit of approximately 3% and affected
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Gross profit andreduced Selling, general and administrative expenses by less than 3%. For the second quarter of 2021 compared to the second quarter of 2020, fluctuations in foreign currencies had a favorable impact on the change in Net sales of approximately 4%, and affected Gross profit and Selling, general and administrative expenses by less than 3%2%. The changes in foreign exchange rates since December 31, 20202021 also decreased net assets by less than 2%approximately 1% as of July 2, 2021.April 1, 2022.

Seasonality

European operations in our Fabrication Technology segment typically experience a slowdown during the July, August and December vacation seasons. Sales in our Medical Technology segment typically peak in the fourth quarter. However, the business impact caused by the COVID-19 pandemic has distorted the effects of historical seasonality patterns in 2020.patterns.


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Non-GAAP Measures

Adjusted EBITA

Adjusted EBITA, a non-GAAP performance measure, is included in this report because it is a key metric used by our management to assess our operating performance. Adjusted EBITA excludes from Net income (loss) from continuing operations the effect of restructuring and other related charges, MDR and otherrelated costs, acquisition-related intangible asset amortization and other non-cash charges, and strategic transaction costs, as well as income tax expense, (benefit), pension settlement gain, debt extinguishment charges and interest expense, net. We also present Adjusted EBITA margin, which is subject to the same adjustments as Adjusted EBITA. Further, we present Adjusted EBITA (and Adjusted EBITA margin) on a segment basis, where we exclude the impact of restructuring and other related charges, MDR and otherrelated costs, acquisition-related intangible asset amortization and other non-cash charges, and strategic transaction costs from segment operating income. Adjusted EBITA assists ColfaxEnovis management in comparing its operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans and other initiatives that are fundamentally different from our ongoing productivity improvements. ColfaxEnovis management also believes that presenting these measures allows investors to view its performance using the same measure that we use in evaluating our financial and business performance and trends.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. The following tables set forth a reconciliation of Net income (loss) from continuing operations, the most directly comparable GAAP financial measure, to Adjusted EBITA.
Three Months EndedSix Months EndedThree Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020April 1, 2022April 2, 2021
(Dollars in millions)(Dollars in millions)
Net income (loss) from continuing operations (GAAP)$31.3 $(3.1)$59.0 $5.7 
Income tax expense (benefit)8.2 (30.1)16.1 (16.9)
Pension settlement gain(11.2)— (11.2)— 
Net income from continuing operations (GAAP)Net income from continuing operations (GAAP)$19.4 $27.7 
Income tax expenseIncome tax expense18.7 7.9 
Interest expense, netInterest expense, net17.8 28.3 43.5 53.1 Interest expense, net15.1 25.7 
Debt extinguishment charges29.9 — 29.9 — 
Restructuring and other related charges(1)
Restructuring and other related charges(1)
5.5 11.2 9.5 22.2 
Restructuring and other related charges(1)
8.3 4.0 
MDR and other costs(2)
1.9 1.0 3.7 1.9 
MDR and related costs(2)
MDR and related costs(2)
2.6 1.8 
Strategic transaction costs(3)
Strategic transaction costs(3)
8.0 1.7 9.4 2.6 
Strategic transaction costs(3)
21.4 1.4 
Acquisition-related amortization and other non-cash charges(4)
Acquisition-related amortization and other non-cash charges(4)
39.0 36.1 77.5 71.9 
Acquisition-related amortization and other non-cash charges(4)
43.6 38.5 
Adjusted EBITA (non-GAAP)Adjusted EBITA (non-GAAP)$130.3 $45.1 $237.4 $140.6 Adjusted EBITA (non-GAAP)$129.0 $107.1 
Net income (loss) margin from continuing operations (GAAP)3.2 %(0.5)%3.2 %0.4 %
Net income margin from continuing operations (GAAP)Net income margin from continuing operations (GAAP)1.9 %3.2 %
Adjusted EBITA margin (non-GAAP)Adjusted EBITA margin (non-GAAP)13.2 %7.3 %12.7 %9.8 %Adjusted EBITA margin (non-GAAP)12.6 %12.2 %
(1) Restructuring and other related charges includes $0.9 million and $2.7$0.5 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the three and six months ended July 3, 2020, respectively.April 1, 2022.
(2) Primarily related to costs specific to compliance with medical device reporting regulations and other requirements of the European Union MDR. These costs are classified as Selling, general and administrative expense on our Condensed Consolidated Statements of Operations for all periods presented.Operations.
(3) For the three and six months ended JulyApril 1, 2022, Strategic transaction costs includes costs related to the Separation and certain transaction and integration costs related to recent acquisitions. For the three months ended April 2, 2021, Strategic transaction costs includes costs related to the Separation. For the three and six months ended July 3, 2020, Strategic transaction costs includes costs incurred for the acquisition of DJO.
(4) Includes amortization of acquired intangibles and fair value charges on acquired inventory.








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The following tables set forth a reconciliation of operating income (loss), the most directly comparable financial statement measure, to Adjusted EBITA by segment for the three and six months ended JulyApril 1, 2022 and April 2, 2021, and July 3, 2020.respectively.
Three Months Ended July 2, 2021Six Months Ended July 2, 2021
 Fabrication TechnologyMedical TechnologyCorporate and otherTotal Fabrication TechnologyMedical TechnologyCorporate and otherTotal
(Dollars in millions)
Operating income (loss) (GAAP)$90.9 $14.3 $(29.3)$75.9 $170.1 $13.8 $(46.7)$137.2 
Restructuring and other related charges3.5 2.0 — 5.5 6.6 3.0 — 9.5 
MDR and other costs— 1.9 — 1.9 — 3.7 — 3.7 
Segment operating income (loss) (non-GAAP)94.4 18.2 (29.3)83.3 176.7 20.4 (46.7)150.4 
Strategic transaction costs0.1 — 7.9 8.0 0.1 — 9.3 9.4 
Acquisition-related amortization and other non-cash charges9.1 29.9 — 39.0 18.2 59.3 — 77.5 
Adjusted EBITA (non-GAAP)$103.6 $48.2 $(21.5)$130.3 $195.0 $79.8 $(37.4)$237.4 
Segment operating income margin (non-GAAP)15.0 %5.1 %— %8.5 %14.8 %3.1 %— %8.1 %
Adjusted EBITA margin (non-GAAP)16.4 %13.5 %— %13.2 %16.3 %12.0 %— %12.7 %

