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What changed in AVANOS MEDICAL, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of AVANOS MEDICAL, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+245 added−226 removedSource: 10-K (2026-02-24) vs 10-K (2025-02-26)

Top changes in AVANOS MEDICAL, INC.'s 2025 10-K

245 paragraphs added · 226 removed · 178 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

39 edited+11 added−6 removed44 unchanged
Biggest changeThe purchase price for our RH business was $110.0 million in cash subject to certain adjustments based on the indebtedness and inventory transferred to Buyer at the closing and the chargebacks assumed by Buyer but that would otherwise have been payable by the Company and its subsidiaries on or after October 2, 2023 to distributors of the Company’s RH products located in the United States. 2 Table of Contents The RH Divestiture represents a key component of Avanos’ ongoing three-year transformation process, which was initiated in January 2023 and is aimed at accelerating the Company’s efforts to focus its portfolio on markets where it is well positioned to succeed (the “Transformation Process”).
Biggest changeThe purchase price for our RH business was $110.0 million in cash subject to certain adjustments based on the indebtedness and inventory transferred to Buyer at the closing and the chargebacks assumed by Buyer but that would otherwise have been payable by the Company and its subsidiaries on or after October 2, 2023 to distributors of the Company’s RH products located in the United States.
Since we market our products worldwide, certain products and variations of product lines must also meet other local regulatory requirements. Certain additional risks are inherent in conducting business outside the United States, including price and currency exchange controls, changes in currency exchange rates, limitations on participation in local enterprises, expropriation, nationalization, and other governmental action.
Since we market our products worldwide, certain products and variations of product lines must also meet applicable local regulatory requirements. Certain additional risks are inherent in conducting business outside the United States, including price and currency exchange controls, changes in currency exchange rates, limitations on participation in local enterprises, expropriation, nationalization, and other governmental action.
In the year ended December 31, 2024, approximately 67% of our net sales outside North America were made through wholesalers or distributors. We utilize distribution centers in North America, Europe, Australia and Japan. No material portion of our business is subject to renegotiation of profits or termination of contracts at the election of the government.
In the year ended December 31, 2025, approximately 67% of our net sales outside North America were made through wholesalers or distributors. We utilize distribution centers in North America, Europe, Australia and Japan. No material portion of our business is subject to renegotiation of profits or termination of contracts at the election of the government.
In addition to regulatory initiatives, our business can be affected by ongoing studies of the utilization, safety, efficacy and outcomes of healthcare products and their components. These studies, which are regularly conducted by industry participants, government agencies and others, can call into question the utilization, safety and efficacy of previously marketed products.
In addition to regulatory initiatives, our business can be affected by ongoing studies of the utilization, safety, effectiveness and outcomes of healthcare products and their components. These studies, which are regularly conducted by industry participants, government agencies and others, can call into question the utilization, safety and effectiveness of previously marketed products.
We believe that our key product characteristics, such as proven efficacy, reliability and safety, along with our product launch capability, efficient manufacturing processes, and our established distribution network, field sales organization and customer service group, are important factors that distinguish us from our competitors.
We believe that our key product characteristics, such as proven efficacy, reliability and safety, along with our product launch capability, efficient manufacturing processes, education and training, and our established distribution network, field sales organization and customer service group, are important factors that distinguish us from our competitors.
Health and Safety; COVID-19 Response We are committed to protecting our employees everywhere we operate. We identify potential risks associated with workplace activities in order to develop measures to mitigate possible hazards. In addition, we support employees with safety training and put specific programs in place for those working in potentially hazardous environments.
Health and Safety We are committed to protecting our employees everywhere we operate. We identify potential risks associated with workplace activities in order to develop measures to mitigate possible hazards. In addition, we support employees with safety training and put specific programs in place for those working in potentially hazardous environments.
Outside the United States, many countries control the price of healthcare products directly or indirectly, through reimbursement, payment, pricing, coverage limitations, or compulsory licensing. Budgetary pressures in the United States and in other countries may also heighten the scope and severity of pricing pressures on our products for the foreseeable future.
Outside the United States, many countries control the price of healthcare products directly or indirectly, through reimbursement, payment, pricing, coverage limitations, or compulsory licensing. Budgetary pressures in the United 5 Table of Contents States and in other countries may also heighten the scope and severity of pricing pressures on our products for the foreseeable future.
Distribution While our products are generally marketed directly to hospitals and other healthcare providers, they are generally sold through third-party wholesale distributors, with some sales directly to healthcare facilities and other end-user customers. In the year ended December 31, 2024, approximately 50% of our net sales in North America were made through distributors.
Distribution While our products are generally marketed directly to hospitals and other healthcare providers, they are generally sold through third-party wholesale distributors, with some sales directly to healthcare facilities and other end-user customers. In the year ended December 31, 2025, approximately 49% of our net sales in North America were made through distributors.
Compensation for salaried employees is strongly tied to performance objectives. Salaried employees above a certain pay grade have a substantial portion of their total compensation subject to performance objectives. More about the compensation paid to our executive officers can be found in the proxy statement relating to our 2025 Annual Meeting of Stockholders (the “2025 Proxy Statement”).
Compensation for salaried employees is strongly tied to performance objectives. Salaried employees above a certain pay grade have a substantial portion of their total compensation subject to performance objectives. More about the compensation paid to our executive officers can be found in the proxy statement relating to our 2026 Annual Meeting of Stockholders (the “2026 Proxy Statement”).
Stockholders may also contact Stockholder Services, 5405 Windward Parkway, Suite 100 South, Alpharetta, Georgia 30004 or call (844) 428-2667 to obtain a hard copy of these reports without charge.
Stockholders may also contact Stockholder Services, 5405 Windward Parkway, Suite 100 South, Alpharetta, Georgia 30004 or call (844) 428-2667 to obtain a hard copy of these reports without charge. 7 Table of Contents
Under our agreements with GPOs, we pay a fee based on sales of our products to GPO members, which is recorded as a reduction of net sales. Approximately 28% of our global net sales in the year ended December 31, 2024, including sales to wholesale distributors, were contracted through GPOs.
Under our agreements with GPOs, we pay a fee based on sales of our products to GPO members, which is recorded as a reduction of net sales. Approximately 29% of our global net sales in the year ended December 31, 2025, including sales to wholesale distributors, were contracted through GPOs.
To sell medical devices in the EU, manufacturers must place a CE mark on their products, signifying to customers that the products meet EU requirements for safety and performance. For all but the 4 Table of Contents lowest risk medical devices, manufacturers must have approval from a notified body prior to placing the CE mark on their devices.
To sell medical devices in the EU, manufacturers must place a CE mark on their products, signifying to customers that the products meet EU requirements for safety and performance. For all but the lowest risk medical devices, manufacturers must have approval from a notified body prior to placing the CE mark on their devices.
Compliance with the EU MDR requires re-certification of many of our products to the enhanced standards, during a transition period ending December 31, 2027 or December 31, 2028, depending upon the classification of the device. Complying with the EU MDR will require us to incur significant expenditures.
Compliance with the EU MDR requires re-certification of many of our products to the enhanced standards, during a transition period ending December 31, 2027 or December 31, 2028, depending upon the classification of the device. Complying with the EU MDR has required us to incur significant expenditures.
In the year ended December 31, 2024, none of our surgical pain and recovery products individually accounted for more than 10% of our consolidated net sales.
In the years ended December 31, 2025 and 2024, none of our surgical pain and recovery products individually accounted for more than 10% of our consolidated net sales.
Competition While no single company competes with us across the full breadth of our offerings, we face significant competition in U.S. and international markets. There are a variety of treatment means and alternative clinical practices to address pain management and recovery and digestive health.
Competition While no single company competes with us across the full breadth of our offerings, we face competition in U.S. and international markets. There are a variety of treatment means and alternative clinical practices to address pain management and recovery and enteral feeding.
The purchase price for the Diros Acquisition was funded by available cash on hand and proceeds from our Revolving Credit Facility. For further information regarding the acquisition of Diros, see “Business Acquisition” in Note 6 to the Consolidated financial statements in Item 8 of this Form 10-K.
The purchase price for the Diros Acquisition was funded by available cash on hand and proceeds from our Revolving Credit Facility. For further information regarding the acquisitions of Nexus and Diros, see “Business Acquisitions” in Note 4 to the Consolidated financial statements in Item 8 of this Form 10-K.
The address of our principal executive offices is 5405 Windward Parkway, Suite 100 South, Alpharetta, Georgia 30004, and our telephone number is (844) 428-2667. We conduct our business in one operating and reportable segment that provides our medical device products to healthcare providers and patients. We have manufacturing facilities in the United States and Mexico.
The address of our principal executive offices is 5405 Windward Parkway, Suite 100 South, Alpharetta, Georgia 30004, and our telephone number is (844) 428-2667. We conduct our business in two operating and reportable segments that provide our medical device products to healthcare providers and patients. We have manufacturing facilities in the United States, Mexico and Canada.
Diversity and Inclusion We are an equal opportunity employer committed to providing a workplace free of harassment or discrimination based on race, color, religion, sex, sexual orientation, gender identity, national origin, disability, veteran status or other legally protected characteristic.
Workforce & Global Culture We are an equal opportunity employer committed to providing a workplace free of harassment or discrimination based on race, color, religion, sex, sexual orientation, gender identity, national origin, disability, veteran status or other legally protected characteristic.
Major competitors include, among others: • Digestive Health: Boston Scientific Corporation, Cook Medical, Applied Medical Technology, Inc. and Cardinal Health • Pain Management and Recovery: Boston Scientific Corporation, Pacira Pharmaceuticals, Inc., Stryker Corporation, Medtronic plc, Pajunk Medical Systems, Nice Recovery Systems and Bioventus, Inc.
Major competitors include, among others: • Specialty Nutrition Systems: Boston Scientific Corporation, Cook Medical, Applied Medical Technology, Inc. and Cardinal Health • Pain Management and Recovery: Boston Scientific Corporation, Pacira Pharmaceuticals, Inc., Stryker Corporation, Medtronic plc, Pajunk Medical Systems, Stratus Medical and Nice Recovery Systems.
Research and Development We continuously engage in research and development to commercialize new products and enhance the effectiveness, reliability and safety of our existing products. We incurred research and development costs of $26.2 million in 2024, $27.2 million in 2023 and $29.2 million in 2022.
Research and Development We continuously engage in research and development to commercialize new products and enhance the effectiveness, reliability and safety of our existing products. We incurred research and development costs of $23.3 million in 2025, $26.2 million in 2024 and $27.2 million in 2023.
Employee Diversity 2024 Women - global director and above (a) 27.3% Ethnically diverse - U.S. director and above (a) 20.0% Women - global salaried employees 49.6% Ethnically diverse - U.S. salaried employees 30.8% __________________________________________________ (a) Leaders in director-level position or higher. Available Information We make financial information, news releases and other information available on our corporate website at www.avanos.com .
Employee Diversity 2025 Women - global director and above (a) 30.8% Ethnically diverse - U.S. director and above (a) 25.9% Women - global salaried employees 49.8% Ethnically diverse - U.S. salaried employees 30.9% __________________________________________________ (a) Leaders in director-level position or higher. Available Information We make financial information, news releases and other information available on our corporate website at www.avanos.com .
In the year ended December 31, 2022, sales to Medline Industries, McKesson Corporation, and Owens & Minor, Inc. accounted for approximately 12%, 12%, and 5% of consolidated net sales, respectively. Outside North America, sales are made either directly to end-user customers or through distributors, depending on the market served.
In the year ended December 31, 2023, sales to Medline Industries, McKesson Corporation, and Owens & Minor, Inc. accounted for approximately 15%, 13%, and 6% of consolidated net sales, respectively. 3 Table of Contents Outside North America, sales are made either directly to end-user customers or through distributors, depending on the market served.
We are not currently named as a party in any judicial or administrative proceeding relating to environmental, health or safety matters. 5 Table of Contents While we have incurred in the past several years, and will in the future continue to incur, capital and operating expenditures in order to comply with environmental, health and safety laws, regulations and ordinances, we believe that our future cost of compliance with such regulations and ordinances, and our exposure to liability for environmental, health and safety claims will not have a material adverse effect on our business, results of operations, financial condition or cash flows.
While we have incurred in the past several years, and will in the future continue to incur, capital and operating expenditures in order to comply with environmental, health and safety laws, regulations and ordinances, we believe that our future cost of compliance with such regulations and ordinances, and our exposure to liability for environmental, health and safety claims will not have a material adverse effect on our business, results of operations, financial condition or cash flows.
We hold numerous patents and have numerous patent applications pending in the United States and other countries that relate to the technology used in many of our products. We utilize patents in our Pain Management and Recovery and Digestive Health products. These patents generally expire between 2025 and 2042.
We hold numerous patents and have numerous patent applications pending in the United States and other countries that relate to the technology used in many of our products. We utilize patents in our Pain Management and Recovery and Specialty Nutrition Systems products. These patents generally expire between 2026 and 2047.
In the years ended December 31, 2024 and 2023, our MIC-KEY enteral feeding tubes (the “MIC-KEY Products”), our Corpak feeding solutions (the “Corpak Products”) and our NeoMed neonatal and pediatric feeding solutions (the “NeoMed Products”) each accounted for more than 10% of our consolidated net sales.
In the years ended December 31, 2025, 2024 and 2023, our MIC-KEY enteral feeding tubes (the “MIC-KEY Products”) and our Corpak feeding solutions (the “Corpak Products”) each accounted for more than 10% of our consolidated net sales. • Neonate solutions, which includes NeoMed ® neonatal and pediatric feeding solutions and Nexus TKO™ anti-reflux needleless connectors.
