ALPHARETTA, Ga., Aug. 9, 2023
/PRNewswire/ -- Avanos Medical, Inc. (NYSE: AVNS) today reported
second quarter 2023 financial results.
"We posted solid second quarter earnings, with Digestive Health
continuing to deliver above-market growth and expanded margins,"
stated Joe Woody, Avanos's chief
executive officer. Woody continued, "Separately, we continue to
deliver on our transformation priorities and remain highly focused
on implementing our new pain franchise strategy outlined at our
Investor Day."
Second Quarter 2023 Financial Highlights
- Total net sales from continuing operations were $169.4 million, a 0.9% decrease from the
comparable prior year period, while total net sales, including the
discontinued Respiratory Health ("RH") business, were $199.8 million.
- Net loss from continuing operations for the quarter was
$4.3 million, compared to net income
from continuing operations of $4.8
million a year ago.
- Adjusted net income from continuing operations totaled
$11.2 million, compared to net income
of $12.5 million a year ago.
- Diluted loss per share from continuing operations was
$0.09, compared to diluted earnings
per share of $0.10 a year ago.
- Adjusted diluted earnings per share from continuing operations
was $0.24, compared to $0.26 a year ago.
Operational and Business Highlights
In June, we announced an agreement to divest substantially all
of the assets primarily related to or used in our RH business (the
"Divestiture"). The Divestiture represents a key component of our
ongoing transformation process and is aimed at accelerating our
effort to focus our portfolio in markets where we believe we are
well-positioned to succeed.
On July 24, we closed the
acquisition of Diros Technologies, Inc. ("Diros"). Based in
Toronto, Canada, Diros is at the
forefront of radiofrequency ablation ("RFA") technology. The
addition of Diros' unique RF Trident™ technology is expected to
further enhance Avanos' Pain Management and Recovery treatment
options and complement our premium COOLIEF* Cooled Radiofrequency
product offering.
On June 28, the UK's National
Institute for Health and Care Excellence ("NICE") recommended the
use of RFA for the treatment of osteoarthritic knee pain. NICE
guidelines are important because they are evidence-based and are
intended to drive quality and consistency in healthcare with the
goal of enhancing patient outcomes. Although NICE guidelines are
specific to the UK, they are globally recognized as useful guidance
for a wide variety of therapies. We anticipate that the release of
these guidelines may help drive the development of similar
guidelines for knee osteoarthritis RFA in other regions of the
world, which is necessary to further improve the reimbursement
landscape for this clinically important chronic pain procedure.
In January, we announced a three-year transformation initiative
that is focused on four key priorities: optimizing our commercial
organization; transforming our 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.
Second Quarter 2023 Operating Results From
Continuing Operations
For the three months ended June 30,
2023, net sales totaled $169.4
million, a decrease of 0.9% compared to the prior year
period, primarily due to lower volume in the Pain Management and
Recovery portfolio, primarily from lower hyaluronic acid portfolio
("HA") sales, partially offset by higher volume in the Digestive
Health portfolio. Favorable pricing was mostly offset by
unfavorable foreign currency translation effects.
As a result of the Divestiture, the RH business's operating
results are reflected as discontinued operations for all periods
presented. Treating the RH business as discontinued operations
results in significant shared overhead costs previously allocated
to the RH business that are now included in continuing operations.
Included in continuing operations are costs previously allocated to
the RH business of $12.0 million in each of the three months
ended June 30, 2023 and 2022.
Gross margin during the second quarter of 2023 was 57.7%,
compared to 59.4% in the prior year period. Adjusted gross margin
was 59.9% compared to 61.9% last year. Gross profit margin
decreased primarily due to product mix and unfavorable currency
exchange rates, partially offset by manufacturing efficiencies.
Selling and general expenses as a percentage of net sales was
54.9% for the second quarter of 2023, compared to 48.7% for the
second quarter of 2022 primarily due to non-recurring expenses
associated with our ongoing Transformation Process and expenses
associated with the Divestiture.