Three Months Ended July 3, 2020Six Months Ended July 3, 2020Three Months Ended April 1, 2022
 Fabrication TechnologyMedical TechnologyCorporate and otherTotal Fabrication TechnologyMedical TechnologyCorporate and otherTotal Fabrication TechnologyMedical TechnologyCorporate and otherTotal
(Dollars in millions)(Dollars in millions)
Operating income (loss) (GAAP)Operating income (loss) (GAAP)$37.5 $(26.9)$(15.6)$(4.9)$103.8 $(32.2)$(29.6)$41.9 Operating income (loss) (GAAP)$90.2 $(5.7)$(31.4)$53.1 
Restructuring and other related charges(1)
6.1 5.1 — 11.2 8.9 13.3 — 22.2 
Restructuring and other related chargesRestructuring and other related charges5.3 3.0 — 8.3 
MDR and other costsMDR and other costs— 1.0 — 1.0 — 1.9 — 1.9 MDR and other costs— 2.6 — 2.6 
Segment operating income (loss) (non-GAAP)Segment operating income (loss) (non-GAAP)43.6 (20.8)(15.6)7.2 112.6 (17.0)(29.6)66.0 Segment operating income (loss) (non-GAAP)95.5 (0.1)(31.4)64.0 
Strategic transaction costsStrategic transaction costs— — 1.7 1.7 — — 2.6 2.6 Strategic transaction costs3.6 2.1 15.7 21.4 
Acquisition-related amortization and other non-cash chargesAcquisition-related amortization and other non-cash charges8.8 27.3 — 36.1 17.7 54.2 — 71.9 Acquisition-related amortization and other non-cash charges7.7 35.9 — 43.6 
Adjusted EBITA (non-GAAP)Adjusted EBITA (non-GAAP)$52.4 $6.5 $(13.8)$45.1 $130.3 $37.2 $(27.0)$140.6 Adjusted EBITA (non-GAAP)$106.9 $37.8 $(15.7)$129.0 
Segment operating income (loss) margin (non-GAAP)10.5 %(10.1)%— %1.2 %12.0 %(3.4)%— %4.6 %
Segment operating income margin (non-GAAP)Segment operating income margin (non-GAAP)14.7 %— %— %6.3 %
Adjusted EBITA margin (non-GAAP)Adjusted EBITA margin (non-GAAP)12.6 %3.2 %— %7.3 %13.9 %7.5 %— %9.8 %Adjusted EBITA margin (non-GAAP)16.5 %10.1 %— %12.6 %
(1) Restructuring and other related charges includes $0.9 million and $2.7$0.5 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the three and six months ended July 3, 2020, respectively.April 1, 2022.

Three Months Ended April 2, 2021
 Fabrication TechnologyMedical TechnologyCorporate and otherTotal
(Dollars in millions)
Operating income (loss) (GAAP)$79.2 $(0.6)$(17.4)$61.3 
Restructuring and other related charges(1)
3.1 1.0 — 4.0 
MDR and other costs— 1.8 — 1.8 
Segment operating income (loss) (non-GAAP)82.3 2.2 (17.4)67.1 
Strategic transaction costs— — 1.4 1.4 
Acquisition-related amortization and other non-cash charges9.1 29.4 — 38.5 
Adjusted EBITA (non-GAAP)$91.4 $31.6 $(15.9)$107.1 
Segment operating income margin (non-GAAP)14.5 %0.7 %— %7.6 %
Adjusted EBITA margin (non-GAAP)16.1 %10.2 %— %12.2 %



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Total Company

Sales

Net sales for the three and six months ended July 2, 2021April 1, 2022 increased as compared withfrom the three and six months ended July 3, 2020.April 2, 2021. The following table presents the components of changes in our consolidated Net sales.
Three Months EndedSix Months EndedThree Months Ended
Net SalesChange %Net SalesChange %Net SalesChange %
(Dollars in millions)(Dollars in millions)
For the three and six months ended July 3, 2020$620.4 $1,436.7 
For the three months ended April 2, 2021For the three months ended April 2, 2021$879.2 
Components of Change:Components of Change:Components of Change:
Existing Businesses(1)
Existing Businesses(1)
317.8 51.2 %352.1 24.5 %
Existing Businesses(1)
124.5 14.2 %
Acquisitions(2)
Acquisitions(2)
23.6 3.8 %38.0 2.6 %
Acquisitions(2)
45.6 5.2 %
Foreign Currency Translation(3)
Foreign Currency Translation(3)
24.1 3.9 %38.3 2.7 %
Foreign Currency Translation(3)
(25.9)(2.9)%
365.6 58.9 %428.4 29.8 %144.2 16.4 %
For the three and six months ended July 2, 2021$985.9 $1,865.1 
For the three months ended April 1, 2022For the three months ended April 1, 2022$1,023.4 
(1) Excludes the impact of foreign exchange rate fluctuations and acquisitions, thus providing a measure of change due to factors such as price, product mix and volume.
(2) Represents the incremental sales as a result of acquisitions closed subsequent to the beginning of the prior year respective periods.period.
(3) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

The increase in Net sales during the three and six monthsfirst quarter ended July 2, 2021April 1, 2022 compared to the prior year periodsperiod was primarily attributable to the strong recovery from theacquisition-related sales, inflation-related pricing increases and organic volume increases.Both current year and prior year COVID-relatedperiods sales downturn in the first half of 2020. During the three and six months ended July 2, 2021, the existingvolumes were negatively impacted by COVID-19. Existing business sales ofin our Fabrication Technology segment increased $196.2$101.2 million in the three months ended April 1, 2022 primarily due to inflation-related pricing increases and, $231.0 million, respectively, whileto a lesser extent, new product initiatives and improved sales volume. During the three months ended April 1, 2022, existing business sales in our Medical Technology segment increased $121.6$23.3 million and $121.1 million, respectively. Our Fabrication Technology segment benefited from new product initiatives indue to higher sales volumes compared to the second quarter and first half of 2021.prior year period. Net sales from acquisitions increased duringfor the three and six months ended July 2, 2021 primarilyApril 1, 2022 are due to acquisitions in our Medical Technology segment that closed insince the fourth quarter of 2020 and first halfbeginning of 2021. The weakeningstrengthening of the U.S. dollar relative to other currencies, most notably the Euro, resulted in $24.1a $25.9 million and $38.3 million favorableunfavorable foreign currency translation impacts during the three and six months ended July 2, 2021, respectively.impact.

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Operating Results
The following table summarizes our results of continuing operations for the comparable periods.
Three Months EndedSix Months EndedThree Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020April 1, 2022April 2, 2021
(Dollars in millions)(Dollars in millions)
Gross profitGross profit$419.0 $241.1 $790.1 $589.3 Gross profit$430.2 $371.1 
Gross profit marginGross profit margin42.5 %38.9 %42.4 %41.0 %Gross profit margin42.0 %42.2 %
Selling, general and administrative expenseSelling, general and administrative expense$337.6 $235.7 $643.3 $527.9 Selling, general and administrative expense$369.4 $305.7 
Operating income (loss)$75.9 $(4.9)$137.2 $41.9 
Operating income (loss) margin7.7 %(0.8)%7.4 %2.9 %
Net income (loss) from continuing operations$31.3 $(3.1)$59.0 $5.7 
Net income (loss) margin from continuing operations3.2 %(0.5)%3.2 %0.4 %
Operating incomeOperating income$53.1 $61.3 
Operating income marginOperating income margin5.2 %7.0 %
Net income from continuing operationsNet income from continuing operations$19.4 $27.7 
Net income margin from continuing operationsNet income margin from continuing operations1.9 %3.2 %
Adjusted EBITA (non-GAAP)Adjusted EBITA (non-GAAP)$130.3 $45.1 $237.4 $140.6 Adjusted EBITA (non-GAAP)$129.0 $107.1 
Adjusted EBITA margin (non-GAAP)Adjusted EBITA margin (non-GAAP)13.2 %7.3 %12.7 %9.8 %Adjusted EBITA margin (non-GAAP)12.6 %12.2 %
Items excluded from Adjusted EBITA:Items excluded from Adjusted EBITA:Items excluded from Adjusted EBITA:
Restructuring and other related charges(1)
Restructuring and other related charges(1)
$5.5 $11.2 $9.5 $22.2 
Restructuring and other related charges(1)
$8.3 $4.0 
MDR and other costs$1.9 $1.0 $3.7 $1.9 
MDR and related costsMDR and related costs$2.6 $1.8 
Strategic transaction costsStrategic transaction costs$8.0 $1.7 $9.4 $2.6 Strategic transaction costs$21.4 $1.4 
Acquisition-related amortization and other non-cash chargesAcquisition-related amortization and other non-cash charges$39.0 $36.1 $77.5 $71.9 Acquisition-related amortization and other non-cash charges$43.6 $38.5 
Pension settlement gain$(11.2)$— $(11.2)$— 
Interest expense, netInterest expense, net$17.8 $28.3 $43.5 $53.1 Interest expense, net$15.1 $25.7 
Debt extinguishment charges$29.9 $— $29.9 $— 
Income tax expense (benefit)$8.2 $(30.1)$16.1 $(16.9)
Income tax expenseIncome tax expense$18.7 $7.9 
(1) Restructuring and other related charges includes $0.9 million and $2.7$0.5 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the three and six months ended July 3, 2020, respectively.April 1, 2022.