In the year ended December 31, 2024, sales to McKesson Corporation and Medline Industries accounted for approximately 18% and 17% of consolidated net sales, respectively. In the year ended December 31, 2023, sales to Medline Industries, McKesson Corporation, and Owens & Minor, Inc. accounted for approximately 15%, 13%, and 6% of consolidated net sales, respectively.
In the year ended December 31, 2025, sales to Medline Industries accounted for approximately 12% of consolidated net sales. In the year ended December 31, 2024, sales to McKesson Corporation and Medline Industries accounted for approximately 18% and 17% of consolidated net sales, respectively.
None of the patents we license from third parties are material to our business. We consider the patents and trademarks which we own and the trademarks under which we sell certain of our products, as a whole, to be material to our business. However, we do not consider our business to be materially dependent upon any individual patent or trademark.
None of the patents we license from third parties are material to our business. We consider the patents we own and the trademarks under which we sell certain of our products, as a whole, to be material to our business.
The services generally commenced on the closing date of the RH Divestiture and will terminate in no later than one to three years. For further information regarding the RH Divestiture, see “Discontinued Operations” in Note 5 to the Consolidated financial statements in Item 8 of this Form 10-K.
The remaining limited support services being performed will terminate no later than three years following the closing. For further information regarding the RH Divestiture, see “Discontinued Operations” in Note 7 to the Consolidated financial statements in Item 8 of this Form 10-K.
In each of the years ended December 31, 2023 and 2022, our ON-Q surgical pain pump individually accounted for more than 10% of our consolidated net sales. • Interventional pain solutions, which provide minimally invasive pain relieving therapies, such as our COOLIEF chronic pain products (the “COOLIEF” Products”), our OrthogenRx knee osteoarthritis hyaluronic acid (“HA”) pain relief injection products (GenVisc and TriVisc) and our Trident radiofrequency ablation (“RFA”) products used to treat chronic pain conditions.
In the year ended December 31, 2023, our ON-Q surgical pain pump individually accounted for more than 10% of our consolidated net sales. • Radiofrequency Ablation (“RFA”) solutions, which provide minimally invasive pain-relieving therapies, such as our COOLIEF ® pain therapy products (the “COOLIEF Products”) and our Trident™ and ESENTEC™ RFA products used to treat chronic pain conditions.
Employee demographics presented in the table below represent the number of employees as of December 31, 2024: Global Employees 2024 % of Total United States 787 35.3% Mexico 1,239 55.6% Latin America 10 0.4% Europe, Middle East and Africa 101 4.5% Asia Pacific 90 4.0% Total 2,227 Compensation We strive to compensate employees competitively and fairly in markets throughout the world.
Employee demographics presented in the table below represent the number of employees as of December 31, 2025: Global Employees 2025 % of Total United States and Canada 754 32.9% Mexico 1,324 57.9% Latin America 10 0.4% Europe, Middle East and Africa 108 4.7% Asia Pacific 91 4.0% Total 2,287 6 Table of Contents Compensation We strive to compensate employees competitively and fairly in markets throughout the world.
In the year ended December 31, 2024, none of our interventional pain solutions individually accounted for more than 10% of our consolidated net sales. In the year ended December 31, 2023, our COOLIEF Products accounted for more than 10% of our consolidated net sales.
In the years ended December 31, 2025 and 2024, none of our RFA solutions individually accounted for more than 10% of our consolidated net sales.
We primarily purchase these materials from external suppliers, some of which are single-source suppliers. Regulatory Matters The development, manufacture, marketing, sale, promotion and distribution of our products are subject to comprehensive government regulation.
Regulatory Matters The development, manufacture, marketing, sale, promotion and distribution of our products are subject to comprehensive government regulation.
Raw Materials We use a wide variety of raw materials and other inputs in our production processes. We base our purchasing decisions on quality assurance, cost effectiveness and regulatory requirements, and we work closely with our suppliers to ensure continuity of supply while maintaining high quality and reliability.
We base our purchasing decisions on quality assurance, cost effectiveness and regulatory requirements, and we work closely with our suppliers to ensure continuity of supply while maintaining high quality and reliability. We primarily purchase these materials from external suppliers, some of which are single-source suppliers.
In the year ended December 31, 2022, our MIC-KEY Products and our NeoMed Products each accounted for more than 10% of our consolidated net sales. Pain Management and Recovery is a portfolio of non-opioid pain solutions including: • Surgical pain and recovery products, such as ON-Q and ambIT surgical pain pumps and our Game Ready cold and compression therapy systems.
Pain Management and Recovery (“PM&R”) is a portfolio of non-opioid pain solutions including: • Surgical pain and recovery products, such as our ON-Q ® and ambIT ® surgical pain pumps and our Game Ready ® cold and compression therapy systems.
In addition to offering a comprehensive health and benefits package, we sponsor a variety of wellness initiatives, including an Employee Assistance Program, health assessments, and Company-sponsored challenges that foster healthy habits. 6 Table of Contents We took additional measures during the COVID-19 pandemic, including implementing new safety protocols and guidelines as recommended by federal, state, local and foreign governments.
In addition to offering a comprehensive health and benefits package, we sponsor a variety of wellness initiatives, including an Employee Assistance Program, health assessments, and Company-sponsored challenges that foster healthy habits.
Within our single reportable segment, we provide a portfolio of innovative product offerings focused on Digestive Health and Pain Management and Recovery to improve patient outcomes and reduce the cost of care. Digestive Health is a portfolio of products that includes our MIC-KEY enteral feeding tubes, Corpak patient feeding solutions and NeoMed neonatal and pediatric feeding solutions.
Within our reportable segments, we provide a portfolio of innovative product offerings focused on Specialty Nutrition Systems and Pain Management and Recovery to improve patient outcomes and reduce the cost of care.
In the year ended December 31, 2022, our COOLIEF Products and our OrthogenRx pain relief injection products each accounted for more than 10% of our consolidated net sales. Acquisitions On July 24, 2023, we closed the acquisition of Diros Technology Inc. (“Diros”), a leading manufacturer of innovative radiofrequency ablation (RFA) products used to treat chronic pain conditions (the “Diros Acquisition”).
The purchase price in the Nexus Acquisition was funded by available cash on hand. On July 24, 2023, we closed the acquisition of Diros Technology Inc. (“Diros”), a leading manufacturer of innovative RFA products used to treat chronic pain conditions (the “Diros Acquisition”).
Ultimately, we aim to strengthen the engagement and motivation of our global workforce through the creation of a highly inclusive environment that allows a greater level of diversity at every level, thus driving better business outcomes. The following table shows various diversity metrics for the Company as of December 31, 2024.
Through these efforts, we seek to enhance engagement and motivation across our global workforce and to cultivate an environment where employees can perform at their best and advance based on merit and contribution. The following table shows various diversity metrics for the Company as of December 31, 2025.
For further information regarding the acquisition of OrthogenRx, see “Business Acquisition” in Note 6 to the Consolidated financial statements in Item 8 of this Form 10-K. Divestiture On October 2, 2023, we closed the sale of our Respiratory Health (“RH”) business to SunMed Group Holdings, LLC (“Buyer”) (the “RH Divestiture”).
These transactions align with our ongoing transformation initiative, which is focused on advancing our strategic SNS and PM&R segments. Divestiture On October 2, 2023, we closed the sale of our Respiratory Health (“RH”) business to SunMed Group Holdings, LLC (“Buyer”) (the “RH Divestiture”).
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On January 20, 2022, we acquired all of the equity voting interests and completed the acquisition of OrthogenRx, Inc. (“OrthogenRx”), which developed and commercialized treatments for knee pain caused by osteoarthritis (the “OrthogenRx Acquisition”). The purchase price was $130.0 million at closing less working capital adjustments.
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Specialty Nutrition Systems (“SNS”) is a portfolio of products including: • Enteral feeding, which includes products such as our MIC-KEY ® enteral feeding tubes and Corpak ® patient feeding solutions.
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We continue to defend our market positions 3 Table of Contents and launched two new products in the global market in 2024.
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In the years ended December 31, 2025, 2024 and 2023, our NeoMed neonatal and pediatric feeding solutions (the “NeoMed Products”) accounted for more than 10% of our consolidated net sales.
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Employee Retention In 2021, we implemented a multi-tiered employee retention strategy.
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In the year ended December 31, 2023, our COOLIEF Products accounted for more than 10% of our consolidated net sales. 2 Table of Contents Acquisitions On September 11, 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Nexus Merger Sub, LLC, a newly formed wholly owned subsidiary of the Company (“Merger Sub”), Nexus Medical, LLC, a Kansas limited liability company (“Nexus”), and Edward Kuklenski, as representative of Nexus’ members.
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The key elements of this strategy include: (i) enhanced compensation and rewards, including retention bonuses and equity grants for key employees, expanded benefits and more flexible work arrangements; (ii) fostering greater employee engagement through initiatives such as peer-to-peer coaching, internal promotions, a leadership development program and increased executive outreach through towns halls, podcasts and videos; and (iii) recognizing employees for their efforts through a variety of awards, spotlights and appreciation events.
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The transaction contemplated by the Merger Agreement (the “Nexus Acquisition”) closed concurrently with the execution of the Merger Agreement. Pursuant to the Merger Agreement, Nexus, a privately held medical device company, merged with and into Merger Sub, with Nexus surviving the merger as a wholly owned subsidiary of the Company.
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When they reopened, our offices did so with strict safety and hygiene guidelines. Employees at our administrative offices generally follow a hybrid model that combines working in the office and working from home.
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The total purchase price paid by the Company in the Nexus Acquisition was $27.0 million (subject to certain working capital and other adjustments), with up to an additional $20.0 million payable in contingent cash consideration based on the increase in net sales of certain Nexus products during the first three years following the acquisition.
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Our commitment to diversity, equity and inclusion (“DE&I”) is aligned to foster the company’s success as we continue to grow our business and develop our workforce. As part of our commitment, our Human Resources (HR) organization is responsible for setting the strategy and providing direction, guidance and support to various DE&I-related employee resource groups.
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Sales of Assets On July 31, 2025, we sold substantially all the assets associated with our HA product line to CMM, a privately held company. In the fourth quarter of 2025, we sold the assets associated with our Game Ready rental business.
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We continued to defend our market positions in 2025, launching two new products globally and completing the Nexus Acquisition, which expanded our portfolio into the vascular access market. The Nexus Acquisition enhanced our product offerings and is aligned with our existing call points, increasing our relevance with current customers.
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However, we do not consider our business to be materially dependent upon any individual patent or trademark. 4 Table of Contents Raw Materials We use a wide variety of raw materials and other inputs in our production processes.
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We are not currently named as a party in any judicial or administrative proceeding relating to environmental, health or safety matters.
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We believe that a strong, high-performing organization benefits from a workforce that reflects a broad range of backgrounds, experiences, and perspectives. This commitment supports our ability to serve diverse patients, customers, and communities around the world and contributes directly to innovation, sound decision-making, and long-term business success.
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Our Human Resources organization is responsible for establishing the strategy and providing direction, guidance, and support to employee networks and engagement initiatives that strengthen connection, collaboration, and belonging across the enterprise.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

62 edited+21 added−13 removed120 unchanged
Biggest changeA number of factors could result in an unsafe condition or injury to, or death of, a patient with respect to the products that we manufacture or sell, including the physician’s skill, technique and experience in performing the relevant surgical procedure, component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or information.
Biggest changeA number of factors could result in an unsafe condition or injury to, or death of, a patient with respect to the products that we manufacture or sell, including the physician’s skill, technique and experience in performing the relevant surgical procedure, component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or information. 14 Table of Contents In addition to product liability claims and litigation, an unsafe condition or injury to, or death of, a patient associated with our products could lead to a recall of, or issuance of a safety alert relating to, our products, or suspension or delay of regulatory product approvals or clearances, product seizures or detentions, governmental investigations, civil or criminal sanctions or injunctions to halt manufacturing and distribution of our products.
One of the objectives of the Transformation Process is the rationalization of our product portfolio through targeted divestitures such as the RH Divestiture. The RH Divestiture represents a key component of the Transformation Process, and is aimed at accelerating the Company’s efforts to focus its portfolio on markets where it is well positioned to succeed.
One of the objectives of the Transformation Process is the rationalization of our product portfolio through targeted divestitures such as the RH Divestiture. The RH Divestiture represents a key component of the Transformation Process, and was aimed at accelerating the Company’s efforts to focus its portfolio on markets where it is well positioned to succeed.
In addition to the foregoing, engaging in international business inherently involves a number of other difficulties and risks, including: • different local medical practices, product preferences and product requirements, • price and currency controls and exchange rate fluctuations, • cost and availability of international shipping channels, • longer payment cycles in certain countries other than the United States, • minimal or diminished protection of intellectual property in certain countries, • uncertainties regarding judicial systems, including difficulties in enforcing agreements through certain non-U.S. legal systems, 15 Table of Contents • political instability and actual or anticipated military or political conflicts, expropriation of assets, economic instability and the impact on interest rates, inflation and the credit worthiness of our customers, and • difficulties and costs of staffing and managing non-U.S. operations.
In addition to the foregoing, engaging in international business inherently involves a number of other difficulties and risks, including: • different local medical practices, product preferences and product requirements, • price and currency controls and exchange rate fluctuations, • cost and availability of international shipping channels, • longer payment cycles in certain countries other than the United States, • minimal or diminished protection of intellectual property in certain countries, • uncertainties regarding judicial systems, including difficulties in enforcing agreements through certain non-U.S. legal systems, • political instability and actual or anticipated military or political conflicts, expropriation of assets, economic instability and the impact on interest rates, inflation and the credit worthiness of our customers, and • difficulties and costs of staffing and managing non-U.S. operations.
