Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 28, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-36440 | |
Entity Registrant Name | AVANOS MEDICAL, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 46-4987888 | |
Entity Address, Address Line One | 5405 Windward Parkway | |
Entity Address, Address Line Two | Suite 100 South | |
Entity Address, City or Town | Alpharetta, | |
Entity Address, State or Province | GA | |
Entity Address, Postal Zip Code | 30004 | |
City Area Code | (844) | |
Local Phone Number | 428-2667 | |
Title of 12(b) Security | Common Stock - $0.01 Par Value | |
Trading Symbol | AVNS | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 47,756,626 | |
Entity Central Index Key | 0001606498 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED INCOME S
CONDENSED CONSOLIDATED INCOME STATEMENTS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Net Sales | $ 180.4 | $ 164.2 |
Cost of products sold | 78.3 | 65.4 |
Gross Profit | 102.1 | 98.8 |
Research and development | 9.4 | 10.2 |
Selling and general expenses | 91.1 | 106.4 |
Other expense, net | 1 | 6.8 |
Operating Income (Loss) | 0.6 | (24.6) |
Interest income | 0.7 | 2.4 |
Interest expense | (4.3) | (3.7) |
Loss Before Income Taxes | (3) | (25.9) |
Income tax benefit | 6.7 | 5.6 |
Net Income (Loss) | $ 3.7 | $ (20.3) |
Earnings (Loss) Per Share | ||
Basic (in dollars per share) | $ 0.08 | $ (0.43) |
Diluted (in earnings per share) | $ 0.08 | $ (0.43) |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Statement of Comprehensive Income [Abstract] | ||
Net Income (Loss) | $ 3.7 | $ (20.3) |
Other Comprehensive (Loss) Income, net of tax | ||
Unrealized currency translation adjustments | (15) | 0.7 |
Defined benefit plans | 0.2 | 0 |
Cash flow hedges | (0.1) | 0 |
Total Other Comprehensive (Loss) Income, net of tax | (14.9) | 0.7 |
Comprehensive Loss | $ (11.2) | $ (19.6) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 187.7 | $ 205.3 |
Accounts receivable, net of allowances | 159.6 | 163.8 |
Inventories | 153.1 | 145.9 |
Prepaid expenses and other current assets | 23.7 | 23.5 |
Total Current Assets | 524.1 | 538.5 |
Property, Plant and Equipment, net | 178.7 | 184.5 |
Operating Lease Right-of-Use Assets | 59.9 | 64 |
Goodwill | 799.8 | 800.9 |
Other Intangible Assets, net | 179.3 | 184.3 |
Deferred Tax Assets | 11 | 16.1 |
Other Assets | 10.9 | 11.3 |
TOTAL ASSETS | 1,763.7 | 1,799.6 |
Current Liabilities | ||
Current portion of operating lease liabilities | 14.3 | 14.7 |
Trade accounts payable | 73.5 | 83 |
Accrued expenses | 101.6 | 114.8 |
Total Current Liabilities | 189.4 | 212.5 |
Long-Term Debt | 248.2 | 248.1 |
Operating Lease Liabilities | 58.8 | 62.6 |
Other Long-Term Liabilities | 10.8 | 11.2 |
Total Liabilities | 507.2 | 534.4 |
Commitments and Contingencies | ||
Stockholders’ Equity | ||
Preferred stock - $0.01 par value - authorized 20,000,000 shares, none issued | 0 | 0 |
Common stock - $0.01 par value - authorized 300,000,000 shares, 47,755,911 outstanding as of March 31, 2020 and 47,734,206 outstanding as of December 31, 2019 | 0.5 | 0.5 |
Additional paid-in capital | 1,596.4 | 1,593.9 |
Accumulated deficit | (284.6) | (288.3) |
Treasury stock | (8.9) | (8.9) |
Accumulated other comprehensive loss | (46.9) | (32) |
Total Stockholders’ Equity | 1,256.5 | 1,265.2 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 1,763.7 | $ 1,799.6 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 300,000,000 | 300,000,000 |
Common stock, shares outstanding (in shares) | 47,755,911 | 47,734,206 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions | Total | Common Stock Issued | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Accumulated Other Comprehensive Loss |
Balance at Dec. 31, 2018 | $ 1,578.1 | $ (242.4) | $ (5.3) | $ (33.7) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | $ (20.3) | (20.3) | ||||
Issuance of common stock upon the exercise or redemption of share-based awards | 0.2 | |||||
Stock-based compensation expense | 4.2 | |||||
Purchases of treasury stock | (1.9) | |||||
Other comprehensive income (loss), net of tax | 0.7 | |||||
Balance at Mar. 31, 2019 | 1,280.1 | $ 0.5 | 1,582.5 | (262.7) | (7.2) | (33) |
Balance at Dec. 31, 2019 | 1,265.2 | 1,593.9 | (288.3) | (8.9) | (32) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | 3.7 | 3.7 | ||||
Issuance of common stock upon the exercise or redemption of share-based awards | 0 | |||||
Stock-based compensation expense | 2.5 | |||||
Purchases of treasury stock | 0 | |||||
Other comprehensive income (loss), net of tax | (14.9) | |||||
Balance at Mar. 31, 2020 | $ 1,256.5 | $ 0.5 | $ 1,596.4 | $ (284.6) | $ (8.9) | $ (46.9) |
CONDENSED CONSOLIDATED CASH FLO
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating Activities | ||
Net income (loss) | $ 3.7 | $ (20.3) |
Depreciation and amortization | 10.6 | 8.4 |
Stock-based compensation expense | 2.5 | 4.2 |
Net loss on asset dispositions | 0 | 0.2 |
Changes in operating assets and liabilities, net of acquisition: | ||
Accounts receivable | 17 | 15.5 |
Inventories | (8.5) | (8.2) |
Prepaid expenses and other assets | (2) | 20.3 |
Accounts payable | (8.2) | (19.7) |
Accrued expenses | (14.5) | (23.8) |
Deferred income taxes and other | (6.4) | 0.3 |
Cash Used in Operating Activities | (5.8) | (23.1) |
Investing Activities | ||
Capital expenditures | (5.2) | (12.5) |
Cash Used in Investing Activities | (5.2) | (12.5) |
Financing Activities | ||
Purchases of treasury stock | 0 | (1.9) |
Proceeds from the exercise of stock options | 0 | 0.2 |
Cash Used in Financing Activities | 0 | (1.7) |
Effect of Exchange Rate Changes on Cash and Cash Equivalents | (6.6) | 1.1 |
Decrease in Cash and Cash Equivalents | (17.6) | (36.2) |
Cash and Cash Equivalents - Beginning of Period | 205.3 | 384.5 |
Cash and Cash Equivalents - End of Period | $ 187.7 | $ 348.3 |
Accounting Policies
Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Accounting Policies | Accounting Policies Background and Basis of Presentation Avanos Medical, Inc. is a medical technology company focused on delivering clinically superior breakthrough medical device solutions to improve patients’ quality of life. Headquartered in Alpharetta, Georgia, Avanos is committed to addressing some of today’s most important healthcare needs, such as reducing the use of opioids while helping patients move from surgery to recovery. We develop, manufacture and market clinically superior solutions around the globe. References to “Avanos,” “Company,” “we,” “our” and “us” refer to Avanos Medical, Inc. and its consolidated subsidiaries. Interim Financial Statements We prepared the accompanying condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, and the condensed consolidated financial statements in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019. Our unaudited interim condensed consolidated financial statements contain all necessary material adjustments, which are of a normal and recurring nature, to fairly state our financial condition, results of operations and cash flows for the periods presented. Use of Estimates Preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Estimates are used in accounting for, among other things, distributor rebate accruals, future cash flows associated with impairment testing for goodwill and long-lived assets, loss contingencies, and deferred tax assets and potential income tax assessments. Our estimates are subject to uncertainties associated with the ongoing COVID-19 pandemic which has caused volatility and adverse effects in global markets. Accordingly, actual results could differ from these estimates, and the effect of the difference could be material to our financial statements. Changes in these estimates are recorded when known. Income Taxes The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020. The CARES Act allows for the carryback of U.S. net operating