Operating loss was $2.1 million,
compared to operating profit of $10.1
million in the prior year period, primarily due to overall
lower sales volume along with an increase in expenses related to
the Transformation Process and the Divestiture. On an adjusted
basis, operating profit totaled $18.4
million, compared to operating profit of $18.5 million a year ago.
Adjusted EBITDA from continuing operations was $22.9 million in each of the three months ended
June 30, 2023 and 2022.
First Six Months 2023 Operating Results From Continuing
Operations
For the six months ended June 30,
2023, net sales totaled $328.7
million, a decrease of 0.5% compared to the prior year
period, primarily due to lower volume in the Pain Management and
Recovery portfolio (primarily lower HA sales), partially offset by
continued strong demand for Digestive Health products. Favorable
pricing was mostly offset by unfavorable foreign currency
translation effects.
Gross margin for the six months ended June 30, 2023 was 57.6%, compared to 57.9% in the
prior year period. Adjusted gross margin was 59.8% compared to
60.3% last year. Gross margin decreased primarily due to product
mix partially offset by manufacturing efficiencies.
Selling and general expenses as a percentage of net sales was
55.3% for the six months ended June 30,
2023, compared to 51.3% for the prior year period, primarily
due to expenses associated with our ongoing Transformation Process
and the Divestiture.
Operating loss for the six months ended June 30, 2023 was $8.2
million, compared to operating profit of $6.1 million in the prior year period, primarily
due to overall lower sales volume along with an increase in
expenses related to the Transformation Process and the Divestiture.
On an adjusted basis, operating profit totaled $29.6 million, compared to $23.0 million a year ago.
Shared overhead costs previously allocated to the RH business
were $24.2 million in the six
months ended June 30, 2023 compared
to $25.0 million in the prior
year period.
Adjusted EBITDA from continuing operations for the six months
ended June 30, 2023 was
$39.0 million, compared to
$31.8 million in the prior year
period.
Cash Flow and Balance Sheet
Cash from operations less capital expenditures, or free cash
flow, for the second quarter was an outflow of $6.6 million, driven primarily by non-recurring
cash expenses associated with our Transformation Process, compared
to an inflow of $22.9 million a year
ago. The Company's cash balance at June 30, 2023 was
$81.8 million, compared to
$127.7 million at year-end 2022.
Total debt outstanding, net of unamortized discounts, was
$209.5 million at June 30,
2023, compared to $232.5 million
at December 31, 2022.
Discontinued Operations
Net sales from discontinued operations were $30.4 million and $62.8
million in the three and six months ended June 30, 2023, respectively, compared to
$32.1 million and $70.2 million in the three and six months ended
June 30, 2022, respectively. We
expect a loss on the disposal of the RH business; accordingly, we
recorded an impairment of $72.3
million against assets in the disposal group, which is
included in "(Loss) income from discontinued operations, net of
tax."
2023 Outlook
For the second half of 2023, the Company anticipates low
single-digit organic growth, adjusted gross margins greater than
59% and adjusted diluted earnings per share from continuing
operations of between $1.05 and
$1.15 for 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:
- Certain acquisition and integration charges related to
acquisitions.
- Expenses associated with restructuring and transformation
activities, including the Divestiture.