If the capabilities of our suppliers and third-party manufacturers are limited or stopped, due to quality, regulatory or other reasons, including natural disasters, pandemics or other health emergencies (such as the COVID-19 pandemic), political instability, government actions, prolonged power or equipment failures or labor dispute, it could negatively impact our ability to manufacture or deliver our products and could expose us to regulatory actions.
If the capabilities of our suppliers and third-party manufacturers are limited or stopped, due to quality, regulatory or other reasons, including natural disasters, pandemics or other health emergencies (such as the COVID-19 pandemic), political instability, government actions, prolonged power or equipment failures or labor dispute, it could negatively impact our ability to 10 Table of Contents manufacture or deliver our products and could expose us to regulatory actions.
Furthermore, due to competitive dynamics, the cost containment efforts of our customers and third-party payors, and contractual limitations, particularly with respect to products we sell under group purchasing agreements, which generally set pricing for a three-year term, we may be unable to pass along commodity-driven cost increases through higher 14 Table of Contents prices.
Furthermore, due to competitive dynamics, the cost containment efforts of our customers and third-party payors, and contractual limitations, particularly with respect to products we sell under group purchasing agreements, which generally set pricing for a three-year term, we may be unable to pass along commodity-driven cost increases through higher prices.
Any one of these could have a material adverse effect on our business, results of operations, financial condition and cash flows. At any given time we are 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.
Any one of these could have a material adverse effect on our business, results of operations, financial condition and cash flows. At any given time we are involved as either a plaintiff or a defendant in a number of patent 9 Table of Contents infringement actions, the outcomes of which may not be known for prolonged periods of time.
Cost-containment efforts of our customers, healthcare purchasing groups, third-party payors and governmental organizations could adversely affect our sales and profitability. Many of our customers are members of GPOs, or integrated delivery networks (“IDNs”). GPOs and IDNs negotiate pricing arrangements with healthcare product manufacturers and distributors and offer the negotiated prices to affiliated hospitals and other members.
Cost-containment efforts of our customers, healthcare purchasing groups, third-party payors and governmental organizations could adversely affect our sales and profitability. Many of our customers are members of GPOs, or integrated delivery networks (“IDNs”). GPOs and IDNs negotiate pricing arrangements with healthcare product manufacturers and distributors and offer the negotiated prices to affiliated hospitals and 15 Table of Contents other members.
Any one or more of these events could have a material adverse effect on our business, results of operations, financial condition and cash flows. 12 Table of Contents We are subject to healthcare fraud and abuse laws and regulations that could result in significant liability, require us to change our business practices or restrict our operations in the future.
Any one or more of these events could have a material adverse effect on our business, results of operations, financial condition and cash flows. We are subject to healthcare fraud and abuse laws and regulations that could result in significant liability, require us to change our business practices or restrict our operations in the future.
Similarly, the repurchase or redemption rights or liquidation preferences we could assign to Avanos preferred stock could affect the residual value of Avanos common stock. 17 Table of Contents Certain provisions of our certificate of incorporation may make it difficult for stockholders to initiate litigation against us in a favorable forum for disputes with us or our directors or officers.
Similarly, the repurchase or redemption rights or liquidation preferences we could assign to Avanos preferred stock could affect the residual value of Avanos common stock. Certain provisions of our certificate of incorporation may make it difficult for stockholders to initiate litigation against us in a favorable forum for disputes with us or our directors or officers.
Our information technology systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems. This enables us to keep pace with continuing changes in information processing technology, evolving legal and regulatory standards and changes in the techniques used to prevent unauthorized access to our data and information systems.
Our information technology systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems. This enables us to keep pace with continuing changes in information processing technology, evolving legal and regulatory standards and changes in the techniques used to prevent unauthorized 8 Table of Contents access to our data and information systems.
There can be no assurance that the actions taken by the Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation since early 2023 in response to bank solvency concerns will achieve the purpose of stabilizing the financial markets, restoring consumer confidence, or have other intended effects.
There can be no assurance that the actions taken by the Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation in response to bank solvency concerns will achieve the purpose of stabilizing the financial markets, restoring consumer confidence, or have other intended effects.
Any reduction in the amount of reimbursements received by our customers could harm our business by reducing their selection of our products and the prices they are willing to pay.
Any reduction in or elimination of the amount of reimbursements received by our customers could harm our business by reducing their selection of our products and the prices they are willing to pay.
Accordingly, we completed an interim goodwill impairment test as of December 1, 2024 and concluded that the fair value of the reporting unit was lower than its carrying value. As a result, during the fourth quarter of 2024, we recorded a $336.5 million impairment to goodwill.
Accordingly, we completed an interim goodwill impairment test as of December 1, 2024 and concluded that the fair value of our then single reporting unit was lower than its carrying value. As a result, during the fourth quarter of 2024, we recorded a $336.5 million impairment to goodwill.
Accordingly, we commit substantial time, funds and other resources to new product development, including research and development, acquisitions, licenses, clinical trials and physician education. We make these substantial 7 Table of Contents expenditures without any assurance that our products will obtain regulatory clearance or reimbursement approval, acquire adequate intellectual property protection or receive market acceptance.
Accordingly, we commit substantial time, funds and other resources to new product development, including research and development, acquisitions, licenses, clinical trials and physician education. We make these substantial expenditures without any assurance that our products will obtain regulatory clearance or reimbursement approval, acquire adequate intellectual property protection or receive market acceptance.
In 2024, approximately 21% of our net sales were generated outside of North America and we expect this percentage will grow over time. Our operations outside of the United States are subject to risks that are inherent in conducting business internationally, including compliance with both United States and foreign laws and regulations that apply to our international operations.
In 2025, approximately 22% of our net sales were generated outside of North America and we expect this percentage will grow over time. Our operations outside of the United States are subject to risks that are inherent in conducting business internationally, including compliance with both United States and foreign laws and regulations that apply to our international operations.
If our Board of Directors were to approve the issuance of preferred stock in the future, the terms of one or more classes or series of such preferred stock could dilute the voting power or reduce the value of Avanos common stock.
If our Board of Directors were to approve the issuance of preferred stock in the future, the 18 Table of Contents terms of one or more classes or series of such preferred stock could dilute the voting power or reduce the value of Avanos common stock.
Due to our international operations, we transact business in many foreign currencies and are subject to the effects of changes in foreign currency exchange rates, including the Mexican peso, Japanese yen, Australian dollar and the Euro. Our financial statements are reported in U.S. dollars with international transactions being translated into U.S. dollars.
Due to our international operations, we transact business in many foreign currencies and are subject to the effects of changes in foreign currency exchange rates, including the Canadian dollar, Mexican peso and the Euro. Our financial statements are reported in U.S. dollars with international transactions being translated into U.S. dollars.
Failure to fully realize or maintain the anticipated benefits of the restructuring initiative could have a material adverse impact on our business, results of operations, financial condition and cash flows. We may not achieve the expected benefits of our divestiture activities.
Failure to fully realize or maintain the anticipated benefits of the Transformation Process could have a material adverse impact on our business, results of operations, financial condition and cash flows. We may not achieve the expected benefits of our divestiture activities.
In addition, the expected benefits and cost-saving opportunities related to the restructuring initiative may take longer to realize than expected. Further, implementation of the restructuring initiative could be disruptive to our operations and result in reduced employee morale.
In addition, the expected benefits and cost-saving opportunities related to the Transformation Process may take longer to realize than expected. Further, implementation of the Transformation Process could be disruptive to our operations and result in reduced employee morale.
Increased tariffs on goods imported from Mexico, whether resulting from a Presidential executive order or amendments to the USMCA, may result in significant increases in tariffs on products imported from Mexico, which would increase the cost of such products.
New or increased tariffs on goods imported from Mexico, whether resulting from a Presidential executive order, legislation or amendments to or withdrawal from the USMCA, may result in significant increases in tariffs on the products we import from Mexico, which would increase the cost of such products.
Any divestiture we undertake is subject to a variety of known and unknown risks and uncertainties, including the potential that we may not be able to achieve the anticipated benefits of such divestiture. In addition, the expected benefits related to any divestiture may take 10 Table of Contents longer to realize than expected.
We may engage in additional divestiture activities in the future. Any divestiture we undertake is subject to a variety of known and unknown risks and uncertainties, including the potential that we may not be able to achieve the anticipated benefits of such divestiture. In addition, the expected benefits related to any divestiture may take longer to realize than expected.
These trends could compel us to reduce prices for our existing products and potential new products and could cause a decrease in the size of the market or a potential increase in competition that could have a material adverse effect on our business, results of operations, financial condition and cash flows. 9 Table of Contents A resurgence of the COVID-19 pandemic could adversely impact our business operations, financial condition, results of operations and cash flows.
These trends could compel us to reduce prices for our existing products and potential new products and could cause a decrease in the size of the market or a potential increase in competition that could have a material adverse effect on our business, results of operations, financial condition and cash flows.
We rely on the proper function, security and availability of our information technology systems and data, as well as those of third parties, to operate our business, and a breach of our information technology systems, or our failure to effectively integrate AI into our information technology systems and operations, could have a material adverse effect on our business.
We rely on the proper function, security and availability of our information technology systems and data, as well as those of third parties, to operate our business, and a breach of our information technology systems, could have a material adverse effect on our business.
Lastly, our information technology systems may be subjected to damage or interruption from power outages, computer and telecommunication failures, usage errors by our employees, security breaches, computer viruses or other malicious codes, unauthorized access attempts and cyber, phishing- or ransomware attacks. In addition, AI technology presents new and significant cybersecurity safety risks.
Lastly, our information technology systems may be subjected to damage or interruption from power outages, computer and telecommunication failures, usage errors by our employees, security breaches, computer viruses or other malicious codes, unauthorized access attempts and cyber, phishing or ransomware attacks.
We may be unable to obtain any desired additional financing on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to fund our expansion, successfully develop or enhance products or respond to competitive pressures, any of which could negatively affect our business.
If adequate funds are not available on acceptable terms, we may be unable to fund our expansion, successfully develop or enhance products or respond to competitive pressures, any of which could negatively affect our business.
In addition, Mexico periodically experiences heightened civil unrest, and certain areas of the country suffer from persistent criminal activity, both of which could interfere with our manufacturing operations, cause transportation delays or stoppages and otherwise disrupt the supply of products to and from our facilities. Further, we have experienced inflationary pressure on our labor and other costs in Mexico.
In addition, Mexico periodically experiences heightened civil unrest, and certain areas of the country suffer from persistent criminal activity, both of which could interfere with our manufacturing operations, cause transportation delays or stoppages and otherwise disrupt the supply of products to and from our facilities.
As of the date of this Form 10-K, it remains unclear whether new tariffs will be imposed on goods imported from Mexico and, if so, at what level and for how long.
These tariffs have increased the costs of the products we manufacture in Mexico. As of the date of this Form 10-K, it remains unclear whether new or increased tariffs will be imposed on goods imported from Mexico and, if so, at what level and for how long.
These limitations or failures could result in operational inefficiencies, reputational damage and legal liabilities. Additionally, developing, testing and deploying AI systems may require additional investment and increase our costs.
These limitations or failures could result in operational inefficiencies, reputational damage and legal liabilities. AI technology also presents new and significant cybersecurity safety risks. Additionally, developing, testing and deploying AI systems may require additional investment and increase our costs.
In January 2023, we initiated a three-year restructuring initiative pursuant to which we: (i) have combined our Chronic Care and Pain Management franchises into a single commercial organization focused on the Digestive Health and Pain Management and Recovery product categories; (ii) plan to rationalize our product portfolio including certain low-margin, low-growth product categories, through targeted divestitures (such as the RH Divestiture); (iii) have undertaken additional cost management activities to enhance our operating profitability; and (iv) plan to pursue efficient capital allocation strategies, including through acquisitions that meet our strategic and financial criteria.
In January 2023, we initiated a three-year restructuring initiative (the “Transformation Process”) pursuant to which we have: (i) combined our Chronic Care and Pain Management franchises into a single commercial organization focused on the SNS and PM&R product categories; (ii) rationalized our product portfolio including certain low-margin, low-growth product categories, through targeted divestitures (such as the RH Divestiture and the sale of our HA assets); (iii) undertaken additional cost management activities to enhance our operating profitability; and (iv) pursued efficient capital allocation strategies, including through acquisitions that meet our strategic and financial criteria (such as the Nexus Acquisition and the Diros Acquisition).
Our exposure to currency exchange rate fluctuations is heightened due to the concentration of our manufacturing operations in Mexico. For example, a hypothetical appreciation of 10% in the value of the Mexican peso in relation to the U.S. dollar would have negatively impacted operating profit for the year ended December 31, 2024 by approximately $0.2 million.
Our exposure to currency exchange rate fluctuations is heightened due to the concentration of our manufacturing operations in Mexico. For example, a hypothetical appreciation of 10% in the value of the Mexican peso in relation to the U.S. dollar would have an immaterial impact to operating profit for the year ended December 31, 2025.
In addition, we have developed and published a policy with guardrails to address the AI-related risks associated with data privacy, cybersecurity and copyright and intellectual property protections.
We have published an enhanced policy with additional guardrails to address the AI-related risks associated with data privacy, cybersecurity and copyright and intellectual property protections.
We cannot be sure that pending patent applications will result in the issuance of patents or that patents issued or licensed to us will remain valid or prevent competitors from introducing similar competing technologies.
Our efforts to protect our intellectual property and proprietary rights may not be sufficient. We cannot be sure that pending patent applications will result in the issuance of patents or that patents issued or licensed to us will remain valid or prevent competitors from introducing similar competing technologies.
