# EDGAR Filing Document

**Accession Number:** 0001606498
**File Stem:** 0001104659-23-033812
**Filing Date:** 2023-3
**Character Count:** 466068
**Document Hash:** 939354d220493e300749737718b663e5
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-033812.hdr.sgml**: 20230317

**ACCESSION NUMBER**: 0001104659-23-033812

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230317

**DATE AS OF CHANGE**: 20230317

**EFFECTIVENESS DATE**: 20230317

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** AVANOS MEDICAL, INC.
- **CENTRAL INDEX KEY:** 0001606498
- **STANDARD INDUSTRIAL CLASSIFICATION:** ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842]
- **IRS NUMBER:** 464987888
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-36440
- **FILM NUMBER:** 23742266

**BUSINESS ADDRESS:**
- **STREET 1:** 5405 WINDWARD PARKWAY
- **STREET 2:** SUITE 100 SOUTH
- **CITY:** ALPHARETTA
- **STATE:** GA
- **ZIP:** 30004
- **BUSINESS PHONE:** 844-428-2667

**MAIL ADDRESS:**
- **STREET 1:** 5405 WINDWARD PARKWAY
- **STREET 2:** SUITE 100 SOUTH
- **CITY:** ALPHARETTA
- **STATE:** GA
- **ZIP:** 30004

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Avanos Medical, Inc.
- **DATE OF NAME CHANGE:** 20180702

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Halyard Health, Inc.
- **DATE OF NAME CHANGE:** 20140424

### Attached PDF Documents

**Attachment 1:** `tm232028d5_ars.pdf`

# AVANOS

**20**

NOTICE OF 2023 ANNUAL MEETING
OF STOCKHOLDERS,

**23**

PROXY STATEMENT
AND 2022 ANNUAL REPORT

# AVANOS

20

23

NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS

AND PROXY STATEMENT

![img-0.jpeg](img-0.jpeg)

April 27, 2023
9:00 a.m. Eastern Time

Avanos Medical, Inc.
5405 Windward Parkway
Alpharetta, Georgia 30004

## COMPANY OVERVIEW

Avanos Medical, Inc. is a medical technology company focused on delivering clinically superior breakthrough medical device solutions to improve patients' quality of life. Headquartered in Alpharetta, Georgia, Avanos is committed to addressing some of today's most important

healthcare needs, such as delivering nutrition to patients from the hospital to home and reducing the use of opioids while helping patients move from surgery to recovery. We develop, manufacture and market clinically superior solutions globally.

### Our Two Product Portfolios

| CHRONIC CARE | PAIN MANAGEMENT |
| --- | --- |
| Comprised of digestive health products and respiratory health solutions focused on improving patient outcomes and increasing patient safety. Avanos has market-leading positions and clinically preferred solutions across its key product offerings, with a strong brand portfolio. | Comprised of acute pain products and interventional pain solutions focused on improving patient outcomes and reducing opioid usage. Avanos is a leader in non-opioid pain therapies. |

## CHRONIC CARE

### A VITAL LIFELINE FROM HOSPITAL TO HOME

#### MIC-KEY®

Long-term feeding market share leader with low-profile balloon-retained gastrostomy feeding tubes.

![img-1.jpeg](img-1.jpeg)

#### CORTRAK®

Short-term feeding leader delivering guided nasal gastric feeding tube placement.

![img-2.jpeg](img-2.jpeg)

#### NeoMed®

Portfolio of specialized feeding and medication dosing products for neonatal and pediatric patients.

![img-3.jpeg](img-3.jpeg)

#### BALLARD®

Leader in closed suction catheter technology offering advanced infection control features.

## PAIN MANAGEMENT

### GETTING BACK TO LIFE

![img-4.jpeg](img-4.jpeg)

Cooled and standard radiofrequency nerve ablation for thermal treatment of chronic pain.

#### GenVisc850 TriVisc

Multi-regimen hyaluronic acid treatment relieving mild-to-moderate knee pain.

![img-5.jpeg](img-5.jpeg)

Market-leading provider of cold and compression therapy systems.

![img-6.jpeg](img-6.jpeg)

Electronic ambulatory infusion pumps for various infusion therapy needs.

![img-7.jpeg](img-7.jpeg)

Portfolio of non-opioid post-surgical pain relief infusion pumps and accessories.

AVANOS

Avanos Medical, Inc.
5405 Windward Parkway
Alpharetta, Georgia 30004

# MESSAGE FROM OUR CEO

March 17, 2023

![img-8.jpeg](img-8.jpeg)

# FELLOW STOCKHOLDERS,

It is my pleasure to invite you to the 2023 Annual Meeting of Stockholders of Avanos Medical, Inc. (the "Company"). The meeting will be held on Thursday, April 27, 2023, at 9:00 a.m. Eastern Time at the Company's headquarters, located at 5405 Windward Parkway, Alpharetta, Georgia 30004.

At the Annual Meeting, stockholders will be asked to:

- Elect the six directors named in the proxy statement for a one-year term;
- Ratify the appointment of the Company's independent auditors for 2023;
- Approve on an advisory basis the compensation of the Company's named executive officers;
- Approve an amendment to the Company's 2021 Long Term Incentive Plan to increase the number of shares of common stock reserved for issuance thereunder by 1,250,000 shares; and
- Take action upon any other business that may properly come before the meeting or any adjournments of the meeting.

These matters are fully described in the accompanying Notice of Annual Meeting and proxy statement.

Your vote is important. Regardless of whether you plan to attend the Annual Meeting, we urge you to vote your shares as soon as possible. You may vote using the included proxy card by completing, signing and dating it, and then returning it by mail. You may also vote your shares online over the internet or by using the telephone by following the instructions set forth on the proxy card. Additional information about voting your shares is included in the proxy statement.

Sincerely,

A handwritten signature in black ink, appearing to read 'J. F. Woody'.

**Joseph F. Woody**
Chief Executive Officer

# AVANOS MEDICAL, INC.
NOTICE OF 2023 ANNUAL MEETING
OF STOCKHOLDERS

To Be Held on April 27, 2023

WHEN

Thursday, April 27, 2023
9:00 a.m. Eastern Time

WHERE

Avanos Medical, Inc.
5405 Windward Parkway
Alpharetta, Georgia 30004

RECORD DATE

Stockholders of record at
the close of business on
March 3, 2023 are entitled
to notice of and to vote at
the Annual Meeting

## Matters to be Voted on at the Annual Meeting

Proposals

1 To elect as directors the six nominees named in the accompanying proxy statement for a one-year term;
2 To ratify the appointment of Deloitte & Touche LLP as the Company's independent auditors for 2023;
3 To approve on an advisory basis the compensation of the Company's named executive officers;

4 To approve an amendment to the Company's 2021 Long Term Incentive Plan to increase the number of shares of common stock reserved for issuance thereunder by 1,250,000 shares; and
5 To take action upon any other business that may properly come before the meeting or any adjournment of the meeting.

Stockholders of record at the close of business on March 3, 2023 are entitled to notice of and to vote at the Annual Meeting or any adjournment thereof. To attend the Annual Meeting in person, please register by following the instructions on page 13.

Regardless of whether you plan to attend the Annual Meeting, we urge you to vote your shares as soon as possible. You may vote online over

the internet, by using the telephone or by signing dating and returning the enclosed proxy card. You may revoke your proxy and vote your shares at the meeting if you would like to do so.

If you own shares in a brokerage account, your broker cannot vote your shares for Proposals 1, 3, 4 or 5 unless you provide voting instructions to your broker. It is important that you exercise your right as a stockholder and vote on all the Proposals.

By Order of the Board of Directors.

**Mojirade James**
Senior Vice President, General Counsel
and Secretary

March 17, 2023

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 27, 2023

This proxy statement, along with a proxy card and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, are available at www.proxyvote.com.

# PROXY STATEMENT

## Table of Contents

| 1 | 2023 PROXY STATEMENT SUMMARY | 46 | Executive Compensation for 2022 |
| --- | --- | --- | --- |
| 10 | INFORMATION ABOUT THE ANNUAL MEETING | 51 | Benefits and Other Compensation |
| 10 | How We Provide Proxy Materials | 52 | Additional Information About Our Compensation Practices |
| 10 | Who May Vote | 54 | Compensation Committee Report |
| 11 | How To Vote | 55 | Analysis of Compensation-Related Risks |
| 11 | How to Revoke or Change Your Vote | 56 | COMPENSATION TABLES |
| 12 | Votes Required | 56 | Summary Compensation |
| 12 | How Withhold Votes and Abstentions will be Counted | 56 | Summary Compensation Table |
| 12 | Effect of Not Instructing Your Broker | 58 | Grants of Plan-Based Awards |
| 13 | Attending the Annual Meeting | 59 | Discussion of Summary Compensation and Plan-Based Awards Tables |
| 13 | Costs of Solicitation | 59 | Outstanding Equity Awards |
| 14 | CORPORATE GOVERNANCE | 60 | Outstanding Equity Awards as of December 31, 2022 |
| 14 | Board Leadership Structure | 61 | Option Exercises and Stock Vested |
| 15 | Director Independence | 61 | Pension Benefits |
| 15 | Board Meetings | 61 | Nonqualified Defined Compensation |
| 15 | Board Committees | 62 | Potential Payments on Termination or Change of Control |
| 21 | Communicating with Directors | 67 | Pay Versus Performance |
| 21 | Other Corporate Governance Policies and Practices | 71 | Ratio of CEO Compensation to Median Employee Compensation |
| 23 | PROPOSAL 1. ELECTION OF DIRECTORS | 72 | PROPOSAL 5. APPROVAL OF AMENDMENT TO OUR 2021 LONG TERM INCENTIVE PLAN |
| 23 | Process and Criteria for Nominating Directors | 73 | Key Data Relating to Outstanding Equity Awards and Shares Available for Issuance |
| 25 | Governance Committee Review of Attributes of Current Directors | 73 | Data Relating to Historical Equity Grants |
| 25 | Diversity of Directors | 74 | Purpose of the Proposed Amendment |
| 25 | The Nominees | 74 | Summary of the 2021 Plan |
| 31 | Director Compensation | 76 | Federal Income Tax Consequences |
| 32 | 2022 Outside Director Compensation | 78 | OTHER INFORMATION |
| 33 | PROPOSAL 2. RATIFICATION OF AUDITORS | 78 | Security Ownership Information |
| 34 | Accounting Firm Fees | 80 | Transactions with Related Persons |
| 34 | Audit Committee Approval of Audit and Non-Audit Services | 80 | Stockholders Sharing the Same Household |
| 35 | Audit Committee Report | 80 | 2024 Stockholder Proposals |
| 36 | PROPOSAL 3. ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION | 81 | Stockholder Nominations for Board of Directors |
| 37 | COMPENSATION DISCUSSION AND ANALYSIS | 82 | Annual Meeting Advance Notice Requirements |
| 38 | Compensation Executive Summary | 82 | Annual Report |
| 41 | Executive Compensation Objectives and Policies | 83 | OTHER MATTERS TO BE PRESENTED AT THE ANNUAL MEETING |
| 42 | Executive Compensation Design Philosophy and Guiding Principles | A-1 | APPENDIX A |
| 43 | Components of Our Executive Compensation Program | B-1 | APPENDIX B |
| 44 | Setting Annual Compensation | C-1 | APPENDIX C - AVANOS MEDICAL, INC. 2021 LONG TERM INCENTIVE PLAN, AS AMENDED |

# 2023 PROXY STATEMENT SUMMARY

This summary represents only selected information. You should review the entire proxy statement before voting. Except where the context otherwise requires, all references herein to “we,” “us,” “our,” “Avanos” or the “Company” refer collectively to Avanos Medical, Inc., a Delaware corporation, and its consolidated subsidiaries.

## Avanos Medical, Inc. 2023 Annual Meeting of Stockholders

WHEN

Thursday, April 27, 2023
9:00 a.m. Eastern Time

WHERE

Avanos Medical, Inc. 5405
Windward Parkway
Alpharetta, Georgia 30004

RECORD DATE

Stockholders of record at the close of business on March 3, 2023 are entitled to notice of and to vote at the meeting

## MATTERS TO BE VOTED ON AT THE ANNUAL MEETING

| Proposal | Description | Board Recommendation | See page |
| --- | --- | --- | --- |
| 1. Election of Directors | Election of Gary D. Blackford, John P. Byrnes, Dr. Lisa Egbuonu-Davis, Patrick J. O’Leary, Dr. Julie Shimer and Joseph F. Woody to serve a one-year term expiring at the 2024 Annual Meeting of Stockholders | ☑ FOR all six nominees | 23 |
| 2. Ratification of Appointment of Auditors | Ratification of the appointment of Deloitte & Touche LLP as our independent auditors for 2023 | ☑ FOR | 33 |
| 3. Say-on-Pay | Stockholder advisory vote on the compensation of our named executive officers | ☑ FOR | 36 |
| 4. Amendment of 2021 Long Term Incentive Plan | Approval of an amendment to the Company’s 2021 Long Term Incentive Plan to increase the number of shares of common stock reserved for issuance thereunder by 1,250,000 shares | ☑ FOR | 72 |
| 5. Other Matters | Action upon any other business that may properly come before the meeting or any adjournments of the meeting | ☑ FOR |  |

This proxy statement and the proxy card are first being given to stockholders on March 17, 2023.

