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 28, 2022

(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, 2022 in a press release dated May 4, 2022. 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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

On April 28, 2022, the Company appointed John J. Hurley, age 51, as its Principal Accounting Officer. Mr. Hurley was appointed to the position of Controller on April 1, 2022, having served as Controller (Interim) since November 1, 2021. Since he joined the Company in 2014, Mr. Hurley has held leadership roles in accounting matters, external reporting, internal control and Sarbanes-Oxley compliance. He has also served in a senior role in the Company’s merger and acquisition transactions. Mr. Hurley has more than 23 years of professional experience in external reporting, technical accounting, internal control and Sarbanes-Oxley compliance.

In his role as Controller and Principal Accounting Officer, Mr. Hurley will receive an annual base salary of $200,000. He will be eligible for cash awards under the Company’s cash incentive program with an annual target award of 30% of his base salary. He will also participate in the Company’s long-term equity incentive compensation program with an annual target award of $60,000. In addition, Mr. Hurley will be eligible to participate in the Company’s medical, dental and other benefit programs.

There are no related party transactions between the Company and Mr. Hurley that would require disclosure under Item 404(a) of Regulation S-K.

Item 5.07 Submission of Matters to a Vote of Security Holders

The Company’s 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”) was held virtually on April 28, 2022. A total of 44,147,208 shares of the Company’s common stock were represented at the 2022 Annual Meeting in person or by proxy, constituting approximately 93.3% of the outstanding shares entitled to vote at the 2022 Annual Meeting.

At the 2022 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 18, 2022:

1.    To elect Gary D. Blackford, John P. Byrnes, Patrick J. O’Leary, Maria Sainz and Dr. Julie Shimer to serve one-year terms expiring at the 2023 Annual Meeting of Stockholders (“Proposal No. 1”);

2. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent auditors for 2022 (“Proposal No. 2”); and

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

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	40,012,248	1,107,513	3,027,447
John P. Byrnes	40,454,210	665,551	3,027,447
Patrick J. O’Leary	40,748,152	371,609	3,027,447
Maria Sainz	40,327,621	792,140	3,027,447
Dr. Julie Shimer	40,086,495	1,033,266	3,027,447

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	43,558,183	480,641	108,384

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	38,502,629	2,537,980	79,152	3,027,447

Item 9.01        Financial Statements and Exhibits

(d)Exhibits.

Exhibit No.	Description
99.1	Press release issued by Avanos Medical, Inc. on May 4, 2022
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:	April 28, 2022	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 2022 Results

ALPHARETTA, Ga., May 4, 2022/PRNewswire/ -- Avanos Medical, Inc. (NYSE: AVNS) today reported first quarter 2022 financial results.

“Coming off last year’s solid finish, we maintained our momentum through the first quarter while adding OrthogenRx to our portfolio,” stated Joe Woody, Avanos’ chief executive officer. Woody continued, “I am very pleased with our first quarter results despite persistent global economic headwinds. We met our customers’ orders and meaningfully improved our gross margins in the face of inflationary pressures and a difficult supply chain environment, and we remain confident in our ability to continue to do so through the back half of the year. Additionally, the OrthogenRx business performed as expected, confirming our belief that our acquisition strategy, combined with solid organic execution, positions us to meet our longer-term financial goals.”

First Quarter 2022 Financial Highlights

•Net sales totaled $197 million, a 9 percent increase from the comparable prior year period.

•Net income for the quarter was $6 million, compared to net loss of $8 million a year ago.

•Adjusted net income totaled $12 million, compared to $11 million a year ago.

•Diluted earnings per share was $0.12, compared to $0.16 diluted loss per share a year ago.

•Adjusted diluted earnings per share was $0.26, compared to $0.23 in the prior year.

Operational and Business Highlights

•On January 20, 2022, we completed the acquisition of OrthogenRx, Inc. (“OrthogenRx”), a leader in viscosupplementation therapies for the treatment of knee osteoarthritis (“OA”) knee pain. The acquisition was based on a purchase price of $130 million plus up to an additional $30 million in contingent cash consideration.