We may not be able to pass these cost increases on to our customers in a timely manner, which could have an impact on our gross margins and profitability.
These inflationary pressures have affected our manufacturing costs, operating expenses (including wages) and other expenses. We may not be able to pass these cost increases on to our customers in a timely manner, which could have an impact on our gross margins and profitability.
Internal Revenue Service, the U.S. Treasury Department, the U.S. Congress, taxing authorities in countries outside the United States, and various state, provincial, local or municipal regulatory agencies.
Congress, taxing authorities in countries outside the United States, and various state, provincial, local or municipal regulatory agencies.
We cannot predict the broader or longer-term consequences of these conflicts, which could include further sanctions and embargoes, regional instability, geopolitical shifts, exchange rate fluctuations, inflation, financial market disruptions and economic recession.
These military conflicts and related sanctions or embargoes could damage or disrupt international commerce, shipping, supply chains and the global economy. We cannot predict the broader or longer- 11 Table of Contents term consequences of these conflicts, which could include further sanctions and embargoes, regional instability, geopolitical shifts, exchange rate fluctuations, inflation, financial market disruptions and economic recession.
We must obtain clearance or approval from the appropriate regulatory authorities prior to introducing a new product or a modification to an existing product. The regulatory clearance process may result in substantial costs, delays and limitations on the types and uses of products we can bring to market, any of which could have a material adverse effect on our business.
The regulatory clearance process may result in substantial costs, delays and limitations on the types and uses of products we can bring to market, any of which could have a material adverse effect on our business.
Furthermore, since many of our customers rely on reimbursement from Medicare, Medicaid and other governmental programs to cover a substantial portion of their expenditures, our exclusion from such programs as a result of a violation of these laws could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Furthermore, since many of our customers rely on reimbursement from Medicare, Medicaid and other governmental programs to cover a substantial portion of their expenditures, our exclusion from such programs as a result of a violation of these laws could have a material adverse effect on our business, results of operations, financial condition and cash flows. 13 Table of Contents We must obtain clearance or approval from the appropriate regulatory authorities prior to introducing a new product or a modification to an existing product.
The adoption and interpretation of tax laws may have a material adverse effect on our business. The laws and rules and related interpretations dealing with income taxation are frequently reviewed and amended by governmental bodies, officials and regulatory agencies in the United States and other jurisdictions in which we do business. The governmental bodies may include the U.S.
The laws and rules and related interpretations dealing with income taxation are frequently reviewed and amended by governmental bodies, officials and regulatory agencies in the United States and other jurisdictions in which we do business. The governmental bodies may include the U.S. Internal Revenue Service, the U.S. Treasury Department, the U.S.
Furthermore, President Trump has expressed his desire to renegotiate, or possibly withdraw from, the United States-Mexico-Canada Agreement (USMCA), which overhauled and updated the North American Free Trade Agreement (NAFTA). An amendment to or the United States’ withdrawal from the USMCA could result in increased tariffs or other new trade restrictions on imports from Mexico.
Furthermore, the U.S. administration has expressed antipathy towards certain existing international trade agreements and organizations, including the United States-Mexico-Canada Agreement (USMCA), which overhauled and updated the North American Free Trade Agreement (NAFTA). An amendment to or the United States’ withdrawal from the USMCA could result in increased tariffs or other new trade restrictions on imports from Mexico.
We are working to expand our use of AI to drive efficiencies and enhance productivity, including in the areas of product design, procurement, marketing and IT support. In early 2025, we plan to introduce secure enterprise versions of Microsoft Co-Pilot and Enterprise ChatGPT within our organization.
We are working to expand our use of AI to drive efficiencies and enhance productivity, including in the areas of finance, procurement, marketing and IT support. In early 2025, we implemented secure enterprise versions of Microsoft Co-Pilot and Enterprise ChatGPT within our organization. We also implemented an Open Text AI solution to automate sales order ingestion into SAP.
We may need additional financing in the future to meet our capital needs or to make acquisitions and such financing may not be available on favorable terms, if at all. We intend to continue our research and development activities and make acquisitions. Accordingly, we may need to seek additional debt or equity financing.
We intend to continue our research and development activities and make acquisitions. Accordingly, we may need to seek additional debt or equity financing. We may be unable to obtain any desired additional financing on terms favorable to us, if at all.
These risks, as well as certain other risks described generally in this Item 1A as they relate specifically to Mexico (including, without limitation, the risk of currency rate fluctuations, the risk of manufacturing interruptions and the risk of doing business outside the United States), could adversely affect our business, results of operations, financial condition and cash flows. 13 Table of Contents We may incur product liability losses, litigation liability, product recalls, safety alerts or regulatory action associated with our products which could be costly and disruptive to our business.
These risks, as well as certain other risks described generally in this Item 1A as they relate specifically to Mexico (including, without limitation, the risk of currency rate fluctuations, the risk of manufacturing interruptions and the risk of doing business outside the United States), could adversely affect our business, results of operations, financial condition and cash flows.
These risks and difficulties, individually or in the aggregate, could have a material adverse effect on our business, results of operations, financial condition and cash flows. New or increased tariffs or other trade restrictions could have a material adverse effect on our business, financial condition, results of operations and cash flows.
These risks and difficulties, individually or in the aggregate, could have a material adverse effect on our business, results of operations, financial condition and cash flows. 16 Table of Contents The tariffs imposed to date, and the imposition of new or additional tariffs by the United States, along with retaliatory tariffs and other trade restrictions imposed by other countries, could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, inflation has resulted in higher interest rates and could otherwise adversely impact the macroeconomic environment, which in turn could adversely impact our customers and their ability or willingness to purchase our products. Our inability to successfully manage the effects of inflation could have a material adverse effect on our business, results of operations and cash flows.
In addition, inflation has resulted in higher interest rates and could otherwise adversely impact the macroeconomic environment, which in turn could adversely impact our customers and their ability or willingness to purchase our products.
The restructuring initiative is subject to a variety of known and unknown risks and uncertainties, including the potential that we may not be able to: (i) successfully execute on the restructuring initiative or (ii) achieve the anticipated benefits and cost-saving opportunities identified in the restructuring initiative.
The initiatives associated with the expansion of the Plan are expected to run through 2026. The Transformation Process is subject to a variety of known and unknown risks and uncertainties, including the potential that we may not be able to: achieve the anticipated benefits and cost-saving opportunities identified in the restructuring initiative.
Inflationary pressures have increased due to general macroeconomic factors as well as the global supply chain disruptions, labor shortages and other factors. We expect those inflationary trends to continue for the foreseeable future. These inflationary pressures have affected our manufacturing costs, operating expenses (including wages) and other expenses.
Our business, operating results, and cash flows have been affected and may continue to be adversely affected by inflationary pressures. Inflationary pressures remain significant due to general macroeconomic factors as well as the global supply chain disruptions, labor shortages and other factors. We expect those inflationary trends to continue for the foreseeable future.
Continued increases in such costs could adversely affect our business, results of operations, financial condition and cash flows. These pressures may be exacerbated by exchange rate fluctuations in the Mexican peso. Additionally, considerable uncertainty exists regarding the possible imposition of tariffs on imported goods from Mexico.
Continued increases in such costs could adversely affect our business, results of operations, financial condition and cash flows. These pressures may be exacerbated by exchange rate fluctuations in the Mexican peso. Since February 2025, the United States has imposed a number of new tariffs on goods originating from many countries in the world, including Mexico.
These and other supply chain issues can increase our costs, disrupt or reduce our production, delay our product shipments, prevent us from meeting customer demand and damage our customer relationships.
These and other supply chain issues can increase our costs, disrupt or reduce our production, delay our product shipments, prevent us from meeting customer demand and damage our customer relationships. They may keep us from successfully implementing our business strategy and could materially harm our business, results of operations, financial condition and cash flows.
Furthermore, President Trump has expressed his antipathy towards certain existing international trade agreements and organizations, including the USMCA and the United States’ membership in the World Trade Organization (the “WTO”).
The U.S. administration has also expressed antipathy towards certain existing international trade agreements and organizations, including the United States-Mexico-Canada Agreement (the “USMCA”) and the United States’ membership in the World Trade Organization (the “WTO”).
We may be unable to protect our intellectual property rights or may infringe the intellectual property rights of others. We rely on patents, trademarks, trade secrets and other intellectual property assets in the operation of our business. Our efforts to protect our intellectual property and proprietary rights may not be sufficient.
Our failure to effectively integrate AI into our information technology systems and operations could have a material adverse effect on our business. We may be unable to protect our intellectual property rights or may infringe the intellectual property rights of others. We rely on patents, trademarks, trade secrets and other intellectual property assets in the operation of our business.
We depend on the availability of various components, raw materials and manufactured products supplied by others for our operations.
An inability to obtain key components, raw materials or manufactured products from third parties may have a material adverse effect on our business. We depend on the availability of various components, raw materials and manufactured products supplied by others for our operations.
Our failure to effectively integrate AI into our information technology systems and operations could have a material adverse effect on our business. 8 Table of Contents Furthermore, from time to time we consummate new business acquisitions.
Our failure to effectively integrate AI into our information technology systems and operations could have a material adverse effect on our business. The development, adoption and use of generative artificial intelligence, or AI, technology presents opportunities and risks.
Also in February 2025, President Trump imposed a 10% tariff on goods imported from China, resulting in retaliatory tariffs imposed on United States exports to China. As of the date of this Form 10-K, it remains unclear whether additional new tariffs will be imposed on imported goods and, if so, at what level and for how long.
The tariffs imposed to date have increased the cost of the products and components we import. Additional tariffs have been threatened by the U.S. administration. As of the date of this Form 10-K, it remains unclear what tariffs will be imposed on imported goods from each country and, if so, at what level and for how long.
The risk of product liability claims is inherent in the design, manufacture and marketing of medical products of the type we produce and sell.
We may incur product liability losses, litigation liability, product recalls, safety alerts or regulatory action associated with our products which could be costly and disruptive to our business. The risk of product liability claims is inherent in the design, manufacture and marketing of medical products of the type we produce and sell.
An amendment to or the United States’ withdrawal from the USMCA or the WTO could result in increased tariffs or other new trade restrictions on imports from Mexico, Canada, China and other countries. These developments, measures and disruptions may result in new or higher tariffs, import-export restrictions and taxes.
An amendment to or the United States’ withdrawal from the USMCA or the WTO could result in additional increased tariffs or other new trade restrictions on imports from Mexico, Canada, China and other countries. In addition, we generate a significant portion of our revenues from sales to customers located outside the United States, including in Europe, Asia and Latin America.
For example, during 2024 the United States announced increased tariffs on a Chinese-sourced component of certain of our products. While we have received an extension on the effectiveness of such tariffs, we are exploring options to identify a longer-term solution to such tariffs (although there can be no assurance that we will succeed in such efforts).
For example, during 2024 the United States announced increased tariffs on a Chinese-sourced component of certain of our products. While we have received an extension on the effectiveness of such tariffs, such extension expired at the end of 2025. In addition, since February 2025 the United States has imposed new tariffs on goods originating from many countries in the world.
There can be no assurance that these efforts will be successful or that systems issues will not arise in the future. In addition, the development, adoption and use of generative artificial intelligence, or AI, technology presents opportunities and risks.
There can be no assurance that these efforts will be successful or that systems issues will not arise in the future. Furthermore, from time to time we consummate new business acquisitions.
Goodwill is tested for impairment annually and whenever events and circumstances indicate that, more likely than not, impairment may have occurred. 16 Table of Contents In the fourth quarter of 2024, we revised downward our future projections for certain product lines due to lower net sales and future year margin expectations.
Goodwill is tested for impairment annually and whenever events and circumstances indicate that, more likely than not, impairment may have occurred. 17 Table of Contents In the second quarter of 2025, our market capitalization decreased to the extent that we determined that it was more likely than not that the fair value of one of our two reporting units was below its carrying value.
A resurgence of the COVID-19 pandemic could result in delays in payments on outstanding accounts receivable, manufacturing, distribution and supply chain disruptions, decreased customer demand for our products, and other adverse effects. If we experience any one of these risks or uncertainties, it may have a material adverse impact to our business, financial condition, results of operations and cash flows.
However, if we are unable to successfully pass through the additional cost of these tariffs to our customers, or if higher prices reduce demand for our products, or if we are otherwise unable to mitigate the impact of tariffs through supply chain adjustments and other actions, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Changes in, or revised interpretations of import-export laws or international trade agreements, along with new or increased tariffs, trade restrictions or taxation on income earned or goods manufactured outside the United States may have a material adverse effect on our business, financial condition, results of operations and cash flows.
These developments, along with other new or increased tariffs and trade restrictions, may have a material adverse effect on our business, financial condition, results of operations and cash flows. We may need additional financing in the future to meet our capital needs or to make acquisitions and such financing may not be available on favorable terms, if at all.
We are also assessing the use of embedded AI in our suite of enterprise applications. We plan to conduct security assessments and tests to mitigate risk prior to the rollout of these AI tools.
We conducted security assessments and tests to mitigate risk prior to the rollout of these AI tools. In 2026, we plan to start working with enterprise Claude Code for non-proprietary coding work and to develop AI Agents in our secure enterprise ChatGPT environment for conducting data analysis.
In addition, actual or threatened military conflict between China and Taiwan could result in significant disruptions to our supply chain. These military conflicts and related sanctions or embargoes could damage or disrupt international commerce, shipping, supply chains and the global economy.
In addition, actual or threatened military conflict between China and Taiwan could result in significant disruptions to our supply chain. Furthermore, any military action taken by the United States against drug cartels in Mexico could disrupt political and economic relations between the United States and Mexico, which could have a material adverse impact on our manufacturing operations in Mexico.