losses to prior years resulting in a $7.4 million benefit that was recognized in the three months ended March 31, 2020. Recently Adopted Accounting Pronouncements Effective January 1, 2020, we adopted Accounting Standards Update (“ASU”) No. 2016-13, as amended by ASU 2019-05, Financial Instruments - Credit Losses (Topic 326) . This standard addresses expected credit losses on financial instruments, including trade receivables, by replacing the incurred loss method with methodology that reflects expected credit losses that requires consideration of a broader range of information. Historically, our bad debt expense has not been material and our trade receivables are generally short-term in nature. Accordingly, adoption of this standard did not have a material impact on our financial condition, results of operations or cash flows. Effective January 1, 2020, we adopted ASU No. 2018-15, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU is intended to reduce complexity by aligning the requirements for capitalizing implementation costs incurred in cloud-based arrangements with the requirements for capitalization of costs incurred to develop internal-use software. Any implementation costs in cloud-based arrangements would then be amortized over the term of the service contract. Adoption of this ASU did not have a material effect on our financial position, results of operations or cash flows. Effective January 1, 2020, we adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU removes certain disclosure requirements regarding the amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of transfers between the levels. The ASU also adds disclosure requirements regarding unrealized gains and losses included in Other Comprehensive Income for recurring Level 3 fair value measurements and regarding the range and weighted average of unobservable inputs used in Level 3 fair value measurements. Adoption of this ASU did not have a material effect on our financial position, results of operations or cash flows. Recently Issued Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2020, with early adoption permitted. We do not expect adoption of this ASU to have a material effect on our financial position, results of operations or cash flows. |
Restructuring Activities
Restructuring Activities | 3 Months Ended |
Mar. 31, 2020 | |
Restructuring and Related Activities [Abstract] | |
Restructuring Activities | Restructuring Activities Post-Divestiture Restructuring Plan In conjunction with the divestiture of our former Surgical & Infection Prevention business, we began a three-phase restructuring plan (the “Plan”) intended to align our organizational structure (“Organizational Alignment”), information technology platform (“IT Transformation”) and supply chain and distribution channels (“Cost Transformation”) to be more appropriate for the size and scale of our remaining Medical Devices business. Organizational Alignment and IT Transformation are substantially complete. In the three months ended March 31, 2020, expenses were incurred only for the final phase, Cost Transformation. The Cost Transformation phase was initiated in June 2019, and is intended to optimize the Company’s procurement, manufacturing, and supply chain operations. The Company expects to incur between $11.0 million and $13.0 million to execute the Cost Transformation, primarily consulting and other expenses that will be expensed as incurred. The Company also expects to spend between $8.0 million to $12.0 million of incremental capital through 2021 and expects to complete the Cost Transformation by the end of 2021. In the three months ended March 31, 2020, we incurred $0.5 million of costs included in “Cost of products sold” and plan-to-date we have incurred $2.8 million of costs related to Cost Transformation. In the three months ended March 31, 2019, the amounts we incurred for the earlier phases of the Plan included $1.5 million for Organizational Alignment and $0.5 million for IT Transformation. Integration of Business Acquisitions During the third quarter of 2019, we initiated activities to integrate recent asset and business acquisitions into our operations, and where appropriate, re-align our organization accordingly. We expect to incur up to $17.0 million of costs, primarily for employee retention, severance and benefits and lease termination costs. In the three months ended March 31, 2020, we have incurred $0.1 million of costs included in “Selling and general expenses” and plan-to-date, we have incurred $9.2 million of expense primarily for employee retention, severance and benefits. We expect the integration of our acquisitions will be substantially complete by the end of 2020. Restructuring Liability We have a liability for employee retention, severance and benefits associated with our restructuring activities, which is summarized below (in millions): Accrual Balance, December 31, 2019 $ 8.5 Charges and adjustments, net 0.2 Payments (0.1) Balance, March 31, 2020 $ 8.6 |
Supplemental Balance Sheet Info
Supplemental Balance Sheet Information | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Supplemental Balance Sheet Information | Supplemental Balance Sheet Information Accounts Receivable Accounts receivable consist of the following (in millions): March 31, 2020 December 31, 2019 Accounts receivable $ 162.8 $ 166.8 Allowances and doubtful accounts: Doubtful accounts (2.9) (2.7) Sales discounts (0.3) (0.3) Accounts receivable, net $ 159.6 $ 163.8 As of March 31, 2020 and December 31, 2019, accounts receivable included $28.9 million and $14.3 million, respectively, in other receivables that were primarily related to tax refunds receivable. Inventories Inventories at the lower of cost (determined on the LIFO/FIFO or weighted-average cost methods) or market consist of the following (in millions): March 31, 2020 December 31, 2019 LIFO Non- Total LIFO Non- Total Raw materials $ 50.4 $ 2.9 $ 53.3 $ 46.3 $ 2.9 $ 49.2 Work in process 28.8 0.4 29.2 30.4 0.5 30.9 Finished goods 53.4 20.1 73.5 49.5 21.7 71.2 Supplies and other — 4.0 4.0 — 4.5 4.5 132.6 27.4 160.0 126.2 29.6 155.8 Excess of FIFO or weighted-average cost over LIFO cost (6.9) — (6.9) (9.9) — (9.9) Total $ 125.7 $ 27.4 $ 153.1 $ 116.3 $ 29.6 $ 145.9 Property, Plant and Equipment Property, plant and equipment consists of the following (in millions): March 31, 2020 December 31, 2019 Land $ 0.8 $ 1.0 Buildings 45.4 48.3 Machinery and equipment 215.0 215.0 Construction in progress 19.6 18.9 280.8 283.2 Less accumulated depreciation (102.1) (98.7) Total $ 178.7 $ 184.5 Depreciation expense was $5.8 million for the three months ended March 31, 2020 compared to $3.6 million for the three months ended March 31, 2019. Depreciation expense in the three months ended March 31, 2020 includes depreciation on $59.3 million of capital that was placed in service in late 2019 associated with (i) implementation of a new IT platform and (ii) post-divestiture network separation. We considered the effects of the ongoing COVID-19 pandemic on the recoverability of our fixed assets and concluded that, as of March 31, 2020, the events and circumstances did not indicate that the carrying value of any of our fixed assets were not recoverable. Goodwill and Intangible Assets The changes in the carrying amount of goodwill are as follows (in millions): Goodwill Balance, December 31, 2019 $ 800.9 Currency translation adjustment (1.1) Balance, March 31, 2020 $ 799.8 We considered the effects of the ongoing COVID-19 pandemic on the fair value of our reporting unit and concluded that, as of March 31, 2020, the events and circumstances did not indicate that an interim period test for goodwill impairment was necessary. Intangible assets subject to amortization consist of the following (in millions): March 31, 2020 December 31, 2019 Gross Accumulated Net Carrying Amount Gross Accumulated Net