8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: April 27, 2023

(Date of earliest event reported)

Commission file number 001-36440

AVANOS MEDICAL, INC.

(Exact name of registrant as specified in its charter)

Delaware				46-4987888
(State or other jurisdiction of incorporation)				(I.R.S. Employer Identification No.)
	5405 Windward Parkway
	Suite 100 South
	Alpharetta,	Georgia	30004
	(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (844) 428-2667

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock - $0.01 Par Value	AVNS	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

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 any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02            Results of Operations and Financial Condition

Avanos Medical, Inc. (the “Company”) announced its results of operations for the three months ended March 31, 2023 in a press release dated May 3, 2023. A copy of the press release is furnished herewith as Exhibit 99.1.

The information contained in Item 2.02 of this Current Report, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in Item 2.02 of this Current Report or Exhibit 99.1 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.

Item 5.07    Submission of Matters to a Vote of Security Holders

The Company’s 2023 Annual Meeting of Stockholders (the “2023 Annual Meeting”) was held on April 27, 2023 at the Company’s headquarters in Alpharetta, Georgia. A total of 43,916,111 shares of the Company’s common stock were represented at the 2023 Annual Meeting in person or by proxy, constituting approximately 94.23% of the outstanding shares entitled to vote at the 2023 Annual Meeting.

At the 2023 Annual Meeting, the Company’s stockholders voted on the following matters, which are described in detail in the proxy statement filed by the Company with the Securities and Exchange Commission on March 17, 2023:

1.To elect Gary D. Blackford, John P. Byrnes, Dr. Lisa Egbuonu-Davis, Patrick J. O’Leary, Dr. Julie Shimer and Joseph F. Woody to serve one-year terms expiring at the 2024 Annual Meeting of Stockholders (“Proposal No. 1”);

2.To ratify the appointment of Deloitte & Touche LLP as the Company’s independent auditors for 2023 (“Proposal No. 2”);

3.To approve, on an advisory basis, the compensation of the Company’s named executive officers, or NEOs (“Proposal No. 3”); and

4.To approve an amendment to the Company’s 2021 Long Term Incentive Plan to increase the number of shares of the Company’s common stock reserved for issuance thereunder by 1,250,000 shares (“Proposal No. 4”).

The Company’s stockholders approved the nominees recommended for election in Proposal No. 1. The votes cast on Proposal No. 1 were as follows:

Director	For	Withhold	Broker non-votes
Gary D. Blackford	40,939,693	719,638	2,256,780
John P. Byrnes	41,020,988	638,343	2,256,780
Dr. Lisa Egbuonu-Davis	41,187,183	472,148	2,256,780
Patrick J. O’Leary	41,327,319	332,012	2,256,780
Dr. Julie Shimer	35,455,820	6,203,511	2,256,780
Joseph F. Woody	41,422,567	236,764	2,256,780

The Company’s stockholders approved Proposal No. 2. The votes cast on Proposal No. 2 were as follows:

	For	Against	Abstain
Appointment of Deloitte & Touche LLP	43,502,269	268,752	145,090

The Company’s stockholders approved Proposal No. 3. The votes cast on Proposal No. 3 were as follows:

	For	Against	Abstain	Broker non-votes
Approval of NEO compensation	38,956,746	2,593,580	109,005	2,256,780

The Company’s stockholders approved Proposal No. 4. The votes cast on Proposal No. 4 were as follows:

	For	Against	Abstain	Broker non-votes
Amendment of the 2021 Long Term Incentive Plan	39,961,025	1,585,386	112,920	2,256,780

Item 9.01        Financial Statements and Exhibits

(d)Exhibits.

Exhibit No.	Description
99.1	Press release issued by Avanos Medical, Inc. on May 3, 2023
104	Cover Page Interactive Data File (embedded within the inline XBRL document)

SIGNATURE

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 hereunto duly authorized.

		AVANOS MEDICAL, INC.
Date:	May 3, 2023	By:	/s/ Mojirade James
			Mojirade James<br>Senior Vice President and General Counsel

Document

Investor Contact: Michael Greiner
Avanos Medical, Inc.
470-562-2692
Investor.Relations@Avanos.com
Media Contact: Katrine Kubis
Avanos Medical, Inc.
CorporateCommunications@Avanos.com

Avanos Medical, Inc. Announces First Quarter 2023 Results

ALPHARETTA, Ga., May 3, 2023/PRNewswire/ -- Avanos Medical, Inc. (NYSE: AVNS) today reported first quarter 2023 financial results.