- 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 2670889. 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; shortage in drugs used in our Surgical Pain and Recovery
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 or our divestiture, acquisition or merger
transactions; 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
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net
Sales
|
$
169.4
|
|
$
170.9
|
|
$
328.7
|
|
$
330.2
|
Cost of products
sold
|
71.6
|
|
69.3
|
|
139.5
|
|
139.1
|
Gross
Profit
|
97.8
|
|
101.6
|
|
189.2
|
|
191.1
|
Research and
development expenses
|
6.8
|
|
7.6
|
|
14.3
|
|
14.9
|
Selling and general
expenses
|
93.0
|
|
83.2
|
|
181.8
|
|
169.5
|
Other expense,
net
|
0.1
|
|
0.7
|
|
1.3
|
|
0.6
|
Operating (Loss)
Income
|
(2.1)
|
|
10.1
|
|
(8.2)
|
|
6.1
|
Interest
income
|
0.5
|
|
0.2
|
|
1.0
|
|
0.2
|
Interest
expense
|
(3.5)
|
|
(2.7)
|
|
(7.0)
|
|
(4.0)
|
(Loss) Income Before
Income Taxes
|
(5.1)
|
|
7.6
|
|
(14.2)
|
|
2.3
|
Income tax benefit
(provision)
|
0.8
|
|
(2.8)
|
|
2.1
|
|
(1.5)
|
(Loss) Income from
Continuing Operations
|
(4.3)
|
|
4.8
|
|
(12.1)
|
|
0.8
|
(Loss) Income from
discontinued operations, net of tax
|
(63.8)
|
|
7.7
|
|
(56.5)
|
|
17.1
|
Net (Loss)
Income
|
$
(68.1)
|
|
$
12.5
|
|
$
(68.6)
|
|
$
17.9
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
$
3.0
|
|
$
2.5
|
|
$
6.0
|
|
$
3.8
|
Income tax (provision)
benefit
|
(1.6)
|
|
5.5
|
|
(1.5)
|
|
7.4
|
Depreciation and
amortization
|
11.5
|
|
11.6
|
|
23.6
|
|
22.7
|
EBITDA
|
$
(55.2)
|
|
$
32.1
|
|
$
(40.5)
|
|
$
51.8
|
|
|
|
|
|
|
|
|
(Loss) Earnings Per
Share
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
Continuing
operations
|
$
(0.09)
|
|
$
0.10
|
|
$
(0.26)
|
|
$
0.02
|
Discontinued
operations
|
(1.37)
|
|
0.17
|
|
(1.21)
|
|
0.36
|
Basic Earnings (Loss)
Per Share
|
$
(1.46)
|
|
$
0.27
|
|
$
(1.47)
|
|
$
0.38
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
Continuing
operations
|
$
(0.09)
|
|
$
0.10
|
|
$
(0.26)
|
|
$
0.01
|
Discontinued
operations
|
$
(1.37)
|
|
0.16
|
|
(1.21)
|
|
0.36
|
Diluted Earnings
(Loss) Per Share
|
$
(1.46)
|
|
$
0.26
|
|
$
(1.47)
|
|
$
0.37
|
|
|
|
|
|
|
|
|
Common Shares
Outstanding
|
|
|
|
|
|
|
|
Basic
|
46.8
|
|
47.2
|
|
46.7
|
|
47.3
|
Diluted
|
46.8
|
|
47.6
|
|
46.7
|
|
47.7
|
AVANOS MEDICAL,
INC. Discontinued Operations
Summary (unaudited) (in millions, except per
share amounts)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net Sales
|
$
30.4
|
|
$
32.1
|
|
$
62.8
|
|
$
70.2
|
Cost of products
sold
|
18.6
|
|
17.3
|
|
37.9
|
|
38.3
|
Gross
Profit
|
11.8
|
|
14.8
|
|
24.9
|
|
31.9