Carrying Amount Trademarks $ 90.9 $ (57.9) $ 33.0 $ 90.9 $ (56.7) $ 34.2 Patents and acquired technologies 281.1 (160.2) 120.9 281.1 (157.2) 123.9 Other 61.3 (35.9) 25.4 61.3 (35.1) 26.2 Total $ 433.3 $ (254.0) $ 179.3 $ 433.3 $ (249.0) $ 184.3 Amortization expense for intangible assets was $4.8 million for the three months ended March 31, 2020 compared to $4.8 million for the three months ended March 31, 2019. We considered the effects of the ongoing COVID-19 pandemic on the recoverability of our intangible assets and concluded that, as of March 31, 2020, events and circumstances did not indicate that the carrying value of any of our intangible assets were not recoverable. We estimate amortization expense for the remainder of 2020 and the following four years and beyond will be (in millions): Amount Remainder of 2020 $ 13.5 2021 17.0 2022 15.9 2023 15.3 2024 15.1 Thereafter 102.5 Total $ 179.3 Accrued Expenses Accrued expenses consist of the following (in millions): March 31, 2020 December 31, 2019 Accrued rebates $ 37.2 $ 51.1 Accrued salaries and wages 22.8 23.6 Accrued taxes 3.3 3.2 Other 38.3 36.9 Total $ 101.6 $ 114.8 Accrued rebates represent amounts accrued for estimated incentives earned by customers. Other Long-Term Liabilities Other long-term liabilities consist of the following (in millions): March 31, 2020 December 31, 2019 Taxes payable $ 0.4 $ 0.4 Accrued compensation benefits 5.1 5.4 Other 5.3 5.4 Total $ 10.8 $ 11.2 |
Fair Value Information
Fair Value Information | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Information | Fair Value Information The following fair value information is based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels in the hierarchy used to measure fair value are: Level 1: Unadjusted quoted prices in active markets accessible at the reporting date for identical assets and liabilities. Level 2: Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets and liabilities in markets that are not considered active or financial instruments for which all significant inputs are observable, either directly or indirectly. Level 3: Prices or valuations that require inputs that are significant to the valuation and are unobservable. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following table includes the fair value of our financial instruments for which disclosure of fair value is required (in millions): March 31, 2020 December 31, 2019 Fair Value Carrying Estimated Carrying Estimated Assets Cash and cash equivalents 1 $ 187.7 $ 187.7 $ 205.3 $ 205.3 Liabilities Senior Unsecured Notes 1 248.2 245.7 248.1 254.5 Cash equivalents are recorded at cost, which approximates fair value due to their short-term nature. The fair value of the senior unsecured notes was based on observable market prices based on trading activity on a primary exchange. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt | Debt As of March 31, 2020 and December 31, 2019, our debt balances were as follows (in millions): Weighted-Average Interest Rate Maturities March 31, 2020 December 31, 2019 Senior Unsecured Notes 6.25 % 2022 $ 249.8 $ 249.8 Unamortized Debt Discounts and Issuance Costs (1.6) (1.7) Total Debt, net $ 248.2 $ 248.1 Senior Unsecured Notes The Senior Unsecured Notes (the “Notes”) will mature on October 15, 2022. Interest accrues at a rate of 6.25% per annum and is payable semi-annually in arrears on April 15 and October 15 of each year. Unamortized debt discount and issuance costs are being amortized over the life of the Notes using the interest method, resulting in an effective interest rate of 6.51% as of March 31, 2020. Revolving Credit Facility We have a senior secured revolving credit facility (“Revolving Credit Facility”) that matures on October 30, 2023 which allows for borrowings up to $250.0 million, with a letter of credit sub-facility in an amount of $75 million and a swingline sub-facility in an amount of $25 million. Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) a reserve-adjusted LIBOR rate, plus a margin ranging between 1.50% to 2.25% per annum, depending on our consolidated total leverage ratio, or (ii) the base rate plus a margin ranging between 0.50% to 1.25% per annum, depending on our consolidated total leverage ratio. The unused portion of the Revolving Credit Facility is subject to a commitment fee equal to (i) 0.25% per annum, when our consolidated total leverage ratio is less than 2.25 to 1.00 or (ii) 0.38% per annum, otherwise. To the extent we remain in compliance with certain financial covenants in our credit agreement, we have the ability to access our Revolving Credit Facility. As of March 31, 2020, we had no borrowings and letters of credit of $0.7 million outstanding under the Revolving Credit Facility. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income The changes in the components of AOCI, net of tax, are as follows (in millions): Unrealized Cash Flow Defined Benefit Accumulated Balance, December 31, 2019 $ (31.5) $ 0.1 $ (0.6) $ (32.0) Other comprehensive loss (15.0) (0.1) 0.2 (14.9) Balance, March 31, 2020 $ (46.5) $ — $ (0.4) $ (46.9) The changes in the components of AOCI, including the tax effect, are as follows (in millions): Three Months Ended March 31, 2020 2019 Unrealized translation $ (15.0) $ 0.7 Defined benefit pension plans 0.3 — Tax effect (0.1) — Defined benefit pension plans, net of tax 0.2 — Cash flow hedges (0.1) — Tax effect — — Cash flow hedges, net of tax (0.1) — Change in AOCI $ (14.9) $ 0.7 |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation Aggregate stock-based compensation expense was $2.5 million and $4.2 million for the three months ended March 31, 2020 and 2019, respectively. Stock-based compensation expense related to stock options was $0.6 million and $0.7 million for the three months ended March 31, 2020 and 2019, respectively. Expense related to time-based restricted share units was $0.9 million and $2.3 million for the three months ended March 31, 2020 and 2019, respectively. Stock-based compensation expense related to performance-based restricted share units was $0.9 million and $1.2 million for the three months ended March 31, 2020 and 2019, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and ContingenciesWe are subject to various legal proceedings, claims and governmental inspections, audits or investigations pertaining to issues such as contract disputes, product liability, tax matters, patents and trademarks, advertising, governmental regulations, employment and other matters, including the matters described below. Under the terms of the distribution agreement we entered into with Kimberly-Clark Corporation (“Kimberly-Clark”) prior to the spin-off, legal proceedings, claims and other liabilities that are primarily related to our business are our responsibility and we are obligated to indemnify and hold Kimberly-Clark harmless for such matters (“Indemnification Obligation”). We incurred $2.2 million and $8.7 million of expenses in the three months ended March 31, 2020 and 2019, respectively, related to these matters. Surgical Gown Litigation and Related Matters Bahamas Surgery Center We have an Indemnification Obligation for the matter styled Bahamas Surgery Center, LLC v. Kimberly-Clark Corporation and Halyard Health, Inc., No. 2:14-cv-08390-DMG-SH (C.D. Cal.) ( “Bahamas” ), filed on October 29, 2014. In that case, the plaintiff brought a putative class action asserting claims for common law fraud (affirmative misrepresentation and fraudulent concealment) and violation of California’s Unfair Competition Law (“UCL”) in connection with our marketing and sale of MicroCool surgical gowns. On April 7, 2017, a jury returned a verdict for the plaintiff, finding that Kimberly-Clark was liable for $3.9 million in compensatory damages (not including prejudgment interest) and $350.0 million in punitive damages, and that Avanos was liable for $0.3 