“Our first quarter results were mixed, with our digestive health portfolio continuing to outperform, strong adjusted earnings per share and continued margin improvement partially offset by our results in our pain portfolio,” stated Joe Woody, Avanos’s chief executive officer. Woody continued, “Separately, we made considerable progress on our transformation initiative during the first quarter. We look forward to sharing further details about these initiatives at our upcoming Investor Day.”

First Quarter 2023 Financial Highlights

•Net sales totaled $191.7 million, a 2.9% decrease from the comparable prior year period. Excluding previously announced product exits, net sales decreased 1% compared to the prior year period.

•Both gross margin and adjusted gross margin improved 50 basis points for the quarter compared to the prior year period.

•Net loss for the quarter was $0.5 million, compared to net income of $5.4 million a year ago.

•Adjusted net income totaled $12.7 million, compared to $11.9 million a year ago.

•Diluted loss per share was $0.01, compared to diluted earnings per share of $0.11 per share a year ago.

•Adjusted diluted earnings per share was $0.27, compared to $0.25 a year ago.

Operational and Business Highlights

In January, we announced a three-year transformation initiative that will be focused on four key priorities: optimizing the commercial organization; transforming the product portfolio; implementing cost management initiatives to enhance operating profitability; and continuing to efficiently deploy capital while maintaining a focused and disciplined approach to M&A (the “Transformation Process”). We anticipate that by 2025, this plan will ultimately result in savings of between $45 million and $55 million compared to 2022.

First Quarter 2023 Operating Results

For the three months ended March 31, 2023, net sales totaled $191.7 million, a decrease of 2.9% compared to the prior year period, primarily due to lower volume in pain management and respiratory health products, offset by higher volume in digestive health products. In addition to volume, 1% of favorable pricing was offset by 1% of unfavorable foreign currency translation effects.

Gross margin was 54.5%, compared to 54.0% in the prior year period. Adjusted gross margin increased by 50 basis points compared to last year. Gross margin improved primarily due to manufacturing efficiencies and improvements in the overall supply chain environment.

Selling and general expenses as a percentage of net sales was 48.4% for the first quarter of 2023, compared to 45.6% for the first quarter of 2022 primarily due to expenses associated with our ongoing Transformation Process.

Operating profit was $2.6 million, compared to $8.6 million in the prior year period, primarily due to overall lower sales volume along with an increase in expenses related to the Transformation Process. On an adjusted basis, operating profit totaled $20.4 million, compared to $17.6 million a year ago.

Adjusted EBITDA for the first quarter was $26.2 million, compared to $23.0 million in the prior year period.

Cash Flow and Balance Sheet

Cash from operations less capital expenditures - or free cash flow - for the first quarter was an outflow of $10.8 million, compared to an outflow of $3.2 million a year ago. The Company’s cash balance at March 31, 2023 was $95.7 million, compared to $127.7 million at year-end 2022.

Total debt outstanding, net of unamortized discounts, was $210.9 million at March 31, 2023, compared to $232.5 million at December 31, 2022.

2023 Outlook

The Company affirms previous guidance for 2023 and anticipates low single-digit organic growth. Additionally, the Company expects operating profit margin and EBITDA margin expansion of approximately 100 basis points and adjusted diluted earnings per share of between $1.60 and $1.80.

Non-GAAP Financial Measures

This press release and the accompanying tables include the following financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S., or GAAP, and are therefore referred to as non-GAAP financial measures:

•Adjusted net income

•Adjusted diluted earnings per share

•Adjusted gross and operating profit

•Adjusted effective tax rate

•Adjusted EBITDA

•Free cash flow

These non-GAAP financial measures exclude the following items, as applicable, for the relevant time periods as indicated in the accompanying non-GAAP reconciliations to the comparable GAAP financial measures:

•Certain acquisition and integration charges related to acquisitions.

•Expenses associated with restructuring and transformation activities.

