Enovis CORPENOV
Enovis CORP Fair Value Disclosure
Financial Instruments and Fair Value Measurements
The Company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments. The guidance establishes a fair value hierarchy based on the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
Level One: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level Two: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level Three: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
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 carrying value of the Company’s term loan and revolving credit facility debt, which bears a variable interest rate indexed to the Secured Overnight Financing Rate (SOFR), approximates fair value as it reprices when market interest rates change. Based on current interest rates for similar types of borrowings, the estimated fair value of the Company’s total debt, including the Senior unsecured convertible notes, the Term Loan Facility, and the Revolver, was $1.3 billion and $1.4 billion as of December 31, 2025 and December 31, 2024, respectively. The estimated fair value, a Level Two valuation in the fair value hierarchy, 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.
As of December 31, 2025, the Company held $15.7 million in Level Three liabilities arising from contingent consideration related to acquisitions. The fair value of the contingent consideration liabilities is determined using unobservable inputs and the inputs vary based on the nature of the purchase agreements. These inputs can include the estimated amount and timing of projected cash flows, the risk-adjusted discount rate used to present value the projected cash flows, and the probability of the acquired company attaining certain targets stated within the purchase agreements. A change in these unobservable inputs to a different amount might result in a significantly higher or lower fair value measurement at the reporting date due to the nature of uncertainty inherent to the estimates. During the year ended December 31, 2025, the Company recorded a net $1.6 million
reduction in contingent consideration primarily due to $4.8 million in settlements of arrangements based on the achievement revenue targets and other milestones, partially offset by the increase due to the 2025 acquisitions. See Note 5 “Acquisitions and Divestitures” for further information.
The gross range of outcomes for contingent consideration arrangements that have a fixed limit is zero to $3.3 million. There is one contingent consideration arrangement as of December 31, 2025 that has no limit and is based on a percentage of sales in excess of a benchmark over a five-year period.
Additionally, in conjunction with the Lima Acquisition, the Company agreed to a contingent issuance of 1,942,686 Contingent Acquisition Shares, as determined based upon a €100 million value divided by the thirty-day volume weighted average price of Enovis common stock as of the close of business on September 21, 2023. The Contingent Acquisition Shares were issuable in two equal tranches within and twelve months of the acquisition date upon the non-occurrence of certain future events, in each case subject to certain adjustments and conditions as provided for in the purchase agreement. The first tranche of 971,343 Contingent Acquisition Shares was issued to the seller on July 16, 2024 and the second tranche of Contingent Acquisition Shares was issued on January 15, 2025. The initial fair value of the Contingent Acquisition Shares at closing was $107.9 million based on the Enovis share price at the close of business on January 3, 2024. The Contingent Acquisition Shares liability, which was recorded in Accrued liabilities, was adjusted to fair value each reporting period with the adjustments reflected in Other income (expense), net in the Consolidated Statement of Operations. The Contingent Acquisition Shares liability was $0.0 million and $42.6 million, as of December 31, 2025 and 2024, respectively. The fair value adjustments resulted in a loss of $1.8 million for the year ended December 31, 2025 and a gain of $20.1 million for the year ended December 31, 2024. The fair value of the Contingent Acquisition Shares liability was a Level One fair value measurement in the hierarchy as it is determined using quoted market prices.
There were no other transfers in or out of Level One, Two or Three during the year ended December 31, 2025.
A summary of the activity in the Company’s contingent consideration in the Consolidated Balance Sheets is as follows:
| Year Ended December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Balance at Beginning of Period | Additions, net | Charges / (Gain) | Interest | Settlements | Foreign Exchange | Balance at End of Period | |||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||
| Contingent Consideration - Level One | $ | 42,622 | $ | — | $ | 1,787 | $ | — | $ | (44,409) | $ | — | $ | — | |||||||||||||||||||||||||||
| Contingent Consideration - Level Three | 17,315 | 2,296 | — | — | (4,809) | 897 | 15,699 | ||||||||||||||||||||||||||||||||||
| Total Contingent Consideration | $ | 59,937 | $ | 2,296 | $ | 1,787 | $ | — | $ | (49,218) | $ | 897 | $ | 15,699 | |||||||||||||||||||||||||||
(1) Settlements reflect cash payments presented as a financing outflows within Deferred consideration payments and other on the Consolidated Statement of Cash Flows, except for the $44.4 million which is a non-cash settlement for the Contingent Acquisition Shares discussed above.