million in compensatory damages (not including prejudgment interest) and $100.0 million in punitive damages. Subsequently, the court also ruled on the plaintiff’s UCL claim and request for injunctive relief. The court found in favor of the plaintiff on the UCL claim but denied the plaintiff’s request for restitution. The court also denied the plaintiff’s request for injunctive relief. On May 25, 2017, we filed post-trial motions seeking, among other things, to have the award of punitive damages reduced. On April 11, 2018, the court issued an Amended Judgment in favor of the plaintiff and against us and Kimberly-Clark that substantially reduced the punitive damages awards. The judgment against us is now $0.4 million in compensatory damages and pre-judgment interest and $1.3 million in punitive damages. The judgment against Kimberly-Clark is now $3.9 million in compensatory damages, $2.4 million in pre-judgment interest, and $19.4 million in punitive damages. On April 12, 2018, we filed a notice of appeal to the Ninth Circuit Court of Appeals. We intend to continue our vigorous defense of the Bahamas matter. Kimberly-Clark Corporation We have notified Kimberly-Clark that we have reserved our rights to challenge any purported obligation to indemnify Kimberly-Clark for the punitive damages awarded against them. In connection with our reservation of rights, on May 1, 2017, we filed a complaint in the matter styled Halyard Health, Inc. v. Kimberly-Clark Corporation , Case No. BC659662 (County of Los Angeles, Superior Court of California). In that case, we sought a declaratory judgment that we have no obligation, under the Distribution Agreement or otherwise, to indemnify, pay, reimburse, assume, or otherwise cover punitive damages assessed against Kimberly-Clark in the Bahamas matter, or any Expenses or Losses (as defined in the distribution agreement) associated with an award of punitive damages. On May 2, 2017, Kimberly-Clark filed a complaint in the matter styled Kimberly-Clark Corporation v. Halyard Health, Inc., Case No. 2017-0332-AGB (Court of Chancery of the State of Delaware). In that case, Kimberly-Clark seeks a declaratory judgment that (1) we must indemnify them for all damages, including punitive damages, assessed against them in the Bahamas matter, (2) we have anticipatorily and materially breached the Distribution Agreement by our failure to indemnify them, and (3) we are estopped from asserting, or have otherwise waived, any claim that we are not required to indemnify them for all damages, including punitive damages, that may be awarded in the Bahamas matter. On May 26, 2017, we moved to dismiss or stay Kimberly-Clark’s Delaware complaint, and on June 16, 2017, Kimberly-Clark moved for summary judgment. On September 12, 2017, the Delaware court granted our motion to stay Kimberly-Clark’s complaint and therefore did not take any action on Kimberly-Clark’s motion for summary judgment. On May 30, 2018, Kimberly-Clark moved to quash service of summons we served on Kimberly-Clark in California for lack of personal jurisdiction. On December 12, 2018, the court granted Kimberly-Clark’s motion. On December 18, 2018, we filed a notice of appeal to the California Court of Appeal. On December 6, 2019, the appellate court affirmed the lower court’s ruling, finding that it did not have personal jurisdiction over Kimberly-Clark. We intend to continue our vigorous defense of the matter. Government Investigation In June 2015, we were served with a subpoena from the Department of Veterans Affairs Office of the Inspector General (“VA OIG”) seeking information related to the design, manufacture, testing, sale and promotion of MicroCool and other Company surgical gowns, and, in July 2015, we also became aware that the subpoena and an earlier VA OIG subpoena served on Kimberly-Clark requesting information about gown sales to the federal government are related to a United States Department of Justice (“DOJ”) investigation. In May 2016, April 2017 and September 2018, we received additional subpoenas from the DOJ seeking further information related to Company gowns. The Company is cooperating with the DOJ investigation. Shahinian On October 12, 2016, after the DOJ and various States declined to intervene, a qui tam matter was unsealed and a complaint was subsequently served on us in a matter styled U.S. ex rel. Shahinian, et al. v. Kimberly-Clark Corporation, No. 2:14- cv-08313-JAK-JPR (C.D. Cal.) ( “Shahinian” ), filed on October 27, 2014. The case alleges, among other things, violations of the federal and various state False Claims Acts in connection with the marketing and sale of certain surgical gowns. On March 8, 2017, Kimberly-Clark moved to dismiss the Shahinian complaint, and on July 14, 2017, the California court granted Kimberly-Clark’s motion. The plaintiff then filed a second amended complaint, and on August 11, 2017, Kimberly-Clark moved to dismiss that one as well. The plaintiff then filed a third amended complaint. On January 18, 2018, Kimberly-Clark moved to dismiss that one too. On September 30, 2018, the court granted Kimberly-Clark’s motion with prejudice. On November 13, 2018, Shahinian filed a notice of appeal to the Ninth Circuit Court of Appeals. We may have an Indemnification Obligation for the Shahinian matter under the distribution agreement with Kimberly-Clark and have notified Kimberly-Clark that we reserve our rights to challenge the obligation to indemnify Kimberly-Clark for any damages or penalties which are not indemnifiable under applicable law or public policy. We intend to continue our vigorous defense of the matter. Jackson We were served with a complaint in a matter styled Jackson v. Halyard Health, Inc., Robert E. Abernathy, Steven E. Voskuil, et al., No. 1:16-cv-05093-LTS (S.D.N.Y.), filed on June 28, 2016. In that case, the plaintiff brings a putative class action against the Company, our former Chief Executive Officer, our former Chief Financial Officer and other defendants, asserting claims for violations of the Securities Exchange Act, Sections 10(b) and 20(a). The plaintiff alleges that the defendants made misrepresentations and failed to disclose certain information about the safety and effectiveness of our MicroCool gowns and thereby artificially inflated the Company’s stock prices during the respective class periods. The alleged class period for purchasers of Kimberly-Clark securities who subsequently received Avanos securities is February 25, 2013 to October 21, 2014, and the alleged class period for purchasers of Avanos securities is October 21, 2014 to April 29, 2016. On February 16, 2017, we moved to dismiss the case. On March 30, 2018, the court granted our motion to dismiss and entered judgment in our favor. On April 27, 2018, the plaintiff filed a Motion for Relief from the Judgment and for Leave to Amend. On April 1, 2019, the court denied the plaintiff’s motion. On May 1, 2019, Jackson appealed the dismissal of the action to the 2nd Circuit Court of Appeals. We intend to continue our vigorous defense of this matter. Richardson, Chiu and Pick We were also served with a complaint in a matter styled Margaret C. Richardson Trustee of the Survivors Trust Dated 6/12/84 for the Benefit of the H&M Richardson Revocable Trust v. Robert E. Abernathy, Steven E. Voskuil, et al., No. 1:16-cv-06296 (S.D.N.Y.) ( “Richardson” ), filed on August 9, 2016. In that case, the plaintiff sues derivatively on behalf of Avanos Medical, Inc., and alleges that the defendants breached their fiduciary duty, were unjustly enriched, and violated Section 14(A) of the Securities and Exchange Act in connection with our marketing and sale of MicroCool gowns. We were also served with a complaint in a matter styled Kai Chiu v. Robert E. Abernathy, Steven E. Voskuil, et al. , No. 2:16-cv-08768 (C.D. Cal.), filed on November 23, 2016. In that case, the plaintiff sues