|
Research and
development expenses
|
0.2
|
|
0.4
|
|
0.6
|
|
0.9
|
Selling, general and
other expenses
|
3.9
|
|
4.0
|
|
7.9
|
|
8.0
|
Pretax loss on
classification as discontinued operations
|
72.3
|
|
—
|
|
72.3
|
|
—
|
(Loss) Income from
discontinued operations before income taxes
|
(64.6)
|
|
10.4
|
|
(55.9)
|
|
23.0
|
Income tax benefit
(provision) from discontinued operations
|
0.8
|
|
(2.7)
|
|
(0.6)
|
|
(5.9)
|
(Loss) from
discontinued operations, net of tax
|
$
(63.8)
|
|
$
7.7
|
|
$
(56.5)
|
|
$
17.1
|
|
|
|
|
|
|
|
|
(Loss) Earnings Per
Share
|
|
|
|
|
|
|
|
Basic
|
$
(1.37)
|
|
$
0.17
|
|
$
(1.21)
|
|
$
0.36
|
Diluted
|
$
(1.37)
|
|
$
0.16
|
|
$
(1.21)
|
|
$
0.36
|
AVANOS MEDICAL,
INC. NON-GAAP RECONCILIATIONS (unaudited) (in
millions)
|
|
|
Gross
Profit
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
As reported
|
$
97.8
|
|
$
101.6
|
|
$
189.2
|
|
$
191.1
|
Acquisition and
integration-related charges
|
—
|
|
0.7
|
|
—
|
|
1.4
|
Restructuring and
transformation charges
|
0.1
|
|
—
|
|
0.1
|
|
—
|
Intangibles
amortization
|
3.6
|
|
3.5
|
|
7.2
|
|
6.6
|
As adjusted
non-GAAP
|
$
101.5
|
|
$
105.8
|
|
$
196.5
|
|
$
199.1
|
Gross profit margin, as
reported
|
57.7 %
|
|
59.4 %
|
|
57.6 %
|
|
57.9 %
|
Gross profit margin, as
adjusted
|
59.9 %
|
|
61.9 %
|
|
59.8 %
|
|
60.3 %
|
|
|
Operating (Loss)
Profit
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
As reported
|
$
(2.1)
|
|
$
10.1
|
|
$
(8.2)
|
|
$
6.1
|
Acquisition and
integration-related charges
|
0.3
|
|
1.0
|
|
1.8
|
|
2.8
|
Restructuring and
transformation charges(a)
|
9.8
|
|
—
|
|
18.7
|
|
—
|
Divestiture related
charges
|
3.7
|
|
—
|
|
3.7
|
|
—
|
EU MDR Compliance
(b)
|
0.9
|
|
1.7
|
|
2.0
|
|
3.2
|
Intangibles
amortization
|
5.8
|
|
5.7
|
|
11.6
|
|
10.9
|
As adjusted
non-GAAP
|
$
18.4
|
|
$
18.5
|
|
$
29.6
|
|
$
23.0
|
|
|
|
|
|
|
(a)
|
Expenses incurred for
the Transformation Process are included in "Costs of products
sold," "Research and development," and "Selling and general
expenses".
|
(b)
|
In the three months
ended June 30, 2023 and 2022, EU MDR Compliance related charges are
included in "Selling and general expenses".
|
AVANOS MEDICAL,
INC. NON-GAAP RECONCILIATIONS (unaudited) (in
millions except per share amounts)
|
|
|
(Loss) Income Before
Taxes
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
As reported
|
$
(5.1)
|
|
$
7.6
|
|
$
(14.2)
|
|
$
2.3
|
Acquisition and
integration-related charges
|
0.3
|
|
1.0
|
|
1.8
|
|
2.8
|
Restructuring and
transformation charges
|
9.8
|
|
—
|
|
18.7
|
|
—
|
Divestiture related
charges
|
3.7
|
|
—
|
|
3.7
|
|
—
|
EU MDR
Compliance