AVANOS

2023 Notice and Proxy Statement ▲ 1

2023 PROXY STATEMENT SUMMARY

# ▲ PROPOSAL 1. ELECTION OF DIRECTORS

Information about the six nominees for director is included below.

☑ Our Board of Directors (the “Board”) unanimously recommends that stockholders vote FOR the election of each of these nominees.

| Name and Experience | Committee Roles | Independent | Experience Highlights |
| --- | --- | --- | --- |
| Gary D. Blackford Chairman of the Board Former Chairman and CEO, Universal Hospital Services | Compensation Committee (Chair) | ☑ | Executive leadership as chief executive officer Financial literacy and experience in finance Knowledge of, and experience in, the healthcare industry International experience Governance and public company board experience |
| John P. Byrnes Former Chairman and CEO, Lincare Holdings | Compliance Committee (Chair) Audit Committee Governance Committee | ☑ | Executive leadership as chief executive officer Knowledge of, and experience in, the healthcare industry International experience Governance and public company board experience |
| Dr. Lisa Egbuonu-Davis Vice President, Medical Innovations, DH Diagnostics, LLC | Compliance Committee Governance Committee | ☑ | Knowledge of, and experience in, the healthcare industry Strategic and operational expertise in the medical and public health sector Governance and public company board experience |
| Patrick J. O’Leary Former Executive Vice President and CFO, SPX Technologies, Inc. | Audit Committee (Chair) Compensation Committee | ☑ | Executive leadership as chief financial officer Financial literacy and experience in finance International experience Governance and public company board experience |
| Dr. Julie Shimer Former CEO and director, Welch Allyn, Inc. | Governance Committee (Chair) Audit Committee | ☑ | Executive leadership as chief executive officer Knowledge of, and experience in, the healthcare industry International experience Governance and public company board experience |
| Joseph F. Woody Chief Executive Officer of Avanos Medical, Inc. |  |  | Executive leadership as our chief executive officer Knowledge of, and experience in, the healthcare industry Significant acquisition and integration experience International experience Public company board experience |

2 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

2023 PROXY STATEMENT SUMMARY

# ▲ **PROPOSAL 2. RATIFICATION OF APPOINTMENT OF AUDITORS**

For 2023, the Audit Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the independent registered public accounting firm to audit our financial statements. The Audit Committee and the Board believe that the continued retention of Deloitte to serve as our independent auditors is in the best interests of the Company and its stockholders.

☑ **The Board of Directors unanimously recommends voting FOR the ratification of the appointment of Deloitte as our independent auditors for 2023.**

# ▲ **PROPOSAL 3. SAY-ON-PAY**

In recent years, Avanos management has engaged with our stockholders, listened to constructive feedback and, in consultation with our Compensation Committee’s independent compensation consultant, made changes to our executive compensation program. We believe those changes resulted in a compensation program in 2022, including as applied to our named executive officers, that appropriately incents management, reflects the objective of pay-for-performance, and is generally aligned with our overall business strategy, values and management initiatives. The Compensation Committee believes that the Company’s executive compensation program is also aligned with stockholder interests.

☑ **The Board of Directors unanimously recommends a vote FOR approval of the compensation paid to our named executive officers.**

# ▲ **PROPOSAL 4. AMENDMENT OF 2021 LONG TERM INCENTIVE PLAN**

This proposal asks stockholders to approve an amendment to the Company’s 2021 Long Term Incentive Plan (the “2021 Plan”) to increase the number of shares of common stock reserved for issuance thereunder by 1,250,000 shares. Our Compensation Committee believes the number of shares currently available for future awards under the 2021 Plan will not be sufficient to make the grants it believes will be needed over the next few years to provide adequate long-term equity incentives to our key employees, consultants and advisors. Considering our historical grant practices, we believe we have been judicious in our share usage under the 2021 Plan and the Company’s prior equity incentive plan, and mindful of potential stockholder dilution. Approval of the proposed amendment will enable the Company to continue to make equity compensation grants that serve as incentives to recruit and retain key employees and to continue aligning the interests of the Company’s employees and its stockholders.

Based on the number of additional shares requested to be reserved under the 2021 Plan and on our anticipated future grant cycles, we expect that the number of shares reserved for issuance will be sufficient to cover future equity incentive awards for approximately two to three years.

☑ **The Board of Directors unanimously recommends a vote FOR approval of the proposal to amend the 2021 Plan.**

AVANOS

2023 Notice and Proxy Statement ▲ 3

2023 PROXY STATEMENT SUMMARY

## HOW TO VOTE

| Shareholders of Record |  | Beneficial Owners |
| --- | --- | --- |
| Have your proxy card in hand and follow the instructions. |  | If you are a beneficial owner and your shares are held in “street name” by a bank, broker or other nominee, you should follow the instructions provided to you by that firm. Although most banks and brokers now offer voting by mail, telephone and internet, availability and specific procedures will depend on their voting arrangements. |
| BY TELEPHONE | Dial toll-free, 24/7 1-800-690-6903 |  |
| BY INTERNET | Visit, 24/7 www.proxyvote.com |  |
| BY MAIL | Complete, date and sign your proxy card and send by mail in the enclosed postage-paid envelope |  |
| IN PERSON | Attend the Annual Meeting and cast your ballot |  |
| The deadline to vote by phone or electronically is 11:59 p.m. Eastern Time on April 26, 2023. If you vote by phone or internet, you do not need to return a proxy card. |  |  |

4 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

2023 PROXY STATEMENT SUMMARY

## BOARD OF DIRECTORS OVERVIEW

| Director and Principal Occupation | Age | Director Since | Independent | Audit | Compensation | Compliance | Governance |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Gary D. Blackford ★ Former Chairman and CEO, Universal Hospital Services | 65 | 2014 | ☑ |  | ☺ |  |  |
| John P. Byrnes Former Chairman and CEO, Lincare Holdings, Inc. | 64 | 2014 | ☑ | ⚠ |  | ☺ | ⚠ |
| Dr. Lisa Egbuonu-Davis Vice President, Medical Innovations DH Diagnostics, LLC | 65 | 2023 | ☑ |  |  | ⚠ | ⚠ |
| Patrick J. O'Leary Former Executive Vice President and CFO, SPX Technologies, Inc. | 65 | 2014 | ☑ | ☺ ☺ | ⚠ |  |  |
| Julie Shimer, Ph.D. Former CEO, Welch Allyn, Inc | 70 | 2014 | ☑ | ⚠ |  |  | ☺ |
| Joseph F. Woody | 57 | 2017 |  |  |  |  |  |
| Number of meetings in 2022 |  |  | Board - 9 | 4* | 5 | 6* | 3 |

★ Chairman of the Board | ☺ Committee Chair | ⚠ Committee Member | ☺ Audit Committee financial expert

* Includes two joint meetings of the Audit and Compliance Committees.

![img-0.jpeg](img-0.jpeg)

![img-1.jpeg](img-1.jpeg)

![img-2.jpeg](img-2.jpeg)

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 5

2023 PROXY STATEMENT SUMMARY

## Environmental, Social and Governance (ESG) and Other Corporate Governance Highlights

We believe there is a direct connection between good ESG practices and sustained business success, and we believe it is important to uphold sound ESG practices.

### Corporate Citizenship

Being a good corporate citizen means that our care extends beyond the patients who benefit from our products. Our culture is based on a commitment to operating ethically and responsibly and complying with all applicable laws and regulations around the world.

We partner with suppliers that mirror our integrity by offering quality products, while also focusing on operating safely and sustainably.

Our commitment to corporate citizenship is reflected in our strong stand on opioid abuse - an epidemic with far-reaching societal effects. Avanos is committed to helping reduce and eliminate opioid abuse by offering alternate methods of pain relief. We believe that by living our values and working collaboratively, we will achieve our vision of being the best at getting patients back to the things that matter.

Our Compliance Committee oversees the Company’s ESG and corporate citizenship policies, programs and initiatives. Highlights of our commitment to ESG are described below.

**Environmental.** Striving for clean air, clean water and a healthy environment is fundamental to the way we manufacture our products. We recently upgraded our environmental software to help us define and monitor our carbon footprint and report metrics related to waste, energy usage and regulatory activity in all our facilities and buildings.

Our key environmental priorities are focused on: (i) reducing waste, including through recycling and minimizing scrap in our production processes; (ii) tracking and managing Scope 1 (direct) and Scope 2 (indirect) greenhouse gas emissions from electricity and other energy generated offsite or

purchased by Avanos; and (iii) measuring and managing water usage and ensuring that effluent water is returned in accordance with applicable guidelines.

Our product packaging helps ensure the quality and safe delivery of our products to customers around the world. In designing product packaging, we seek to optimize patient safety and customer ease of use, while also meeting environmental, sterilization and supply chain needs. We incorporate sustainable packaging considerations early in the product design process to balance environmental concerns with the need to protect product quality and transport products efficiently and economically.

**Social.** The Avanos Code of Conduct provides guidance for dealing with our customers, suppliers, employees, competitors and the public with integrity and in an ethical and appropriate manner.

We respect international social compliance principles aimed at promoting and protecting human rights. We integrate human rights into our direct and contracted operations. These values are formalized in the Avanos Human Rights in Employment Policy and Instructions, which aligns with the goals of several international standards, including the International labor Organization’s Declaration on Fundamental Principles and Rights at Work.

Avanos also promotes human rights in its supply chain through its Supplier Social Compliance Standards, which are designed to identify, prevent, mitigate and account for human rights violations, with a focus on countries at high risk for human rights abuses. We strive to do business with suppliers that share our values of quality, service and fair dealing, and our commitment to being a responsible corporate citizen. In selecting new suppliers, Avanos uses a multi-level due diligence process that involved surveys, reviews of supplier policies and procedures, and background/reference checks.

6 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

2023 PROXY STATEMENT SUMMARY

**Governance.** We believe that good governance is integral to achieving long-term value for all our

stakeholders. The governance best practices we follow are summarized in the table below.

# GOVERNANCE BEST PRACTICES

- Separate Chairman and CEO roles
- 5 of our 6 directors are independent, including all members of our Audit, Compensation, Governance and Compliance Committees
- Board has responsibility for risk oversight
- Independent directors regularly meet without management present
- Board is diverse in age, gender, skills and experience
- Two of our directors are women, including one who is African American.
- Active stockholder engagement
- Periodic review of long-term management development and succession plans

**Diversity, Equity and Inclusion.** Avanos' commitment to diversity, equity and inclusion ("DE&I") supports the Company's goal of achieving success as we continue to grow our business and develop our workforce. Our commitment is also reflected in the important role that our DE&I Council plays in our governance practices. Founded in 2021, the DE&I Council is comprised of employees from various salary levels, functional departments and representatives from all the global regions in which the Company operates. Our Board receives reports from the DE&I Council regarding its objectives and activities.

The DE&I Council plays a critical role by:
(i) implementing Avanos' DE&I strategy and policies; (ii) ensuring that DE&I is an integral part

of the Avanos culture; (iii) providing governance and oversight with respect to our DE&I endeavors; (iv) advising senior leadership on Avanos' DE&I strategies to ensure they are in alignment with our overall business strategy, while capturing suggestions for improvements; and (v) recommending actions to implement, enhance and drive accountability for DE&I metrics. Ultimately, the DE&I Council aims 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.

Set out below are key 2022 DE&I statistics for Avanos.

3 of 7

executive officers are ethnically diverse, including 1 woman

30%

of global director level and above employees are women

44%

of global salaried employees are women

30%

of U.S. salaried employees are ethnically diverse

**Health and Safety: COVID-19 Response.** Avanos takes its commitment to the ongoing health and safety of its employees seriously. 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.

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. In 2022, our OSHA recordable incident rate was 0.14 per 100 employees. 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. 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.

**Employee Engagement and Retention.** We believe that employees who are engaged in their

AVANOS

2023 Notice and Proxy Statement ▲ 7

2023 PROXY STATEMENT SUMMARY

roles, treated as partners in the business and recognized for their efforts are more satisfied and productive. We foster employee engagement through an employee recognition program and ongoing, two- way communications, including videos and podcasts, that allow employees to engage with and hear directly from members of the executive team. In addition, we support our employees' development through our Education Assistance Policy, which enables employees to receive tuition reimbursement for qualifying coursework.

In 2021, we implemented a multi-tiered employee retention strategy. The key elements of this strategy include: (i) enhanced compensation and rewards 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; and (iii) recognizing employees for their efforts through a variety of awards, spotlights and appreciation events.

## Executive Compensation Highlights

Pay-for-performance is a key objective of our compensation program. Consistent with that objective, performance-based compensation constituted a significant portion of our named executive officers' total direct annual compensation for 2022. To further align the financial interests of our executives with those of our stockholders, a majority of our executives' total direct annual compensation for 2022 was performance-based.

