Enovis CORPENOV
Enovis CORP Income Taxes Disclosure
Income Taxes
The Company records interest and penalties on uncertain tax positions as a component of Income tax expense (benefit), which was $0.3 million, $(0.1) million, and $(2.0) million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025 and 2024, we had accrued $2.5 million and $3.0 million, respectively, of interest and penalties related to unrecognized tax benefits.
Loss from continuing operations before income taxes and Income tax expense (benefit) consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Income (loss) from continuing operations before income taxes: | |||||||||||||||||
| Domestic operations | $ | (726,211) | $ | (828,834) | $ | (114,700) | |||||||||||
| Foreign operations | (433,207) | 5,910 | 47,572 | ||||||||||||||
| $ | (1,159,418) | $ | (822,924) | $ | (67,128) | ||||||||||||
| Income tax expense (benefit): | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 212 | $ | 3,114 | $ | 949 | |||||||||||
| State | 2,140 | 2,222 | 4,177 | ||||||||||||||
| Foreign | 22,167 | 9,172 | 8,997 | ||||||||||||||
| $ | 24,519 | $ | 14,508 | $ | 14,123 | ||||||||||||
| Deferred: | |||||||||||||||||
| Domestic operations | $ | (3,792) | $ | 1,787 | $ | (22,866) | |||||||||||
| Foreign operations | 1,566 | (11,803) | (4,546) | ||||||||||||||
| (2,226) | (10,016) | (27,412) | |||||||||||||||
| $ | 22,293 | $ | 4,492 | $ | (13,289) | ||||||||||||
See Note 4 “Discontinued Operations” for Income (loss) from discontinued operations and related income taxes.
The Company’s Income tax expense (benefit) from continuing operations differs from the amount that would be computed by applying the U.S. federal statutory rate as follows:
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percentage | ||||||||||
| (In thousands) | |||||||||||
| Income tax expense at the U.S. Federal statutory tax rate | $ | (243,478) | 21.0 | % | |||||||
State and local income taxes, net of Federal income tax effect (1) | 2,340 | (0.2) | % | ||||||||
| Foreign tax effects: | |||||||||||
| Australia | |||||||||||
| Goodwill impairment | 2,790 | (0.2) | % | ||||||||
| Other | (1,262) | 0.1 | % | ||||||||
| France | |||||||||||
| Goodwill impairment | 2,992 | (0.3) | % | ||||||||
| Other | 228 | — | % | ||||||||
| Germany | |||||||||||
| Statutory tax rate difference | (1,046) | 0.1 | % | ||||||||
| Effect of changes in tax laws | 4,710 | (0.4) | % | ||||||||
| Foreign exchange impact | (2,410) | 0.2 | % | ||||||||
| Other | (16) | — | % | ||||||||
| Italy | |||||||||||
| Statutory tax rate difference | (6,151) | 0.5 | % | ||||||||
| Goodwill impairment | 50,175 | (4.3) | % | ||||||||
| Other | 754 | (0.1) | % | ||||||||
| Mexico | |||||||||||
| Changes in valuation allowances | 3,127 | (0.3) | % | ||||||||
| Other | 511 | — | % | ||||||||
| Switzerland | |||||||||||
| Statutory tax rate difference | 31,506 | (2.7) | % | ||||||||
| Subnational tax effects | 1,535 | (0.1) | % | ||||||||
| Goodwill impairment | 8,993 | (0.8) | % | ||||||||
| Foreign exchange impact | 1,674 | (0.1) | % | ||||||||
| Changes in valuation allowances | 13,771 | (1.2) | % | ||||||||
| Other | (141) | — | % | ||||||||
| Other foreign jurisdictions | 3,304 | (0.3) | % | ||||||||
| Effect of cross-border tax laws: | |||||||||||
| Global intangible low-taxed income | 6,702 | (0.6) | % | ||||||||
| Other | 1,514 | (0.1) | % | ||||||||
| Tax credit: | |||||||||||
| Research and development tax credits | (3,687) | 0.3 | % | ||||||||
| Changes in valuation allowances | 25,653 | (2.2) | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Non-deductible employee compensation | 5,346 | (0.5) | % | ||||||||
| Goodwill impairment | 107,963 | (9.3) | % | ||||||||
| Gain/Loss on disposition of business | 2,290 | (0.2) | % | ||||||||
| Other | 644 | (0.1) | % | ||||||||
| Changes in unrecognized tax benefits | 1,962 | (0.2) | % | ||||||||
| Income tax expense | $ | 22,293 | (1.9) | % | |||||||
(1) The tax effect in this category primarily reflects state and local taxes in Alabama, California, Florida, Georgia, Illinois, Indiana, Massachusetts, New York, Pennsylvania, and Tennessee.