|
0.9
|
|
1.7
|
|
2.0
|
|
3.2
|
Intangibles
amortization
|
5.8
|
|
5.7
|
|
11.6
|
|
10.9
|
Loss on extinguishment
of debt
|
—
|
|
1.1
|
|
—
|
|
1.1
|
As adjusted
non-GAAP
|
$
15.4
|
|
$
17.1
|
|
$
23.6
|
|
$
20.3
|
|
|
Tax
Provision
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
As reported
|
$
0.8
|
|
$
(2.8)
|
|
$
2.1
|
|
$
(1.5)
|
Tax effects of
adjusting items
|
(5.0)
|
|
(1.8)
|
|
(8.5)
|
|
(4.0)
|
As adjusted
non-GAAP
|
$
(4.2)
|
|
$
(4.6)
|
|
$
(6.4)
|
|
$
(5.5)
|
Effective tax rate, as
reported
|
15.7 %
|
|
36.8 %
|
|
14.8 %
|
|
65.2 %
|
Effective tax rate, as
adjusted
|
27.0 %
|
|
27.0 %
|
|
27.0 %
|
|
27.0 %
|
|
|
(Loss) Income from
Continuing Operations
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
As reported
|
$
(4.3)
|
|
$
4.8
|
|
$
(12.1)
|
|
$
0.8
|
Acquisition and
integration-related charges
|
0.3
|
|
1.0
|
|
1.8
|
|
2.8
|
Restructuring and
transformation charges
|
9.8
|
|
—
|
|
18.7
|
|
—
|
Divestiture related
charges
|
3.7
|
|
—
|
|
3.7
|
|
—
|
EU MDR
Compliance
|
0.9
|
|
1.7
|
|
2.0
|
|
3.2
|
Intangibles
amortization
|
5.8
|
|
5.7
|
|
11.6
|
|
10.9
|
Loss on extinguishment
of debt
|
—
|
|
1.1
|
|
—
|
|
1.1
|
Tax effects of
adjusting items
|
(5.0)
|
|
(1.8)
|
|
(8.5)
|
|
(4.0)
|
As adjusted
non-GAAP
|
$
11.2
|
|
$
12.5
|
|
$
17.2
|
|
$
14.8
|
Diluted (loss) earnings
per share, as reported
|
$
(0.09)
|
|
$
0.10
|
|
$
(0.26)
|
|
$
0.02
|
Diluted earnings per
share, as adjusted
|
$
0.24
|
|
$
0.26
|
|
$
0.37
|
|
$
0.31
|
AVANOS MEDICAL,
INC. NON-GAAP RECONCILIATIONS (unaudited) (in
millions except per share amounts)
|
|
|
(Loss) Income from
Discontinued Operations, net of tax
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
As reported
|
$
(63.8)
|
|
$
7.7
|
|
$
(56.5)
|
|
$
17.1
|
Estimated loss on
divestiture
|
72.3
|
|
—
|
|
72.3
|
|
—
|
Intangibles
amortization
|
0.3
|
|
0.5
|
|
0.8
|
|
1.0
|
Tax effects of
adjusting items
|
(2.9)
|
|
(0.2)
|
|
(4.0)
|
|
(0.5)
|
As adjusted
non-GAAP
|
$
5.9
|
|
$
8.0
|
|
$
12.6
|
|
$
17.6
|
Diluted (loss) earnings
per share, as reported
|
$
(1.37)
|
|
$
0.16
|
|
$
(1.21)
|
|
$
0.36
|
Diluted earnings per
share, as adjusted
|
$
0.13
|
|
$
0.17
|
|
$
0.27
|
|
$
0.37
|
|
|
Net (Loss)
Income
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
As reported
|
$
(68.1)
|
|
$
12.5
|
|
$
(68.6)
|
|
$
17.9
|
Acquisition and
integration-related charges
|
0.3
|
|
1.0
|
|
1.8
|
|
2.8
|
Restructuring and
transformation charges
|
9.8
|
|
—
|
|
18.7
|
|
—
|
Divestiture related
charges
|
3.7
|
|
—
|
|
3.7
|
|
—
|
Estimated loss on
divestiture
|
72.3
|
|
—
|
|
72.3
|
|
—
|
EU MDR
Compliance
|
0.9
|
|
1.7