![img-3.jpeg](img-3.jpeg)

\* Percentage of 2022 target equity grant value.

8 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

2023 PROXY STATEMENT SUMMARY

## COMPENSATION PRACTICES AND POLICIES

The design principles for our executive compensation program are intended to protect and promote the interests of our stockholders.

| WHAT WE DO | WHAT WE DON'T DO |
| --- | --- |
| ☑ Pay for performance | ☒ No employment contracts |
| ☑ Perform an annual compensation risk assessment | ☒ No excise tax gross-up on change-in-control payments |
| ☑ Utilize an independent compensation consultant retained by the Compensation Committee | ☒ No repricing of underwater options without stockholder approval |
| ☑ Require that change-in-control agreements contain a double trigger severance requirement | ☒ No current payment of dividends or dividend equivalents on unearned long-term incentives |
| ☑ Maintain stock ownership guidelines | ☒ No executive officer hedging or pledging transactions involving Company stock |
| ☑ Entitle the Compensation Committee to seek a clawback of incentive payments in case of financial restatement | ☒ Only minimal perquisites such as relocation benefits |
| ☑ Benchmark our compensation practices to ensure executive compensation is competitive with our peer group |  |
| ☑ Cap short and long-term incentive payments at reasonable levels |  |

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 9

# INFORMATION ABOUT THE ANNUAL MEETING

On behalf of the Board of Directors of Avanos Medical, Inc., we are soliciting your proxy for the 2023 Annual Meeting of Stockholders.

WHEN

Thursday, April 27, 2023
9:00 a.m. Eastern Time

WHERE

Avanos Medical, Inc.
5405 Windward Parkway
Alpharetta, Georgia 30004

RECORD DATE

Stockholders of record at the close of business on March 3, 2023 are entitled to notice of and to vote at the Annual Meeting

At the Annual Meeting, the stockholders will vote on the following matters:

Proposals

| 1 To elect as directors the six nominees named in this proxy statement for a one-year term; | 4 To approve an amendment to the Company's 2021 Long Term Incentive Plan to increase the number of shares of common stock reserved for issuance thereunder by 1,250,000 shares; and |
| --- | --- |
| 2 To ratify the appointment of Deloitte & Touche LLP as the Company's independent auditors for 2023; | 5 To take action upon any other business that may properly come before the meeting or any adjournment of the meeting. |
| 3 To approve on an advisory basis the compensation of our named executive officers; |  |

Our Board of Directors recommends that you vote your shares FOR the nominees in Proposal 1 and FOR each of Proposals 2, 3, 4 and 5.

## How We Provide Proxy Materials

We began providing our proxy statement and form of proxy to stockholders on March 17, 2023.

As permitted by rules of the Securities and Exchange Commission ("SEC"), we are making this proxy statement and our 2022 Annual Report available to many of our stockholders via the internet rather than by mail. This reduces printing and delivery costs and supports our sustainability

efforts. You may have received in the mail a "Notice of Electronic Availability" explaining how to access this proxy statement and our 2022 Annual Report on the internet and how to vote online. If you received this Notice but would like to receive a paper copy of the proxy materials, you should follow the instructions contained in the Notice for requesting these materials.

## Who May Vote

If you were a stockholder of record at the close of business on March 3, 2023, you are eligible to vote at the Annual Meeting. Each share of our common stock that you own entitles you to one vote. Shares may not be voted cumulatively.

As of the record date, 46,604,128 shares of common stock were outstanding.

If your shares are held by a bank or brokerage firm, you are considered a "beneficial owner" of the shares held in "street name." If your shares are held in street name, your bank or brokerage firm (the record holder of your shares) forwarded to you these proxy materials, along with a voting instruction card. As the beneficial owner, you have the right to direct your record holder how to vote your shares, and the record holder is required

10 ▲ 2023 Notice and Proxy Statement

AVANOS

INFORMATION ABOUT THE ANNUAL MEETING

to vote your shares in accordance with your instructions. If you do not give instructions to your bank or brokerage firm, it will nevertheless be entitled to vote your shares with respect to “routine” matters but it will not be permitted to

## How to Vote

If you are the record holder of your shares as of the record date, you may vote by using the telephone or internet, by completing and returning the enclosed proxy card by mail, or by voting at the Annual Meeting.

To vote by telephone or internet, see the instructions on the proxy card and have the proxy card available when you place your telephone call or access the internet website. To vote your proxy by mail, mark your vote on the proxy card, then follow the instructions on the card to return it by postage-prepaid mail.

If your shares are held in street name, please follow the instructions on the voting instruction card to vote your shares.

If you are the record holder of your shares and you attend the Annual Meeting, you may vote at that time. Beneficial owners of shares held in street name who wish to vote at the Annual Meeting will need to obtain a power of attorney or proxy from their record holder to do so.

If you return a completed and properly signed proxy card prior to the meeting, or if you vote by telephone or internet prior to the meeting, the persons named as proxies on the proxy card will

vote your shares with respect to “non-routine” matters. In the case of non-routine matters, your shares will be considered “broker non-votes” on those proposals.

vote your shares according to your directions. The voting results will be certified by independent Inspectors of Election.

If you are a stockholder of record and you sign and return your proxy card, or if you vote by using the telephone or internet, but you do not specify how you want to vote your shares, the persons named as proxies on the proxy card will vote your shares as follows:

- FOR the election of the six directors named in this proxy statement;
- FOR ratification of the selection of Deloitte & Touche LLP as the Company’s independent auditors for 2023;
- FOR approval of the compensation of our named executive officers; and
- FOR approval of the proposal to amend the 2021 Plan to increase the number of shares of common stock reserved for issuance thereunder by 1,250,000 shares.

If any other matters are properly presented at the Annual Meeting for consideration, the persons named as proxies on the proxy card will vote as recommended by the Board of Directors or, if no recommendation is given, in their discretion.

## How to Revoke or Change Your Vote

If you are a stockholder of record, there are several ways to revoke or change your vote:

- Mail a revised proxy card or a written notice of revocation with a later date to the Corporate Secretary of the Company. The revised proxy card or notice of revocation must be received by close of business on April 26, 2023. Use the following address:

Avanos Medical, Inc.
Attn: Corporate Secretary
5405 Windward Parkway
Suite 100 South
Alpharetta, GA 30004

- Use the telephonic voting procedures or internet voting website. The revocation or change must be completed by 11:59 p.m. Eastern Time on April 26, 2023.
- Attend the Annual Meeting and vote. Please note that attendance at the Annual Meeting will not revoke a proxy if you do not actually vote at the meeting.

If you hold your shares in street name, the above options for changing your vote or revoking your instructions do not apply and you must follow the instructions received from your bank or broker to change your vote or revoke your proxy.

AVANOS

2023 Notice and Proxy Statement ▲ 11

INFORMATION ABOUT THE ANNUAL MEETING

## Votes Required

There must be a quorum to conduct business at the Annual Meeting, which is established by having a majority of the outstanding shares of our common stock present in person or represented by proxy at the Annual Meeting. If you vote, your shares will be included in the number of shares

to establish the quorum. Abstentions (or “Withhold” votes for the election of directors) or proxy cards returned without voting instructions and broker non-votes will be counted as present for the purpose of determining whether the quorum requirement is satisfied.

| Proposal | Voting Policy |
| --- | --- |
| 1 Election of directors | Plurality plus |
| 2 Ratification of appointment of auditors | Affirmative vote of a majority of the shares present and entitled to vote |
| 3 Say-on-Pay | Affirmative vote of a majority of the shares present and entitled to vote |
| 4 Amendment of 2021 Plan | Affirmative vote of a majority of the shares present and entitled to vote |

## How Withhold Votes and Abstentions Will Be Counted

### ELECTION OF DIRECTORS

“Withhold” votes for the election of directors will be counted for the purpose of determining the

presence of a quorum and the number of votes cast and, in effect, as votes “against” a nominee.

### OTHER PROPOSALS

Abstentions will be counted:

- In determining the presence of a quorum;

- In determining the total number of shares entitled to vote on a proposal; and
- As votes against a proposal.

## Effect of Not Instructing Your Broker

### ROUTINE MATTERS

If your shares are held in street name and you do not instruct the broker on how to vote your shares, your broker may choose to leave your shares un-voted or to vote your shares on

routine matters. “Proposal 2 - Ratification of Auditors” is the only routine matter on the agenda at this year’s Annual Meeting.

### NON-ROUTINE MATTERS

Without instructions from you on how to vote your shares, your broker cannot vote your shares on non-routine matters, including Proposals 1, 3, 4 and 5, resulting in what are known as “broker

non-votes.” Broker non-votes will not be considered present or entitled to vote on non-routine matters and will also not be counted for the purpose of determining the number of votes cast on these proposals.

12 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

INFORMATION ABOUT THE ANNUAL MEETING

## ELECTION OF DIRECTORS

The Company has a “plurality-plus” voting policy for directors in uncontested elections. Under our “plurality-plus” voting policy, if any nominee for director receives a greater number of votes “withheld” than votes “for” such nominee in an uncontested election, he or she will promptly tender his or her resignation. The Governance Committee, without the participation of the director who tendered his or her resignation, will then take action to accept or reject the director’s resignation and submit its recommendation to the full Board of Directors. The full Board of Directors,

## OTHER PROPOSALS OR MATTERS

Approval of other matters at the Annual Meeting requires the affirmative vote of a majority of shares that are present at the Annual Meeting (in person or by proxy) and entitled to vote on the proposal.

## Attending the Annual Meeting

If you are a stockholder of record, you or your duly appointed representative may attend the Annual Meeting. Returning your proxy card will not affect your right to attend the Annual Meeting and to vote. If you do plan to attend, we ask that you inform us by e-mail, by telephone, or by checking the appropriate box on your proxy form.

If you are not a stockholder of record but hold shares as a beneficial owner in street name, you may be required to provide proof of beneficial ownership, such as your account statement reflecting your ownership as of the Record Date, a copy of the voting instruction provided by your

## Costs of Solicitation

The Company will bear all costs of this proxy solicitation, including the cost of preparing, printing and delivering materials, and the out-of-pocket expenses of brokers, fiduciaries and other nominees who forward proxy materials to stockholders. In addition to mail and electronic means, our employees may solicit proxies by

without the participation of the director who tendered his or her resignation, will accept or reject the resignation within 90 days of the certification of the election results and, if it chooses not to accept the resignation, will promptly disclose its decision in a Current Report on Form 8-K or other filing with the SEC. Further details about our “plurality plus” policy are included in our Corporate Governance Policies, which are available in the Investors section of our website at www.avanos.com.

If you are a stockholder of record and you do not sign and return a proxy card or vote by telephone or over the internet, your shares will not count toward the quorum requirement and will not affect the outcome of any proposal at the Annual Meeting.

broker, bank, trustee, or nominee, or other similar evidence of ownership.

To register to attend the Annual Meeting, or if you have questions about the Annual Meeting, please contact Stockholder Services as follows:

BY PHONE 470-448-5000

BY E-MAIL stockholderservices@avanos.com

telephone or otherwise. Our employees will not receive additional compensation for such solicitations. We have retained D. F. King & Co., Inc., to aid in the solicitation at a cost of approximately $12,500 plus reimbursement of out-of-pocket expenses.

AVANOS

2023 Notice and Proxy Statement ▲ 13

# CORPORATE GOVERNANCE

Our governance structure and processes are based on a number of important governance documents, including our Code of Conduct, Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), Bylaws, Corporate Governance Policies and our Board Committee Charters. These documents, which are available in the Investors section of our website at www.avanos.com, guide the Board and our management in the execution of their responsibilities.

The Company believes there is a direct connection between good corporate governance and long-term, sustained business success, and we believe it is important to uphold sound governance practices. As such, the Board reviews its

governance practices and documents on an ongoing basis, and it monitors and considers changing regulatory requirements, governance trends and issues raised by our stockholders. After careful evaluation, we may periodically make governance changes in view of these matters to maintain current good governance practices and promote stockholder value.

We believe we are in compliance with all applicable corporate governance requirements of the New York Stock Exchange (“NYSE”), the SEC, the Sarbanes-Oxley Act of 2002 and the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that are effective as of the date of this proxy statement.

## Board Leadership Structure

![img-4.jpeg](img-4.jpeg)

Gary D. Blackford has served as the Chairman of the Board (“Chairman”) since April 2020 and as a member of the Board since October 2014. It is the Board’s view at this time that having separate Chairman and CEO roles promotes candid discourse and responsible corporate governance.

The Board, however, retains the discretion to combine the Chairman and CEO roles and appoint an independent lead director at any time if it deems that to be in the best interests of our Company and stockholders.

Consistent with this leadership structure, at least once each quarter our Chairman, who is an independent director, chairs executive sessions of our non-management directors. Members of the Company’s senior management team do not attend these sessions.