Removed
The COVID-19 pandemic caused significant volatility in the global financial markets, caused disruption in global supply and distribution channels and caused us to modify certain of our business practices (including with respect to remote work policies and physical participation in meetings and other events).
Added
Our PM&R portfolio of products includes RFA treatments for peripheral nerve pain. Currently, Medicare covers RFA treatments for peripheral nerve pain when deemed medically necessary and other treatments have not been successful.
Removed
While the COVID-19 pandemic has subsided, new mutations to the virus could lead to a resurgence of the pandemic.
Added
Recently, a number of Medicare Administrative Contractors (“MACs”) have drafted a proposed coverage policy questioning whether RFA treatment for peripheral nerve pain is reasonable and necessary for Medicare coverage. A final determination on this issue is expected to be made in early 2026.
Removed
The impact of such a resurgence would depend on a number of factors which are uncertain and unpredictable, including the severity, extent and duration of the new outbreak and the potential severe adverse financial impact the outbreak could have on our customers.
Added
While Avanos has joined an industry coalition and taken other steps to advocate against any change to the existing Medicare reimbursement policies for peripheral RFA treatments, there can be no assurance that such efforts will be successful.
Removed
Additionally, our business could be severely impacted by widespread regional, national or global health epidemics unrelated to COVID-19 in the future. An inability to obtain key components, raw materials or manufactured products from third parties may have a material adverse effect on our business.
Added
A final determination by certain MACs that RFA treatment for peripheral nerve pain is not reasonable and necessary for coverage would eliminate Medicare reimbursements for such treatments for such MACs, which could have a material adverse effect on sales of our RFA products.
Removed
They may keep us from successfully implementing our business strategy and could materially harm our business, results of operations, financial condition and cash flows. 11 Table of Contents Our business, operating results, and cash flows have been affected and may continue to be adversely affected by inflationary pressures.
Added
A pandemic or other public health emergency could adversely impact our business operations, financial condition, results of operations and cash flows. In connection with prior pandemics (such as the COVID-19 pandemic), governmental authorities and private enterprises implemented measures, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns.
Removed
On February 1, 2025, President Donald Trump announced the imposition of a 25% tariff on all goods imported from Mexico. Days later, President Trump suspended the imposition of such tariffs for a period of 30 days.
Added
These or other measures may in the future be implemented in connection with another pandemic or public health emergency. Our customers, global suppliers, distributors and manufacturing facilities have in the past been, and could in the future be, materially affected by restrictive measures implemented in response to a pandemic or public health emergency.
Removed
In addition to product liability claims and litigation, an unsafe condition or injury to, or death of, a patient associated with our products could lead to a recall of, or issuance of a safety alert relating to, our products, or suspension or delay of regulatory product approvals or clearances, product seizures or detentions, governmental investigations, civil or criminal sanctions or injunctions to halt manufacturing and distribution of our products.
Added
As a result of a future pandemic or public health emergency, we could experience delays in, or the suspension of, our manufacturing operations, sales activities, research and product development activities, regulatory work streams and other important commercial functions, which may have a material adverse impact on our business, financial condition, results of operations and cash flows.
Removed
In addition, changes in the United States government following the 2024 presidential and congressional elections may result in significant changes to United States trade policies and significantly increased tariffs on imported goods, and may cause other countries to react to such changes.
Added
The extent of any future pandemic or public health emergency’s effect on our business and industry will depend on, among other things, the severity of the disease, the successful development, distribution and acceptance of vaccines for diseases, future resurgences and/or the spread of disease variants, all of which are uncertain and difficult to predict.
Removed
We are subject to tariffs and taxes in the United States and numerous foreign jurisdictions, and we may be subject to trade protection measures that are being contemplated by the United States and other governments around the world, as well as potential disruptions in trade agreements, such as a possible amendment to or withdrawal from the USMCA and the exit of the United Kingdom from the EU.
Added
The initial activities associated with the Transformation Process were substantially complete at the end of 2024. During 2024, following the RH Divestiture, we initiated the final phase of the Transformation Process, which is aimed at aligning our organizational structure, our manufacturing and distribution activities, and our operational footprint with our remaining business.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

4 edited+0 added−1 removed16 unchanged
Biggest changeOur CIO (who has 15 years of cybersecurity experience), our Director of Global IT Security and Compliance (who has 11 years of cybersecurity experience and 25 years in IT), and our Associate Director of Global Cyberseurity (who has 26 years of cybersecurity experience) are the members of our management team who are responsible for assessing and managing our 19 Table of Contents material risks from cybersecurity threats.
Biggest changeDuring the year ended December 31, 2025, our Audit Committee met five times. 20 Table of Contents Our CIO (who has 17 years of cybersecurity experience), our Director of Global IT Security and Compliance (who has 19 years of cybersecurity experience and 26 years in IT), and our Associate Director of Global Cybersecurity (who has 28 years of cybersecurity experience) are the members of our management team who are responsible for assessing and managing our material risks from cybersecurity threats.
Incidents that are defined as medium, high or critical are reported the Chief Financial Officer, Principal Accounting Officer, General Counsel and CIO to determine materiality and associated public disclosure steps. For these incidents, we engage our third-party forensic partner to assist with containment, remediation and issuing a report on the incident. • Recovery.
Incidents that are defined as medium, high or critical are reported to the Chief Financial Officer, Principal Accounting Officer, General Counsel and CIO to determine materiality and associated public disclosure steps. For these incidents, we engage our third-party forensic partner to assist with containment, remediation and issuing a report on the incident. • Recovery.
To define that threat landscape, we utilize threat intelligence feeds, such as those provided by Health Information Sharing and Analysis Center (Health-ISAC) and a third-party vendor, to determine security threats to the Company and other healthcare and life science organizations. • Protection. We utilize multiple intrusion protection systems and processes to protect our technology assets.
To define that threat landscape, we utilize threat intelligence feeds, such as those provided by Health Information Sharing and Analysis Center (Health-ISAC) and a third-party vendor, to determine security threats to the Company and other healthcare and life science organizations. 19 Table of Contents • Protection. We utilize multiple intrusion protection systems and processes to protect our technology assets.
These protections include Identity and Access Management (IAM), Privileged Access Management (PAM), Multi-Factor 18 Table of Contents Authentication (MFA), Vulnerability Management, Endpoint Detection and Response (EDR), Advanced Anti-Phishing and Awareness trainings, Network and Cloud Security and other protective technologies. Annual audits are conducted to assess these controls.
These protections include Identity and Access Management (IAM), Privileged Access Management (PAM), Multi-Factor Authentication (MFA), Vulnerability Management, Endpoint Detection and Response (EDR), Advanced Anti-Phishing and Awareness trainings, Network and Cloud Security and other protective technologies. Annual audits are conducted to assess these controls.
Removed
During the year ended December 31, 2024, our Audit Committee met four times.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe locations of our principal medical device production facilities owned or leased by us around the world are as follows: Location Country Owned/Leased Nogales Mexico Owned Tucson, Arizona USA Leased Tijuana Mexico Leased Markham Canada Leased
Biggest changeThe locations of our principal medical device production facilities owned or leased by us around the world are as follows: Location Country Owned/Leased Nogales Mexico Owned Tucson, Arizona USA Leased Tijuana Mexico Leased Markham Canada Leased Lenexa, Kansas USA Leased

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee “Commitments and Contingencies” in Note 14 to the consolidated financial statements in Item 8 of this Form 10-K for a description of current legal matters. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeSee “Commitments and Contingencies” in Note 15 to the consolidated financial statements in Item 8 of this Form 10-K for a description of current legal matters. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 20 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 20 Item 6. [Reserved] 21 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 31 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 21 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 Item 6. [Reserved] 22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 33 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock price performance shown on the graph is not necessarily indicative of future price performance. 20 Table of Contents The preceding chart is based on the following data: AVNS S&P MidCap 400 S&P 500 Health Care Equipment and Services December 31, 2019 $ 100.00 $ 100.00 $ 100.00 December 31, 2020 136.14 121.84 119.80 December 31, 2021 102.88 159.79 158.73 December 31, 2022 80.30 148.79 153.77 December 31, 2023 66.56 184.67 166.28 December 31, 2024 47.24 222.11 174.31
Biggest changeThe stock price performance shown on the graph is not necessarily indicative of future price performance. 21 Table of Contents The preceding chart is based on the following data: AVNS S&P MidCap 400 S&P 500 Health Care Equipment and Services December 31, 2020 $ 100.00 $ 100.00 $ 100.00 December 31, 2021 75.57 131.14 132.50 December 31, 2022 58.95 122.12 128.36 December 31, 2023 48.89 151.57 138.80 December 31, 2024 34.70 182.29 145.51 December 31, 2025 24.48 206.59 197.41
Performance The following graph compares the cumulative total return of our common stock from December 31, 2019 through December 31, 2024 with the cumulative return of companies comprising the Standard and Poor’s S&P MidCap 400 Index and the S&P 500 Health Care Equipment and Services Index.
Performance The following graph compares the cumulative total return of our common stock from December 31, 2020 through December 31, 2025 with the cumulative return of companies comprising the Standard and Poor’s S&P MidCap 400 Index and the S&P 500 Health Care Equipment and Services Index.
We did not pay any dividends on our common stock in the years ended December 31, 2024 and 2023 and we do not expect to pay any cash dividends on our common stock in the foreseeable future. As of February 19, 2025, we had 8,870 holders of record of our common stock.
We did not pay any dividends on our common stock in the years ended December 31, 2025 and 2024 and we do not expect to pay any cash dividends on our common stock in the foreseeable future. As of February 17, 2026, we had 8,318 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeA reconciliation of the non-GAAP measure to the most directly comparable GAAP financial measures is provided under “Adjusted Operating Profit (Loss).” Net Sales Our net sales are summarized in the following table for the years ended December 31, 2024, 2023 and 2022 (in millions): Year Ended December 31, 2024 2023 Change 2022 Change Digestive Health $ 396.4 $ 371.6 6.7 % $ 340.4 9.2 % Pain Management and Recovery: Surgical pain and recovery 124.1 139.2 (10.8) % 160.1 (13.1) % Interventional pain 167.3 162.5 3.0 % 183.6 (11.5) % Total Pain Management and Recovery 291.4 301.7 (3.4) % 343.7 (12.2) % Total Net Sales $ 687.8 $ 673.3 2.2 % $ 684.1 (1.6) % Total Volume (a) Pricing/Mix Currency Other Net Sales - percentage change 2024 vs. 2023 2.2 % 4.3 % (2.2) % 0.1 % — % Net Sales - percentage change 2023 vs. 2022 (1.6) % (1.7) % 0.3 % (0.2) % — % ______________________________ (a) Volume includes incremental sales from acquisitions.
Biggest changeA reconciliation of the non-GAAP measure to the most directly comparable GAAP financial measures is provided under “Adjusted Operating Profit (Loss).” Net Sales Our net sales are summarized in the following table for the years ended December 31, 2025, 2024 and 2023 (in millions): Year Ended December 31, 2025 2024 Change 2023 Change Specialty Nutrition Systems: Enteral feeding $ 314.7 $ 289.7 8.6 % $ 283.3 2.3 % Neonate solutions 118.2 106.7 10.8 % 88.3 20.8 % Total Specialty Nutrition Systems 432.9 396.4 9.2 % 371.6 6.7 % Pain Management and Recovery: Surgical pain and recovery 98.8 108.0 (8.5) % 117.5 (8.1) % Radiofrequency ablation 139.0 126.2 10.1 % 109.8 14.9 % Total Pain Management and Recovery 237.8 234.2 1.5 % 227.3 3.0 % Segment Net Sales 670.7 630.6 6.4 % 598.9 5.3 % Corporate and Other 30.5 57.2 (46.7) % 74.4 (23.1) % Total Net Sales $ 701.2 $ 687.8 1.9 % $ 673.3 2.2 % Net Sales - percentage change 2025 vs. 2024 Total Volume (a) Pricing/Mix Currency Other (b) Specialty Nutrition Systems 9.2 % 9.0 % 0.4 % 0.5 % (0.7) % Pain Management and Recovery 1.5 % 1.9 % 0.3 % 0.2 % (0.9) % Corporate and Other (46.7) % (7.0) % (9.5) % — % (30.2) % Net Sales - percentage change 2024 vs. 2023 Specialty Nutrition Systems 6.7 % 6.3 % 0.2 % 0.2 % — % Pain Management and Recovery 3.0 % 3.0 % 0.1 % (0.1) % — % Corporate and Other (23.1) % (1.7) % (21.4) % — % — % ______________________________ (a) Volume includes incremental sales from acquisitions.
Results of Operations and Related Information Use of Non-GAAP Measures In this section, “Adjusted Operating Profit (Loss),” which is a profitability measure that is not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), is referred to as a non-GAAP financial measure.
Results of Operations and Related Information Use of Non-GAAP Measures In this section, we present “Adjusted Operating Profit (Loss),” which is a profitability measure that is not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), is referred to as a non-GAAP financial measure.
At this time, the determination of deferred tax liabilities on the amount of financial reporting over tax basis is not practicable. Legal Matters A description of legal matters can be seen in “Commitments and Contingencies” in Note 14 to the consolidated financial statements in Item 8 of this Form 10-K.
At this time, the determination of deferred tax liabilities on the amount of financial reporting over tax basis is not practicable. Legal Matters A description of legal matters can be seen in “Commitments and Contingencies” in Note 15 to the consolidated financial statements in Item 8 of this Form 10-K.