|
|
2.0
|
|
3.2
|
Intangibles
amortization
|
6.1
|
|
6.2
|
|
12.4
|
|
11.9
|
Loss on extinguishment
of debt
|
—
|
|
1.1
|
|
—
|
|
1.1
|
Tax effects of
adjusting items
|
(7.9)
|
|
(2.0)
|
|
(12.5)
|
|
(4.5)
|
As adjusted
non-GAAP
|
$
17.1
|
|
$
20.5
|
|
$
29.8
|
|
$
32.4
|
Diluted (loss) earnings
per share, as reported
|
$
(1.46)
|
|
$
0.26
|
|
$
(1.47)
|
|
$
0.37
|
Diluted earnings per
share, as adjusted
|
$
0.37
|
|
$
0.43
|
|
$
0.64
|
|
$
0.68
|
AVANOS MEDICAL,
INC. NON-GAAP RECONCILIATIONS (unaudited)
|
|
|
EBITDA
|
|
Three Months
Ended
June 30, 2023
|
|
Three Months
Ended
June 30, 2022
|
|
Continuing
Operations
|
|
Discontinued
Operations
|
|
Total
|
|
Continuing
Operations
|
|
Discontinued
Operations
|
|
Total
|
Net (loss)
income
|
$
(4.3)
|
|
$
(63.8)
|
|
$
(68.1)
|
|
$
4.8
|
|
$
7.7
|
|
$
12.5
|
Interest expense,
net
|
3.0
|
|
—
|
|
3.0
|
|
2.5
|
|
—
|
|
2.5
|
Income tax (provision)
benefit
|
(0.8)
|
|
(0.8)
|
|
(1.6)
|
|
2.8
|
|
2.7
|
|
5.5
|
Depreciation
|
4.5
|
|
0.9
|
|
5.4
|
|
4.4
|
|
1.0
|
|
5.4
|
Amortization
|
5.8
|
|
0.3
|
|
6.1
|
|
5.7
|
|
0.5
|
|
6.2
|
EBITDA
|
8.2
|
|
(63.4)
|
|
(55.2)
|
|
20.2
|
|
11.9
|
|
32.1
|
Acquisition and
integration-related charges
|
0.3
|
|
—
|
|
0.3
|
|
1.0
|
|
—
|
|
1.0
|
Restructuring and
transformation charges
|
9.8
|
|
—
|
|
9.8
|
|
—
|
|
—
|
|
—
|
Divestiture related
charges
|
3.7
|
|
—
|
|
3.7
|
|
—
|
|
—
|
|
—
|
Estimated loss on
divestiture
|
—
|
|
72.3
|
|
72.3
|
|
—
|
|
—
|
|
—
|
EU MDR
Compliance
|
0.9
|
|
—
|
|
0.9
|
|
1.7
|
|
—
|
|
1.7
|
Adjusted
EBITDA
|
$
22.9
|
|
$
8.9
|
|
$
31.8
|
|
$
22.9
|
|
$
11.9
|
|
$
34.8
|
|
|
EBITDA
|
|
Six Months
Ended
June 30, 2023
|
|
Six Months
Ended
June 30, 2022
|
|
Continuing
Operations
|
|
Discontinued
Operations
|
|
Total
|
|
Continuing
Operations
|
|
Discontinued
Operations
|
|
Total
|
Net (loss)
income
|
$
(12.1)
|
|
$
(56.5)
|
|
$
(68.6)
|
|
$
0.8
|
|
$
17.1
|
|
$
17.9
|
Interest expense,
net
|
6.0
|
|
—
|
|
6.0
|
|
3.8
|
|
—
|
|
3.8
|
Income tax (provision)
benefit
|
(2.1)
|
|
0.6
|
|
(1.5)
|
|
1.5
|
|
5.9
|
|
7.4
|
Depreciation
|
9.4
|
|
1.8
|
|
11.2
|
|
8.8
|
|
2.0
|
|
10.8
|
Amortization
|
11.6
|
|
0.8
|
|
12.4
|
|
10.9
|
|
1.0
|
|
11.9
|
EBITDA
|
12.8
|
|
(53.3)
|
|
(40.5)
|
|
25.8
|
|
26.0
|
|
51.8
|
Acquisition and
integration-related charges
|
1.8
|
|
—
|
|
1.8
|
|
2.8
|
|
—
|
|
2.8
|
Restructuring and
transformation charges
|
18.7
|
|
—
|
|
18.7
|
|
—
|
|
—
|
|
—
|
Divestiture related
charges
|
3.7
|
|
—
|
|
3.7
|
|
—
|
|
—
|
|
—
|
Estimated loss on
divestiture
|
—
|
|
72.3
|
|
72.3
|
|
—
|
|
—
|
|
—
|
EU MDR
Compliance
|
2.0
|
|
—
|
|
2.0
|
|
3.2
|
|
—
|