Year Ended December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
| Amount | Percentage | Amount | Percentage | ||||||||||||||||||||
| Taxes calculated at the U.S. federal statutory rate | $ | (172,814) | 21.0 | % | $ | (14,097) | 21.0 | % | |||||||||||||||
| State taxes | (6,724) | 0.8 | % | (1,835) | 2.7 | % | |||||||||||||||||
| Effect of tax rates on international operations | (6,354) | 0.8 | % | (3,053) | 4.5 | % | |||||||||||||||||
| Changes in valuation allowance | 52,815 | (6.4) | % | 4,646 | (6.9) | % | |||||||||||||||||
| Changes in tax reserves | 565 | (0.1) | % | (2,182) | 3.3 | % | |||||||||||||||||
| Research and development tax credits | (5,414) | 0.7 | % | (4,499) | 6.7 | % | |||||||||||||||||
| Net items not deductible (taxable) | 1,908 | (0.2) | % | (1,478) | 2.2 | % | |||||||||||||||||
| U.S. tax on international operations | 1,318 | (0.2) | % | 2,789 | (4.2) | % | |||||||||||||||||
| Non-includable transaction-related activities | (1,679) | 0.2 | % | 840 | (1.3) | % | |||||||||||||||||
| Non-deductible employee compensation | 5,502 | (0.7) | % | 5,232 | (7.8) | % | |||||||||||||||||
| Goodwill impairment | 135,450 | (16.5) | % | — | — | % | |||||||||||||||||
| Other | (81) | — | % | 348 | (0.5) | % | |||||||||||||||||
| Income tax expense (benefit) | $ | 4,492 | (0.5) | % | $ | (13,289) | 19.8 | % | |||||||||||||||
Deferred income taxes, net reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The significant components of deferred tax assets and liabilities included in continuing operations are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Expenses currently not deductible | $ | 37,854 | $ | 32,231 | |||||||
| Net operating loss and interest expense limitation carryforward | 139,902 | 151,663 | |||||||||
| Tax credit carryforward | 42,759 | 39,301 | |||||||||
| Depreciation and amortization | 55,405 | 62,933 | |||||||||
| Inventory reserves and capitalization | 33,055 | 25,805 | |||||||||
| Capitalized R&D expenditures | 58,102 | 47,527 | |||||||||
| Cross-currency swap | 45,438 | 5,110 | |||||||||
| Non-current lease liability | 20,348 | 18,752 | |||||||||
| Other | 9,924 | 5,754 | |||||||||
| Valuation allowance | (226,857) | (156,443) | |||||||||
| Deferred tax assets, net | 215,930 | 232,633 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | (263,586) | (275,554) | |||||||||
| Inventory reserves and capitalization | (3,270) | — | |||||||||
| Other | (5,653) | — | |||||||||
| Lease asset - right of use | (19,187) | (18,022) | |||||||||
| Total deferred tax liabilities | (291,696) | (293,576) | |||||||||
| Total deferred tax liabilities, net | $ | (75,766) | $ | (60,943) | |||||||
The Company classifies all deferred tax assets, deferred tax liabilities and valuation allowances as non-current on the balance sheet, recorded as a net asset or net liability on a jurisdictional basis. At December 31, 2025, the Company’s $75.8 million net deferred tax liability is recorded on the balance sheet with $26.9 million as a component of Other Assets and $102.7 million as a component of Other Liabilities.
The Company evaluates the recoverability of its deferred tax assets on a jurisdictional basis by considering whether deferred tax assets will be realized on a more likely than not basis. To the extent a portion or all of the applicable deferred tax assets do not meet the more likely than not threshold, a valuation allowance is recorded. During the year ended December 31, 2025, the valuation allowance increased from $156.4 million to $226.9 million with a net increase of $27.2 million recognized in Income tax expense (benefit), a $39.0 million increase related to unrealized loss on hedging activities, and a $4.2 million increase related to changes in foreign currency rates. Consideration was given to tax planning strategies and, when applicable, future taxable income as to how much of the relevant deferred tax asset could be realized on a more likely than not basis.