•During January, we repurchased 588,293 shares of our Common Stock for $19.3 million, completing our repurchases under a board-authorized $30 million repurchase program.

•A lead investigator on one of our clinical studies presented data at the North American Neuromodulation Society’s annual meeting that provided a combined analysis of subjects across two randomized clinical studies that demonstrated remarkable consistency of COOLIEF for treating knee OA pain.

•Pre-clinical data exploring in-vivo tissue response following a COOLIEF procedure was recently published in the Journal of Pain Research.

•We are seeing significant engagement with state-level pain societies in issuing statements in support of reimbursement coverage for genicular radio-frequency pain therapies.

First Quarter 2022 Operating Results

Net sales totaled $197 million, an increase of 9 percent compared to the prior year primarily due to incremental revenue resulting from the acquisition of OrthogenRx. Digestive health products enjoyed strong demand and volume, although this was offset by decreased demand and volume in respiratory health products. Excluding OrthogenRx, pain management volume increased by 6 percent over the prior year period. In addition, favorable pricing/product mix of 1 percent was offset by 1 percent of unfavorable foreign currency effects.

Gross margin was 54 percent, compared to 51 percent in the prior year period. Adjusted gross margin was 56 percent, compared to 52 percent last year.

Operating profit was $9 million compared to a $12 million operating loss in the prior year period primarily due to lower legal expenses. On an adjusted basis, operating profit totaled $18 million, compared to $16 million a year ago.

Adjusted EBITDA for the quarter was $24 million, compared to $22 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 of 2022 was an outflow of $3 million, compared to an outflow of $9 million a year ago. The company’s cash balance was $104 million at the end of the first quarter, compared to $119 million at year-end 2021.

Total debt outstanding was $254 million at the end of the first quarter compared to $130 million at December 31, 2021. In the three months ended March 31, 2022, the company borrowed $125 million in conjunction with closing the acquisition of OrthogenRx.

2022 Outlook

The company affirms previous guidance for 2022 net sales of between $830 million to $850 million, which assumes organic growth between 3 percent to 6 percent. Additionally, we anticipate gross profit margins to be between 55 percent to 57 percent with adjusted diluted earnings per share between $1.55 to $1.75.

Each of these measures is inclusive of the impact of the OrthogenRx acquisition and reflects our expectation that supply chain headwinds related to both product availability and inflation pressures will continue throughout the year.

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:

•Expenses associated with restructuring activities.

•Expenses associated with post divestiture transition activities.

•Certain acquisition and integration charges related to acquisitions.

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

•Expenses associated with certain litigation matters.

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

•The tax effects of certain adjusting items.

•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 3937658. 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 device company focused on delivering clinically superior breakthrough solutions that will help patients get back to the things that matter. Headquartered in Alpharetta, Georgia, Avanos is committed to creating the next generation of innovative healthcare solutions which will address our most important healthcare needs, such as reducing the use of opioids while helping patients move from surgery to recovery. Avanos

develops, manufactures and markets its recognized brands in more than 90 countries. 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, among others. 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; 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. 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,
	2022		2021
Net Sales	$	197.4	$	180.7
Cost of products sold	90.2		89.4
Gross Profit	107.2		91.3
Research and development expenses	7.8		8.3
Selling and general expenses	90.1		73.4
Other expense, net	0.1		22.0
Operating Income (Loss)	9.2		(12.4)
Interest expense	(1.3)		(0.8)
Income (Loss) Before Income Taxes	7.9		(13.2)
Income tax (provision) benefit	(2.1)		5.6
Net Income (Loss)	$	5.8	$	(7.6)
Interest expense, net	$	1.3	$	0.8
Income tax provision (benefit)	2.1		(5.6)
Depreciation and amortization	11.1		9.7
EBITDA	$	20.3	$	(2.7)
Earnings (Loss) Per Share
Basic	$	0.12	$	(0.16)
Diluted	0.12		(0.16)
Common Shares Outstanding
Basic	47.4		48.0
Diluted	47.8		48.0

AVANOS MEDICAL, INC.