SecondFirst Quarter of 20212022 Compared to SecondFirst Quarter of 20202021

Gross profit increased $177.9 million in the secondfirst quarter of 20212022 compared with the prior year period due to a $78.5$24.5 million increase in our Fabrication Technology segment and a $99.4$34.6 million increase in our Medical Technology segment. The Gross profit increase was primarily attributable to the significant rebound from lowerbusiness acquisition-related increases, favorable sales volumes in the second quarter of 2020 caused by the COVID-19 impact, which created more favorable operating leveragemix, and production efficiencies. These factors also contributed to the increase inimproved volumes. Increased Gross profit margin, whichin our Medical Technology segment was also due to acquisition growth primarily in Reconstructive product lines. Improved Gross profit in both segments was partially offset by increased supply chain costs and inflation-related pricing and cost increases in our Fabrication Technology segment during the second quarter of 2021.

Selling, general and administrative expense increased $101.9 million in the second quarter of 2021 compared to the prior year period due to increased sales commissions from increased sales levels, the cessation of prior year temporary cost reduction measures that were taken in response to COVID-19, and $17.9 million related to acquired businesses. Strategic transaction costs increased due to costs incurred related to the Separation. Restructuring and other related charges decreased due to the completion of certain restructuring programs.

Additionally, during the second quarter of 2021, a pension settlement gain of $11.2 million was recognized when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

Debt extinguishment charges of $29.9 million were recorded in the second quarter of 2021 due to an early redemption of certain senior notes. Interest expense, net decreased in the second quarter of 2021 compared to the same period in the prior year,
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due to a reduction in debt balances in the second quarter of 2021, primarily as a result of the aforementioned redemption of senior notes.

The effective tax rate for Net income (loss) from continuing operations during the second quarter of 2021 was 20.7%, which was slightly lower than the 2021 U.S. federal statutory tax rate of 21%, mainly due to the net impact of international tax rates, effective settlements on uncertain tax positions and U.S. tax credits, offset by withholding taxes, U.S. tax on international operations and other non-deductible expenses. The effective tax rate for the second quarter of 2020 was 90.5%, which was higher than the 2020 U.S. federal statutory tax rate of 21% mainly due to the impact of additional U.S. tax on international operations and taxable foreign exchange gains, offset in part by a discrete tax benefit associated with the enactment of a tax law change in India.

Net income from continuing operations increased in the second quarter of 2021 compared with the prior year period primarily due to the strong recovery from the prior year COVID-related sales downturn and related cost impacts. The sales-related benefits from this recovery in the second quarter of 2021 were partially offset by increases in expenses attributable to the temporary cost reductions implemented in the second quarter of 2020 in reaction to COVID-driven sales reductions. In the second quarter of 2021 we incurred higher sales commissions related to higher sales, increased Strategic transaction costs related to the Separation, and debt extinguishment charges in the current year period. Net income margin from continuing operations increased by 370 basis points due to the aforementioned factors. Adjusted EBITA and related margins increased primarily due to the improved sales volumes, partially offset by higher sales commissions and the cessation of second quarter 2020 temporary cost reductions.

Six months ended July 2, 2021 Compared to Six months ended July 3, 2020

logistic costs. Gross profit increased $200.8 million in the six months ended July 2, 2021 compared with the prior year period due to a $89.5 million increase in our Fabrication Technology segment and a $111.3 million increase in our Medical Technology segment. The Gross profit increasemargin was primarily attributable to higher sales volumes and the related improved production variances compared to the six months ended July 3, 2020, during which sales volumes were negatively impacted by the COVID-19 pandemic. During the six months ended July 2, 2021,same drivers as Gross profit, also improvedbut decreased slightly due to acquisition growth, new product initiatives and favorable foreign currency impacts. Gross profit margin increased for the same reasons Gross profit increased, partially offset by inflation-related customer pricing and cost increases in our Fabrication Technology segment.

Selling, general and administrative expense increased $115.4$63.7 million in the six months ended July 2, 2021first quarter of 2022 compared to the prior year period primarily due to increased sales commissions from increased sales levels, and the cessationbusiness acquisition-related increases of prior year temporary cost reduction measures that were taken in response to COVID-19. To a lesser extent, acquisition-related expenses and strategic transaction costs related to the Separation also increased Selling, general and administrative expense during the six months ended July 2, 2021. Restructuring and other related charges decreased due to the completion of certain restructuring programs$26.7 million in our Medical Technology segment.segment, a $20.0 million increase in strategic transaction costs driven by higher Separation-related costs, and, to a lesser extent, increases in compensation and travel costs.

Additionally, during the six months ended July 2, 2021, a pension settlement gain of $11.2 million was recognized when the independent trustees of a company pension plan agreed to merge that plan with another company pension plan and contribute its surplus assets.

Debt extinguishment charges of $29.9 million were recorded in the second quarter of 2021 due to an early redemption of certain senior notes. Interest expense, net decreased in the six months ended July 2, 2021first quarter of 2022 compared to the same period in the prior year primarilyperiod due to an overalla reduction in debt balances, during the current year periodprimarily as a result of the aforementioned redemption of senior notes.notes in the second quarter of 2021.

The effective tax rate for Net income (loss) from continuing operations during the six months ended July 2, 2021first quarter of 2022 was 21.4%49.1%, which was slightly higher than the 20212022 U.S. federal statutory tax rate of 21%, mainly due to withholding taxes, taxable foreign exchange gains, U.S. tax ontaxation of international operations, and other non-deductible expenses, offset byand various items expensed discretely to the net impact of international tax rates, the realization of tax benefits associated with effective settlements on uncertain tax positions, and U.S. tax credits.quarter. The effective tax rate for the six months ended July 3, 2020first quarter of 2021 was 151.3%22.2%, which was higher than the 20202021 U.S. federal statutory tax rate of 21% mainly due to withholding taxes, taxable foreign exchange gains and other non-deductible expenses partially offset by the impactbenefit of U.S. tax credits and state taxes on the forecasted rate and discrete tax benefits associated with the filing of timely elected changes to U.S. Federal tax returns to credit rather than to deduct foreign taxes, the impact of an enacted law change in India, and the realization of tax benefits associated with effective settlements on uncertain tax. These favorable impacts were offset by the impact of additional U.S. tax on international operations and taxable foreign exchange gains.credits.