The Company has $14.1 million of U.S. net operating losses expiring in years 2026 through 2045, $9.6 million of net operating losses that may be carried forward indefinitely and U.S. interest limitation carryforward of $53.6 million that may be carried forward indefinitely. The Company’s ability to use these various carryforwards to offset any taxable income generated in future taxable periods may be limited under Section 382 and other federal tax provisions. As of December 31, 2025, the Company had $18.2 million foreign net operating loss carryforwards primarily in Germany, Switzerland, Brazil, Japan, and the United Kingdom that may be subject to local tax limitations including changes in ownership. The foreign net operating losses can be carried forward indefinitely, except $5.4 million of net operating losses in Switzerland and Japan expiring between 2029 and 2031. The company has $44.4 million of foreign interest limitation carryforward primarily in Italy and Germany, that may be carried forward indefinitely.
The Company has U.S. foreign tax and R&D tax credits that may be used to offset U.S. tax in previous or future tax periods subject to Section 382 and other federal provisions. The Company’s $22.0 million foreign tax credit can be carried back one year and carried forward to tax years 2026 through 2035. The Company’s $16.7 million R&D credit can be carried back one year and carried forward to tax years 2026 through 2045. The Company has non-refundable R&D tax offsets of $4.1 million carrying forward indefinitely that that may be used to reduce Australian income tax in future periods.
The amounts of cash taxes paid, net of refunds are as follows:
| Year Ended December 31, 2025 | |||||
| (In thousands) | |||||
| Federal | $ | 1,770 | |||
| State | 1,920 | ||||
| Foreign: | |||||
| Barbados | 2,530 | ||||
| France | 3,167 | ||||
| Italy | 2,630 | ||||
| Mexico | 1,518 | ||||
| All Other Foreign | 4,844 | ||||
| Income taxes paid, net of refund | $ | 18,379 | |||
The Company records a liability for unrecognized income tax benefits for the amount of benefit included in its previously filed income tax returns and in its financial results expected to be included in income tax returns to be filed for periods through the date of its Consolidated Financial Statements for income tax positions for which it is not more likely than not to be sustained upon examination by the respective taxing authority. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
| (In thousands) | |||||
| Balance, January 1, 2023 | $ | 38,299 | |||
| Acquisitions and divestitures | 2,052 | ||||
| Addition for tax positions taken in prior periods | 3,659 | ||||
| Addition for tax positions taken in the current period | 2,251 | ||||
| Reductions related to settlements with taxing authorities | (125) | ||||
| Reductions resulting from a lapse of applicable statute of limitations | (14,240) | ||||
| Other, including the impact of foreign currency translation | 230 | ||||
| Balance, December 31, 2023 | 32,126 | ||||
| Acquisitions and divestitures | — | ||||
| Addition for tax positions taken in prior periods | 1,086 | ||||
| Addition for tax positions taken in the current period | 6,779 | ||||
| Reductions related to settlements with taxing authorities | — | ||||
| Reductions resulting from a lapse of applicable statute of limitations | (7,876) | ||||
| Other, including the impact of foreign currency translation | (679) | ||||
| Balance, December 31, 2024 | 31,436 | ||||
| Addition for tax positions taken in prior periods | 3,501 | ||||
| Addition for tax positions taken in the current period | 764 | ||||
| Reductions related to settlements with taxing authorities | (1,876) | ||||
| Reductions resulting from a lapse of applicable statute of limitations | (3,525) | ||||
| Other, including the impact of foreign currency translation | 680 | ||||
| Balance, December 31, 2025 | $ | 30,980 | |||
The Company is routinely examined by tax authorities around the world. Tax examinations remain in process in multiple countries, including but not limited to Germany, Spain, France, Tunisia, and the United States. The Company files numerous group and separate tax returns in U.S. federal and state jurisdictions, as well as international jurisdictions. In the U.S., tax years dating back to 2008 remain subject to examination, due to tax attributes available to be carried forward to open or future tax years. With some exceptions, other major tax jurisdictions generally are not subject to tax examinations for years beginning before 2019.
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 Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.