Gary D. Blackford serves as our independent Chairman. Our Corporate Governance Policies outline the significant roles and responsibilities of the Chairman, which include:

- Presiding over meetings of the Board and stockholders and providing perspective to the CEO regarding discussions at these meetings;
- Chairing executive sessions at which non-management directors meet outside management’s presence, and providing feedback from such sessions to the CEO;
- Coordinating the activities of the independent directors and serving as a

liaison between the independent directors, as a group, and the CEO;

- Approving agendas and schedules for Board meetings;
- Reviewing, approving and revising materials for distribution to the Board, in connection with Board meetings or otherwise, as appropriate;
- Leading (with the Chair of the Governance Committee) the annual Board evaluation;
- Leading (with the Chair of the Compensation Committee) the Board’s review and discussion of the CEO’s performance and compensation;
- Providing feedback to individual directors following their periodic evaluations;
- Acting as a direct conduit to the Board for stockholders, employees and others according to the Board’s policies; and
- Assuming such other responsibilities that the Board may designate from time to time.

14 ▲ 2023 Notice and Proxy Statement

AVANOS

CORPORATE GOVERNANCE

## Director Independence

We believe our independent board helps ensure good corporate governance and strong internal controls.

Our Corporate Governance Policies provide independence standards consistent with the rules and regulations of the SEC and the listing standards of the NYSE. Our independence standards can be found in Section 17 of our Corporate Governance Policies, available in the Investors section of our website at www.avanos.com.

The Governance Committee of the Board has determined that all our directors, other than our CEO, Joseph F. Woody, are independent directors and meet the independence standards in our Corporate Governance Policies. The Governance Committee also determined that Maria Sainz, who served as one of our directors throughout 2022 before resigning effective January 1, 2023, was independent while she served on the Board.

## Board Meetings

| 9 | 100% | 100% |
| --- | --- | --- |
| Board meetings held in 2022 | of our incumbent directors attended more than 75% of Board and applicable committee meetings in 2022* | attendance at the 2022 Annual Meeting of Stockholders by our directors |

The Board of Directors met nine times in 2022. All our incumbent directors attended in excess of 75 percent of the total number of meetings of the Board and the committees on which they served during 2022.*

Although we do not have a formal policy with respect to director attendance at annual meetings, all our directors attended the 2022 Annual Meeting, and we expect that all directors will be in attendance at the 2023 Annual Meeting.

## Board Committees

In 2022, the standing Committees of the Board consisted of the:

- Audit Committee;
- Compensation Committee;
- Compliance Committee; and
- Governance Committee.

In compliance with applicable NYSE corporate governance listing standards, the Board has adopted charters for all the Committees.

In April 2022, the Executive Committee of the Board was dissolved. The Executive Committee did not meet in 2022 prior to its dissolution.

Our Committee charters are available in the Investors section of our website at www.avanos.com.

As set forth in our Corporate Governance Policies, and in the charter of each individual Committee, the Board's Committees all have the authority to retain independent advisors and consultants, with all costs paid by the Company.

* Does not include Dr. Lisa Egbuonu-Davis, who was appointed to the Board effective March 6, 2023 to fill a vacancy.

AVANOS

2023 Notice and Proxy Statement ▲ 15

CORPORATE GOVERNANCE

| Director | Committee Memberships |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | Independent | Audit | Compensation | Compliance | Governance |
| Gary D. Blackford * | ☑ |  | ☐ |  |  |
| John P. Byrnes | ☑ | ☐ |  | ☐ | ☐ |
| Lisa Egbuonu-Davis, MD | ☑ |  |  | ☐ | ☐ |
| Patrick J. O'Leary | ☑ | ☐ | ☐ | ☐ |  |
| Julie Shimer, Ph.D. | ☑ | ☐ |  |  | ☐ |
| Joseph F. Woody |  |  |  |  |  |
| Committee meetings in 2022 |  | 4* | 5 | 6* | 3 |
| ☐ Chairman of the Board | ☐ Committee Chair | ☐ Committee Member | ☐ Audit Committee financial expert |  |  |

*Includes two joint meetings of the Audit and Compliance Committees.

### AUDIT COMMITTEE

**MEMBERS**

**Patrick J. O'Leary** ☐
**John P. Byrnes**
**Dr. Julie Shimer**

Meetings in 2022: 4
(includes 2 joint meetings of the Audit and Compliance Committees)

☑ ALL MEMBERS ARE INDEPENDENT

### PRIMARY RESPONSIBILITIES

The Audit Committee's principal functions, as specified in its charter, include:

- Overseeing:
  - The quality and integrity of our financial statements;
  - Our compliance programs in coordination with the Compliance Committee;
  - Our hedging strategies and policies;
  - The independence, qualification and performance of our independent auditors; and
  - The performance of our internal auditors.
- Selecting and engaging our independent auditors, subject to stockholder ratification.
- Pre-approving all audit and non-audit services that our independent auditor provides.
- Reviewing the scope of audits and audit findings, including any comments or recommendations of our independent auditors.
- Establishing policies for our internal audit programs.
- Overseeing our risk management program and receiving periodic reports from management on risk assessments, the risk management process, and issues related to the risks of managing our business.

- The Board has determined that: (i) one of the three Audit Committee members is an "audit committee financial expert" under SEC rules and regulations and (ii) all three members of the Audit Committee satisfy the NYSE's financial literacy requirements and qualify as independent audit committee members under our Corporate Governance Policies and consistent with the NYSE's listing standards.
- No member of the Audit Committee serves on the audit committee of more than three public companies. Under our Audit Committee charter and NYSE corporate governance listing standards, if a member were to serve on more than three such committees, the Board would then determine whether this situation impairs the member's ability to serve effectively on our Audit Committee, and we would post information about this determination on the Investors section of our website at www.avanos.com.

### AUDIT COMMITTEE REPORT

- For additional information about the Audit Committee's oversight activities with respect to our 2022 financial statements, see "Proposal 2, Ratification of Auditors - Audit Committee Report."

16 ▲ 2023 Notice and Proxy Statement

AVANOS

CORPORATE GOVERNANCE

# COMPENSATION COMMITTEE

![img-0.jpeg](img-0.jpeg)

# MEMBERS

Gary D. Blackford
Patrick J. O'Leary

Meetings in 2022: 5

ALL MEMBERS ARE INDEPENDENT

# PRIMARY RESPONSIBILITIES

The Compensation Committee's principal functions, as specified in its charter, include:

- Establishing and administering the policies governing annual compensation and long-term compensation, including time-based restricted share awards, performance-based restricted share awards and stock option awards, such that the policies are designed to align compensation with our overall business strategy and performance;
- Setting, after an evaluation of his overall performance, the compensation level of the CEO;
- Determining, in consultation with the CEO, compensation levels and performance targets for our other executive officers;
- Setting annual targets and certifying awards for corporate performance under our corporate incentive compensation plans; and
- Advising the Board on outside director compensation.

# Overseeing:

- Leadership development for senior management and future senior management candidates;
- A periodic review of our long-term and emergency succession planning for the CEO and other key officer positions, in conjunction with our Board; and
- Key organizational effectiveness and engagement policies.

# Reviewing:

- Our diversity and inclusion programs and related metrics;
- Key human resource policies and practices related to workplace environment and culture, organizational engagement and employee recruitment and retention; and
- Our compensation policies and practices for the purpose of mitigating risks arising from these policies and practices that could reasonably have a material adverse effect on the Company.

# ROLES OF THE COMMITTEE AND CEO IN COMPENSATION DECISIONS

Each year, the Compensation Committee reviews and approves the compensation of our named executive officers, including our CEO, and certain other officers (collectively, the "Covered Officers"). The Compensation Committee's charter does not permit the Committee to delegate to anyone the authority to establish any compensation policies or programs for the executive officers. With respect to officers other than the Covered Officers, our CEO has the authority to establish compensation programs and, subject to certain limits, to approve equity grants. However, only the Compensation Committee may make equity grants to our executive officers.

Our CEO makes a recommendation to the Compensation Committee each year on the

appropriate target annual compensation for each of the Covered Officers. The Compensation Committee makes the final determination of the target annual compensation for each Covered Officer. While our CEO typically attends Compensation Committee meetings, none of the other executive officers is present during the portion of the Committee meetings when their compensation is set. In addition, our CEO is not present during the portion of any Compensation Committee meeting when his compensation is set.

For additional information on the Compensation Committee's processes and procedures for determining executive compensation, and for a detailed discussion of our compensation policies, see "Compensation Discussion and Analysis."

AVANOS

2023 Notice and Proxy Statement 17

CORPORATE GOVERNANCE

## USE OF COMPENSATION CONSULTANTS

The Compensation Committee's charter authorizes the Committee to retain advisors, including compensation consultants, to assist it in its work. The Committee believes that compensation consultants can provide important market information and perspectives that can help it determine compensation programs that best meet the objectives of our compensation policies. In selecting a consultant, the Compensation Committee evaluates the independence of the firm as a whole and of the individual advisors who will be working with the Committee.

The Compensation Committee retains an independent compensation consultant who, according to the Committee's written policy, provides services solely to the Committee and not to the Company. The Compensation Committee's consultant has no other business relationship with the Company and receives no payments from the Company other than fees for services to the Committee. The consultant reports directly to the Committee, and the

Committee may replace the consultant or hire additional consultants at any time. The Compensation Committee has selected Meridian Compensation Partners, LLC ("Meridian") as its independent consultant.

In 2022, the scope of Meridian's activities included:

- Conducting a review of the executive compensation peer group;
- Benchmarking the compensation of the Covered Officers;
- Reviewing and commenting on the Company's executive compensation programs;
- Conducting a risk assessment of the Company's executive compensation programs;
- Attending Compensation Committee meetings; and
- Periodically consulting with the Chair of the Compensation Committee.

## COMMITTEE ASSESSMENT OF CONSULTANT CONFLICTS OF INTEREST

The Compensation Committee has reviewed whether the work provided by Meridian raises any conflict of interest. Factors considered by the Committee include:

1. Whether other services are provided to the Company by the consultant;
2. What percentage of the consultant's total revenue is made up of fees from the Company;
3. Policies or procedures of the consultant that are designed to prevent a conflict of interest;

4. Any business or personal relationships between individual consultants involved in the engagement and Committee members;
5. Any shares of the Company stock owned by individual consultants involved in the engagement; and
6. Any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement.

Based on its review, the Compensation Committee does not believe that Meridian's services to the Committee in 2022 raised a conflict of interest with respect to the work they performed for the Committee.

## COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed the "Compensation Discussion and Analysis" section of this proxy statement and has recommended that it be included in this proxy statement. The

Committee's report is located at "Compensation Discussion and Analysis - Compensation Committee Report."

18 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

CORPORATE GOVERNANCE

# COMPLIANCE COMMITTEE

![img-1.jpeg](img-1.jpeg)

# MEMBER*

John P. Byrnes
Dr. Lisa Egbuonu-Davis

Meetings in 2022: 6

(includes 2 joint meetings of the Audit and Compliance Committees)

ALL MEMBERS ARE INDEPENDENT

# PRIMARY RESPONSIBILITIES

The Compliance Committee's principal functions, as specified in its charter, include the following:

- Overseeing the Company's compliance program in the areas of:
  - Code of Conduct
  - Conflicts of Interest
  - Consumer Protection
  - Customs and Export Controls
  - Environment
  - Ethics
  - False Claims
  - Foreign Corrupt Practices Act and Similar Anti-Bribery Laws
  - Fraud and Abuse Laws including Anti-Kickback
  - Government Reimbursement Programs, including Medicare
  - Government Relations
  - Health and Safety
  - Interactions with Healthcare Professionals
  - Information Systems Security
  - Intellectual Property
  - International Distributors
  - Labor & Employment
  - Physical Security
  - Public Policy
  - Quality
  - Recalls
  - Regulatory, including FDA
  - Safety
  - Sales of Products or Services to US or Foreign Governments, including entities owned by such governments
  - Sunshine Act and Other Laws Relating to Reporting of and Transparency with Respect to Payments to Healthcare Professionals
  - Transportation
- Overseeing the Company's sustainability, corporate social responsibility and corporate citizenship matters.
- Monitoring the Company's efforts to implement programs, policies and procedures relating to compliance matters.
- Overseeing the investigation of any significant instances of non-compliance with laws or the Company's compliance program, policies or procedures, other than any instances involving financial non-compliance.
- Reviewing the Company's compliance risk assessment plan.
- Identifying and investigating emerging compliance issues and trends that may affect the Company.

ΔVΔNOS

2023 Notice and Proxy Statement 19

CORPORATE GOVERNANCE

| GOVERNANCE COMMITTEE |  |
| --- | --- |
|  | MEMBERS* Dr. Julie Shimer 📍 John P. Byrnes Dr. Lisa Egbuonu-Davis |
|  | Meetings in 2022: 3 ☑ ALL MEMBERS ARE INDEPENDENT |
| PRIMARY RESPONSIBILITIES The Governance Committee's principal functions, as specified in its charter, include: Overseeing the screening and recruitment of prospective Board members and making recommendations to the Board regarding specific director nominees, as well as overseeing the process for Board nominations; Overseeing corporate governance matters, including developing and recommending to the Board changes to our Corporate Governance Policies; and Advising the Board on: Board organization, membership, function and performance. Committee structure and membership. | Reviewing director independence standards and making recommendations to the Board with respect to the determination of director independence. Monitoring and recommending improvements to the Board's practices and procedures. Reviewing stockholder proposals and considering how to respond to them. The Committee, in accordance with its charter and our Certificate of Incorporation, has established criteria and processes for director nominations, including those proposed by stockholders. Those criteria and processes are described in "Proposal 1. Election of Directors - Process and Criteria for Nominating Directors" and "Other Information - Stockholder Nominations for Board of Directors." |

20 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

CORPORATE GOVERNANCE

## Communicating with Directors

The Board has established processes by which stockholders and other interested parties may communicate with the Board, as well as with the

Audit Committee and Compliance Committee. Those processes can be found in the Investors section of our website at www.avanos.com.