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Net income from continuing operations increaseddecreased in the six months ended July 2, 2021first quarter of 2022 compared with the prior year period primarily due to costs associated with the strong recovery from the prior year COVID-related sales downturnSeparation, increased income tax expense and related cost impacts. The sales-related benefits from this recovery in the six months ended July 2, 2021 wereacquisition-related costs, partially offset by increases in expenses attributable to the temporary cost reductions implemented during the six months ended July 3, 2020 in reaction to COVID-drivenimproved sales reductions. In the six months ended July 2, 2021, we incurred higher sales commissions related to higher sales, and debt extinguishment charges.volumes. Net income margin from continuing operations increaseddecreased by 280130 basis points due to the aforementioned factors. Adjusted EBITA increased primarily due to the improved sales volumes, new product initiatives, and benefits from previously-completed restructuring programs, partially offset by the aforementioned sales commission increases,higher supply chain and the cessation of the aforementioned temporary cost reductions.logistic costs. Adjusted EBITA margin increased 40 basis points for the same reasons Adjusted EBITA increased, partially offset by inflation-related customer pricing and cost increases in our Fabrication Technology segment, duringas well as recent acquisitions in our Medical Technology segment which were dilutive to the six months ended July 2, 2021.margin, but are expected to be accretive in future years.

Business Segments

As discussed above, we report results in two reportable segments: Fabrication Technology and Medical Technology.

Fabrication Technology

We formulate, develop, manufactureOur fabrication technology business formulates, develops, manufactures and supplysupplies consumable products and equipment, including cutting, joining, and automated welding products, as well as gas control equipment. Our fabrication technology products are marketed under several brand names, most notably ESAB, providing a wide range of products with innovative technologies to solve challenges in virtually any 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 end markets, including general industry, construction, infrastructure, wind power, marine,transportation, energy, renewable energy, and medical /& life sciences, pipelines, mobile/off-highway equipment, oil, gas, and mining.sciences. As part of the Separation described elsewhere in this report, on April 4, 2022, we spun-off our fabrication technology business. Refer to Note 15, “Subsequent Events” in the accompanying Notes to the Condensed Consolidated Financial Statements for more information regarding the Separation.

The following table summarizes selected financial results for our Fabrication Technology segment:
Three Months EndedSix Months EndedThree Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020April 1, 2022April 2, 2021
(Dollars in millions)(Dollars in millions)
Net salesNet sales$629.8 $414.4 $1,197.9 $939.9 Net sales$647.9 $568.1 
Gross profitGross profit$218.4 $139.9 $418.2 $328.7 Gross profit$224.3 $199.8 
Gross profit marginGross profit margin34.7 %33.8 %34.9 %35.0 %Gross profit margin34.6 %35.2 %
Selling, general and administrative expenseSelling, general and administrative expense$124.0 $96.3 $241.5 $216.1 Selling, general and administrative expense$128.8 $117.5 
Segment operating income (non-GAAP)Segment operating income (non-GAAP)$94.4 $43.6 $176.7 $112.6 Segment operating income (non-GAAP)$95.5 $82.3 
Segment operating income margin (non-GAAP)Segment operating income margin (non-GAAP)15.0 %10.5 %14.8 %12.0 %Segment operating income margin (non-GAAP)14.7 %14.5 %
Adjusted EBITA (non-GAAP)Adjusted EBITA (non-GAAP)$103.6 $52.4 $195.0 $130.3 Adjusted EBITA (non-GAAP)$106.9 $91.4 
Adjusted EBITA margin (non-GAAP)Adjusted EBITA margin (non-GAAP)16.4 %12.6 %16.3 %13.9 %Adjusted EBITA margin (non-GAAP)16.5 %16.1 %
Items excluded from Adjusted EBITA:Items excluded from Adjusted EBITA:Items excluded from Adjusted EBITA:
Restructuring and other related chargesRestructuring and other related charges$3.5 $6.1 $6.6 $8.9 Restructuring and other related charges$5.3 $3.1 
Strategic transaction costsStrategic transaction costs$0.1 $— $0.1 $— Strategic transaction costs$3.6 $— 
Acquisition-related amortization and other non-cash chargesAcquisition-related amortization and other non-cash charges$9.1 $8.8 $18.2 $17.7 Acquisition-related amortization and other non-cash charges$7.7 $9.1 

SecondFirst Quarter of 20212022 Compared to SecondFirst Quarter of 20202021

Net sales in our Fabrication Technology segment increased $215.4$79.8 million, or 14%, in the secondfirst quarter of 20212022 compared with the prior year period driven primarily by inflation-related customer pricing impacts, as well as new product initiatives and improved sales volumes, partially offset by unfavorable foreign currency translation. Gross profit increased $24.5 million due to the strong recovery from the COVID effects in the second quarter of 2020. Sales also increased due toimproved sales volumes, driven by new product initiatives, inflation-related pricing impacts of approximately 11% of the sales increase, and an $18.5 million favorable foreign currency impact during the second quarter of 2021. Gross profit andproduct mix. Gross profit margin increased $78.5 million and 90decreased 60 basis points respectively, due to the higher sales volumes and the related improved production efficiencies compared to the prior year period. The increase in Gross profit margin was partially offset by inflation-related
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customer pricing and cost increases, which compressed the margin. Selling, general and administrative expense increased primarily due to increased costs related to the cessation of temporary cost reductions implemented during the second quarter of 2020, partially offset by benefits from ongoing restructuring initiatives to structurally reduceSeparation, as well as increased allowances on receivables in certain regions and increased compensation costs. Segment operating income and Adjusted EBITASegment operating income margin improved due to increased sales volumes,and favorable product mix, partially offset by increased Selling, general and
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administrative expenses. The related marginsAdjusted EBITA and Adjusted EBITA margin increased for the same reasons, partially offset by inflation-related customer pricing and cost increases during the secondfirst quarter of 2021.

Six months ended July 2, 2021 Compared to Six months ended July 3, 2020

Net sales increased $258.0 million in the six months ended July 2, 2021 compared with the prior year period, due to the strong recovery from the COVID effects in the six months ended July 3, 2020, as well as new product initiatives, inflation-related pricing impacts, and a $25.9 million favorable foreign currency translation impact in the current year period. Gross profit increased $89.5 million during the six months ended July 2, 2021 as a result of improved sales volumes, while Gross profit margin decreased 10 basis points due to inflation-related pricing and cost increases, which compressed the margin. Selling, general and administrative expense increased in the period primarily due to the cessation of temporary cost reductions implemented in the second quarter of 2020, partially offset by benefits from restructuring initiatives. Segment operating income and Adjusted EBITA increased in the six months ended July 2, 2021 compared to the prior year period due to the improved sales volumes, partially offset by increased Selling, general and administrative costs. The related margins increased for the same reasons, partially offset by inflation-related pricing and cost increases over the same period.2022.

Medical Technology
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. Our products are used by orthopedic specialists, spine surgeons, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers and other healthcare professionals. Our products primarily include orthopedic braces, rehabilitation devices, footwear, surgical implants, and bone growth stimulators.