|
3.2
|
Adjusted
EBITDA
|
$
39.0
|
|
$
19.0
|
|
$
58.0
|
|
$
31.8
|
|
$
26.0
|
|
$
57.8
|
AVANOS MEDICAL,
INC. NON-GAAP RECONCILIATIONS (unaudited) (in
millions except per share amounts)
|
|
|
Free Cash
Flow
|
|
Three Months Ended
June 30,
|
|
Three Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Cash (used in) provided
by operating activities
|
$
(2.6)
|
|
$
27.0
|
|
$
(9.4)
|
|
$
28.8
|
Capital
expenditures
|
(4.0)
|
|
(4.1)
|
|
(8.0)
|
|
(9.1)
|
Free Cash
Flow
|
$
(6.6)
|
|
$
22.9
|
|
$
(17.4)
|
|
$
19.7
|
2023 OUTLOOK
|
|
|
Estimated
Range
|
Diluted earnings per
share (GAAP)
|
$
(1.21)
|
to
|
$
(0.77)
|
Intangibles
amortization
|
0.37
|
to
|
0.37
|
Restructuring and
transformation charges
|
0.42
|
to
|
0.35
|
EU MDR
compliance
|
0.16
|
to
|
0.13
|
Divestiture related
charges
|
0.16
|
to
|
0.13
|
Estimated loss on
divestiture
|
1.23
|
to
|
1.01
|
Other
|
(0.08)
|
to
|
(0.07)
|
Adjusted diluted
earnings per share (non-GAAP)
|
$
1.05
|
to
|
$
1.15
|
AVANOS MEDICAL,
INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited) (in millions)
|
|
|
June 30,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$
81.8
|
|
$
127.7
|
Accounts receivable,
net
|
152.3
|
|
167.9
|
Inventories
|
148.3
|
|
132.3
|
Prepaid and other
current assets
|
15.8
|
|
13.9
|
Assets held for
sale
|
108.7
|
|
58.0
|
Total Current
Assets
|
506.9
|
|
499.8
|
Property, Plant and
Equipment, net
|
122.6
|
|
118.6
|
Operating Lease
Right-of-Use Assets
|
29.1
|
|
27.5
|
Goodwill
|
762.6
|
|
760.3
|
Other Intangible
Assets, net
|
222.6
|
|
234.2
|
Deferred Tax
Assets
|
4.4
|
|
4.6
|
Other
Assets
|
18.5
|
|
17.6
|
Assets Held for
Sale
|
—
|
|
124.3
|
TOTAL
ASSETS
|
$
1,666.7
|
|
$
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
|
13.5
|
|
12.0
|
Trade accounts
payable
|
65.4
|
|
67.9
|
Accrued
expenses
|
72.7
|
|
98.9
|
Liabilities held for
sale
|
2.7
|
|
0.8
|
Total Current
Liabilities
|
160.5
|
|
185.8
|
Long-Term
Debt
|
203.3
|
|
226.3
|
Operating Lease
Liabilities
|
30.9
|
|
32.5
|
Deferred Tax
Liabilities
|
21.8
|
|
25.4
|
Other Long-Term
Liabilities
|
15.4
|
|
23.5
|
Liabilities Held for
Sale
|
—
|
|
2.2
|
TOTAL
LIABILITIES
|
431.9
|
|
495.7
|
Stockholders'
Equity
|
1,234.8
|
|
1,291.2
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
1,666.7
|
|
$
1,786.9
|
AVANOS MEDICAL,
INC. CONDENSED CONSOLIDATED CASH FLOW
STATEMENTS (unaudited) (in
millions)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Operating
Activities
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
(68.1)
|
|
$
12.5
|
|
$
(68.6)
|
|
$
17.9
|
Depreciation and
amortization
|
11.5
|
|
11.6
|
|
23.6
|
|
22.7