## Other Corporate Governance Policies and Practices

### CORPORATE GOVERNANCE POLICIES

The Board has adopted Corporate Governance Policies. These policies guide the Company and the Board on matters of corporate governance, including:

- Director responsibilities;
- Board committees and their charters;
- Director independence;
- Director compensation and performance assessments;

- Director orientation and education;
- Director access to management;
- Board access to outside financial, business, and legal advisors; and
- Management development and succession planning.

To see these policies, go to the Investors section of our website at www.avanos.com.

### CODE OF CONDUCT

The Company has a Code of Conduct that applies to all of our directors, executive officers and employees, including our CEO, Chief Financial Officer and Controller. It is available in the Investors section of our website at

www.avanos.com. Any amendments to or waivers of our Code of Conduct applicable to our CEO, Chief Financial Officer or Controller will also be posted at that location.

### BOARD AND MANAGEMENT ROLES IN RISK OVERSIGHT

The Board is responsible for providing risk oversight with respect to our operations. In connection with this oversight, the Board particularly focuses on our strategic and operational risks, as well as related risk mitigation.

In addition, the Board reviews and oversees management's response to the key risks facing the Company. The Board's committees review particular risk areas to assist the Board in its overall risk oversight of the Company.

| COMMITTEES |  |  |  |
| --- | --- | --- | --- |
| AUDIT | COMPENSATION | COMPLIANCE | GOVERNANCE |
| The Audit Committee monitors risks relating to such matters as our: • Internal controls; • Cybersecurity; • Financial statement integrity and fraud risks; and • Related risk mitigation. In connection with this oversight, the Audit Committee receives regular reports from management on: • Risk assessments; • The risk management process; and • Issues related to the risks of managing our business. | The Compensation Committee reviews the risk profile of our compensation policies and practices. This process includes an assessment of our compensation programs, as described in "Compensation Discussion and Analysis - Analysis of Compensation-Related Risks." | The Compliance Committee monitors risks relating to certain compliance matters, such as those described in the section "Compliance Committee," and recommends appropriate actions in response to those risks. | The Governance Committee monitors risks relating to governance matters and recommends appropriate actions in response to those risks. |

AVANOS

2023 Notice and Proxy Statement ▲ 21

CORPORATE GOVERNANCE

Complementing the Board's overall risk oversight, our senior executive team identifies and monitors key enterprise-wide and business unit risks, providing the basis for the Board's risk review and oversight process. Our senior management team is supported by management members from business units and from our finance, treasury, information technology, global risk management, compliance, internal audit and legal functions. Management identifies significant risks for review and updates our policies for risk management in

areas such as hedging, foreign currency, and country risks, product liability, property and casualty risks, and supplier and customer risks. The Board believes this allocation of risk management responsibilities supplements the Board's leadership structure by allocating risk areas to an appropriate committee for oversight, allows for an orderly escalation of issues as necessary, and helps the Board satisfy its risk oversight responsibilities.

## WHISTLEBLOWER PROCEDURES

The Audit Committee has established procedures for receiving, recording and addressing any complaints we receive regarding accounting, internal accounting controls or auditing matters, and for the confidential and anonymous submission, by our employees or others, of any concerns about our accounting or auditing practices. The Compliance Committee has adopted similar procedures for receiving, recording and

addressing any complaints we receive regarding compliance matters other than those addressed by the Audit Committee. The Audit Committee's and Compliance Committee's procedures are available in the Investors section of our website at www.avanos.com. We also maintain a toll-free Code of Conduct telephone line and a website, each allowing our employees and others to voice their concerns anonymously.

## MANAGEMENT SUCCESSION PLANNING

In conjunction with the Board, the Compensation Committee is responsible for periodically reviewing the long-term management development plans and succession plans for the CEO and other key

officers, as well as the emergency succession plan for the CEO and other key officers if any of these officers unexpectedly becomes unable to perform his or her duties.

## DISCLOSURE COMMITTEE

We have established a Disclosure Committee to assist in fulfilling our obligations to maintain disclosure controls and procedures and to coordinate and oversee the process of preparing

our periodic securities filings with the SEC. This committee is composed of members of management and is chaired by our Controller.

## NO EXECUTIVE LOANS

We do not extend loans to our executive officers or directors and therefore do not have any such loans outstanding.

## CHARITABLE CONTRIBUTIONS

The Governance Committee has adopted guidelines for the review and approval of charitable contributions by the Company to organizations or entities with which a director or an executive officer may be affiliated. We will disclose in the Investors section of our website at www.avanos.com any contributions made by us to a tax-exempt organization under the following circumstances:

- If an independent director serves as an executive officer of the tax-exempt organization; or
- If, within the preceding three years, contributions in any single year from the Company to the organization exceeded the greater of $1 million or 2 percent of the tax-exempt organization's consolidated gross revenues.

22 ▲ 2023 Notice and Proxy Statement

AVANOS

# PROPOSAL 1.
ELECTION OF DIRECTORS

The Board is declassified, as a result of which all six of our directors have terms that expire at the 2023 Annual Meeting. All six of our directors have been nominated to serve for a one-year term until the 2024 Annual Meeting of Stockholders and until their successors have been duly elected and qualified.

Each of the nominees for re-election is an incumbent director. All the director nominees have

advised us that they will serve if elected. However, should any nominee become unable to serve, the Board may reduce the number of directors to be elected or select a substitute nominee. If the Board selects a substitute nominee, the shares represented by valid proxies will be voted for the substitute nominee, other than shares voted “Withhold” with respect to the original nominee.

## Process and Criteria for Nominating Directors

The Board is responsible for nominating candidates for election by stockholders and filling vacancies on the Board. The Board has delegated the screening and recruitment process to the Governance Committee, in consultation with the Chairman and the CEO. The Governance Committee therefore recommends to the Board nominees for election as directors at our Annual Meeting of Stockholders. It also recommends nominees to fill any vacancies. As provided in our Certificate of Incorporation, the Board may elect a new director to fill any vacancy between Annual Meetings of Stockholders. Dr. Lisa Egbuonu-Davis was appointed to the Board effective March 6, 2023 on the recommendation of the Governance Committee to fill a vacancy on the Board.

The Governance Committee may receive recommendations for Board candidates from various sources, including our directors, management and stockholders. Stockholders may submit recommendations for Board candidates to:

Avanos Medical, Inc.
Attn: Corporate Secretary
5405 Windward Parkway
Suite 100 South
Alpharetta, GA 30004

Board candidates recommended by stockholders are evaluated using the same criteria as candidates recommended by other sources. In addition, the Governance Committee may periodically retain a search firm to assist it in identifying and recruiting director candidates meeting the criteria specified by the Committee.

The Governance Committee believes the criteria for director nominees should foster effective corporate governance, support our strategies and businesses, take gender and ethnic diversity into account, and ensure that our directors, as a group, have an overall mix of the attributes needed for an effective Board. The criteria should also support the successful recruitment of qualified candidates.

Qualified candidates for director are those who, in the judgment of the Committee, possess all the personal attributes and a sufficient mix of the experience attributes listed below to ensure effective service on the Board.

AVANOS

2023 Notice and Proxy Statement ▲ 23

PROPOSAL 1. ELECTION OF DIRECTORS

# PERSONAL ATTRIBUTES

LEADERSHIP

Lead in personal and professional lives.

INDEPENDENCE

Independent of management and Company (for non-management directors only).

ETHICAL CHARACTER

Possess high standards for ethical behavior.

ABILITY TO COMMUNICATE

Possesses good interpersonal skills.

COLLABORATIVE

Actively participate in Board and committee matters.

EFFECTIVENESS

Bring a proactive and solution-oriented approach.

Attribute

FINANCIAL ACUMEN

Has good knowledge of business finance and financial statements.

GENERAL BUSINESS EXPERIENCE

Possesses experience that will aid in judgments concerning business issues.

INDUSTRY KNOWLEDGE

Possesses knowledge about our business.

DIVERSITY OF BACKGROUND AND EXPERIENCE

Brings diversity to the Board.

SPECIAL BUSINESS EXPERIENCE

Possesses global management experience with medical devices.

Factors That May Be Considered

- Satisfies the financial literacy requirements of the NYSE.
- Qualifies as an audit committee financial expert under the rules and regulations of the SEC.
- Has an accounting, finance or banking background.

- Has leadership experience as a chief or senior executive officer.
- Has experience setting compensation.

- Has substantial knowledge of the healthcare industry, including with respect to caregiving, cost reimbursement or regulatory environment.
- Has governance/public company board experience.

- Brings a diverse background that is representative of our customer, patient, employee and stockholder base, including with respect to gender, race, ethnic or national origin, and age.
- Reflects a different experience stemming, for example, from a different academic background or from experiences outside the healthcare industry.

- Has international experience.
- Has a track record of successful innovation.
- Has supply chain management expertise.
- Has cybersecurity expertise.

24 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

PROPOSAL 1. ELECTION OF DIRECTORS

## Governance Committee Review of Attributes of Current Directors

The Governance Committee has reviewed the background of each of our current directors and their service on the Board in light of the personal and experience attributes described above. The Committee has determined that each director possesses all of the personal attributes as well as a sufficient mix of the experience attributes.

For details about each director’s specific experience attributes, see “The Nominees” and “Director Continuing in Office” below.

### Diversity of Directors

As noted above, the Governance Committee believes that diversity of backgrounds and experience is a key attribute for directors. As a result, the Committee seeks to have a diverse Board that is representative of our customer, patient, employee and stockholder base, including with respect to gender, race, ethnic or national origin, and age. While the Committee carefully

considers diversity when considering nominees for director, the Committee has not established a formal policy regarding diversity in identifying director nominees.

Two of our Board members are women, including one who is African American.

### The Nominees

**The following six** individuals are nominated for election to the Board for a one-year term expiring at the 2024 Annual Meeting of Stockholders and until their successors have been duly elected and qualified:

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 25

PROPOSAL 1. ELECTION OF DIRECTORS

![img-0.jpeg](img-0.jpeg)

**FORMER
CHAIRMAN AND
CEO, UNIVERSAL
HOSPITAL
SERVICES**

**COMMITTEES**

- Compensation (Chair)

# **GARY D. BLACKFORD**

Age 65 | Independent | Director since October 2014; Chairman since April 2020

**CAREER HIGHLIGHTS**

**Universal Hospital Services**, a leading, nationwide provider of medical technology outsourcing and services to the health care industry

- Chairman of the Board and Chief Executive Officer (2002 to February 2015)

**Curative Health Services, Inc.**, a specialty pharmacy and health services company

- Chief Executive Officer (2001 to 2002)

**ShopforSchool, Inc.**, an online retailer

- Chief Executive Officer (1999 to 2001)

**OTHER CURRENT PUBLIC COMPANY BOARDS**

- ReShape Lifesciences, Inc. (NASDAQ: RSLS) (Director since 2016; lead director since 2019; chairman of the compensation committee and of the nominating and corporate governance committee)

**OTHER CURRENT DIRECTORSHIPS**

- Lifespace Communities, Inc., a not-for-profit organization (Director since February 2022)

**PRIOR PUBLIC COMPANY BOARDS**

- Wright Medical Group N.V. (NASDAQ: WMGI) (2008 to 2020)

**OTHER PRIOR DIRECTORSHIPS**

- Children's Hospitals and Clinics of Minnesota (2017 to 2023; Chairman from 2020 to 2021)
- PipelineRX, Inc. (2016 to 2020)

**KEY SKILLS AND QUALIFICATIONS**

Mr. Blackford has been selected to serve as a member of our Board of Directors due to his:

- Executive leadership experience as a chief executive officer;
- Financial literacy and experience in finance and accounting;
- Knowledge of, and experience in, the healthcare industry;
- International experience; and
- Governance and public company board experience.