The following table summarizes the selected financial results for our Medical Technology segment:
 
Three Months EndedSix Months EndedThree Months Ended
July 2, 2021July 3, 2020July 2, 2021July 3, 2020April 1, 2022April 2, 2021
(Dollars in millions)(Dollars in millions)
Net salesNet sales$356.1 $206.0 $667.2 $496.8 Net sales$375.5 $311.1 
Gross profitGross profit$200.6 $101.2 $371.9 $260.6 Gross profit$205.9 $171.3 
Gross profit marginGross profit margin56.3 %49.1 %55.7 %52.5 %Gross profit margin54.8 %55.1 %
Selling, general and administrative expenseSelling, general and administrative expense$184.3 $123.9 $355.1 $282.2 Selling, general and administrative expense$208.4 $170.9 
Segment operating income (loss) (non-GAAP)$18.2 $(20.8)$20.4 $(17.0)
Segment operating income (loss) margin (non-GAAP)5.1 %(10.1)%3.1 %(3.4)%
Segment operating income (non-GAAP)Segment operating income (non-GAAP)$(0.1)$2.2 
Segment operating income margin (non-GAAP)Segment operating income margin (non-GAAP)— %0.7 %
Adjusted EBITA (non-GAAP)Adjusted EBITA (non-GAAP)$48.2 $6.5 $79.8 $37.2 Adjusted EBITA (non-GAAP)$37.8 $31.6 
Adjusted EBITA margin (non-GAAP)Adjusted EBITA margin (non-GAAP)13.5 %3.2 %12.0 %7.5 %Adjusted EBITA margin (non-GAAP)10.1 %10.2 %
Items excluded from Adjusted EBITA:Items excluded from Adjusted EBITA:Items excluded from Adjusted EBITA:
Restructuring and other related charges(1)
Restructuring and other related charges(1)
$2.0 $5.1 $3.0 $13.3 
Restructuring and other related charges(1)
$3.0 $1.0 
MDR and other costs$1.9 $1.0 $3.7 $1.9 
MDR and related costs(2)
MDR and related costs(2)
$2.6 $1.8 
Strategic transaction costsStrategic transaction costs$2.1 $— 
Acquisition-related amortization and other non-cash chargesAcquisition-related amortization and other non-cash charges$29.9 $27.3 $59.3 $54.2 Acquisition-related amortization and other non-cash charges$35.9 $29.4 
(1) Restructuring and other related charges includes $0.9 million and $2.7$0.5 million of expense classified as Cost of sales on our Condensed Consolidated Statements of Operations for the three and six months ended July 3, 2020, respectively.April 1, 2022.

SecondFirst Quarter of 20212022 Compared to SecondFirst Quarter of 20202021

Net sales increased forin our Medical Technology segment in the secondfirst quarter of 20212022 compared with the prior year period primarily due to the strong recovery from COVID-driven lower sales in the second quarter of 2020, as well as acquisition-related sales growth of $22.9 million and a favorable foreign currency translation effect of $5.6$45.6 million in the current year
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period. Sales from existing business increased $23.3 million primarily due to higher sales volumes in the current year period compared to the prior year period, both of which were impacted by COVID-19. The benefit from acquisition-related sales and increased existing business sales was partially offset by unfavorable foreign currency translation. Gross profit and gross profit margins increased in the secondfirst quarter of 2022 compared to the first quarter of 2021 compared to the second quarter of 2020 primarily due to improved sales volumesacquisition-related growth and acquisition-related growth,favorable product mix, partially offset by increased supply chain costs.and logistic costs and acquisition-related inventory valuation step-up charges, which also led to a slight decrease in Gross profit margin. Selling, general and administrative expense increased over the same period primarily due to the cessation of temporary employee cost reductions implemented during the second quarter of 2020, as well as higher sales commissions and acquisition-related expenses,costs associated with acquisitions, including integration costs fromfor the newly-acquired businesses in the current year period. Segment operating income, Adjusted EBITA and the related margins all increased commissions as a result of the aforementioned factors. Restructuringimproved sales volumes. Segment operating income and other related chargesSegment operating income margin decreased by $3.1 millionprimarily due to the completion of certain projects in earlier periods.

Six months ended July 2, 2021 Compared to Six months ended July 3, 2020

Net sales increased for our Medical Technology segment in the six months ended July 2, 2021 compared with the prior year period due to a recovery in sales volumes from the declineacquisition-related costs and costs related to COVID-19 during the six months ended July 3, 2020, as well as continued expansion in the reconstructive product group from key products launched in 2020, acquisition-relatedSeparation, partially offset by improved sales growth of $36.9 million and a favorable foreign currency translation effect of $12.4 million during the current year period. While sales volumes early in the first quarter of 2021 were negatively impacted by certain jurisdictions putting further COVID-19-related restrictions in place in response to the surge in COVID-19 cases late in 2020, sales volumes have since normalized. Gross profit and Gross profit marginsvolumes. Adjusted EBITA increased during the six months ended July 2, 2021 compared to the prior year periodprimarily due to improved sales volumes and acquisition-related growth,in the current year, partially offset by increased supply chain costs.and logistic costs and increased Selling, general and administrative expense also increasedcosts, while adjusted EBITA margin decreased slightly primarily due to the cessationdilutive impact of temporary employee cost reductions implemented during the second quarter of 2020 and higher sales commissions in the current year period, as well as costs associated with acquisitions and the related integration costs from the newly acquired businesses during the six months ended July 2, 2021. Segment operating income, Adjusted EBITA, and related margins all increased as a result of the aforementioned factors.recent acquisitions. Restructuring and other related charges decreasedincreased by $10.3$2.0 million due to completing certain projects.the implementation of new restructuring initiatives.


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Liquidity and Capital Resources

Overview

We finance our long-term capital and working capital requirements through a combination of cash flows from operating activities, various borrowings and the issuances of equity. We expect that our primary ongoing requirements for cash after the Separation will be for working capital, funding of acquisitions, near-term Separation costs, capital expenditures, restructuring, asbestos-related cash outflows, and debt service and required amortization of principal.principal repayments. We believe we could raise additional funds in the form of debt or equity if it was determined to be appropriate for strategic acquisitions or other corporate purposes.

On April 4, 2022, we completed the separation of our fabrication technology business through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB Corp to Enovis stockholders. We retained 10% of the shares of ESAB Corp common stock immediately following the Separation. We intend to divest the 10% retained shares in ESAB Corp in a tax-efficient exchange for our outstanding debt no later than 12 months after the Distribution date.

In connection with the Separation, ESAB Corp issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to us upon Separation. We used the distribution proceeds in conjunction with $450 million of borrowings on a term loan under the new credit facility, and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest on our existing credit facility, $302.8 million of outstanding debt and accrued interest on our senior notes due February 15, 2026 (“2026 Notes”), as well as a redemption premium at 103.188% of the principal amount of our 2026 Notes, and other fees and expenses due at closing. Additionally, on April 7, 2022, we completed the redemption of our senior unsecured notes due April 2025 (“Euro Senior Notes”) representing all of its outstanding €350 million principal 3.250% Senior Notes due 2025 at a redemption price of 100.813% of the principal amount. Refer to Note 15, “Subsequent Events” for further information including detail of ongoing financing arrangements.

Equity Capital
    
On March 19, 2021, we completed the underwritten public offering of 16.15.4 million shares of our Common stock, at a price toas adjusted for the public of $46.00 per share,reverse split, resulting in net proceeds of $711.3 million, after deducting offering expenses and underwriters’ discount and commissions. We used thesethe proceeds to pay down certain of our senior notes, as discussed further below.

On July 28, 2021, the Company issued 2.2 million shares of Common stock, as adjusted for the reverse split, to the former shareholders of Mathys for acquisition consideration of $285.7 million.

In 2018, our Board of Directors authorized the repurchase of our Common stock from time-to-time on the open market or in privately negotiated transactions. No stock repurchases have been made under this plan since the third quarter of 2018. As of July 2, 2021,April 1, 2022, the remaining stock repurchase authorization provided by our Board of Directors was $100.0 million. The timing, amount, and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors. There is no term associated with the remaining repurchase authorization.