NON-GAAP RECONCILIATIONS

(unaudited)

(in millions)

	Gross Profit
	Three Months Ended March 31,
	2022			2021
As reported	$	107.2		$	91.3
2020 Restructuring charges	—			0.2
Post divestiture restructuring charges	—			0.9
Post divestiture transition charges	—			0.1
Acquisition and integration-related charges	0.7			—
Intangibles amortization	3.1			1.6
As adjusted non-GAAP	$	111.0		$	94.1
Gross profit margin, as reported	54.3		%	50.5		%
Gross profit margin, as adjusted	56.2		%	52.1		%			Operating Profit (Loss)
---	---	---	---	---
	Three Months Ended March 31,
	2022		2021
As reported	$	9.2	$	(12.4)
2020 Restructuring charges	—		0.2
Post divestiture restructuring charges	—		0.9
Post divestiture transition charges(a)	—		—
Acquisition and integration-related charges	1.7		0.4
EU MDR Compliance(b)	1.6		0.2
Litigation and legal	—		22.5
Intangibles amortization	5.7		4.2
As adjusted non-GAAP	$	18.2	$	16.0

__________________________________________________

(a)In the three months ended March 31, 2021, post divestiture transition charges include $0.1 million in “Cost of products sold” (see “Gross Profit” table) offset by a benefit of $0.1 million in “Selling and general expenses.”

(b)EU MDR Compliance related charges are included in “Selling and general expenses”.

AVANOS MEDICAL, INC.

NON-GAAP RECONCILIATIONS

(unaudited)

	Income (Loss) Before Taxes
	Three Months Ended March 31,
	2022		2021
As reported	$	7.9	$	(13.2)
2020 Restructuring charges	—		0.2
Post divestiture restructuring charges	—		0.9
Acquisition and integration-related charges	1.7		0.4
EU MDR Compliance	1.6		0.2
Litigation and legal	—		22.5
Intangibles amortization	5.7		4.2
As adjusted non-GAAP	$	16.9	$	15.2			Tax Benefit (Provision)
---	---	---	---	---	---	---
	Three Months Ended March 31,
	2022			2021
As reported	$	(2.1)		$	5.6
Tax effects of adjusting items	(2.5)			(9.9)
Effects of the CARES Act and other	—			0.2
As adjusted non-GAAP	$	(4.6)		$	(4.1)
Effective tax rate, as reported	26.6		%	42.4		%
Effective tax rate, as adjusted	27.2		%	27.0		%

AVANOS MEDICAL, INC.

NON-GAAP RECONCILIATIONS

(unaudited)

(in millions, except per share amounts)

	Net Income (Loss)
	Three Months Ended March 31,
	2022		2021
As reported	$	5.8	$	(7.6)
2020 Restructuring charges	—		0.2
Post divestiture restructuring charges	—		0.9
Acquisition and integration-related charges	1.7		0.4
EU MDR Compliance	1.6		0.2
Litigation and legal	—		22.5
Intangibles amortization	5.7		4.2
Tax effects of adjusting items	(2.5)		(9.9)
Tax effects of the CARES Act and other	—		0.2
As adjusted non-GAAP	$	12.3	$	11.1
Diluted EPS, as reported	$	0.12	$	(0.16)
Diluted EPS, as adjusted	$	0.26	$	0.23			EBITDA
---	---	---	---	---
	Three Months Ended March 31,
	2022		2021
EBITDA, as reported	$	20.3	$	(2.7)
2020 Restructuring charges	—		0.2
Post divestiture restructuring charges	—		0.9
Acquisition and integration-related charges	1.7		0.4
EU MDR Compliance	1.6		0.2
Litigation and legal	—		22.5
Adjusted EBITDA	$	23.6	$	21.5

AVANOS MEDICAL, INC.