derivatively on behalf of Avanos Medical, Inc., and makes allegations and brings causes of action similar to those in Richardson , but the plaintiff also adds causes of action for abuse of control, gross mismanagement, and waste of corporate assets. We were also served with a complaint in a matter styled Lukas Pick v. Robert E. Abernathy, Steven E. Voskuil, et al., No. e:18-cv-00295 (D. Del.) filed on February 21, 2018. In that case, the plaintiff sues derivatively on behalf of Avanos Medical, Inc. and makes allegations and brings causes of action similar to those in Richardson and Chiu . We intend to continue our vigorous defense of this matter. Patent Litigation We operate in an industry characterized by extensive patent litigation and competitors may claim that our products infringe upon their intellectual property. Resolution of patent litigation or other intellectual property claims is typically time consuming and costly and can result in significant damage awards and injunctions that could prevent the manufacture and sale of the affected products or require us to make significant royalty payments in order to continue selling the affected products. At any given time we may be involved as either a plaintiff or a defendant in a number of patent infringement actions, the outcomes of which may not be known for prolonged periods of time. General While we maintain general and professional liability, product liability and other insurance, our insurance policies may not cover all of these matters and may not fully cover liabilities arising out of these matters. In addition, we may be obligated to indemnify our directors and officers against these matters. We record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. For any matters that are reasonably possible to result in loss and for which no possible loss or range of loss is disclosed in this report, management has determined that it is unable to estimate the possible loss or range of loss because, in each case, at least the following facts applied: (a) early stage of the proceedings; (b) indeterminate (or unspecified) damages; and (c) significant factual issues yet to be resolved, or such amounts have been determined to be immaterial. At present, although the results of litigation and claims cannot be predicted with certainty, we believe that the ultimate resolution of these matters will not materially impact our liquidity, access to capital markets or ability to conduct our daily operations. As of March 31, 2020, we have an accrued liability for the matters described herein, and reasonably possible losses have been disclosed. The accrued liability is included in “Accrued Expenses” in the accompanying condensed consolidated balance sheet. Our estimate of these liabilities is based on facts and circumstances existing at this time, along with other variables. Factors that may affect our estimate include, but are not limited to: (i) changes in the number of lawsuits filed against us, including the potential for similar, duplicate or “copycat” lawsuits filed in multiple jurisdictions, including lawsuits that bring causes or action or allege violations of law with regard to additional products; (ii) changes in the legal costs of defending such claims; (iii) changes in the nature of the lawsuits filed against us; (iv) changes in the applicable law governing any legal claims against us; (v) a determination that our assumptions used in estimating the liability are no longer reasonable; and (vi) the uncertainties associated with the judicial process, including adverse judgments rendered by courts or juries. Thus, the actual amount of these liabilities for existing and future claims could be materially different than the accrued amount. Additionally, the above matters, regardless of the outcome, could disrupt our business and result in substantial costs and diversion of management attention. Environmental Compliance We are subject to federal, state and local environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations. None of our compliance obligations with environmental protection laws and regulations, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition, results of operations or liquidity. |
Earnings Per Share ("EPS")
Earnings Per Share ("EPS") | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Share (“EPS”) | Earnings Per Share (“EPS”) Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during each period. Diluted earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding and the effect of all dilutive common stock equivalents outstanding during each period, as determined using the treasury stock method. The calculation of basic and diluted earnings per share for the three months ended March 31, 2020 and 2019 is set forth in the following table (in millions, except per share amounts): Three Months Ended March 31, 2020 2019 Net income (loss) $ 3.7 $ (20.3) Weighted Average Shares Outstanding: Basic weighted average shares outstanding 47.8 47.5 Dilutive effect of stock options and restricted share unit awards 0.2 — Diluted weighted average shares outstanding 48.0 47.5 (Loss) Earnings Per Share: Basic $ 0.08 $ (0.43) Diluted $ 0.08 $ (0.43) Restricted share units (“RSUs”) contain provisions allowing for the equivalent of any dividends paid on common stock during the restricted period to be reinvested into additional RSUs at the then fair market value of the common stock on the date the dividends are paid. Such awards are to be included in the EPS calculation under the two-class method. Currently, we do not anticipate any cash dividends for the foreseeable future and our outstanding RSU awards are not material in comparison to our weighted average shares outstanding. Accordingly, all EPS amounts reflect shares as if they were fully vested and the disclosures associated with the two-class method are not presented herein. For the three months ended March 31, 2020, 1.2 million of potentially dilutive stock options and restricted share unit awards were excluded from the computation of earnings per share as their effect would have been anti-dilutive. |
Business and Products Informati
Business and Products Information | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Business and Products Information | Business and Products InformationWe conduct our business in one operating and reportable segment that provides our medical device products to healthcare providers and patients in more than 90 countries with manufacturing facilities in the United States, Mexico, France, Germany and Tunisia. We provide a portfolio of innovative product offerings focused on pain management and chronic care to improve patient outcomes and reduce the cost of care. Our management evaluates net sales by product category within our single reportable segment as follows (in millions): Three Months Ended March 31, 2020 2019 Chronic care $ 115.7 $ 100.0 Pain management 64.7 64.2 Total Net Sales $ 180.4 $ 164.2 Chronic care is focused on (i) digestive health products such as our Mic-Key enteral feeding tubes, Corpak patient feeding solutions and NeoMed neonatal feeding solutions and (ii) respiratory health products such as our Ballard closed airway suction systems and oral care kits. Pain management is focused on non-opioid solutions including (i) acute pain products such as On-Q and ambIT® surgical pain pumps and Game Ready cold and compression therapy systems and (ii) interventional pain solutions, which provides minimally invasive pain relieving therapies, such as our Coolief pain therapy. Due to the nature of our business, we receive purchase orders for products under supply agreements which are normally fulfilled within three to four weeks. Our performance obligations under purchase orders are satisfied and revenue is recognized at a point in time, which is upon shipment or upon delivery of our products to unaffiliated customers, depending on shipping terms. Accordingly, we normally do not have transactions that give rise to material unfulfilled performance obligations. |