Term Loan and Revolving Credit Facility

Our credit agreement (the “Credit Facility”) by and among, which was legally extinguished in conjunction with the Company, as the borrower, certain U.S. subsidiaries of the Company, as guarantors, each of the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Citizens Bank, N.A., as syndication agent, and the co-documentation agents named therein consistsSeparation on April 4, 2022, consisted of a $975 million revolving credit facility (the “Revolver”) and a Term A-1 loan in an initial aggregate principal amount of $825 million, each with a maturity date of December 6, 2024. The Revolver containscontained a $50 million swing line loan sub-facility. Refer to Note 10, “Debt” and Note 15, “Subsequent Events” in the accompanying Notes to the Condensed Consolidated Financial Statements for more information.

As of July 2, 2021, we areApril 1, 2022, the Company was in compliance with the covenants under the Credit Facility.

As of July 2, 2021,April 1, 2022, the weighted-average interest rate of borrowings under the Credit Facility was 1.84%1.74%, excluding accretion of original issue discount and deferred financing fees, and there was $890375 million available on the Revolver.

Euro Senior Notes

Our senior unsecured notes with an aggregate principal amount of €350 million (the “Euro Notes”) arewere due in AprilMay 2025 haveand had an interest rate of 3.25%, and are guaranteed by certain of our domestic subsidiaries (the “Guarantees”). The Euro Senior Notes andwere redeemed on April 7, 2022 after the Guarantees have not been, and will not be, registered undercompletion of the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any other jurisdiction.Separation.

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TEU Amortizing Notes

OurOn January 15, 2022, we made the final installment payment on our TEU amortizing notes, withwhich had an initial principal amount of $15.6099 per unit bearand an interest at a rate of 6.50% per annum, and have equal quarterly cash installments of $1.4375 per TEU amortizing note with a final installment payment date of January 15, 2022. The quarterly cash installment constitutes a payment of interest and a partial repayment of principal.annum. We paid $12.3$6.5 million and $11.5$6.1 million of principal on the TEU amortizing notes in the sixthree months ended JulyApril 1, 2022 and April 2, 2021, and July 3, 2020, respectively. The TEU amortizing notes are the direct, unsecured and unsubordinated obligations of the Company and rank equally with all of the existing and future other unsecured and unsubordinated indebtedness of the Company. Refer to Note 10, “Debt” in the accompanying Notes to Condensed Consolidated Financial Statements for more information.


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2024 Notes and 2026 Notes

We had senior notes with an initial aggregate principal amount of $600$300 million, (the “2024 Notes”), which were due on February 15, 20242026 and had an interest rate of 6.0%. We have senior notes with an initial aggregate principal amount of $400 million (the “2026 Notes”), which are due on February 15, 2026 and have an interest rate of 6.375%. The 2026 Notes are guaranteed by certain of our domestic subsidiaries. Wewere redeemed allon April 7, 2022 after the completion of the outstanding 2024 Notes and $100 million of the outstanding principal amount of our 2026 Notes on April 24, 2021. Refer to Note 10, “Debt”, in the accompanying Notes to Condensed Consolidated Financial Statements for more information.Separation.

Other Indebtedness

In addition, we are party to various bilateral credit facilities with a borrowing capacity of $192.6$168.2 million. As of July 2, 2021,April 1, 2022, there were no outstanding borrowings under these facilities. Subsequent to the end of the first quarter of 2022, the bilateral credit facilities are no longer available to Enovis due to the completion of the Separation as they relate to ESAB Corp or expired.

We are also party to letter of credit facilities with an aggregate capacity of $339.8$211.9 million. Total letters of credit of $70.1$40.2 million were outstanding as of July 2, 2021.April 1, 2022. Substantially all of the letter of credit facilities relate to central banking entities and operations of ESAB Corp which was spun-off with the fabrication technology business on April 4, 2022.

We believe that our sources of liquidity are adequate to fund our operations for the next twelve months.

Cash Flows

As of July 2, 2021,April 1, 2022, we had $62.3$661.5 million of Cash and cash equivalents, a decrease of $38.8$57.9 million from the balance as of December 31, 20202021 of $101.1 million, which included $4.0 million of Restricted cash.$719.4 million. The following table summarizes the change in Cash and cash equivalents during the periods indicated:
Six Months EndedThree Months Ended
July 2, 2021July 3, 2020April 1, 2022April 2, 2021
(Dollars in millions)
(Dollars in millions)
Net cash provided by operating activities$162.8 $93.2 
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities$(14.4)$84.4 
Purchases of property, plant and equipmentPurchases of property, plant and equipment(44.6)(50.4)Purchases of property, plant and equipment(24.1)(24.5)
Proceeds from sale of property, plant and equipmentProceeds from sale of property, plant and equipment3.2 5.0 Proceeds from sale of property, plant and equipment2.7 — 
Acquisitions, net of cash received, and investmentsAcquisitions, net of cash received, and investments(230.7)(7.5)Acquisitions, net of cash received, and investments(13.8)(103.5)
Net cash used in investing activitiesNet cash used in investing activities(272.1)(53.0)Net cash used in investing activities(35.2)(128.0)
Proceeds (repayments) from borrowings, net(627.7)(63.2)
Repayments of borrowings, netRepayments of borrowings, net(7.4)(6.3)
Proceeds from issuance of common stock, netProceeds from issuance of common stock, net730.0 2.3 Proceeds from issuance of common stock, net1.2 716.6 
Payment of debt extinguishment costs(24.4)— 
Other(6.2)(16.4)
Deferred consideration payments and otherDeferred consideration payments and other(4.6)(2.7)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities71.7 (77.4)Net cash provided by (used in) financing activities(10.8)707.7 
Effect of foreign exchange rates on Cash and cash equivalentsEffect of foreign exchange rates on Cash and cash equivalents(1.1)(6.1)Effect of foreign exchange rates on Cash and cash equivalents2.5 (1.4)
Decrease in Cash and cash equivalents$(38.8)$(43.2)
Increase (decrease) in Cash and cash equivalentsIncrease (decrease) in Cash and cash equivalents$(57.9)$662.6 

Cash flows from operating activities can fluctuate significantly from period to period due to changes in working capital and the timing of payments for items such as pension funding, asbestos-related costs, restructuring, and restructuring program funding.strategic transaction costs including Separation costs. Changes in significant operating cash flow items are discussed below.

During the sixthree months ended JulyApril 1, 2022 and April 2, 2021, and July 3, 2020, cash payments of $10.2$9.1 million and $23.6$4.7 million, respectively, were made related to our restructuring initiatives.

During the three months ended April 1, 2022, cash payments of $7.9 million were made related to the Separation.
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Year-to-date 20212022 results include $47.6$61.9 million of outflows from working capital as a result of business growth.growth, which have caused certain increases in accounts receivable and inventory levels, offset by an increase in accounts payable. Results in the comparable prior year period provided cash of $59.8$8.3 million due to a decrease in receivables, partially offset by a decreasean increase in accounts payable, offset by increases in accounts receivable and inventory levels due to COVID-related declines.COVID-19 recovery.

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Year-to-date 2021Prior year net cash provided by operating activities also included a one-time cash inflow from a $36.0 million U.S. federal tax refund received in the first quarter of 2021.

Cash used in operating activities related to discontinued operations for the sixthree months ended July 2, 2021April 1, 2022 was $4.6 million, primarily due to a settlement related to a disposed business, partially offset by net asbestos inflows.$5.8 million. Cash used in operating activities related to discontinued operations for the sixthree months ended July 3, 2020April 2, 2021 was $7.9 million.$7.3 million, primarily due to a settlement related to a disposed business.