Purchase of royalty interest liability
In the first and second quarters of 2025, the Company entered into agreements to buyout the economic interest in future royalty payments in connection with the termination of certain legacy product development agreements related to certain of the Company’s U.S. reconstructive products. The aggregate gross buyout amount under such agreements is $56.5 million, which will be paid over nine years. The Company recorded charges to the Consolidated Statements of Operations of $45.8 million for the year ended December 31, 2025, representing the discounted liability upon entering the agreements of which $6.4 million is recorded in Accrued liabilities as of December 31, 2025, and the non-current portion is recorded in Other liabilities on the Consolidated Balance Sheet.
Deferred Compensation Plans
The Company maintains deferred compensation plans for the benefit of certain employees and non-executive officers. As of December 31, 2025 and 2024, the fair values of these plans were $19.9 million and $17.0 million, respectively. These plans are deemed to be Level Two within fair value hierarchy.
Forward Currency Contracts
The Company’s objective in using forward currency contracts is to add stability to the Company’s earnings and to protect the U.S. Dollar value of forecasted transactions. To accomplish this objective, the Company has entered into forward currency
contract agreements between the U.S. Dollar and the Mexican Peso as part of its risk management strategy. These forward currency contract agreements are designated and qualify as cash flow hedges.
The gain or loss on a derivative instrument designated as a cash flow hedge is recorded in Unrealized gain (loss) on hedging activities, net of tax within the Company’s Consolidated Statements of Comprehensive Income (Loss) until the underlying third party transaction occurs. When the underlying third-party transaction occurs, the Company recognizes the gain or loss in earnings within Cost of Sales in its Consolidated Statements of Operations. The contracts are recorded at fair value and deemed to be Level Two in the fair value hierarchy.
At December 31, 2025, the Company’s Mexican Peso forward currency contracts have fully settled and there is no notional amounts outstanding. At December 31, 2024 and 2023, the Company’s forward currency contracts have Mexican Peso notional amount of approximately $1.0 billion and $840.0 million, respectively, and a U.S. Dollar aggregate notional amount of $50.7 million and $47.9 million, respectively. The Company recognized a $0.3 million realized loss, a $0.6 million realized gain, and a $0.2 million realized gain on its Consolidated Statements of Operations related to its forward currency contracts designated as cash flow hedges for the years ended December 31, 2025, 2024 and 2023, respectively.
Net Investment Hedges
On April 18, 2023, the Company entered into cross-currency swap agreements to hedge its net investment in a Swiss Franc-denominated legal entity and its subsidiaries against adverse movements in exchange rates between the U.S. Dollar and the Swiss Franc. These swap agreements are designated and qualify as net investment hedges. These contracts had a Swiss Franc notional amount of approximately ₣403 million and a U.S. Dollar aggregate notional amount of $450 million. In April 2024, the ₣403 million cross-currency swap agreements designated as net investment hedges were de-designated and settled for $4.6 million which is reflected as a cash outflow within investing activities in the Consolidated Statements of Cash Flows. The $0.7 million gain on settlement is reported in the Consolidated Balance Sheet as part of Accumulated other comprehensive income (loss) and in the Company’s Consolidated Statements of Comprehensive Income (Loss) as part of the foreign currency translation adjustment.
On April 8, 2024, April 12, 2024, and July 2, 2024, the Company entered into additional cross-currency swap agreements to hedge its net investment in a Swiss Franc-denominated legal entity and its subsidiaries against adverse movements in exchange rates between the U.S. Dollar and the Swiss Franc. These swap agreements are designated and qualify as net investment hedges. These contracts have a Swiss Franc notional amount of approximately ₣1.2 billion and a U.S. Dollar aggregate notional amount of $1.5 billion as of December 31, 2025.