Accounting Policies (Policies)
Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Background and Basis of Presentation and Interim Financial Statements | Background and Basis of Presentation Avanos Medical, Inc. is a medical technology company focused on delivering clinically superior breakthrough medical device solutions to improve patients’ quality of life. Headquartered in Alpharetta, Georgia, Avanos is committed to addressing some of today’s most important healthcare needs, such as reducing the use of opioids while helping patients move from surgery to recovery. We develop, manufacture and market clinically superior solutions around the globe. References to “Avanos,” “Company,” “we,” “our” and “us” refer to Avanos Medical, Inc. and its consolidated subsidiaries. Interim Financial Statements |
Use of Estimates | Use of Estimates Preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Estimates are used in accounting for, among other things, distributor rebate accruals, future cash flows associated with impairment testing for goodwill and long-lived assets, loss contingencies, and deferred tax assets and potential income tax assessments. Our estimates are subject to uncertainties associated with the ongoing COVID-19 pandemic which has caused volatility and adverse effects in global markets. Accordingly, actual results could differ from these estimates, and the effect of the difference could be material to our financial statements. Changes in these estimates are recorded when known. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements Effective January 1, 2020, we adopted Accounting Standards Update (“ASU”) No. 2016-13, as amended by ASU 2019-05, Financial Instruments - Credit Losses (Topic 326) . This standard addresses expected credit losses on financial instruments, including trade receivables, by replacing the incurred loss method with methodology that reflects expected credit losses that requires consideration of a broader range of information. Historically, our bad debt expense has not been material and our trade receivables are generally short-term in nature. Accordingly, adoption of this standard did not have a material impact on our financial condition, results of operations or cash flows. Effective January 1, 2020, we adopted ASU No. 2018-15, Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU is intended to reduce complexity by aligning the requirements for capitalizing implementation costs incurred in cloud-based arrangements with the requirements for capitalization of costs incurred to develop internal-use software. Any implementation costs in cloud-based arrangements would then be amortized over the term of the service contract. Adoption of this ASU did not have a material effect on our financial position, results of operations or cash flows. Effective January 1, 2020, we adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU removes certain disclosure requirements regarding the amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of transfers between the levels. The ASU also adds disclosure requirements regarding unrealized gains and losses included in Other Comprehensive Income for recurring Level 3 fair value measurements and regarding the range and weighted average of unobservable inputs used in Level 3 fair value measurements. Adoption of this ASU did not have a material effect on our financial position, results of operations or cash flows. Recently Issued Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2020, with early adoption permitted. We do not expect adoption of this ASU to have a material effect on our financial position, results of operations or cash flows. |
Restructuring Activities (Table
Restructuring Activities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Restructuring and Related Activities [Abstract] | |
Summary of Accrual and Payment Activity | We have a liability for employee retention, severance and benefits associated with our restructuring activities, which is summarized below (in millions): Accrual Balance, December 31, 2019 $ 8.5 Charges and adjustments, net 0.2 Payments (0.1) Balance, March 31, 2020 $ 8.6 |
Supplemental Balance Sheet In_2
Supplemental Balance Sheet Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of accounts receivable | Accounts receivable consist of the following (in millions): March 31, 2020 December 31, 2019 Accounts receivable $ 162.8 $ 166.8 Allowances and doubtful accounts: Doubtful accounts (2.9) (2.7) Sales discounts (0.3) (0.3) Accounts receivable, net $ 159.6 $ 163.8 |
Schedule of inventories | Inventories at the lower of cost (determined on the LIFO/FIFO or weighted-average cost methods) or market consist of the following (in millions): March 31, 2020 December 31, 2019 LIFO Non- Total LIFO Non- Total Raw materials $ 50.4 $ 2.9 $ 53.3 $ 46.3 $ 2.9 $ 49.2 Work in process 28.8 0.4 29.2 30.4 0.5 30.9 Finished goods 53.4 20.1 73.5 49.5 21.7 71.2 Supplies and other — 4.0 4.0 — 4.5 4.5 132.6 27.4 160.0 126.2 29.6 155.8 Excess of FIFO or weighted-average cost over LIFO cost (6.9) — (6.9) (9.9) — (9.9) Total $ 125.7 $ 27.4 $ 153.1 $ 116.3 $ 29.6 $ 145.9 |
Schedule of property, plant and equipment | Property, plant and equipment consists of the following (in millions): March 31, 2020 December 31, 2019 Land $ 0.8 $ 1.0 Buildings 45.4 48.3 Machinery and equipment 215.0 215.0 Construction in progress 19.6 18.9 280.8 283.2 Less accumulated depreciation (102.1) (98.7) Total $ 178.7 $ 184.5 |
Changes in the carrying amount of goodwill by business segment | The changes in the carrying amount of goodwill are as follows (in millions): Goodwill Balance, December 31, 2019 $ 800.9 Currency translation adjustment (1.1) Balance, March 31, 2020 $ 799.8 |
Schedule of intangible assets subject to amortization | Intangible assets subject to amortization consist of the following (in millions): March 31, 2020 December 31, 2019 Gross Accumulated Net Carrying Amount Gross Accumulated Net Carrying Amount Trademarks $ 90.9 $ (57.9) $ 33.0 $ 90.9 $ (56.7) $ 34.2 Patents and acquired technologies 281.1 (160.2) 120.9 281.1 (157.2) 123.9 Other 61.3 (35.9) 25.4 61.3 (35.1) 26.2 Total $ 433.3 $ (254.0) $ 179.3 $ 433.3 $ (249.0) $ 184.3 |
Schedule of estimated amortization expense | We estimate amortization expense for the remainder of 2020 and the following four years and beyond will be (in millions): Amount Remainder of 2020 $ 13.5 2021 17.0 2022 15.9 2023 15.3 2024 15.1 Thereafter 102.5 Total $ 179.3 |
Schedule of accrued expenses | Accrued expenses consist of the following (in millions): March 31, 2020 December 31, 2019 Accrued rebates $ 37.2 $ 51.1 Accrued salaries and wages 22.8 23.6 Accrued taxes 3.3 3.2 Other 38.3 36.9 Total $ 101.6 $ 114.8 |
Schedule of other long-term liabilities | Other long-term liabilities consist of the following (in millions): March 31, 2020 December 31, 2019 Taxes payable $ 0.4 $ 0.4 Accrued compensation benefits 5.1 5.4 Other 5.3 5.4 Total $ 10.8 $ 11.2 |
Fair Value Information (Tables)