In the year ended December 31, 2023,we incurred $10.0 million of costs for litigation matters. This expense was for a settlement related to a customer claim and is included in “Other expense, net”. We incurred no costs for litigation matters in the year ended December 31, 2022.
We incurred no costs for litigation matters in the year ended December 31, 2024. In the year ended December 31, 2023,we incurred $10.0 million of costs for litigation matters. This expense was for a settlement related to a customer claim and is included in “Other expense, net”.
See further discussion below in “Critical Accounting Policies and Use of Estimates” under “Income Taxes.” We do not expect restrictions on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition or results of operations for the foreseeable future.
See further discussion below in “Critical Accounting Policies and Use of Estimates” under “Income 30 Table of Contents Taxes.” We do not expect restrictions on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition or results of operations for the foreseeable future.
Information regarding our obligations under lease and debt arrangements and defined benefit plans are provided in Notes 6, 8, and 10, respectively, to the consolidated financial statements contained in Item 8 of this Form 10-K.
Information regarding our obligations under lease and debt arrangements and defined benefit plans are provided in Notes 8, 10, and 12, respectively, to the consolidated financial statements contained in Item 8 of this Form 10-K.
Additionally, we determined it was more likely than not that the fair value of our medical devices reporting unit may be below its carrying value. Accordingly, we completed an interim goodwill impairment test as of December 1, 2024 which resulted in a $336.5 million noncash impairment to goodwill.
Additionally, we determined it was more likely than not that the 29 Table of Contents fair value of our medical devices reporting unit may be below its carrying value. Accordingly, we completed an interim goodwill impairment test as of December 1, 2024 which resulted in a $336.5 million noncash impairment to goodwill.
Goodwill and intangible impairments: In the fourth quarter of 2024,we revised our future projections downward for our HA and Intravenous infusion product lines due to lower net sales and future margin expectations. We assessed the recoverability of our HA asset group and recorded a noncash impairment loss on this asset group of $100.2 million.
In the fourth quarter of 2024, we revised our future projections downward for our HA and Intravenous infusion product lines due to lower net sales and future margin expectations. We assessed the recoverability of our HA asset group and recorded a noncash impairment loss on this asset group of $100.2 million.
This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of 30 Table of Contents types of evidence, including the nature, frequency, and severity of current and cumulative financial reporting losses, sources of future taxable income, taxable income in prior carryback year(s) and tax planning strategies.
This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of types of evidence, including the nature, frequency, and severity of current and cumulative financial reporting losses, sources of future taxable income, taxable income in prior carryback year(s) and tax planning strategies.
Repurchases under this program will be made from time to time at management’s discretion on the open market or through privately negotiated transactions in compliance with Rule 10b-18 under the Exchange Act, subject to market conditions, applicable legal requirements and other relevant factors.
Repurchases under this program were able to be made from time to time at management’s discretion on the open market or through privately negotiated transactions in compliance with Rule 10b-18 under the Exchange Act, subject to market conditions, applicable legal requirements and other relevant factors.
As of December 31, 2024, we were in compliance with all of our debt covenants. For further information regarding our debt arrangements, see “Debt” in Note 9 to the consolidated financial statements in Item 8 of this Form 10-K.
As of December 31, 2025, we were in compliance with all of our debt covenants. For further information regarding our debt arrangements, see “Debt” in Note 10 to the consolidated financial statements in Item 8 of this Form 10-K.
We provide this non-GAAP measure because we use it to measure our operational performance and provide greater insight into our ongoing business operations. This measure is not intended to be, and should not be, considered separately from, or an 23 Table of Contents alternative to, the most directly comparable GAAP financial measures.
We provide this non-GAAP measure because we use it to measure our operational performance and provide greater insight into our ongoing business operations. This measure is not intended to be, and should not be, considered separately from, or an alternative to, the most directly comparable GAAP financial measures.
In the year ended December 31, 2023, we incurred expenses of $28.2 million, which consisted of costs associated with program management consulting and employee retention expenses and employee severance and benefits costs.
In the year ended December 31, 2023, we incurred expenses of $28.2 million, in connection with the Transformation Process, which consisted of costs associated with program management consulting and employee retention expenses and employee severance and benefits costs.
On November 1, 2024, the Board of Directors approved a new one-year program under which we may repurchase up to $25.0 million of our common stock.
On November 1, 2024, the Board of Directors approved a new one-year program under which we were able to repurchase up to $25.0 million of our common stock.
Our overall effective tax rate was 4.2% for the year ended December 31, 2024 compared to a rate of (25.3)% in 2023 and 19.5% in 2022. See “Income Taxes” in Note 10 to the consolidated financial statements in Item 8 of this Form 10-K for further details regarding our income taxes.
Provision for Income Taxes Our overall effective tax rate was (10.1)% for the year ended December 31, 2025 compared to a rate of 4.2% in 2024 and (25.3)% in 2023. See “Income Taxes” in Note 11 to the consolidated financial statements in Item 8 of this Form 10-K for further details regarding our income taxes.
Estimates are used in accounting for, among other things, certain amounts included in discontinued operations, certain amounts included in assets and liabilities held for sale, distributor rebate accruals, future cash flows associated with impairment testing for goodwill and long-lived assets, loss contingencies, and 29 Table of Contents deferred income taxes and potential income tax assessments.
Estimates are used in accounting for, among other things, certain amounts included in discontinued operations, certain amounts included in assets and liabilities held for sale, distributor rebate accruals, future cash flows associated with impairment testing for goodwill and long-lived assets, valuations of assets and liabilities acquired in business combinations, loss contingencies, and deferred income taxes and potential income tax assessments.
Share Repurchase Program On May 16, 2022, the Board of Directors approved a new one-year program authorizing us to repurchase up to $25.0 million of our common stock. In connection with such repurchase program, we established a pre-arranged trading plan in accordance with Rule 10b5-1 which permitted common stock to be repurchased over a twelve-month period.
Share Repurchase Program On July 28, 2023, the Board of Directors approved a new one-year program under which we may repurchase up to $25.0 million of our common stock. In connection with such repurchase program, we established a pre-arranged trading plan in accordance with Rule 10b5-1 which permitted common stock to be repurchased over a twelve-month period.
Items impacting operating results include the following: Acquisition and integration-related charges : We incurred $4.2 million, $3.3 million and $3.4 million of costs in connection with acquisition and integration activities for the years ended December 31, 2024, 2023 and 2022, respectively. Expenses incurred during 2024 and 2023 were related to the acquisition of Diros and OrthogenRx.
Items impacting operating results include the following: Acquisition and integration-related charges : We incurred $1.5 million, $4.2 million and $3.3 million of costs in connection with acquisition and integration activities for the years ended December 31, 2025, 2024 and 2023, respectively. Expenses incurred during 2025 were related to the acquisition of Nexus.
Restructuring and transformation charges: In January 2023, we initiated the Transformation Process, a three-year restructuring initiative intended to align the Company under a single commercial organization, rationalize our product portfolio, undertake additional cost management activities to enhance the Company’s operating profitability and pursue efficient capital allocation strategies.
Expenses incurred in 2024 and 2023 were related to the acquisitions of Diros. Restructuring and transformation charges: In January 2023, we initiated the Transformation Process, a three-year restructuring initiative intended to align the Company under a single commercial organization, rationalize our product portfolio, undertake additional cost management activities to enhance the Company’s operating profitability and pursue efficient capital allocation strategies.
As of December 31, 2024, we have accumulated undistributed earnings generated by our foreign subsidiaries of approximately $34.2 million. Certain earnings were previously subject to tax due to the one-time transition tax of the Tax Cuts and Jobs Act of 2017.
As of December 31, 2025, we have accumulated undistributed earnings generated by our foreign subsidiaries. Certain earnings were previously subject to tax due to the one-time transition tax of the Tax Cuts and Jobs Act of 2017.
In the year ended December 31, 2024, we had a net benefit of $0.8 million related to the Transformation Process due to a gain on lease modification for our Alpharetta headquarters.
In the year ended December 31, 2025, we incurred no expenses in connection with the Transformation Process. In the year ended December 31, 2024, we had a net benefit of $0.8 million related to the Transformation Process due to a gain on lease modification for our Alpharetta headquarters.
EU MDR Compliance : The EU Medical Device Regulation (“EU MDR”) became effective in 2021 and brings significant new requirements for many of our medical devices. Incremental costs associated with EU MDR compliance are primarily related to re-certification of our products under the enhanced standards.
EU MDR Compliance : The EU Medical Device Regulation (“EU MDR”) became effective in 2021 and brings significant new requirements for many of our medical devices. Incremental costs associated with EU MDR compliance are primarily related to re-certification of our products under the enhanced standards. We incurred no costs for EU MDR compliance in the year ended December 31, 2025.
Unamortized debt discount 28 Table of Contents and issuance costs are being amortized to interest expense over the life of the Term Loan Facility using the interest method, resulting in an effective interest rate of 6.1% as of December 31, 2024.
Unamortized debt discount and issuance costs are being amortized to interest expense over the life of the Term Loan Facility using the interest method, resulting in an effective interest rate of 5.6% as of December 31, 2025.
As of December 31, 2024, $51.0 million of our $107.7 million of cash and cash equivalents was held by foreign subsidiaries. We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and currently do not have plans to repatriate such earnings.
As of December 31, 2025, $52.7 million of our $89.8 million of cash and cash equivalents was held by foreign subsidiaries. We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and currently do not have plans to repatriate such earnings.
In the fourth quarter of 2024, due to market conditions and a decrease in our market capitalization, we determined it was more likely than not that the fair value of our medical devices reporting unit may be below its carrying value.
In the fourth quarter of 2024, we determined it was more likely than not that the fair value of our medical devices reporting unit may be below its carrying value.
For obligations under our purchase arrangements which consist mostly of open purchase orders and other commitments, as of December 31, 2024, we have amounts due in less than one year of $68.0 million, $4.9 million in one to three years, and none thereafter.
For obligations under our purchase arrangements which consist mostly of open purchase orders and other commitments, as of December 31, 2025, we have amounts due in less than one year of $79.8 million, $46.2 million in one to three years, and none thereafter.
Pain Management and Recovery is a portfolio of products including: • Surgical pain and recovery products such as our ON-Q and ambIT surgical pain pumps and our Game Ready cold and compression therapy systems; and • Interventional pain solutions, which provide minimally invasive pain relief therapies, such as our COOLIEF pain therapy, our OrthogenRx knee osteoarthritis HA pain relief injection products and our Trident RFA products used to treat chronic pain conditions.
Pain Management and Recovery, or PM&R, is a portfolio of products including: • Surgical pain and recovery products such as ON-Q and ambIT surgical pain pumps and Game Ready cold and compression therapy systems; and • Radiofrequency Ablation (“RFA”) solutions, which provide minimally invasive pain relief therapies, such as our COOLIEF pain therapy and our Trident and ESENTEC RFA products used to treat chronic pain conditions.
The following will be discussed and analyzed: • Goodwill and Intangibles Impairment; • Restructuring Activities; • Divestiture of the Respiratory Health Business; • Discontinued Operations; • Business Acquisition; • Results of Operations and Related Information; • Liquidity and Capital Resources; • Critical Accounting Policies and Use of Estimates; and • Legal Matters.
The following will be discussed and analyzed: • Goodwill and Intangibles Impairment; • Restructuring Activities; • Business Acquisitions; • Sales of Assets; • Discontinued Operations; • Risks Related to Tariffs • Results of Operations and Related Information; • Liquidity and Capital Resources; • Critical Accounting Policies and Use of Estimates; and • Legal Matters.
The excluded items include: • Expenses associated with post-RH Divestiture transition and restructuring activities. • Certain acquisition and integration charges related to the acquisitions of Diros and OrthogenRx. • Expenses associated with the Transformation Process. • Expenses for accounting, legal and other professional fees associated with the divestiture of our RH business. • Goodwill and intangibles impairment. • Expenses associated with EU MDR compliance. • Expenses associated with other unusual items such as consulting costs associated with evaluating transformational restructuring or other strategies or asset impairment charges for cancelled research and development projects. • Expenses associated with certain litigation matters. • The amortization of intangible assets associated with prior business acquisitions.
The excluded items include: • Expenses associated with post-RH Divestiture transition and restructuring activities. • Certain acquisition and integration charges related to the acquisitions of Nexus and Diros • Expenses associated with the Transformation Process. • Expenses for accounting, legal and other professional fees associated with the divestiture of our RH business. • Goodwill and intangibles impairment. • Expenses associated with EU MDR compliance. • Expenses associated with certain litigation matters. • The amortization of intangible assets associated with prior business acquisitions.
Post-RH Divestiture transition charges : In conjunction with the divestiture of our RH business, we incurred professional services fees, equipment write-offs and incremental labor charges of approximately $3.1 million for the year ended December 31, 2024. Post-RH Divestiture restructuring charges: We initiated a post-RH Divestiture restructuring plan intended to align our organizational structure and operational footprint with our remaining business.
Post-RH Divestiture transition charges : In conjunction with the divestiture of our RH business, we incurred professional services fees, equipment write-offs and incremental labor charges of approximately $3.1 million for the year ended December 31, 2024.
Other expense, net increased from $3.0 million in 2022 to $13.3 million in 2023 primarily due to litigation and legal costs of $10.0 million.
Other expense, net decreased from $13.3 million in 2023 to other income, net of $3.9 million in 2024 primarily due to litigation and legal costs of $10.0 million incurred in 2023.