•Expenses associated with European Union Medical Device Regulation (“EU MDR”) compliance.

•The amortization of intangible assets associated with prior business acquisitions.

•The tax effects of certain adjusting items.

•The benefit associated with the tax effects of the CARES Act.

•The positive or negative effect of changes in currency exchange rates during the year.

The Company provides these non-GAAP financial measures as supplemental information to its GAAP financial measures. Management and the Company’s board of directors use net sales on a constant currency basis, adjusted net income, adjusted diluted earnings per share, adjusted operating profit, adjusted EBITDA, and free cash flow to: (a) evaluate the Company’s historical and prospective financial performance and its performance relative to its competitors, (b) allocate resources and (c) measure the operational performance of the Company’s business units and their managers. Management also believes that the use of an adjusted effective tax rate provides improved insight into the tax effects of the Company’s ongoing business operations.

Additionally, the compensation committee of the Company’s board of directors will use certain of the non-GAAP financial measures when setting and assessing achievement of incentive compensation goals. These goals are based, in part, on the Company’s net sales on a constant currency basis and adjusted EBITDA, which will be determined by excluding certain items that are used in calculating these non-GAAP financial measures.

Our competitors may define these non-GAAP financial measures differently, and as a result, our measure of these non-GAAP financial measures may not be directly comparable to those of other companies. Items excluded from these non-GAAP financial measures are significant components in understanding and assessing financial performance. These non-GAAP financial measures are supplemental measures of operating performance that do not represent, and should not be considered in isolation or as an alternative to, or substitute for, the financial statement data presented in the Company’s consolidated financial statements as indicators of financial performance. These non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of the Company’s results as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP financial measures as supplemental information.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the attached financial tables.

Conference Call Webcast

Avanos Medical, Inc. will host a conference call today at 9 a.m. ET. The conference call can be accessed live over the internet at https://avanos.investorroom.com or via telephone by dialing 877-240-5772 in the United States. A replay of the call will be available at noon ET today by calling 877-344-7529 in the United States and entering passcode 9722195. A webcast of the call will also be archived in the Investors section on the Avanos website.

About Avanos Medical, Inc.

Avanos Medical (NYSE: AVNS) is a medical technology company focused on delivering clinically superior solutions that will help patients get back to the things that matter. Headquartered in Alpharetta, Georgia, Avanos is committed to addressing some of today’s most important healthcare needs, including providing a vital lifeline for nutrition to patients from hospital to home, and reducing the use of opioids while helping patients move from surgery to recovery. Avanos develops, manufactures and markets its recognized brands globally and holds leading market positions in multiple categories across its portfolio. For more information, visit www.avanos.com and follow Avanos Medical on Twitter (@AvanosMedical), LinkedIn and Facebook.

Forward-Looking Statements

This press release contains information that includes or is based on “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the current plans and expectations of management and are subject to various risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in such statements. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan” or “continue” and similar expressions. Such factors include, but are not limited to: weakening of economic conditions that could adversely affect the level of demand for our products; pricing pressures generally, including cost-containment measures that could adversely affect the price of or demand for our products; risks related to the ongoing COVID-19 pandemic; shortage in drugs used in our Acute Pain products or other disruptions in our supply chain; the ongoing conflict between Russia and Ukraine; our ability to successfully execute on or achieve the expected benefits of the Transformation Process; inflationary pressures; the effects of the recent financial conditions affecting the banking system and the potential threats to the solvency of

commercial banks; changes in foreign exchange markets; legislative and regulatory actions; unanticipated issues arising in connection with clinical studies and otherwise that affect U.S. Food and Drug Administration approval of new products; changes in reimbursement levels from third-party payors; a significant increase in product liability claims; the impact of investigative and legal proceedings and compliance risks; the impact of the federal legislation to reform the United States healthcare system; changes in financial markets; and changes in the competitive environment. The information contained herein speaks only as of the date of this release and we undertake no obligation to update forward-looking statements, except as may be required by the securities laws.

Additional information concerning these and other factors that may impact future results is contained in our filings with the U.S. Securities and Exchange Commission, including our most recent Form 10-Q.