NON-GAAP RECONCILIATIONS

(unaudited)

(in millions)

	Free Cash Flow
	Three Months Ended March 31,
	2022		2021
Cash provided by (used in) operating activities	$	1.8	$	(3.3)
Capital expenditures	(5.0)		(5.7)
Free Cash Flow	$	(3.2)	$	(9.0)

2022 OUTLOOK

	Estimated Range
Diluted earnings per share (GAAP)	$	1.05	to	$	1.30
Intangibles amortization	0.25		to	0.25
Other	0.25		to	0.20
Adjusted diluted earnings per share (non-GAAP)	$	1.55	to	$	1.75

AVANOS MEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in millions)

	March 31,<br>2022		December 31,<br>2021
ASSETS
Current Assets
Cash and cash equivalents	$	104.3	$	118.5
Accounts receivable, net	161.6		131.2
Inventories	157.6		150.3
Prepaid and other current assets	15.7		18.6
Total Current Assets	439.2		418.6
Property, Plant and Equipment, net	166.9		168.1
Operating Lease Right-of-Use Assets	36.1		38.6
Goodwill	826.0		801.6
Other Intangible Assets, net	271.1		141.2
Deferred Tax Assets	11.3		10.0
Other Assets	15.9		16.5
TOTAL ASSETS	$	1,766.5	$	1,594.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of operating lease liabilities	$	14.5	$	14.7
Trade accounts payable	63.8		56.4
Accrued expenses	74.6		68.1
Total Current Liabilities	152.9		139.2
Long-Term Debt	254.4		130.0
Operating Lease Liabilities	40.0		42.8
Deferred Tax Liabilities	34.7		9.6
Other Long-Term Liabilities	28.0		9.1
TOTAL LIABILITIES	510.0		330.7
Stockholders’ Equity	1,256.5		1,263.9
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,766.5	$	1,594.6

AVANOS MEDICAL, INC.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(unaudited)

(in millions)

	Three Months Ended March 31,
		2022		2021
Operating Activities
Net income (loss)		$	5.8	$	(7.6)
Depreciation and amortization		11.1		9.7
Net loss on asset dispositions		—		0.1
Changes in operating assets and liabilities, net of acquisition		(18.5)		(2.7)
Deferred income taxes and other		3.4		(2.8)
Cash Provided by (Used in) Operating Activities		1.8		(3.3)
Investing Activities
Capital expenditures		(5.0)		(5.7)
Acquisition of assets and investments in businesses		(116.7)		—
Cash Provided by (Used) in Investing Activities		(121.7)		(5.7)
Financing Activities
Proceeds from issuance of secured debt		125.0		—
Senior secured revolving credit facility proceeds		20.0		—
Senior secured revolving credit facility repayments		(20.0)		(5.0)
Purchase of treasury stock		(19.4)		—
Payments of debt issuance costs		(0.6)		—
Proceeds from the exercise of stock options		0.7		4.8
Cash Provided by (Used in) Financing Activities		105.7		(0.2)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		—		(2.2)
Decrease in Cash and Cash Equivalents		(14.2)		(11.4)
Cash and Cash Equivalents - Beginning of Period		118.5		111.5
Cash and Cash Equivalents - End of Period		$	104.3	$	100.1

AVANOS MEDICAL, INC.

SELECTED BUSINESS AND PRODUCTS DATA

(unaudited)

(in millions)

					Three Months Ended March 31,
					2022			2021			Change
Chronic Care:
Digestive health					$	81.4		$	78.1		4.2	%
Respiratory health					38.0			43.0			(11.6)	%
Total Chronic Care					119.4			121.1			(1.4)	%
Pain Management:
Acute pain					$	38.7		$	37.1		4.3	%
Interventional pain					39.3			22.5			74.7	%
Total Pain Management					78.0			59.6			30.9	%
Total Net Sales					$	197.4		$	180.7		9.2	%
	Total		Volume(a)		Pricing/Mix			Currency			Other(b)
Net Sales - percentage change 2022 vs. 2021	9.2	%	9.7	%	0.5		%	(1.0)		%	—	%

__________________________________________________

(a)Volume includes incremental sales from acquisitions.

(b)Other includes rounding.