26 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

PROPOSAL 1. ELECTION OF DIRECTORS

![img-1.jpeg](img-1.jpeg)

**FORMER**
**CHAIRMAN AND**
**CEO, LINCARE**
**HOLDINGS, INC.**

**COMMITTEES**

- Compliance (Chair)
- Audit
- Governance

# **JOHN P. BYRNES**

Age 64 | Independent | Director since October 2014

**CAREER HIGHLIGHTS**

**Lincare Holdings** (NASDAQ: LNCR), a provider of home respiratory care, infusion therapy and medical equipment

- Chairman of the Board (March 2000 to March 2015); director May 1997 to August 2015)
- Chief Executive Officer (1997 to March 2015)
- President (June 1996 to December 1996)
- Chief Operating Officer (January 1996 to December 1996)
- Various executive leadership positions (1986 to 1996)

**PRIOR PUBLIC COMPANY BOARDS**

- Tenet Healthcare Corporation (NYSE: THC) (2016 to 2018)

**OTHER PRIOR DIRECTORSHIPS**

- U.S. Renal Care, Inc. (2005 to 2012)
- Kinetic Concepts, Inc. (2003 to 2011)

**KEY SKILLS AND QUALIFICATIONS**

Mr. Byrnes has been selected to serve as a member of our Board of Directors due to his:

- Executive leadership experience as a chief executive officer;
- Knowledge of, and experience in, the healthcare industry;
- International experience; and
- Governance and public company board experience.

![img-2.jpeg](img-2.jpeg)

**VICE PRESIDENT,**
**MEDICAL**
**INNOVATIONS,**
**DH DIAGNOSTICS,**
**LLC**

**COMMITTEES**

- Compliance
- Governance

# **LISA EGBUONU-DAVIS, MD**

Age 65 | Independent | Director since March 2023

**CAREER HIGHLIGHTS**

**Johns Hopkins Medicine**, which integrates the operations and planning of the Johns Hopkins University School of Medicine with the Johns Hopkins Health System and Hospital

- Member, Board of Trustees since 2021

**DH Diagnostics, LLC**, an affiliate of Danaher Corporation (NYSE: DHR), a developer and manufacturer of innovative diagnostic medical and other products

- Vice President, Medical Innovations (since 2019)

Also served as Interim Chief Medical Officer of Leica Biosystems (2021-2022) and Beckman Coulter Diagnostics (2022-2023), both of which are affiliates of Danaher Corporation

**Sanofi, Inc.** (NYSE: SNY), a designer and manufacturer of medical and other products

- Vice President, Global Patient-Centered Outcomes and Solutions (2015 to 2019)

**OTHER CURRENT PUBLIC COMPANY BOARDS**

- **Omega Healthcare Investors, Inc.** (NYSE: OHI), a real estate investment trust (Director since 2021; member of nominating and corporate governance committee)

**PRIOR DIRECTORSHIPS**

- Founder and board member of ROI Squared, LLC, a life science company focused on diagnostic medical devices

**KEY SKILLS AND QUALIFICATIONS**

Dr. Egbuonu-Davis has been selected to serve as a member of our Board of Directors due to her:

- Knowledge of, and experience in, the healthcare industry
- Strategic and operational expertise in the medical and public health sector
- Governance and public company board experience

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 27

PROPOSAL 1. ELECTION OF DIRECTORS

![img-3.jpeg](img-3.jpeg)

**FORMER EXECUTIVE VICE PRESIDENT AND CFO, SPX TECHNOLOGIES INC.**

**COMMITTEES**

- Audit (Chair)
- Compensation

# PATRICK J. O'LEARY

Age 65 | Independent | Director since October 2014

**CAREER HIGHLIGHTS**

**SPX Technologies Inc.** (NYSE: SPXC), a global industrial and technological services and products company

- Executive Vice President and Chief Financial Officer (December 2004 to August 2012)
- Chief Financial Officer and Treasurer (October 1996 to December 2004)

**OTHER CURRENT PUBLIC COMPANY BOARDS**

- SPX Technologies Inc. (Director and Chairman since 2015; member of the governance and sustainability committee)

**PRIOR PUBLIC COMPANY BOARDS**

- PulteGroup (NYSE: PHM) (2005 to 2018)

**KEY SKILLS AND QUALIFICATIONS**

Mr. O'Leary has been selected to serve as a member of our Board of Directors due to his:

- Executive leadership experience as a chief financial officer;
- Financial literacy and experience in finance and accounting;
- International experience; and
- Governance and public company board experience.

28 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

PROPOSAL 1. ELECTION OF DIRECTORS

![img-4.jpeg](img-4.jpeg)

**FORMER CEO, WELCH ALLYN, INC. COMMITTEES:**

**COMMITTEES:**

- Governance (Chair)
- Audit

# **JULIE SHIMER, PhD**

Age 70 | Independent | Director since October 2014

# **CAREER HIGHLIGHTS**

Dr. Shimer is currently a private investor and has over 30 years of product development experience, including many years with major telecommunications companies.

**Welch Allyn, Inc.**, a manufacturer of frontline medical products and solutions

- Chief Executive Officer and Director (March 2007 to April 2012)

**Vocera Communications, Inc.** a provider of wireless communications systems (2001 to 2007)

- President, Chief Executive Officer and Director

**3Com Corporation**

- General Manager

**Motorola**

- General Manager and Product Development Leader

**AT&T Bell Laboratories**

- Product Development Leader

# **OTHER CURRENT PUBLIC COMPANY BOARDS**

- Apollo Endosurgery, Inc. (NASDAQ: APEN) (Director since May 2018; chair of the compensation committee)
- Masimo Corporation (NASDAQ: MASI) (Director since January 2019; chair of the nominating, compliance and corporate governance committee; member of the audit committee)

# **OTHER CURRENT DIRECTORSHIPS AND ADVISORY POSITIONS**

- Board member of Derivation, LLC, a provider of multilingual business technology
- Advisor to Kitchology, a mobile platform empowering families dealing with special diets through the power of technology and community
- Advisor to CPLANE Networks, a leader in end-to-end data center and wide area network service orchestration

# **PRIOR PUBLIC COMPANY BOARDS**

- NetGear, Inc. (NASDAQ: NTGR) (2007 to 2019)
- Windstream Holdings, Inc., (NASDAQ: WIN) (2017 to 2020)
- Earthlink, Inc., (NASDAQ: ELNK) (2013 to 2017)

# **OTHER PRIOR DIRECTORSHIPS**

- Welch Allyn, Inc.
- Vocera Communications, Inc.
- Wycliffe USA

# **KEY SKILLS AND QUALIFICATIONS**

Dr. Shimer has been selected to serve as a member of our Board of Directors due to her:

- Executive leadership experience as a chief executive officer;
- Knowledge of, and experience in, the healthcare industry;
- International experience; and
- Governance and public company board experience.

ΔVΔNOS

2023 Notice and Proxy Statement 29

PROPOSAL 1. ELECTION OF DIRECTORS

![img-5.jpeg](img-5.jpeg)

CEO, AVANOS MEDICAL, INC.

# JOSEPH F. WOODY

Age 57 | Director since June 2017

# CAREER HIGHLIGHTS

Mr. Woody has more than 20 years of experience in the healthcare sector.

Avanos Medical, Inc.

- Chief Executive Officer (June 26, 2017 to present)

Acelity Holdings, Inc., a global advanced wound care and regenerative medicine company

- Director, President and Chief Executive Officer (August 2015 to April 2017)

Kinetic Concepts, Inc., LifeCell Corporation and Systagenix Wound Management B.V., the combined organization that became Acelity

- President and Chief Executive Officer of the combined organization (September 2013 to August 2015)
- Interim Chief Executive Officer, LifeCell (April 2013 to September 2013)
- President and Chief Executive Officer, KCI (January 2012 to September 2013)
- Various leadership roles, KCI and LifeCell (November 2011 to January 2012)

Covidien plc

- Global President, Vascular Therapies

Smith & Nephew Advanced Wound Management

- Global President

Alliance Imaging, Inc.

- Vice President, Sales

Acuson

- Executive leadership positions

GE Medical Systems

- Executive Leadership Positions

# OTHER CURRENT DIRECTORSHIPS

- AdvaMed, Inc. (since 2013)

# KEY SKILLS AND QUALIFICATIONS

Mr. Woody has been selected to serve as a member of our Board of Directors due to his:

- Leadership experience as our CEO;
- Knowledge of, and experience in, the healthcare industry, including significant acquisition and integration experience;
- International experience; and
- Company board experience.

The Board of Directors unanimously recommends a vote FOR the election of each of the six nominees for director named above.

30 ▲ 2023 Notice and Proxy Statement

AVANOS

PROPOSAL 1. ELECTION OF DIRECTORS

## Director Compensation

Directors who are not officers or employees of the Company or any of our subsidiaries or affiliates are “Outside Directors” for compensation purposes and are compensated for their services under our Outside Directors’ Compensation Plan. All independent directors currently on our Board are Outside Directors and are compensated under this Plan.

Our objectives for Outside Director compensation are to:

- Attract qualified candidates for Board service;
- Remain competitive with the median compensation paid to Outside Directors of comparable companies;
- Keep pace with changes in practices in director compensation; and
- Reinforce our practice of encouraging stock ownership by our directors.

Our Outside Director compensation for 2022 was established based on the median non-management director compensation for our peers. A list of the 2022 peer group companies may be found in the “Compensation Discussion and Analysis” section of this proxy statement.

We structure Outside Director compensation as follows:

### BOARD MEMBERS

- Cash retainer: $70,000 annually, paid in four quarterly payments at the beginning of each quarter.
- Restricted share units: Annual grant with a value of $190,000, awarded and valued on the first business day of the year.

### CHAIRMAN OF THE BOARD

- Additional cash compensation of $115,000 per annum, paid in four quarterly payments at the beginning of each quarter.

### COMMITTEE CHAIRS

- Additional cash compensation of $15,000 per annum, paid to committee chairs in four quarterly payments at the beginning of each

quarter, except that the Audit Committee chair receives additional cash compensation of $25,000 per annum.

### OTHER COMMITTEE MEMBERS

Additional annual cash compensation, paid to committee members (other than the committee chairs) in four quarterly installments at the beginning of each quarter, paid as follows:

- Audit Committee: $12,500
- Compensation Committee: $7,500
- Governance Committee: $5,000
- Compliance Committee: $7,500

New Outside Directors receive a pro-rated annual retainer and grant of restricted share units based on their start date.

We also reimburse Outside Directors for expenses incurred in attending Board or committee meetings.

Restricted share units are not shares of our common stock. Rather, restricted share units represent the right to receive a pre-determined number of shares of our common stock within 90 days following a “restricted period” that begins on the date of grant and expires on the date the Outside Director retires from or otherwise terminates service on the Board. In this way, they align the director’s interests with the interests of our stockholders. Outside Directors may not dispose of the units or use them in a pledge or similar transaction. Outside Directors also receive additional restricted share units equivalent in value to the dividends, if any, that would have been paid to them if the restricted share units granted to them were shares of our common stock. The Company does not currently pay dividends on its common stock.

Pursuant to our stock ownership policy, Outside Directors are expected to hold shares of our common stock equal to five times their annual cash retainer amount. Currently, all our Outside Directors (other than Dr. Lisa Egbuonu-Davis, who was appointed to the Board effective March 6, 2023) meet the guideline requirements. See “Stock Ownership Guidelines.”

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 31

PROPOSAL 1. ELECTION OF DIRECTORS

## 2022 Outside Director Compensation

The following table shows the compensation paid to each Outside Director for his or her service in 2022:

| Name | Fees Earned or Paid in Cash ($) | Stock Awards (1)(2)(3) ($) | Total ($) |
| --- | --- | --- | --- |
| Gary D. Blackford | $194,375 | $190,000 | $384,375 |
| John P. Byrnes | 102,500 | 190,000 | 292,500 |
| Dr. Lisa Egbuonu-Davis (4) | - | - | - |
| Patrick J. O’Leary | 102,500 | 190,000 | 292,500 |
| Maria Sainz (5) | 61,875 | 190,000 | 251,875 |
| Dr. Julie Shimer | 97,500 | 190,000 | 287,500 |

(1) Amounts shown reflect the grant date fair value of those grants, determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718 - Stock Compensation (“ASC Topic 718”) for restricted share unit awards granted pursuant to our Outside Directors’ Compensation Plan. See Note 12 to our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for the assumptions used in valuing these restricted share units.

(2) Outside Director compensation for 2023 will be the same as in 2022. Accordingly, each acting Outside Director received an annual grant of 7,008 restricted share units on January 3, 2023.

(3) Set forth below is the number of restricted share units held by each Outside Director as of December 31, 2022:

| Name | Restricted shares units held as of December 31, 2022 |
| --- | --- |
| Gary D. Blackford | 34,204 |
| John P. Byrnes | 34,204 |
| Dr. Lisa Egbuonu-Davis | 0 |
| Patrick J. O’Leary | 34,204 |
| Maria Sainz | 34,204 |
| Dr. Julie Shimer | 34,204 |

(4) Dr. Egbuonu-Davis was appointed to the Board effective March 6, 2023 and therefore did not receive any compensation in 2022. On March 6, 2023, Dr. Egbuonu-Davis received a grant of 5,433 restricted share units pursuant to the Outside Directors’ Compensation Plan.

(5) Ms. Sainz resigned from the Board effective January 1, 2023 and is not standing for re-election at the 2023 Annual Meeting of Stockholders. Ms. Sainz did not receive a grant of restricted share units on January 3, 2023.