AVANOS MEDICAL, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

(unaudited)

(in millions, except per share amounts)

	Three Months Ended March 31,
		2023		2022
Net Sales		$	191.7	$	197.4
Cost of products sold		87.2		90.8
Gross Profit		104.5		106.6
Research and development expenses		7.9		7.8
Selling and general expenses		92.7		90.1
Other expense, net		1.3		0.1
Operating Income		2.6		8.6
Interest income		0.5		—
Interest expense		(3.5)		(1.3)
(Loss) Income Before Income Taxes		(0.4)		7.3
Income tax provision		(0.1)		(1.9)
Net (Loss) Income		$	(0.5)	$	5.4
Interest expense, net		$	3.0	$	1.3
Income tax provision		0.1		1.9
Depreciation and amortization		12.1		11.1
EBITDA		$	14.7	$	19.7
(Loss) Earnings Per Share
Basic		$	(0.01)	$	0.11
Diluted		(0.01)		0.11
Common Shares Outstanding
Basic		46.6		47.4
Diluted		47.2		47.8

AVANOS MEDICAL, INC.

NON-GAAP RECONCILIATIONS

(unaudited)

(in millions)

		Gross Profit
	Three Months Ended March 31,
		2023			2022
As reported		$	104.5		$	106.6
Acquisition and integration-related charges		—			0.7
Intangibles amortization		3.6			3.1
As adjusted non-GAAP		$	108.1		$	110.4
Gross profit margin, as reported		54.5		%	54.0		%
Gross profit margin, as adjusted		56.4		%	55.9		%				Operating Profit
---	---	---	---	---	---
	Three Months Ended March 31,
		2023		2022
As reported		$	2.6	$	8.6
Acquisition and integration-related charges		1.5		1.7
Restructuring and transformation charges(a)		8.9		—
EU MDR Compliance (b)		1.1		1.6
Intangibles amortization		6.3		5.7
As adjusted non-GAAP		$	20.4	$	17.6

__________________________________________________

(a) Expenses incurred for the Transformation Process are included in “Selling and general expenses”.

(b) In the three months ended March 31, 2023 and 2022, EU MDR Compliance related charges are included in “Selling and general expenses”.

AVANOS MEDICAL, INC.

NON-GAAP RECONCILIATIONS

(unaudited)

		(Loss) Income Before Taxes
	Three Months Ended March 31,
		2023		2022
As reported		$	(0.4)	$	7.3
Acquisition and integration-related charges		1.5		1.7
Restructuring and transformation charges		8.9		—
EU MDR Compliance		1.1		1.6
Intangibles amortization		6.3		5.7
As adjusted non-GAAP		$	17.4	$	16.3
		Tax Provision
---	---	---	---	---	---	---	---
	Three Months Ended March 31,
		2023			2022
As reported		$	(0.1)		$	(1.9)
Tax effects of adjusting items		(4.6)			(2.5)
As adjusted non-GAAP		$	(4.7)		$	(4.4)
Effective tax rate, as reported		25.0		%	26.0		%
Effective tax rate, as adjusted		27.0		%	27.0		%

AVANOS MEDICAL, INC.

NON-GAAP RECONCILIATIONS

(unaudited)

(in millions, except per share amounts)

		Net (Loss) Income
	Three Months Ended March 31,
		2023		2022
As reported		$	(0.5)	$	5.4
Acquisition and integration-related charges		1.5		1.7
Restructuring and transformation charges		8.9		—
EU MDR Compliance		1.1		1.6
Intangibles amortization		6.3		5.7
Tax effects of adjusting items		(4.6)		(2.5)
As adjusted non-GAAP		$	12.7	$	11.9
Diluted (loss) earnings per share, as reported		$	(0.01)	$	0.11
Diluted earnings per share, as adjusted		$	0.27	$	0.25				EBITDA
---	---	---	---	---	---
	Three Months Ended March 31,
		2023		2022
EBITDA, as reported		$	14.7	$	19.7
Acquisition and integration-related charges		1.5		1.7
Restructuring and transformation charges		8.9		—
EU MDR Compliance		1.1		1.6
Adjusted EBITDA		$	26.2	$	23.0

AVANOS MEDICAL, INC.