Cash flows used in investing activities during the sixthree months ended July 2, 2021 increasedApril 1, 2022 decreased due to cashlower acquisition and investment activity in the current year period. Cash paid for acquisitions and investments in our Medical Technology segment of $225.7was $13.8 million as well asand $98.5 million during the three months ended April 1, 2022 and April 2, 2021, respectively. During the three months ended April 2, 2021, we also had an acquisition outlay in our Fabrication Technology segment of $5.0 million.

Cash flows used in financing activities during the three months ended April 1, 2022 include $7.4 million repayment of borrowings. Cash flows provided by financing activities for the sixthree months ended JulyApril 2, 2021 included the $711.3 million net proceeds from the public offering of 16.1 million shares of Colfaxour Common stock on March 19, 2021. The net proceeds were used infor the $600 million full redemption of our 2024 Notes and the $100 million partial redemption of our 2026 Notes. Cash flows from financing activities reflects a net borrowing on our RevolverNotes in 2021 and a net repayment on our Revolver in 2020.the second quarter of 2021.

Our Cash and cash equivalents as of July 2, 2021April 1, 2022 include $50.6$59.9 million held in jurisdictions outside the U.S., an increase of $7.4 million in the second quarter of 2021. Cash repatriation of non-U.S. cash into the U.S. may be subject to taxes, other local statutory restrictions and minority owner distributions. The majority of the cash and cash equivalents held in jurisdictions outside the U.S. relate to central banking entities and operations of ESAB Corp which was spun-off with the Fabrication Technology business on April 4, 2022.

Critical Accounting Policies

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on our results of operations and financial position. We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what our management anticipates, and different assumptions or estimates about the future could have a material impact on our results of operations and financial position.

There have been no other significant additions or changes to the methods, estimates and judgments included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies” in our 20202021 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in short-term interest rates, foreign currency exchange rates and commodity prices that could impact our results of operations and financial condition. We address our exposure to these risks through our normal operating and financing activities. We do not enter into derivative contracts for trading purposes.

Interest Rate Risk

We are subject to exposure from changes in short-term interest rates related to interest payments on our borrowing arrangements. A significant amount of our borrowings as of July 2, 2021April 1, 2022 are variable-rate facilities based on LIBOR or EURIBOR.LIBOR. In order to mitigate our interest rate risk, we may enter into interest rate swap or collar agreements. A hypothetical increase in interest rates of 1% during the three and six months ended JulyApril 1, 2022 and April 2, 2021 would have increased Interest expense for our variable rate-based debt by approximately $2.3$3.5 million and $4.3$2.0 million, respectively.
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Exchange Rate Risk

We have manufacturing sites throughout the world and sell our products globally. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar and against the currencies of other countries in which we manufacture and sell products and services. During both the three and six months ended JulyApril 1, 2022 and April 2, 2021, approximately 59% and 60%61% of our sales respectively, were derived from operations outside the U.S. We have significant manufacturing operations in European countries that are not part of the Eurozone. Sales are more highly weighted toward the Euro and U.S. dollar. We also have significant contractual obligations in U.S. dollars that are met with cash flows in other currencies as well
39

as U.S. dollars. To better match revenue and expense, as well as cash needs from contractual liabilities, we regularly enter into currency swaps and forward contracts.

We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries. Euro denominated borrowings under the Euro Senior Notes provide a natural hedge to a portion of our European net asset position. The effect of a change in currency exchange rates on our net investment in international subsidiaries, net of the translation effect of our Euro denominated borrowings, is reflected in the Accumulated other comprehensive loss component of Equity. A 10% depreciation in major currencies relative to the U.S. dollar as of July 2, 2021April 1, 2022 (net of the translation effect of our Euro denominated borrowings) would result in a reduction in Equity of approximately $169$186 million.

We also face exchange rate risk from intercompany transactions between affiliates. Although we use the U.S. dollar as our functional currency for reporting purposes, we have manufacturing sites throughout the world, and a substantial portion of our costs are incurred and sales are generated in foreign currencies. Costs incurred and sales recorded by subsidiaries operating outside of the U.S. are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. Similarly, tax costs may increase or decrease as local currencies strengthen or weaken against the U.S. dollar.

Commodity Price Risk

We are exposed to changes in the prices of raw materials used in our production processes. In order to manage commodity price risk, we periodically enter into fixed price contracts directly with suppliers.

See Note 12, “Financial Instruments and Fair Value Measurements” in our Notes to Condensed Consolidated Financial Statements included in this Form 10-Q for additional information regarding our derivative instruments.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of July 2, 2021.April 1, 2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in providing reasonable assurance that the information required to be disclosed in this report on Form 10-Q has been recorded, processed, summarized and reported as of the end of the period covered by this report on Form 10-Q.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II - OTHER INFORMATION
Item 1. Legal Proceedings

Discussion of legal proceedings is incorporated by reference to Note 13, “Commitments and Contingencies,” in the Notes to Condensed Consolidated Financial Statements included in Part I. Item 1. “Financial Statements” of this Form 10-Q.

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. In addition to risk factors included in “Part I. Item 1A. Risk Factors” in our 20202021 Form 10-K, we face the following risks:

Risks Relating to the Separation

The separation of our fabrication technology and medical technology business into two, differentiated, independent publicly traded companies may not be completed on the currently contemplated timeline, or at all, andWe may not achieve the intended benefits.

In March 2021, we announced our intention to separate our fabrication technology and medical technology business into two, differentiated, independent publicly traded companies (the “Separation”). We are targeting completionsome or all of the Separation in the first quarter of 2022. Completion of the Separation is subject to, among other things, completion of financing and other transactions on satisfactory terms, other steps necessary to qualify the Separation as a generally tax-free transaction, receipt of other regulatory approvals, obtaining final approvals from our board of directors and market conditions. The Separation is complex in nature, and unanticipated developments or changes, including changes in the law, macroeconomic environment and competitive conditions of our markets, the need both to receive regulatory approvals or clearances and to satisfy the requirements to effectuate a generally tax-free transaction, the uncertainty of the financial markets and challenges in executing the Separation, could delay or prevent the completion of the Separation or cause the Separation to occur on terms or conditions that are different or less favorable than expected.

Whether or not we complete the Separation, our ongoing businesses may face material challenges in connection with the Separation, including, but not limited to:

the diversion of our management’s attention from operating and growing our business as a result of the significant amount of time and effort required to execute the Separation;

foreseen and unforeseen costs and expenses that will be incurred in connection with the Separation, including accounting, tax, legal and other professional services costs, and potential prepayment charges and write-offs of deferred costs related to establishing new capital structures;

retaining existing business and operational relationships, including with customers, suppliers and employees, as well as cultivating new business relationships; and

potential negative reactions from the financial markets if we fail to complete the Separation in its currently intended form, within the anticipated time frame or at all.

Additionally, volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets. Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions. These conditions may adversely affect our anticipated timeline to complete the Separation and the expected benefits of the Separation, including by increasing the time and expense involved in the Separation. Other challenges associated with effectively executing the Separation include attracting, retaining and motivating key management and employees during the pendency of the Separation and following its completion, addressing any disruptions tomay adversely affect our supply chain, manufacturing, sales and distribution, and other operations resulting from separating our fabrication and specialty medical technology business into two, differentiated, independent publicly traded companies. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or the price of our common stock. Furthermore, if the Separation is completed, we cannot provide assurance thatbusinesses.
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the Separation willWe may not be able to achieve the full strategic and financial benefits expected to result from the Separation, nor can weor such benefits may be delayed or not occur at all. The Separation is expected to provide assurance that each independent company will be successful in meeting its objectives.the following benefits, among others:

If the Separation occurs,will allow investors to value the Company based on its distinct investment identity, and enable investors to evaluate the merits, performance and future prospects of the Company’s businesses based on the distinct characteristics;
the Separation will facilitate incentive compensation structures for employees more directly tied to the performance of the Company’s businesses, and may enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives; and
the Separation will allow us to more effectively pursue our financialoperating priorities and operational profile will change,strategies, and we will be a smaller, less diversified company than we are today.enable management to focus on unique opportunities for long-term growth and profitability.