Cross-currency swaps involve the receipt of functional-currency fixed-rate amounts from a counterparty in exchange for the Company making foreign-currency fixed-rate payments over the life of the agreement. For derivatives designated as net investment hedges, the gain or loss on the derivative is reported in the Consolidated Balance Sheet as part of Accumulated other comprehensive income (loss) and in the Company’s Consolidated Statements of Comprehensive Income (Loss) as part of the foreign currency translation adjustment. Amounts are reclassified out of Accumulated other comprehensive loss into earnings only if the hedged net investment is either sold or substantially liquidated.
These net assets are impacted by adverse movements in exchange rates between the U.S. Dollar and the Swiss Franc and any allocation of Goodwill impairments related to the Company’s Swiss Franc-denominated legal entity and its subsidiaries. In 2026, the Company’s Swiss Franc notional amounts of its cross-currency swap agreements may exceed the net investment as a result of goodwill impairment charges.
In the event the Company can not designate a portion of its cross-currency swaps in 2026, the fair value adjustments on the undesignated derivative instruments will be reported as non-operating Other income (expense), net in the Consolidated Statement of Operations until it can be designated again as a hedge of the net investment in a Swiss Franc-denominated legal entity and its subsidiaries.
During the years ended December 31, 2025, 2024 and 2023, the Company received interest income on its cross-currency swap derivatives of $48.0 million, $32.5 million and $7.3 million, respectively, which is included within Interest expense, net in the Consolidated Statements of Operations.
The following table presents the effect of the Company’s designated hedging instruments on Accumulated other comprehensive income (loss) for the year ended December 31, 2025, 2024, and 2023:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Gain (loss) on cross-currency swaps | $ | (165,368) | $ | 10,945 | $ | (36,893) | |||||||||||
| Gain (loss) on forward currency contracts | 5,201 | (4,151) | 247 | ||||||||||||||
| $ | (160,167) | $ | 6,794 | $ | (36,646) | ||||||||||||
Non-Designated Hedging Instruments
The Company also used non-designated forward currency contracts for the purpose of managing its exposure to currency exchange rate risk related to the Euro-denominated purchase price of the Lima Acquisition which closed on January 3, 2024. In the first quarter of 2024, the Company recorded a loss of $11.1 million on its Consolidated Statements of Operations related to the exchange rate movements over the first three days of 2024. In the fourth quarter of 2023, the Company recorded a gain of $24.3 million on its Consolidated Statements of Operations. The gain or loss is recorded in Other income (expense), net on the Consolidated Statements of Operations. From inception of the forward contracts on October 4, 2023 through settlement at the closing of the Lima Acquisition on January 3, 2024, the foreign currency forward contracts resulted in an overall realized gain of $13.2 million. The Company did not have any other non-designate forward currency contracts in 2025 or 2024.
The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the Consolidated Balance Sheets as of December 31, 2025 and 2024:
| December 31, | |||||||||||||||||
| (In thousands) | Location on Consolidated Balance Sheets (1) | 2025 | 2024 | ||||||||||||||
| Derivative Assets | |||||||||||||||||
| Designated Hedging Instruments: | |||||||||||||||||
| Cross-currency swaps | Other current assets | $ | 34,176 | $ | 35,376 | ||||||||||||
| Total Derivative Assets | $ | 34,176 | $ | 35,376 | |||||||||||||
| Derivative Liabilities | |||||||||||||||||
| Designated Hedging Instruments: | |||||||||||||||||
| Forward currency contracts | Accrued liabilities | $ | $ | ||||||||||||||
| Cross-currency swaps | Accrued liabilities | ||||||||||||||||
| Cross-currency swaps | Other long-term liabilities | ||||||||||||||||
| Total Derivative Liabilities | $ | 222,151 | $ | 59,111 | |||||||||||||
(1) The Company classifies derivative assets and liabilities as current when the settlement date of the contract is one year or less.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. Concentrations of credit risk are considered to exist when there are amounts collectible from multiple counterparties with similar characteristics, which could cause their ability to meet contractual obligations to be similarly impacted by economic or other conditions. The Company performs credit evaluations of its customers prior to delivery or commencement of services and normally does not require collateral. Letters of credit are occasionally required when the Company deems necessary. There are no customers that represent more than 10% of the Company’s Trade receivables, net as of December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 24, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Feb 14, 2017 | |
| 2015 | Feb 16, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.