Other than the cash payments and grants of restricted share units previously described, no Outside Director received any compensation or perquisites from the Company for services as a director in 2022.

A director who is not an Outside Director does not receive any compensation for services as a member of the Board or any committee but is reimbursed for expenses incurred as a result of his or her services.

32 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

## PROPOSAL 2.
RATIFICATION OF AUDITORS

The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention and oversight of our independent auditors. The Audit Committee is also responsible for overseeing the negotiation of the audit fees associated with retaining our independent auditors. To ensure continuing auditor independence, the Audit Committee periodically considers whether a different audit firm should perform our independent audit work. Also, in connection with the mandated rotation of the independent auditor's lead engagement partner, the Audit Committee and its Chair are directly involved in the selection of the lead engagement partner.

For 2023, the Audit Committee has selected Deloitte & Touche LLP as the independent registered public accounting firm to audit our financial statements. In engaging Deloitte for 2023, the Audit Committee utilized a review and selection process that included the following:

- A review of management's assessment of the services Deloitte provided in 2022;
- Discussions, in executive session, with the Chief Financial Officer and Controller regarding their viewpoints on the selection of the 2023 independent auditors and on Deloitte's performance;
- Discussions, in executive session, with representatives of Deloitte about their possible engagement;

- Audit Committee discussions, in executive session, about the selection of the 2023 independent auditors;
- A review and approval of Deloitte's proposed estimated fees for 2023; and
- A review and assessment of Deloitte's independence.

The Audit Committee and the Board believe that the continued retention of Deloitte to serve as our independent auditor is in the best interests of the Company and our stockholders, and they recommend that our stockholders ratify this selection.

Representatives of Deloitte are expected to attend the Annual Meeting with the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

Stockholders are not required to ratify the appointment of Deloitte as our independent auditor. However, we are submitting the ratification to our stockholders as a matter of good corporate practice. If our stockholders fail to ratify the appointment of Deloitte, or even if our stockholders do ratify the appointment of Deloitte, the Audit Committee in its discretion may select a different independent auditor at any time during the year if it determines that such change would be in the best interests of the Company and our stockholders.

The Board of Directors unanimously recommends a vote FOR ratification of the selection of Deloitte as the Company's auditor for 2023.

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 33

PROPOSAL 2. RATIFICATION OF AUDITORS

## Accounting Firm Fees

Our aggregate fees to Deloitte (excluding value added taxes) with respect to the fiscal years ended December 31, 2022 and 2021 were as follows:

|  | 2022 ($) | 2021 ($) |
| --- | --- | --- |
| Audit Fees (1) | 2,507,000 | 2,226,200 |
| Audit-Related Fees | - | - |
| Tax Fees (2) | 371,000 | 713,000 |
| All Other Fees | - | - |

(1) These amounts represent fees billed or expected to be billed for professional services rendered by Deloitte for the audit of the Company's annual financial statements for the fiscal years ended December 31, 2022 and December 31, 2021, reviews of the financial statements included in the Company's Quarterly Reports on Form 10-Q, and other services that are normally provided by the independent registered public accounting firm in connection with statutory or regulatory filings or engagements for each of those fiscal years, including: fees for consolidated financial audits, statutory audits, comfort letters, attest services, consents, assistance with and review of SEC filings and other related matters.

(2) These amounts represent Deloitte's aggregate fees for tax compliance, tax advice and tax planning for 2022 and 2021.

## Audit Committee Approval of Audit and Non-Audit Services

Using the following procedures, the Audit Committee pre-approves all audit and non-audit services provided by Deloitte to the Company:

- Before the first in-person or virtual Audit Committee meeting of the year, our Controller prepares a detailed memorandum regarding non-audit services to be provided by Deloitte during the year. This memorandum includes the services to be provided, the estimated cost of these services, reasons why it is appropriate to have Deloitte provide these services, and reasons why the requested services are not inconsistent with applicable auditor independence rules;
- At the first in-person or virtual Audit Committee meeting each year, our Controller presents a proposal, including fees, to engage Deloitte for audit and non-audit services; and
- Before each subsequent meeting of the Audit Committee, our Controller prepares an additional memorandum that includes

updated information regarding the approved services and highlights any new audit and non-audit services to be provided by Deloitte. All new non-audit services to be provided are described in individual requests for services.

The Audit Committee reviews the requests presented in these proposals and memoranda and approves all services it finds acceptable.

To ensure prompt handling of unexpected matters, the Audit Committee has delegated to the Chair of the Audit Committee the authority to amend or modify the list of audit and non-audit services and fees between meetings, as long as the additional or amended services do not affect Deloitte's independence under applicable rules.

Any actions taken under this authority are reported to the Audit Committee at its next meeting.

All Deloitte's services and fees in 2022 were pre-approved by the Audit Committee or the Audit Committee Chair.

34 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

PROPOSAL 2. RATIFICATION OF AUDITORS

## Audit Committee Report

In accordance with its charter adopted by the Board, the Audit Committee assists the Board in overseeing the quality and integrity of the Company’s accounting, auditing, and financial reporting practices.

In discharging its oversight responsibility for the audit process, the Audit Committee obtained from the independent registered public accounting firm (the “auditors”) a formal written statement describing all relationships between the auditors and the Company that might bear on the auditors’ independence, as required by Public Company Accounting Oversight Board (“PCAOB”) Rule 3526, “*Communication with Audit Committees Concerning Independence*,” discussed with the auditors any relationships that may impact their objectivity and independence, and satisfied itself as to the auditors’ independence. The Audit Committee also discussed with management, the internal auditors, and the auditors, the quality and adequacy of the Company’s internal controls and the internal audit function’s organization, responsibilities, budget, and staffing. The Audit Committee reviewed with both the auditors and the internal auditors their audit plans, audit scope, and identification of audit risks.

The Audit Committee discussed and reviewed with the auditors all communications required by the PCAOB’s auditing standards, including those required by PCAOB AS 16, “*Communication with Audit Committees*.” Also, with and without management present, it discussed and reviewed the results of the auditors’ examination of the Company’s financial statements.

Management is responsible for preparing the Company’s financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and for establishing and maintaining the Company’s internal control over financial reporting. The auditors have the responsibility for performing an independent audit of the Company’s financial statements and for expressing opinions on the conformity of the Company’s financial statements with GAAP. The Audit Committee discussed and reviewed the Company’s audited financial statements as of and for the fiscal year ended December 31, 2022, with management and the auditors.

Based on the above-mentioned review and discussions with management and the auditors, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, for filing with the SEC. The Audit Committee also has selected and recommended to the Company’s stockholders for ratification the reappointment of Deloitte as the independent registered public accounting firm for 2023.

### AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Patrick J. O'Leary, Chair  
John P. Byrnes  
Dr. Julie Shimer

ΔVΔNOS

2023 Notice and Proxy Statement 35

# PROPOSAL 3.
## ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

In the Compensation Discussion and Analysis that follows, we describe in detail our executive compensation program, including its objectives, policies, and components. Our executive compensation program seeks to align the compensation of our executives with the

objectives of our business plans and strategies. To this end, the Compensation Committee approved an executive compensation program for 2022 that was designed to achieve the following objectives:

| I. PAY FOR PERFORMANCE | II. FOCUS ON LONG-TERM SUCCESS | III. STOCKHOLDER ALIGNMENT | IV. QUALITY OF TALENT |
| --- | --- | --- | --- |
| Support a performance-oriented environment that rewards achievement of our financial and non-financial goals | Reward executives for long-term strategic management and stockholder value enhancement | Align the financial interest of our executives with those of our stockholders | Attract and retain executives whose abilities are considered essential to our long-term success |

For a more detailed discussion of how our executive compensation program reflects these objectives, including information about the 2022 compensation of our named executive officers, see “Compensation Discussion and Analysis,” below.

We are asking our stockholders to support our executive compensation as described in this proxy statement. This proposal, commonly known as a “say- on-pay” proposal, gives our stockholders the opportunity to express their views on our executive compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our executives and the objectives, policies and practices described in this proxy statement. Accordingly, our stockholders are being asked to vote on the following non-binding resolution at the Annual Meeting:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the compensation

tables and any related material disclosed in the Company’s proxy statement relating to the 2023 Annual Meeting of Stockholders, be, and it hereby is, approved by the Company’s stockholders on an advisory basis.”

The say-on-pay vote is advisory and is therefore not binding on the Company, the Compensation Committee or our Board. Nonetheless, the Compensation Committee and our Board value the opinions of our stockholders. Therefore, to the extent there is any significant vote against the executive compensation as disclosed in this proxy statement, the Compensation Committee and our Board will consider our stockholders’ concerns and will evaluate whether any actions are necessary to address those concerns.

At the 2021 annual meeting of stockholders, our stockholders expressed a preference that advisory votes on executive compensation be held on an annual basis. The Board has determined, in line with the recommendation of our stockholders, to have an annual advisory vote on the compensation of our named executive officers. Accordingly, an advisory vote on executive compensation will occur at the 2023 Annual Meeting.

The Board of Directors unanimously recommends a vote FOR the approval of the compensation paid to the Company’s named executive officers as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules.

36 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

# COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) is intended to provide investors with an understanding of the compensation policies and decisions regarding 2022 compensation for our named executive officers.

For 2022, our named executive officers were:

| JOSEPH F. WOODY CHIEF EXECUTIVE OFFICER | MICHAEL C. GREINER (1) SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER | MOJIRADE JAMES SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY |
| --- | --- | --- |
| KERR W. HOLBROOK (2) SENIOR VICE PRESIDENT AND GENERAL MANAGER, CHRONIC CARE | WILLIAM D. HAYDON (3) SENIOR VICE PRESIDENT AND GENERAL MANAGER, PAIN FRANCHISE | DAVID E. BALL (4) SENIOR VICE PRESIDENT, GLOBAL SUPPLY CHAIN & PROCUREMENT |

(1) On January 10, 2023, Mr. Greiner assumed the additional role of Chief Transformation Officer.

(2) On January 10, 2023, Mr. Holbrook was appointed to the position of Senior Vice President and Chief Commercial Officer.

(3) On January 10, 2023, the Company and Mr. Haydon entered into a Severance and Separation Agreement pursuant to which Mr. Haydon’s employment with the Company will terminate effective March 31, 2023.

(4) The employment of Mr. Ball terminated on September 6, 2022 as a result of his retirement.

A biography of each of our named executive officers (other than David E. Ball, whose employment with the Company terminated on September 6, 2022 as a result of his retirement) is provided under the caption “Directors, Executive Officers and Corporate Governance” in Item 10 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

To assist stockholders in finding important information, this CD&A is organized as follows:

| 38 COMPENSATION EXECUTIVE SUMMARY | 44 SETTING ANNUAL COMPENSATION |
| --- | --- |
| 41 EXECUTIVE COMPENSATION OBJECTIVES AND POLICIES | 46 EXECUTIVE COMPENSATION FOR 2022 |
| 42 EXECUTIVE COMPENSATION DESIGN PHILOSOPHY AND GUIDING PRINCIPLES | 51 BENEFITS AND OTHER COMPENSATION |
| 43 COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM | 52 ADDITIONAL INFORMATION ABOUT OUR COMPENSATION PRACTICES |

AVANOS

2023 Notice and Proxy Statement ▲ 37

COMPENSATION DISCUSSION AND ANALYSIS

# Compensation Executive Summary

This executive summary provides a brief overview of our key accomplishments in 2022 and our key compensation principles and practices.

## 2022 BUSINESS HIGHLIGHTS

As Joseph F. Woody, our CEO, stated when announcing our Fourth Quarter and Full-Year 2022 results, “We were pleased to finish 2022 with a strong fourth quarter, continued margin expansion and meaningful free cash flow. Our team is focused on execution and we are determined to deliver on the three-year restructuring plan that we announced in January 2023.”

Our 2022 financial highlights include:

- Net sales increased 10 percent to $820 million.
- Adjusted net income totaled $78 million, compared to $57 million in the prior year.
- Adjusted diluted earnings per share totaled $1.65, compared to $1.17 in 2021.

In January 2023, the Company announced a three-year restructuring initiative pursuant to which we plan to:

- Combine our Chronic Care and Pain Management franchises into a single commercial organization focused on the Digestive Health and Orthopedic Pain & Recovery product categories;
- Rationalize our product portfolio through targeted divestitures;
- Undertake cost management initiatives to enhance the Company’s operating profitability; and
- Pursue efficient capital allocation strategies, including through acquisitions that meet the Company’s strategic and financial criteria.

The Company anticipates that this initiative will ultimately result in gross savings of between $45 and $55 million by 2025.

| $820M net sales | 10% sales growth | $136M adjusted EBITDA | $1.65 adjusted diluted EPS | $128M cash on hand at December 31, 2022 |
| --- | --- | --- | --- | --- |

Adjusted EBITDA and adjusted diluted EPS are non-GAAP financial measures. A description of these measures and a reconciliation to the most

directly comparable GAAP financial measures is provided in Appendix A to this proxy statement.