Adjusted Operating Profit (Loss) A reconciliation of adjusted operating profit (loss), a non-GAAP measure, to operating (loss) profit is provided in the table below (in millions): Year Ended December 31, 2024 2023 2022 Operating profit (loss), as reported (GAAP) $ (396.2) $ 4.2 $ 35.5 Acquisition and integration-related charges 4.2 3.3 3.4 Restructuring and transformation charges (0.8) 28.2 — Post-RH Divestiture transition charges 3.1 — — Post-RH Divestiture restructuring 8.9 — — Divestiture related — 6.0 — Goodwill and intangibles impairment 436.7 — EU MDR Compliance 6.2 3.7 6.9 Litigation and legal — 10.0 — Other Items — — 3.8 Intangibles amortization 25.2 24.3 23.6 Adjusted Operating Profit (Loss) (non-GAAP) $ 87.3 $ 79.7 $ 73.2 The items noted in the table above are described below: On a GAAP basis, we had an operating loss compared to operating income in the prior year, primarily due to goodwill and intangibles impairment and plant separation costs, partially offset by higher sales and lower selling costs.
Goodwill impairment of $77.0 million drove consolidated operating loss to $61.6 million in the year ended December 31, 2025, compared to operating loss of $396.2 million and operating income of $4.2 million in the years ended December 31, 2024 and 2023, respectively. 28 Table of Contents Adjusted Operating Profit A reconciliation of adjusted operating profit, a non-GAAP measure, to operating (loss) profit is provided in the table below (in millions): Year Ended December 31, 2025 2024 2023 Operating profit (loss), as reported (GAAP) $ (61.6) $ (396.2) $ 4.2 Acquisition and integration-related charges 1.5 4.2 3.3 Restructuring and transformation charges — (0.8) 28.2 Post-RH Divestiture transition charges — 3.1 — Post-RH Divestiture restructuring 32.4 8.9 — Divestiture related — — 6.0 Goodwill and intangibles impairment 77.0 436.7 — EU MDR Compliance — 6.2 3.7 Litigation and legal (1.4) — 10.0 Intangibles amortization 19.2 25.2 24.3 Adjusted Operating Profit (Loss) (non-GAAP) $ 67.1 $ 87.3 $ 79.7 The items noted in the table above are described below: On a GAAP basis, our operating loss decreased compared to the prior year primarily due to lower goodwill and intangibles impairment and higher sales volume.
The amount we recognize is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We recognize deferred tax assets for deductible temporary differences, operating loss carry-forwards and tax credit carry-forwards. We record valuation allowances to reduce deferred tax assets to amounts that are more likely than not to be realized.
We recognize deferred tax assets for deductible temporary differences, operating loss carry-forwards and tax credit carry-forwards. We record valuation allowances to reduce deferred tax assets to amounts that are more likely than not to be realized.
Goodwill and Other Intangible Assets We test goodwill for impairment annually or more frequently whenever events or circumstances more likely than not indicate that the fair value of the reporting unit may be below its carrying value. We operate as a single reportable operating segment with one reporting unit.
Goodwill and Other Intangible Assets We test goodwill for impairment annually or more frequently whenever events or circumstances more likely than not indicate that the fair value of our reporting units may be below their respective carrying amounts.
Cash and equivalents increased by $20.0 million to $107.7 million as of December 31, 2024 compared to $87.7 million last year. The increase was driven by $100.7 million of cash provided by operating activities and $20.0 million of proceeds from our revolving credit facility.
The increase was driven by $100.7 million of cash provided by operating activities and $20.0 million of proceeds from our revolving credit facility.
In the year ended December 31, 2024, we incurred expenses of $8.9 million related to the Plan, which primarily consisted of employee severance and benefits costs. 26 Table of Contents RH Divestiture related charges: In conjunction with the divestiture of our RH business, we incurred accounting, legal and other professional fees of approximately $6.0 million for the year ended December 31, 2023.
RH Divestiture related charges: In conjunction with the divestiture of our RH business, we incurred accounting, legal and other professional fees of approximately $6.0 million for the year ended December 31, 2023.
As a result, during the fourth quarter of 2024, we recorded a $336.5 million impairment to goodwill, which is included in “Goodwill and intangibles impairment.” Restructuring Activities In January 2023, we initiated a three-year restructuring initiative pursuant to which we: (i) have combined our Chronic Care and Pain Management franchises into a single commercial organization focused on the Digestive Health and Pain Management and Recovery product categories; (ii) plan to rationalize our product portfolio, including certain low-margin, low-growth product categories, through targeted divestitures; (iii) have undertaken additional cost management activities aimed at enhancing the Company’s operating profitability; and (iv) plan to pursue efficient capital allocation strategies, including through acquisitions that meet the Company’s strategic and financial criteria (the “Transformation Process”).
Restructuring Activities In January 2023, we initiated the Transformation Process, a three-year restructuring initiative pursuant to which we have: (i) combined our Chronic Care and Pain Management franchises into a single commercial organization focused on the SNS and PM&R product categories; (ii) rationalized our product portfolio, including certain low-margin, low-growth product categories, through targeted divestitures (such as the RH Divestiture and the sale of our HA assets); (iii) undertaken additional cost management activities aimed at enhancing the Company’s operating profitability; and (iv) pursued efficient capital allocation strategies, including through acquisitions that meet the Company’s strategic and financial criteria (such as the Nexus Acquisition and the Diros Acquisition).
We have established a pre-arranged trading plan under Rule 10b5-1 of the Exchange Act in connection with this share repurchase program. This share repurchase program does not obligate us to purchase any particular amount of common stock and may be suspended, modified or discontinued by us without prior notice.
We established a pre-arranged 31 Table of Contents trading plan under Rule 10b5-1 of the Exchange Act in connection with this share repurchase program. This share repurchase program did not obligate us to purchase any particular amount of common stock. No purchases of our common stock were made under this plan.
In the year ended December 31, 2024, $0.9 million of interest was capitalized on long-term capital projects. $0.5 million and $0.1 million of interest was capitalized on long-term capital projects in the years ended December 31, 2023 and 2022, respectively. Interest expense consists of interest accrued and amortization of debt discount and issuance costs on our long-term debt.
Interest Expense Interest expense was $7.8 million, $12.2 million and $15.0 million in the years ended December 31, 2025, 2024 and 2023, respectively. In the years ended December 31, 2025, 2024 and 2023, $0.7 million, $0.9 million and $0.5 million of interest was capitalized on long-term capital projects, respectively.
Research and Development (in millions) Year Ended December 31, 2024 2023 2022 Research and development $ 26.2 $ 27.2 $ 29.2 Percentage of net sales 3.8 % 4.0 % 4.3 % Research and development consists primarily of compensation for personnel and expenses for product trial costs, outside laboratory and license fees, the cost of laboratory equipment and facilities and asset write-offs for equipment associated with unsuccessful product launches.
Research and development consists primarily of compensation for personnel and expenses for product trial costs, outside laboratory and license fees, the cost of laboratory equipment and facilities and asset write-offs for equipment associated with unsuccessful product launches.
The increase in amortization in the year ended December 31, 2023 is due to incremental amortization of intangibles acquired with Diros in Q3 2023. Our non-GAAP measures excludes certain items, as applicable, for the relevant time periods as indicated in the “Operating Profit” table above.
Intangibles amortization : Intangibles amortization is related primarily to the amortization of intangibles acquired in prior business acquisitions and was $19.2 million, $25.2 million and $24.3 million, respectively, in the years ended December 31, 2025, 2024 and 2023. Our non-GAAP measures excludes certain items, as applicable, for the relevant time periods as indicated in the “Operating Profit” table above.
Net sales from discontinued operations were $54.6 million in the year ended December 31, 2024, compared to $100.9 million and $135.9 million in the years ended December 31, 2023 and 2022, respectively. Business Acquisition On July 24, 2023, we closed the acquisition of Diros Technology, Inc.
We did not have Net sales from discontinued operations for the year ended December 31, 2025. Net sales from discontinued operations were $54.6 million and $100.9 million in the years ended December 31, 2024 and 2023, respectively.
We incurred $6.2 million, $3.7 million and $6.9 million of costs related to EU MDR compliance in the years ended December 31, 2024, 2023 and 2022 respectively. Other items: In the years ended December 31, 2024 and December 31, 2023, we incurred no costs associated with other items.
We incurred $6.2 million and $3.7 million of costs related to EU MDR compliance in the years ended December 31, 2024 and 2023 respectively. Litigation and legal : In the year ended December 31, 2025, we recovered $1.4 million from a settlement for a customer claim from 2023.
The decrease was driven by $49.6 million of cash used for the acquisition of Diros, $15.0 million used to repurchase shares of our common stock, repayments of our debt, including $115.0 million on our revolving credit facility and $4.7 million on our secured term loan, $11.7 million of contingent consideration payments and $17.8 million of capital expenditures.
The decrease was driven by $31.6 million of capital expenditures, $28.0 million of cash used in the acquisition of Nexus, $5.0 million of investments in non-affiliated entities, and repayments of our debt, including $25.0 million on our revolving credit facility and $9.4 million on our secured term loan.
Cash and equivalents decreased by $40.0 million to $87.7 million as of December 31, 2023 compared to $127.7 million as of December 31, 2022.
Cash and equivalents decreased by $17.9 million to $89.8 million as of December 31, 2025 compared to $107.7 million last year.
Accordingly, we completed an interim goodwill impairment test as of December 1, 2024 and concluded that the fair value of the reporting unit was lower than its carrying value.
Accordingly, we completed an interim goodwill impairment test as of June 30, 2025, using a combination of income and market approaches to determine the fair value of the reporting units. Consequently, we concluded that the fair value of the Pain Management and Recovery (“PM&R”) reporting unit was below its carrying value.
These amounts include between $6.0 million and $8.0 million of employee severance and benefits costs. The accompanying consolidated income statements for the year ended December 31, 2024 include a net benefit of $0.8 million due to a gain on lease modification for 22 Table of Contents our Alpharetta headquarters.
The accompanying consolidated income statement for the year ended December 31, 2024 includes a net benefit of $0.8 million due to a gain on lease modification for our Alpharetta headquarters. Costs incurred in connection with the Transformation Process are in “Cost of products sold,” “Research and development,” “Selling and general expenses” and “Other expense, net”.
This impairment loss is included in “Goodwill and intangibles impairment” in the accompanying consolidated income statements. See Note 2, “Goodwill and Intangibles Impairment,” for disclosures about intangible asset impairment. Income Taxes We recognize tax benefits in our financial statements when our uncertain tax positions are more likely than not to be sustained upon audit.
Income Taxes We recognize tax benefits in our financial statements when our uncertain tax positions are more likely than not to be sustained upon audit. The amount we recognize is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
Net Sales - 2023 Compared to 2022 Net sales decreased by 1.6% to $673.3 million for the year ended December 31, 2023, primarily due lower volume in the Pain Management and Recovery portfolio (primarily lower HA sales), partially offset by continued strong demand for Digestive Health products.
Pain Management and Recovery For the year ended December 31, 2024, PM&R net sales were $234.2 million, an increase of 3% compared to the prior period, primarily due to higher volume in RFA partially offset by lower volume in Surgical Pain and Recovery, primarily from the effects of withdrawing selected products from certain international markets.
Costs incurred in connection with the Transformation Process are in “Cost of products sold,” “Research and development,” “Selling and general expenses” and “Other expense, net”. Divestiture of the Respiratory Health Business On October 2, 2023, we closed the sale of our Respiratory Health (“RH”) business to SunMed Group Holdings, LLC (“Buyer”) (the “RH Divestiture”).
These transactions align with our ongoing transformation initiative, which is focused on advancing our strategic SNS and PM&R segments. Discontinued Operations On October 2, 2023, we closed the sale of our Respiratory Health (“RH”) business to SunMed Group Holdings, LLC (“Buyer”) (the “RH Divestiture”).
Net Sales by Geographic Region Net sales by region is presented in the table below (in millions): Year Ended December 31, 2024 2023 Change 2022 Change North America $ 545.0 $ 537.9 1.3 % $ 552.0 (2.6) % Europe, Middle East and Africa 94.8 84.1 12.7 77.4 8.7 Asia Pacific and Latin America 48.0 51.3 (6.4) 54.7 (6.2) Total Net Sales $ 687.8 $ 673.3 2.2 % $ 684.1 (1.6) % 24 Table of Contents Gross Profit (in millions) Year Ended December 31, 2024 2023 2022 Net sales $ 687.8 $ 673.3 $ 684.1 Cost of products sold 306.5 293.6 289.9 Gross profit 381.3 379.7 394.2 Gross profit margin 55.4 % 56.4 % 57.6 % Cost of products sold increased from $293.6 million to $306.5 million during the year ended December 31, 2024, primarily driven by costs associated with our restructuring initiatives and plant separation costs associated with the RH Divestiture along with unfavorable pricing for our HA products.
Net Sales by Geographic Region Net sales by region is presented in the table below (in millions): Year Ended December 31, 2025 2024 Change 2023 Change North America $ 543.9 $ 545.0 (0.2) % $ 537.9 1.3 % Europe, Middle East and Africa 102.8 94.8 8.4 84.1 12.7 Asia Pacific and Latin America 54.5 48.0 13.5 51.3 (6.4) Total Net Sales $ 701.2 $ 687.8 1.9 % $ 673.3 2.2 % 26 Table of Contents Cost of Products Sold (in millions): Year Ended December 31, 2025 2024 2023 Specialty Nutrition Systems $ 198.4 $ 166.7 $ 155.8 Pain Management and Recovery 104.4 99.5 99.5 Segment Cost of Products Sold (a) 302.8 266.2 255.3 Corporate and Other 44.5 40.3 38.3 Total Cost of Products Sold $ 347.3 $ 306.5 $ 293.6 __________________________________________________ (a) Segment Cost of Products Sold includes the “Cost of goods sold” and “Distribution” line items in “Segment Information” in Note 5 to the consolidated financial statements, and $14.5 million, $11.6 million and $13.8 million of depreciation and amortization expense in the years ended December 31, 2025, 2024 and 2023, respectively.