|
Goodwill
impairment
|
59.1
|
|
—
|
|
59.1
|
|
—
|
Changes in operating
assets and liabilities, net of acquisition
|
(13.4)
|
|
(1.2)
|
|
(32.7)
|
|
(19.3)
|
Deferred income taxes
and other
|
8.3
|
|
4.1
|
|
9.2
|
|
7.5
|
Cash (Used in)
Provided by Operating Activities
|
(2.6)
|
|
27.0
|
|
(9.4)
|
|
28.8
|
Investing
Activities
|
|
|
|
|
|
|
|
Capital
expenditures
|
(4.0)
|
|
(4.1)
|
|
(8.0)
|
|
(9.1)
|
Acquisition of assets
and investments in businesses
|
(2.5)
|
|
—
|
|
(2.5)
|
|
(116.7)
|
Cash Used in
Investing Activities
|
(6.5)
|
|
(4.1)
|
|
(10.5)
|
|
(125.8)
|
Financing
Activities
|
|
|
|
|
|
|
|
Proceeds from issuance
of secured debt
|
—
|
|
125.0
|
|
—
|
|
250.0
|
Secured debt
repayments
|
(1.5)
|
|
(125.0)
|
|
(3.1)
|
|
(125.0)
|
Revolving credit
facility proceeds
|
—
|
|
130.0
|
|
—
|
|
150.0
|
Revolving credit
facility repayments
|
—
|
|
(130.0)
|
|
(20.0)
|
|
(150.0)
|
Payments of debt
issuance costs
|
—
|
|
(2.3)
|
|
—
|
|
(2.9)
|
Purchase of treasury
stock
|
(2.6)
|
|
(14.7)
|
|
(3.7)
|
|
(34.1)
|
Proceeds from the
exercise of stock options
|
—
|
|
0.1
|
|
0.6
|
|
0.8
|
Cash (Used in)
Provided by Financing Activities
|
(4.1)
|
|
(16.9)
|
|
(26.2)
|
|
88.8
|
Effect of Exchange Rate
Changes on Cash and Cash Equivalents
|
(0.7)
|
|
(3.8)
|
|
0.2
|
|
(3.8)
|
Decrease in Cash and
Cash Equivalents
|
(13.9)
|
|
2.2
|
|
(45.9)
|
|
(12.0)
|
Cash and Cash
Equivalents - Beginning of Period
|
95.7
|
|
104.3
|
|
127.7
|
|
118.5
|
Cash and Cash
Equivalents - End of Period
|
$
81.8
|
|
$
106.5
|
|
$
81.8
|
|
$
106.5
|
AVANOS MEDICAL,
INC. SELECTED BUSINESS AND PRODUCTS
DATA (unaudited) (in millions)
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2023
|
|
2022
|
|
Change
|
|
2023
|
|
2022
|
|
Change
|
Digestive
Health
|
$
93.0
|
|
$
80.2
|
|
16.0 %
|
|
$
181.8
|
|
$ 161.6
|
|
12.5 %
|
Pain Management and
Recovery:
|
|
|
|
|
|
|
|
|
|
|
|
Surgical pain and
recovery
|
$
34.8
|
|
$
41.2
|
|
(15.5) %
|
|
$
69.5
|
|
$
79.9
|
|
(13.0) %
|
Interventional
pain
|
41.6
|
|
49.5
|
|
(16.0) %
|
|
77.4
|
|
88.7
|
|
(12.7) %
|
Total Pain Management
and Recovery
|
76.4
|
|
90.7
|
|
(15.8) %
|
|
146.9
|
|
168.6
|
|
(12.9) %
|
Total Net
Sales
|
$
169.4
|
|
$ 170.9
|
|
(0.9) %
|
|
$
328.7
|
|
$ 330.2
|
|
(0.5) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Volume
|
|
Pricing/Mix
|
|
Currency
|
|
Other
|
Net sales - percentage
change
|
QTD
|
|
(0.9) %
|
|
(1.1) %
|
|
0.9 %
|
|
(0.6) %
|
|
(0.1) %
|
Net sales - percentage
change
|
YTD
|
|
(0.5) %
|
|
(0.5) %
|
|
1.1 %
|
|
(0.8) %
|
|
(0.3) %
|
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SOURCE Avanos Medical, Inc.