Fair Value Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of financial instruments | The following table includes the fair value of our financial instruments for which disclosure of fair value is required (in millions): March 31, 2020 December 31, 2019 Fair Value Carrying Estimated Carrying Estimated Assets Cash and cash equivalents 1 $ 187.7 $ 187.7 $ 205.3 $ 205.3 Liabilities Senior Unsecured Notes 1 248.2 245.7 248.1 254.5 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of debt balances | As of March 31, 2020 and December 31, 2019, our debt balances were as follows (in millions): Weighted-Average Interest Rate Maturities March 31, 2020 December 31, 2019 Senior Unsecured Notes 6.25 % 2022 $ 249.8 $ 249.8 Unamortized Debt Discounts and Issuance Costs (1.6) (1.7) Total Debt, net $ 248.2 $ 248.1 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Schedule of changes in the components of accumulated other comprehensive income | The changes in the components of AOCI, net of tax, are as follows (in millions): Unrealized Cash Flow Defined Benefit Accumulated Balance, December 31, 2019 $ (31.5) $ 0.1 $ (0.6) $ (32.0) Other comprehensive loss (15.0) (0.1) 0.2 (14.9) Balance, March 31, 2020 $ (46.5) $ — $ (0.4) $ (46.9) The changes in the components of AOCI, including the tax effect, are as follows (in millions): Three Months Ended March 31, 2020 2019 Unrealized translation $ (15.0) $ 0.7 Defined benefit pension plans 0.3 — Tax effect (0.1) — Defined benefit pension plans, net of tax 0.2 — Cash flow hedges (0.1) — Tax effect — — Cash flow hedges, net of tax (0.1) — Change in AOCI $ (14.9) $ 0.7 |
Earnings Per Share ("EPS") (Tab
Earnings Per Share ("EPS") (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Calculation of basic and diluted earnings per share | The calculation of basic and diluted earnings per share for the three months ended March 31, 2020 and 2019 is set forth in the following table (in millions, except per share amounts): Three Months Ended March 31, 2020 2019 Net income (loss) $ 3.7 $ (20.3) Weighted Average Shares Outstanding: Basic weighted average shares outstanding 47.8 47.5 Dilutive effect of stock options and restricted share unit awards 0.2 — Diluted weighted average shares outstanding 48.0 47.5 (Loss) Earnings Per Share: Basic $ 0.08 $ (0.43) Diluted $ 0.08 $ (0.43) |
Business and Products Informa_2
Business and Products Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Net sales by product category | Our management evaluates net sales by product category within our single reportable segment as follows (in millions): Three Months Ended March 31, 2020 2019 Chronic care $ 115.7 $ 100.0 Pain management 64.7 64.2 Total Net Sales $ 180.4 $ 164.2 |
Accounting Policies (Details)
Accounting Policies (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Accounting Policies [Abstract] | |
Deferred income tax benefit | $ 7.4 |
Restructuring Activities - Narr
Restructuring Activities - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Employee retention, severance and benefits and lease termination costs | EndoClear, Summit, NeoMed and Game Ready | ||
Restructuring Cost and Reserve [Line Items] | ||
Costs expected to incur | $ 17 | |
Employee retention, severance and benefits | EndoClear, Summit, NeoMed and Game Ready | ||
Restructuring Cost and Reserve [Line Items] | ||
Costs incurred | 9.2 | |
Costs incurred to date | 0.1 | |
Cost Transformation | ||
Restructuring Cost and Reserve [Line Items] | ||
Costs incurred | 0.5 | |
Costs incurred to date | 2.8 | |
Cost Transformation | Minimum | ||
Restructuring Cost and Reserve [Line Items] | ||
Costs expected to incur | 11 | |
Incremental capital cost | 8 | |
Cost Transformation | Maximum | ||
Restructuring Cost and Reserve [Line Items] | ||
Costs expected to incur | 13 | |
Incremental capital cost | $ 12 | |
Organizational Alignment | ||
Restructuring Cost and Reserve [Line Items] | ||
Costs incurred | $ 1.5 | |
IT Transformation | ||
Restructuring Cost and Reserve [Line Items] | ||
Costs incurred | $ 0.5 |
Restructuring Activities - Accr
Restructuring Activities - Accrual and Payment Activity (Details) - Multi-year restructuring plan - Employee severance and benefits $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Restructuring Cost and Reserve [Line Items] | |
Balance, December 31, 2019 | $ 8.5 |
Charges and adjustments, net | 0.2 |
Payments | (0.1) |
Balance, March 31, 2020 | $ 8.6 |
Supplemental Balance Sheet In_3
Supplemental Balance Sheet Information - Accounts Receivable (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | ||
Accounts receivable | $ 162.8 | $ 166.8 |
Accounts receivable, net | 159.6 | 163.8 |
Income taxes receivable, current | 28.9 | 14.3 |
Doubtful accounts | ||
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | ||
Allowances and doubtful accounts | (2.9) | (2.7) |
Sales discounts | ||
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | ||
Allowances and doubtful accounts | $ (0.3) | $ (0.3) |
Supplemental Balance Sheet In_4
Supplemental Balance Sheet Information - Inventories (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Inventory, LIFO, Net [Abstract] | ||
Raw materials | $ 50.4 | $ 46.3 |
Work in process | 28.8 | 30.4 |
Finished goods | 53.4 | 49.5 |
Supplies and other | 0 | 0 |
Inventory, gross | 132.6 | 126.2 |
Excess of FIFO or weighted-average cost over LIFO cost | (6.9) | (9.9) |
Inventories, net | 125.7 | 116.3 |
Inventory, Non-LIFO, Net [Abstract] | ||
Raw materials | 2.9 | 2.9 |
Work in process | 0.4 | 0.5 |
Finished goods | 20.1 | 21.7 |
Supplies and other | 4 | 4.5 |
Inventory, gross | 27.4 | 29.6 |
Inventories, net | 27.4 | 29.6 |
Inventory, Net [Abstract] | ||
Raw materials | 53.3 | 49.2 |
Work in process | 29.2 | 30.9 |
Finished goods | 73.5 | 71.2 |
Supplies and other | 4 | 4.5 |
Inventory, gross | 160 | 155.8 |
Excess of FIFO or weighted-average cost over LIFO cost | (6.9) | (9.9) |
Inventories | $ 153.1 | $ 145.9 |
Supplemental Balance Sheet In_5
Supplemental Balance Sheet Information - Property, Plant and Equipment (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | $ 280.8 | $ 283.2 | |
Less accumulated depreciation | (102.1) | (98.7) | |
Total | 178.7 | 184.5 | |
Depreciation expense | 5.8 | $ 3.6 | |
Land | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 0.8 | 1 | |
Buildings | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 45.4 | 48.3 | |
Machinery and equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 215 | 215 | |
Construction in progress | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | $ 19.6 | 18.9 | |
IT Platform And Post-Divestiture | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | $ 59.3 |
Supplemental Balance Sheet In_6
Supplemental Balance Sheet Information - Schedule of Goodwill (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Goodwill [Roll Forward] | |
Balance at December 31, 2019 | $ 800.9 |
Currency translation adjustment | (1.1) |
Balance at March 31, 2020 | $ 799.8 |
Supplemental Balance Sheet In_7
Supplemental Balance Sheet Information - Schedule of Intangible Assets (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | $ 433.3 | $ 433.3 | |
Accumulated Amortization | (254) | (249) | |
Net Carrying Amount | 179.3 | 184.3 | |
Amortization expense for intangible assets | 4.8 | $ 4.8 | |
Trademarks | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 90.9 | 90.9 | |
Accumulated Amortization | (57.9) | (56.7) | |
Net Carrying Amount | 33 | 34.2 | |
Patents and acquired technologies | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 281.1 | 281.1 | |
Accumulated Amortization | (160.2) | (157.2) | |
Net Carrying Amount | 120.9 | 123.9 | |
Other | |||
Finite-Lived Intangible Assets [Line Items] | |||
Gross Carrying Amount | 61.3 | 61.3 | |
Accumulated Amortization | (35.9) | (35.1) | |
Net Carrying Amount | $ 25.4 | $ 26.2 |
Supplemental Balance Sheet In_8
Supplemental Balance Sheet Information - Schedule of Estimated Amortization Expense (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Estimated Amortization Expense | ||
Remainder of 2020 | $ 13.5 | |
2021 | 17 | |
2022 | 15.9 | |
2023 | 15.3 | |
2024 | 15.1 | |
Thereafter | 102.5 | |
Net Carrying Amount | $ 179.3 | $ 184.3 |
Supplemental Balance Sheet In_9
Supplemental Balance Sheet Information - Accrued Expenses (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accrued rebates | $ 37.2 | $ 51.1 |
Accrued salaries and wages | 22.8 | 23.6 |
Accrued taxes | 3.3 | 3.2 |
Other | 38.3 | 36.9 |
Total | $ 101.6 | $ 114.8 |
Supplemental Balance Sheet I_10
Supplemental Balance Sheet Information - Other Long-Term Liabilities (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Taxes payable | $ 0.4 | $ 0.4 |