If the Separation occurs, it will result in two smaller, less diversified companies, each withWe may not achieve these and other anticipated benefits for a more concentrated areavariety of focus. As a result, each company may be more vulnerable to changing market conditions and competitive pressures, which could have a material adverse effect on our business, financial condition and results of operations. The diversification of revenues,reasons, including, among others:

certain costs and cash flows will diminish as a result ofliabilities that were otherwise less significant to the Separation, such that each company’s results of operations, cash flows, working capital, effective tax rate and financing requirements may be subjectCompany prior to increased volatility, and each company’s ability to fund capital expenditures, investments and service our debt may be diminished. There can be no assurance that the combined value of the common stock of the two independent publicly traded companies following the completion of the Separation will be equal to or greater than whatmore significant for us as a separate company after the valueSeparation; and
we may not achieve the anticipated benefits of our common stock would have been had the Separation not occurred.for a variety of reasons, including, among others, (i) we may be more susceptible to market fluctuations and other adverse events than we were prior to the Separation and (ii) following the Separation, our businesses are less diversified than they were prior to the Separation.

If we fail to achieve some or all of the benefits expected to result from the Separation, or if such benefits are delayed, our businesses, operating results and financial condition could be adversely affected.

We could incur significant liability if the separation and distribution of ESAB Corp is determined to be a taxable transaction.

We have received an opinion from outside tax counsel to the effect that the separation and distribution of ESAB Corp qualifies as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code. The opinion relies on certain facts, assumptions, representations and undertakings from ESAB and us regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, our stockholders and we may not be able to rely on the opinion of tax counsel and could be subject to significant tax liabilities. Notwithstanding the opinion of tax counsel we have received, the IRS could determine on audit that the separation and distribution are taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion. If the Separation and/or certain related transactions do not qualify as transactions thatseparation and distribution of ESAB are generally tax-freedetermined to be taxable for U.S. federal income tax purposes, we and our stockholders could bethat are subject to U.S. federal income tax and we could incur significant U.S. federal income tax liabilities.

Notwithstanding thatPotential indemnification liabilities to ESAB Corp pursuant to the separation agreement could materially and adversely affect our businesses, financial condition, results of operations and cash flows.

We entered into a separation and distribution agreement and related agreements with ESAB Corp to govern the separation and distribution of ESAB Corp and the relationship between the two companies going forward. These agreements provide for specific indemnity and liability obligations of each party and could lead to disputes between us. If we intendare required to structureindemnify ESAB Corp under the Separationcircumstances set forth in these agreements, we may be subject to generally be a tax-free transaction,substantial liabilities. In addition, with
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respect to the U.S. Internal Revenue Service (the “IRS”) could determine that the Separation and/or certain related transactions should be treated as taxable transactionsliabilities for U.S. federal income tax purposes. Accordingly,which ESAB Corp has agreed to indemnify us under these agreements, there can be no assurance that the IRSindemnity rights we have against ESAB Corp will not assert thatbe sufficient to protect us against the Separation and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposesfull amount of the liabilities, or that a court would not sustain such a challenge. In the event the IRS wereESAB Corp will be able to prevail with such challenge, wefully satisfy its indemnification obligations. Each of these risks could negatively affect our businesses, financial condition, results of operations and our stockholders could be subject to significant U.S. federal income tax liability.cash flows.

If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355Our business, financial condition and 368(a)(1)(D)results of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), in general, for U.S. federal income tax purposes, we would recognize taxable gain as if we had sold the common stock of the separated entity in a taxable sale for its fair market value (unless we and the separated entity jointly make an election under Section 336(e) of the Code with respect to the Separation, in which case, in general, (a) we would recognize taxable gain as if the separated entity had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of its common stock and the assumption of all its liabilities and (b) the separated entity would obtain a related step-upoperations could be adversely affected by disruptions in the basis of its assets),global economy caused by the ongoing conflict between Russia and our stockholders who receive shares of common stock of the separated entity in the Separation would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.Ukraine.


The global economy has been negatively impacted by the military conflict between Russia and Ukraine. Furthermore, governments in the United States, United Kingdom and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia and Russia has imposed counter-sanctions in response. Although we have no direct operations in Russia or Ukraine or government-imposed sanctions on our products currently, we could experience sanctions in the future and/or shortages in materials, increased costs for raw material and other supply chain issues due in part to the negative impact of the Russia-Ukraine military conflict on the global economy. Further escalation of geopolitical tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, additional supply disruptions, lower consumer demand and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain. In addition, the effects of the ongoing conflict could heighten many of our known risks described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 22, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.


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Item 5. Other Information

The information set forth below is included herein for the purpose of providing the disclosure required under “Item 3.02 - Unregistered Sales of Equity Securities.” of Form 8-K.

On June 7, 2021, we entered into a definitive agreement to acquire Mathys AG Bettlach, a Swiss company that develops and distributes innovative products for artificial joint replacement, synthetic bone graft solutions, and sports medicine. On July 26, 2021, we provided the sellers with notice of our election to exercise our right under the acquisition agreement to fund the purchase price in shares of our common stock. Total acquisition consideration of approximately $285 million is expected to be financed with our common stock, with the aggregate number of shares to be determined based on, among other things, the share price of our common stock on the New York Stock Exchange on the closing date. We intend to issue the consideration shares at closing, which is expected to occur on July 28, 2021 subsequent to the filing of this Form 10-Q, subject to the satisfaction of closing conditions, in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, on the basis that it did not involve a public offering.None.
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Item 6. Exhibits
Exhibit No.Exhibit Description
Certificate of Incorporation
Amendment No. 4 to Credit Agreement dated asAmended and Restated Bylaws of April 15, 2021.Enovis Corporation.
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File - The cover page from this Quarterly Report on Form 10-Q for the quarter ended July 2, 2021April 1, 2022 is formatted in Inline XBRL (included as Exhibit 101).
*Incorporated by reference to Exhibit 3.01 to ColfaxEnovis (formerly Colfax) Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on January 30, 2012.
**Incorporated by reference to Exhibit 3.023.1 to ColfaxEnovis Corporation’s Form 10-Q8-K (File No. 001-34045) as filed with the SEC on July 23, 2015.April 8, 2022.
***Incorporated by reference to Exhibit 3.2 to Enovis Corporation’s Form 8-K (File No. 001-34045) as filed with the SEC on April 8, 2022.










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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Registrant: ColfaxEnovis Corporation


By:

/s/ Matthew L. TrerotolaPresident and Chief Executive Officer
Matthew L. Trerotola(Principal Executive Officer)July 28, 2021May 10, 2022
/s/ Christopher M. HixExecutive Vice President, Finance
Christopher M. HixChief Financial OfficerJuly 28, 2021May 10, 2022
(Principal Financial Officer)
/s/ Douglas J. PittsVice President
Douglas J. PittsController and Chief Accounting OfficerJuly 28, 2021May 10, 2022
(Principal Accounting Officer)
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