NON-GAAP RECONCILIATIONS

(unaudited)

(in millions)

		Free Cash Flow
	Three Months Ended March 31,
		2023		2022
Cash (used in) provided by operating activities		$	(6.8)	$	1.8
Capital expenditures		(4.0)		(5.0)
Free Cash Flow		$	(10.8)	$	(3.2)

2023 OUTLOOK

	Estimated Range
Diluted earnings per share (GAAP)	$	0.71	to	$	1.00
Intangibles amortization	0.39		to	0.39
Restructuring and transformation charges	0.34		to	0.28
EU Medical Device Regulation	0.16		to	0.13
Adjusted diluted earnings per share (non-GAAP)	$	1.60	to	$	1.80

AVANOS MEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in millions)

	March 31,<br>2023		December 31,<br>2022
ASSETS
Current Assets
Cash and cash equivalents	$	95.7	$	127.7
Accounts receivable, net	142.7		167.9
Inventories	200.0		190.3
Prepaid and other current assets	15.4		13.9
Total Current Assets	453.8		499.8
Property, Plant and Equipment, net	163.5		163.9
Operating Lease Right-of-Use Assets	28.3		30.6
Goodwill	821.5		819.4
Other Intangible Assets, net	244.7		251.0
Deferred Tax Assets	4.5		4.6
Other Assets	18.6		17.6
TOTAL ASSETS	$	1,734.9	$	1,786.9
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt	$	6.2	$	6.2
Current portion of operating lease liabilities	12.1		12.8
Trade accounts payable	59.6		67.9
Accrued expenses	80.6		98.9
Total Current Liabilities	158.5		185.8
Long-Term Debt	204.7		226.3
Operating Lease Liabilities	32.4		34.7
Deferred Tax Liabilities	25.1		25.4
Other Long-Term Liabilities	15.5		23.5
TOTAL LIABILITIES	436.2		495.7
Stockholders’ Equity	1,298.7		1,291.2
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,734.9	$	1,786.9

AVANOS MEDICAL, INC.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(unaudited)

(in millions)

	Three Months Ended March 31,
		2023		2022
Operating Activities
Net (loss) income		$	(0.5)	$	5.4
Depreciation and amortization		12.1		11.1
Changes in operating assets and liabilities, net of acquisition		(19.3)		(18.1)
Deferred income taxes and other		0.9		3.4
Cash (Used in) Provided by Operating Activities		(6.8)		1.8
Investing Activities
Capital expenditures		(4.0)		(5.0)
Acquisition of assets and investments in businesses		—		(116.7)
Cash Used in Investing Activities		(4.0)		(121.7)
Financing Activities
Proceeds from issuance of secured debt		—		125.0
Secured debt repayments		(1.6)		—
Revolving credit facility proceeds		—		20.0
Revolving credit facility repayments		(20.0)		(20.0)
Payments of debt issuance costs		—		(0.6)
Purchase of treasury stock		(1.1)		(19.4)
Proceeds from the exercise of stock options		0.6		0.7
Cash (Used in) Provided by Financing Activities		(22.1)		105.7
Effect of Exchange Rate Changes on Cash and Cash Equivalents		0.9		—
Decrease in Cash and Cash Equivalents		(32.0)		(14.2)
Cash and Cash Equivalents - Beginning of Period		127.7		118.5
Cash and Cash Equivalents - End of Period		$	95.7	$	104.3

AVANOS MEDICAL, INC.

SELECTED BUSINESS AND PRODUCTS DATA

(unaudited)

(in millions)

			Three Months Ended March 31,
					2023			2022			Change
Chronic Care:
Digestive health					$	88.8		$	81.4		9.1	%
Respiratory health					32.4			38.0			(14.7)	%
Total Chronic Care					121.2			119.4			1.5	%
Pain Management:
Acute pain					$	34.7		$	38.7		(10.3)	%
Interventional pain					35.8			39.3			(8.9)	%
Total Pain Management					70.5			78.0			(9.6)	%
Total Net Sales					$	191.7		$	197.4		(2.9)	%
	Total		Volume		Pricing/Mix			Currency			Other
Net sales - percentage change 2023 vs. 2022	(2.9)	%	(2.8)	%	1.0		%	(1.1)		%	—	%