Accrued compensation benefits | 5.1 | 5.4 |
Other | 5.3 | 5.4 |
Total | $ 10.8 | $ 11.2 |
Fair Value Information (Details
Fair Value Information (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Assets | ||||
Cash and cash equivalents | $ 187.7 | $ 205.3 | $ 348.3 | $ 384.5 |
Liabilities | ||||
Senior Unsecured Notes | 248.2 | 248.1 | ||
Level 1 | Carrying Amount | ||||
Assets | ||||
Cash and cash equivalents | 187.7 | 205.3 | ||
Liabilities | ||||
Senior Unsecured Notes | 248.2 | 248.1 | ||
Level 1 | Estimated Fair Value | ||||
Assets | ||||
Cash and cash equivalents | 187.7 | 205.3 | ||
Liabilities | ||||
Senior Unsecured Notes | $ 245.7 | $ 254.5 |
Debt - Schedule of Debt (Detail
Debt - Schedule of Debt (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
Unamortized Debt Discounts and Issuance Costs | $ (1.6) | $ (1.7) |
Total Debt, net | $ 248.2 | 248.1 |
Senior Unsecured Notes | 6.25% Senior Notes | ||
Debt Instrument [Line Items] | ||
Weighted-Average Interest Rate | 6.25% | |
Senior Unsecured Notes | $ 249.8 | $ 249.8 |
Debt - Additional Information (
Debt - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
6.25% Senior Notes | Senior Unsecured Notes | |
Debt Instrument [Line Items] | |
Weighted-average interest rate | 6.25% |
Effective interest rate | 6.51% |
Term loan facility | Secured line of credit | Revolving credit facility | |
Debt Instrument [Line Items] | |
Borrowing capacity | $ 250,000,000 |
Unused capacity, commitment fee percentage | 0.38% |
Consolidated total leverage ratio | 2.25 |
Term loan facility | Secured line of credit | Revolving credit facility | Leverage Ratio, Less than 2.25 | |
Debt Instrument [Line Items] | |
Unused capacity, commitment fee percentage | 0.25% |
Term loan facility | Secured line of credit | Revolving credit facility | Minimum | LIBOR | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 1.50% |
Term loan facility | Secured line of credit | Revolving credit facility | Minimum | Base rate | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 0.50% |
Term loan facility | Secured line of credit | Revolving credit facility | Maximum | LIBOR | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 2.25% |
Term loan facility | Secured line of credit | Revolving credit facility | Maximum | Base rate | |
Debt Instrument [Line Items] | |
Basis spread on variable rate | 1.25% |
Term loan facility | Secured line of credit | Letter of credit | |
Debt Instrument [Line Items] | |
Borrowing capacity | $ 75,000,000 |
Term loan facility | Secured line of credit | Swingline sub-facility | |
Debt Instrument [Line Items] | |
Borrowing capacity | 25,000,000 |
Term loan facility | Senior Secured Term Loan | Revolving credit facility | |
Debt Instrument [Line Items] | |
Amount outstanding | 0 |
Term loan facility | Senior Secured Term Loan | Letter of credit | |
Debt Instrument [Line Items] | |
Letters of credit outstanding | $ 700,000 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Accumulated Other Comprehensive Income | ||
Balance | $ 1,265.2 | |
Other comprehensive loss | (14.9) | $ 0.7 |
Balance | 1,256.5 | 1,280.1 |
Accumulated Other Comprehensive (Loss) Income | ||
Accumulated Other Comprehensive Income | ||
Balance | (32) | (33.7) |
Balance | (46.9) | $ (33) |
Unrealized Translation | ||
Accumulated Other Comprehensive Income | ||
Balance | (31.5) | |
Other comprehensive loss | (15) | |
Balance | (46.5) | |
Cash Flow Hedges | ||
Accumulated Other Comprehensive Income | ||
Balance | 0.1 | |
Other comprehensive loss | (0.1) | |
Balance | 0 | |
Defined Benefit Pension Plans | ||
Accumulated Other Comprehensive Income | ||
Balance | (0.6) | |
Other comprehensive loss | 0.2 | |
Balance | $ (0.4) |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Income - Net Changes in Components of AOCI, Including Tax Effect (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Equity [Abstract] | ||
Unrealized translation | $ (15) | $ 0.7 |
Defined benefit pension plans | 0.3 | 0 |
Tax effect | (0.1) | 0 |
Defined benefit pension plans, net of tax | 0.2 | 0 |
Cash flow hedges | (0.1) | 0 |
Tax effect | 0 | 0 |
Cash flow hedges, net of tax | (0.1) | 0 |
Total Other Comprehensive (Loss) Income, net of tax | $ (14.9) | $ 0.7 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 2,500,000 | $ 4,200,000 |
Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | 600,000 | 700,000 |
Time-Based Restricted Share Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | 900,000 | 2,300,000 |
Performance-based Restricted Share Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | 900,000 | 1,200,000 |
Employee Stock Purchase Program | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 100,000 | $ 0 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Millions | Apr. 11, 2018 | Apr. 07, 2017 | Mar. 31, 2020 | Mar. 31, 2019 |
Loss Contingencies [Line Items] | ||||
Legal expense and settlement accrual | $ 2.2 | $ 8.7 | ||
Class action, compensatory damages | Bahamas Surgery Center | Judicial ruling | ||||
Loss Contingencies [Line Items] | ||||
Compensatory damages awarded to plaintiff | $ 0.3 | |||
Class action, compensatory damages | Kimberly-Clark Corporation | Bahamas Surgery Center | Judicial ruling | ||||
Loss Contingencies [Line Items] | ||||
Compensatory damages awarded to plaintiff | 3.9 | |||
Class action, punitive damages | Bahamas Surgery Center | Judicial ruling | ||||
Loss Contingencies [Line Items] | ||||
Compensatory damages awarded to plaintiff | 100 | |||
Class action, punitive damages | Kimberly-Clark Corporation | Bahamas Surgery Center | Judicial ruling | ||||
Loss Contingencies [Line Items] | ||||
Compensatory damages awarded to plaintiff | $ 350 | |||
Class action, compensatory damages, amended | Bahamas Surgery Center | Judicial ruling | ||||
Loss Contingencies [Line Items] | ||||
Compensatory damages awarded to plaintiff | $ 0.4 | |||
Class action, compensatory damages, amended | Kimberly-Clark Corporation | Bahamas Surgery Center | Judicial ruling | ||||
Loss Contingencies [Line Items] | ||||
Compensatory damages awarded to plaintiff | 3.9 | |||
Class action, punitive damages, amended | Bahamas Surgery Center | Judicial ruling | ||||
Loss Contingencies [Line Items] | ||||
Compensatory damages awarded to plaintiff | 1.3 | |||
Class action, punitive damages, amended | Kimberly-Clark Corporation | Bahamas Surgery Center | Judicial ruling | ||||
Loss Contingencies [Line Items] | ||||
Compensatory damages awarded to plaintiff | 19.4 | |||
Pre-judgment interest | $ 2.4 |
Earnings Per Share ("EPS") (Det
Earnings Per Share ("EPS") (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share [Abstract] | ||
Net income (loss) | $ 3.7 | $ (20.3) |
Weighted Average Shares Outstanding: | ||
Basic weighted average shares outstanding (in shares) | 47.8 | 47.5 |
Dilutive effect of stock options and restricted share unit awards (in shares) | 0.2 | 0 |
Diluted weighted average shares outstanding (in shares) | 48 | 47.5 |
Earnings (Loss) Per Share | ||
Basic (in dollars per share) | $ 0.08 | $ (0.43) |
Diluted (in earnings per share) | $ 0.08 | $ (0.43) |
Dilutive securities excluded from computation of earnings per share (in shares) | 1.2 |
Business and Products Informa_3
Business and Products Information - Narrative (Details) | 3 Months Ended |
Mar. 31, 2020countrysegment | |
Segment Reporting [Abstract] | |
Number of operating segments | 1 |
Number of reportable segments | 1 |
Number of countries entity provides goods to | country | 90 |
Business and Products Informa_4
Business and Products Information - Net Sales by Product Category (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||
Net Sales | $ 180.4 | $ 164.2 |
Chronic care | ||
Disaggregation of Revenue [Line Items] | ||
Net Sales | 115.7 | 100 |
Pain management | ||
Disaggregation of Revenue [Line Items] | ||
Net Sales | $ 64.7 | $ 64.2 |