Discontinued Operations As a result of the RH Divestiture, the results of operations from our RH business are reported as “(Loss) income from discontinued operations, net of tax” and the related assets and liabilities were classified as “held for sale” in the consolidated financial statements.
The remaining limited support services being performed will terminate no later than three years following the closing. Finally, as a result of the RH Divestiture, the results of operations from our RH business are reported as “Loss from discontinued operations, net of tax” in the condensed consolidated income statements.
This was partially offset by $32.4 million of cash provided by operating activities, $55.0 million of proceeds from our revolving credit facility and $89.0 million of proceeds from the RH divestiture.
This was partially offset by $74.7 million of cash provided by operating activities and $4.0 million in proceeds from the sale of assets. Cash and equivalents increased by $20.0 million to $107.7 million as of December 31, 2024 compared to $87.7 million as of December 31, 2023.
In the fourth quarter of 2024, we revised downward our future projections for certain product lines due to lower net sales and future year margin expectations. This required us to assess the recoverability of a specific asset group during the fourth quarter of 2024, which resulted in an impairment loss of $100.2 million.
In the fourth quarter of 2024, we assessed the recoverability of a certain asset group which resulted in an impairment loss of $100.2 million. This impairment loss is included in “Goodwill and intangibles impairment” in the accompanying consolidated income statements. See Note 2, “Goodwill and Intangibles Impairment,” for disclosures about intangible asset impairment.
Selling and General Expenses (in millions) Year Ended December 31, 2024 2023 2022 Selling and general expenses $ 318.5 $ 335.0 $ 326.5 Percentage of net sales 46.3 % 49.8 % 47.7 % Selling and general expenses decreased from $335.0 million in 2023 to $318.5 million in 2024, driven by savings realized from our Transformation Process and disciplined spending.
Selling and general expenses decreased from $318.5 million in 2024 to $315.6 million in 2025, driven by savings realized from the execution on the Transformation Process and increased spending discipline.
This required us to assess the recoverability of a specific asset group during the fourth quarter of 2024, which resulted in an impairment loss of $100.2 million, which is included in “Goodwill and intangibles impairment.” Due to the business factors described above and a decrease in our market capitalization, we determined it was more likely than not that the fair value of our medical devices reporting unit may be below its carrying value.
Goodwill and Intangibles Impairment In the second quarter of 2025, our market capitalization decreased to the extent that we determined that it was more likely than not that the fair value of one of our two reporting units was below its carrying value.
In the year ended December 31, 2024, gross profit margin decreased from 56.4% to 55.4%. Cost of products sold increased from $289.9 million to $293.6 million during the year ended December 31, 2023, primarily driven by unfavorable product mix, partially offset by improved manufacturing efficiencies. In the year ended December 31, 2023, gross profit margin decreased from 57.6% to 56.4%.
Cost of products sold increased to $306.5 million from $293.6 million during the year ended December 31, 2024, primarily driven by costs associated with our restructuring initiatives and plant separation costs associated with the RH Divestiture along with unfavorable pricing for our HA products.
Product Category Descriptions Digestive Health i s a portfolio of products such as our MIC-KEY enteral feeding tubes, our Corpak patient feeding solutions and our NeoMed neonatal and pediatric feeding solutions.
(b) Other includes the effects of our withdrawal from certain revenue streams that did not meet our return criteria and rounding. 25 Table of Contents Segment and Product Category Descriptions Specialty Nutrition Systems, or SNS is a portfolio of products including: • Enteral feeding, which includes products such as our MIC-KEY enteral feeding tubes and Corpak patient feeding solutions; and • Neonate solutions, which includes NeoMed neonatal and pediatric feeding solutions and Nexus’ TKO anti-reflux needleless connectors.
Removed
Goodwill and Intangibles Impairment In the fourth quarter of 2024, we revised downward our future projections for certain product lines due to lower net sales and future year margin expectations.
Added
As a result, we recorded a $77.0 million impairment to goodwill, which is included in “Goodwill and intangibles impairment” in the accompanying consolidated income statements. In our most recent goodwill impairment test on July 1, 2025, we determined that the fair value of our reporting units equaled or exceeded the net carrying amount of our reporting units.
Removed
We expect the Transformation Process will be substantially complete by the end of 2025.
Added
In the fourth quarter of 2024, we assessed the recoverability of a certain asset group which resulted in an impairment loss of $100.2 million. This impairment loss is included in “Goodwill and intangibles impairment” in the accompanying consolidated income statements. A roll-forward of our intangible assets is presented in Note 6, “Supplemental Balance Sheet Information”.
Removed
We expect to incur up to $30.0 million of cash expenses in connection with the Transformation Process, consisting of between $9.0 million and $12.0 million of program management consulting and employee retention expenses, between $8.0 million and $11.0 million of expenses associated with manufacturing and supply chain improvements and portfolio rationalization; and the remainder for expenses associated with organization design and alignment and other related activities.
Added
Accordingly, we completed an interim goodwill impairment test as of December 1, 2024, and recorded a $336.5 million impairment to goodwill, which is included in “Goodwill and intangibles impairment” in the accompanying consolidated income statements.
Removed
The RH Divestiture represents a key component of the Transformation Process, and is aimed at accelerating the Company’s efforts to focus its portfolio on markets where it is well positioned to succeed.
Added
The initial restructuring activities in the Transformation Process related primarily to organizational design and the implementation of business process efficiencies. These initial restructuring activities and related costs were substantially 23 Table of Contents complete at the end of 2024.
Removed
The services generally commenced on the closing date of the RH Divestiture and will terminate in no later than one to three years. In conjunction with the RH Divestiture, we and Buyer also entered into distribution agreements pursuant to which we will remain a limited risk distributor for RH products on Buyer’s behalf for sales outside of the United States.
Added
During 2024, following the RH Divestiture, we initiated the final phase of the Transformation Process, which is aimed at aligning our organizational structure, our manufacturing and distribution activities, and our operational footprint with our remaining business (the “Plan”). In the first six months of 2025, the Plan was expanded to accommodate additional manufacturing and operational initiatives.
Removed
As of December 31, 2024, our obligations under the limited risk distribution agreements were substantially complete and expected to terminate in early 2025.
Added
In the fourth quarter of 2025, the assessment of our organization performed in conjunction with the appointment of our new Chief Executive Officer was completed and the Plan was expanded to align our organizational structure with our business needs. As a result, we expect to incur up to $10.0 million of incremental expenses consisting primarily of employee severance and benefits.
Removed
Finally, pursuant to an agreement under which we provided certain manufacturing services to Buyer, certain manufacturing facilities and equipment did not transfer to Buyer upon the Initial Closing and remained in “Assets Held for Sale”, with a corresponding liability representing our obligation to transfer the relevant manufacturing facilities and equipment to Buyer until the final conveyance.
Added
We anticipate annualized savings from these initiatives to be between $15.0 million and $20.0 million. The initiatives associated with the expansion of the Plan are expected to run through 2026. In the year ended December 31, 2025, we incurred $32.4 million of costs related to the Plan, compared to $8.9 million in the year ended December 31, 2024.
Removed
Similarly, the results of operations from these manufacturing operations continued to be classified as “(Loss) income from discontinued operations, net of tax.” Our obligation to manufacture products on behalf of Buyer terminated and the related manufacturing assets were transferred to Buyer and the corresponding liability was extinguished on October 1, 2024.
Added
These costs are included in “Cost of products sold” and “Selling and general expenses” in the accompanying consolidated income statements. Business Acquisitions On September 11, 2025, we entered into the Nexus Acquisition pursuant to which Nexus, a privately held medical device company, became a wholly owned subsidiary of the Company.
Removed
Our obligation to manufacture products on behalf of Buyer terminated and the related manufacturing assets were transferred to Buyer and the corresponding liability was extinguished on October 1, 2024. Accordingly, there were no assets or liabilities held for sale as of December 31, 2024.
Added
The total purchase price paid by the Company in the Nexus Acquisition was $27.0 million (subject to certain working capital and other adjustments), with up to an additional $20.0 million payable in contingent cash consideration based on the increase in net sales of certain Nexus product during the first three years following the acquisition.
Removed
(“Diros”), a leading manufacturer of innovative radiofrequency ablation (“RFA”) products used to treat chronic pain conditions (the “Diros Acquisition”).
Added
The purchase price in the Nexus Acquisition was funded by available cash on hand. On July 24, 2023, we closed our acquisition of Diros, a leading manufacturer of innovative RFA products used to treat chronic pain conditions.
Removed
The purchase price for the Diros Acquisition was funded by proceeds from our Revolving Credit Facility. On January 20, 2022, we acquired all of the equity voting interests and completed the acquisition of OrthogenRx, which developed and commercialized hyaluronic acid (“HA”) treatments for knee pain caused by osteoarthritis.
Added
The purchase price for the Diros Acquisition was funded by proceeds from our Revolving Credit Facility. Sales of Assets On July 31, 2025, we sold substantially all the assets associated with our HA product line to CMM, a privately held company. In the fourth quarter of 2025, we sold the assets associated with our Game Ready rental business.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−0 removed7 unchanged
Biggest changeThe hypothetical change in UTA is calculated by multiplying the net assets of these non-U.S. operations by a 10% change in the currency exchange rates. 31 Table of Contents As of December 31, 2024, a 10% change in the exchange rate of the U.S. dollar against the prevailing market rates of our foreign currency translation exposures would have impacted stockholders’ equity by approximately $15.3 million.
Biggest changeAs of December 31, 2025, a 10% change in the exchange rate of the U.S. dollar against the prevailing market rates of our foreign currency translation exposures would have impacted stockholders’ equity by approximately $16.8 million. These hypothetical adjustments in UTA are based on the difference between the December 31, 2025 exchange rates and the assumed rates.
As of December 31, 2024, a 10% change in the exchange rate of the U.S. dollar against the prevailing market rates of foreign currencies involving balance sheet transactional exposures would have an effect of $0.9 million to our consolidated financial position, results of operations and cash flows.
As of December 31, 2025, a 10% change in the exchange rate of the U.S. dollar against the prevailing market rates of foreign currencies involving balance sheet transactional exposures would have an effect of $0.9 million to our consolidated financial position, results of operations and cash flows.
These hypothetical effects on transactional exposures are based on the difference between the December 31, 2024 rates and the assumed rates. The translation of the balance sheets of non-U.S. operations from local currencies into U.S. dollars is also sensitive to changes in foreign currency exchange rates.
These hypothetical effects on transactional exposures are based on the difference between the December 31, 2025 rates and the assumed rates. The translation of the balance sheets of non-U.S. operations from local currencies into U.S. dollars is also sensitive to changes in foreign currency exchange rates.
As of December 31, 2024, a one percentage point increase in SOFR could result in $3.8 million of incremental interest expense if the senior secured revolving credit facility was fully drawn for the entire year. Foreign Currency Risk Foreign currency risk is managed by the systematic use of foreign currency forward contracts for a limited portion of our exposure.
As of December 31, 2025, a one percentage point increase in SOFR could result in $4.8 million of incremental interest expense if the senior secured revolving credit facility was fully drawn for the entire year. Foreign Currency Risk Foreign currency risk is managed by the systematic use of foreign currency forward contracts for a limited portion of our exposure.
In addition, we are subject to price risk for utilities and manufacturing inputs, which are used in our manufacturing operations. 32 Table of Contents
In addition, we are subject to price risk for utilities and manufacturing inputs, which are used in our manufacturing operations. 34 Table of Contents
All foreign currency derivative instruments are entered into with major financial institutions. Our credit exposure under these arrangements is limited to agreements with a positive fair value at the reporting date. Credit risk with respect to the counterparties is actively monitored but is not considered significant.
All foreign currency derivative instruments are entered into with major financial institutions. Our credit exposure under these arrangements is limited to agreements with a 33 Table of Contents positive fair value at the reporting date. Credit risk with respect to the counterparties is actively monitored but is not considered significant.
Commodity Price Risk We are subject to commodity price risk for certain raw materials used in the manufacture of our products. As previously discussed under “Risk Factors,” increases in commodities prices could adversely affect our earnings if selling prices are not adjusted or if such adjustments significantly trail the increases in commodities prices.
As previously discussed under “Risk Factors,” increases in commodities prices could adversely affect our earnings if selling prices are not adjusted or if such adjustments significantly trail the increases in commodities prices.
These hypothetical adjustments in UTA are based on the difference between the December 31, 2024 exchange rates and the assumed rates. In the view of management, the above UTA adjustments resulting from these assumed changes in foreign currency exchange rates are not material to our consolidated financial position because they would not affect our cash flow.
In the view of management, the above UTA adjustments resulting from these assumed changes in foreign currency exchange rates are not material to our consolidated financial position because they would not affect our cash flow. Commodity Price Risk We are subject to commodity price risk for certain raw materials used in the manufacture of our products.
Interest Rate Risk Our senior secured revolving credit facility under our Credit Agreement, which allows for borrowings up to $375.0 million, is subject to a variable interest rate based on SOFR.
Interest Rate Risk Our senior secured Revolving Credit Facility, which allows for borrowings up to $375.0 million, and our Term Loan Facility, with an outstanding balance of $100.8 million as of December 31, 2025 are subject to a variable interest rate based on SOFR.
Added
The hypothetical change in UTA is calculated by multiplying the net assets of these non-U.S. operations by a 10% change in the currency exchange rates.

Other AVNS 10-K year-over-year comparisons