38 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION DISCUSSION AND ANALYSIS

## PERFORMANCE-BASED COMPENSATION

Pay-for-performance is a key objective of our compensation program. Consistent with that objective, performance-based compensation constituted a significant portion of our named executive officers' target total direct annual compensation (i.e., sum of base salary, target annual incentive and target long-term incentive) for 2022. Also, to further align the financial interests of our executives with those of our stockholders, a majority of our executives' target total direct annual compensation for 2022 was equity-based.

To illustrate the pay-for-performance aspect of our compensation program, the following chart identifies the target total direct annual compensation of our CEO, Joseph F. Woody, for each of the past three years and compares that to the amounts that were actually realized for such periods.

The chart shows that when the Company's performance was above expectations, as was the case in 2020, our CEO's realized pay was above

target. It also reflects that, when the Company's performance was below expectations, as was the case in 2021, our CEO's realized pay was below target. Our CEO's realized pay was slightly below target in 2022, when the Company's performance was generally in line with expectations.

The chart further reflects the pay-for-performance aspect of the Company's long-term incentive equity grants. The stock options and time-based restricted share units ("TRSUs") granted to our CEO in 2020, when performance was above expectations, appreciated in value in 2020 as our performance improved and, consequently, as the value of our stock rose. The value of the TRSUs and performance-based restricted share units ("PRSUs") awarded to our CEO in 2021 reflects the Company's lower than expected performance in those years. The value of the TRSUs and PRSUs awarded to our CEO increased somewhat in 2022, reflecting the Company's improved performance for the year.

![img-0.jpeg](img-0.jpeg)

# Notes:

(1) Bonus refers to our annual cash incentive program, and the realized amount reflected above was the actual amount paid to Mr. Woody in the year following the performance period.
(2) To determine target compensation, stock options, TRSUs and PRSUs are valued as of their grant date. To determine realized compensation, stock options, TRSUs and PRSUs are valued as of December 31 of the applicable year, provided that if the target value of stock options exceeds the realized value as of the applicable measurement date (i.e., the options are under water), they are considered to have no value.

AVANOS

2023 Notice and Proxy Statement ▲ 39

COMPENSATION DISCUSSION AND ANALYSIS

## COMPENSATION DESIGN PRINCIPLES AND GOVERNANCE PRACTICES

The design principles for our executive compensation program are intended to protect and promote the interests of our stockholders. Below we summarize certain practices we have implemented to drive performance and those we have not implemented because we do not believe they would serve our stockholders' long-term interests:

| WHAT WE DO | WHAT WE DON'T DO |
| --- | --- |
| ☑ Pay for performance | ☒ No employment contracts |
| ☑ Perform an annual compensation risk assessment | ☒ No excise tax gross-up on change-in-control payments |
| ☑ Utilize an independent compensation consultant retained by the Compensation Committee | ☒ No repricing of underwater options without stockholder approval |
| ☑ Require that change-in-control agreements contain a double trigger severance requirement | ☒ No current payment of dividends or dividend equivalents on unearned long-term incentives |
| ☑ Maintain share ownership guidelines | ☒ No executive officer hedging or pledging transactions involving Company stock |
| ☑ Entitle the Compensation Committee to seek a clawback of incentive payments in case of financial restatement | ☒ Only minimal perquisites such as relocation benefits |
| ☑ Benchmark our compensation practices to ensure executive compensation is competitive with our peer group |  |
| ☑ Cap short and long-term incentive payments at reasonable levels |  |

40 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION DISCUSSION AND ANALYSIS

## EXECUTIVE COMPENSATION OBJECTIVES AND POLICIES

The Compensation Committee is responsible for establishing and administering our policies governing the compensation of our executive officers. The Compensation Committee reviews our executive officer compensation objectives and policies annually, including determining whether they continue to support our business objectives and are consistent with the Committee’s charter.

Our 2022 executive officer compensation policies were designed to achieve the following objectives:

| Objective | Description | Related Policies |
| --- | --- | --- |
| Pay-for-Performance | Support a performance-oriented environment that rewards achievement of our financial and non-financial goals. | The majority of executive officer pay varies with the levels at which annual and long-term performance goals are achieved. Performance goals are aligned with our strategies for sustained growth and profitability. |
| Focus on Long-Term Success | Reward executive officers for long-term strategic management and stockholder value enhancement. | Prior to 2020, the Company granted PRSUs. In 2020, a significant portion of our executive officers’ total direct annual compensation consisted of TRSUs. The value of the shares received upon vesting of TRSUs depends on our share price performance over a three-year period. The change from PRSUs to TRSUs in 2020 was due to the difficulty of setting meaningful and fair long-term performance targets on account of the economic uncertainty caused by the COVID-19 pandemic. In 2021, consistent with its commitment to return to a long-term incentive mix with a higher proportion of PRSUs, the Committee granted a mix of 75% TRSUs and 25% PRSUs. This trend continued in 2022, when the Committee granted a mix of 60% TRSUs and 40% PRSUs. The Compensation Committee believes this greater reliance on PRSUs supports the pay-for-performance and stockholder alignment objectives of our executive officer compensation program. |
| Stockholder Alignment | Align the financial interest of our executive officers with those of our stockholders. | Equity-based awards, including PRSUs and TRSUs, as well as our stock ownership guidelines, directly align the financial interests of our executive officers with those of our stockholders. |
| Quality of Talent | Attract and retain executive officers whose abilities are considered essential to our long-term success as a global company. | The Compensation Committee reviews peer group data to ensure our executive officer compensation program remains competitive so we can continue to attract and retain this talent. |

ΔVΔNOS

2023 Notice and Proxy Statement 41

COMPENSATION DISCUSSION AND ANALYSIS

## EXECUTIVE COMPENSATION DESIGN PHILOSOPHY AND GUIDING PRINCIPLES

The Compensation Committee has adopted the following design philosophy to guide the manner in which our named executive officer compensation objectives and policies are implemented:

| Philosophy | Description | Guiding Principles |
| --- | --- | --- |
| Aligned | A majority of executive officer compensation should be at risk and vary with the performance outcomes for stockholders. | 50% or more of executive officer compensation should be incentive-based. Incentive metrics should be aligned to stockholder value. Performance goals should generally reflect year-over-year growth to achieve target funding. TRSUs to executive officers should be a minority part of their direct annual compensation. Within business groups, a majority of performance should be placed on business unit performance goals. |
| Compelling | The value and structure of executive officer compensation should assist in the attraction and retention of key executive talent. | Base salaries should be at or above the 50 th percentile of our peer group with variance based on skills, experience, performance and role responsibilities. Target annual incentive compensation payout opportunities should be at the 50 th percentile of our peer group, with meaningful upside payouts for performance over target. |
| Simple | The executive officer compensation arrangements should be relatively simple and focus on broad performance factors. | Performance-based compensation arrangements should use a minimal number of metrics, typically one or two. Special or one-time incentive awards should be used sparingly. Perquisites and other special executive benefits generally should be avoided. |
| Sound | Executive officer compensation policies and structure should support strong corporate governance and drive an ownership culture among executives. | Ownership culture should be reinforced through use of good governance practices. Individual employment contracts should be avoided and severance practices should be conservative. Compensation deferral opportunities should be consistent with market practices. Compensation programs should encourage innovation while deterring excessive risk taking. |

42 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION DISCUSSION AND ANALYSIS

## COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM

The Compensation Committee retains the discretion to deviate from the above guiding principles if it determines that to do so would be consistent with our overall executive officer compensation objectives and would be in the best interests of the Company and its stockholders.

The table below gives an overview of the compensation components used in our 2022 executive officer compensation program and matches each with one or more of the objectives described above.

| Component | Objective | Purpose | Target Competitive Position |
| --- | --- | --- | --- |
| Base salary | Quality of talent | Provide annual cash income based on: • Level of responsibility, performance and experience • Comparison to market pay information | • Compared to median of peer group • Actual base salary will vary based on the individual's performance and experience in the position |
| Annual cash incentive | Pay-for-performance Quality of talent | Motivate and reward achievement of annual performance goals | • Target award compared to median of peer group • Actual payout will vary based on actual corporate and business unit performance |
| Long-term equity incentive | Stockholder alignment Focus on long-term success Pay-for-performance Quality of talent | Provide an incentive to deliver stockholder value and to achieve our long-term objectives through awards of: • Performance-based restricted share units • Time-based restricted share units | • Target compared to median of peer group • Actual payout of PRSUs granted in 2021 and 2022 will vary based on actual performance • Actual payout of TRSUs granted in 2021 and 2022 will also vary based on actual stock price performance |
| Retirement benefits | Quality of talent | Provide competitive retirement plan benefits through a 401(k) plan and other defined contribution plans | • Retirement benefits comparable to those of peer group |
| Perquisites | Quality of talent | Provide minimal market-based additional benefits | • Determined by the Compensation Committee |
| Post-termination compensation (severance and change of control) | Quality of talent | Encourage attraction and retention of executives critical to our long-term success and competitiveness: • Severance Pay Plan provides eligible employees, including executive officers, with payments and benefits in the event of certain involuntary terminations • Executive Severance Plan provides eligible executives with payments and benefits in the event of a qualified separation from service following a change of control | • Severance benefits comparable to peer group |

AVANOS

2023 Notice and Proxy Statement ▲ 43

COMPENSATION DISCUSSION AND ANALYSIS

# SETTING ANNUAL COMPENSATION

This section describes the processes followed in setting 2022 target annual compensation for our executive officers.

## FOCUS ON TARGET TOTAL DIRECT ANNUAL COMPENSATION

In setting 2022 compensation for our executive officers, including our CEO, the Compensation Committee focused on total direct annual compensation, which consisted of annual cash compensation (base salary and target annual cash incentive) and long-term equity incentive

compensation (TRSUs and PRSUs). The Committee considered annual cash and long-term equity incentive compensation both separately and together to help ensure that the executive officer compensation objectives are met.

## BENCHMARKING - EXECUTIVE COMPENSATION PEER GROUP

In 2022, we used a custom executive compensation peer group to benchmark named executive officer compensation. The peer group consists of companies with which we compete for talent. We generally compete for talent with medical device companies with annual revenues ranging from approximately 39 percent of our annual revenues to 2.5 times our annual revenues.

Based on the foregoing criteria, the Compensation Committee approved the following peer group and used compensation data derived from each peer group company in its determination of each executive officer's 2022 target total direct annual compensation:

### 2022 Executive Compensation Peer Group

| • Abiomed, Inc. | • Globus Medical Inc. | • Integra Lifesciences Holding | • Natus Medical, Inc. |
| --- | --- | --- | --- |
| • Accuray Incorporated | • ICU Medical, Inc. | • Lantheus Holdings, Inc. | • Nevro Corporation |
| • AngioDynamics, Inc. | • Insulet Corporation | • Masimo Corporation | • NuVasive, Inc. |
| • CONMED Corporation | • Integer Holdings Corporation | • Merit Medical Systems, Inc. | • Orthofix Medical |
| • ConvaTec Group Plc |  |  |  |

The Compensation Committee determined that the 2022 peer group, with annual revenue ranging from $321 million to $2.04 billion, and with a median annual revenue of $830 million, was an appropriate peer group from which to derive competitive compensation.

The Compensation Committee, working with its independent compensation consultant, reviews the executive compensation peer group at least annually to ensure it continues to serve as an appropriate comparison for our compensation program. The companies in the 2022 peer group remained unchanged from 2021.

## PROCESS FOR SETTING TARGET TOTAL DIRECT ANNUAL COMPENSATION

In setting target total direct annual compensation for each of our executive officers, the Compensation Committee considers both competitive market data derived from our peer group and each executive officer's prior year performance. To remain competitive in the marketplace for executive talent, the Committee generally sets each compensation component at the 50th percentile of the peer group.

To reinforce a pay-for-performance culture, targets for individual executive officers may be set above or below this median depending on the executive's performance in prior years and experience in the position, as well as any applicable retention concerns.

44 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Committee believes that generally setting the target level of each compensation component at the 50th percentile of the peer group (subject to adjustment as noted above) and providing incentive compensation opportunities that will enable executive officers to earn above-target compensation for superior performance is consistent with the objectives of our executive officer compensation policies. In particular, the Committee believes that this approach enables us to attract and retain skilled and talented executive officers to guide and lead our businesses and supports a pay-for-performance culture.

When setting target annual compensation for our executive officers, the Compensation Committee considers each compensation component

separately (base salary, annual cash incentive and long-term equity incentive), but its decision regarding a particular component does not necessarily impact its decision about other components.

In setting compensation for executive officers that join us from other companies, the Compensation Committee evaluates both market data for the position to be filled and, as appropriate, the candidate's compensation history. The Committee recognizes that to successfully recruit a candidate to leave his or her current position and to join the Company, the candidate's compensation package may have to exceed his or her current compensation, which could result in a compensation package above the median of our peer group for a period of time.

## CEO TOTAL DIRECT ANNUAL COMPENSATION

Our CEO's total direct annual compensation is determined in the same manner as the total direct annual compensation of the other named executive officers. Our CEO's compensation is

appropriately higher than that of the other named executive officers in recognition of our CEO's greater responsibility for managing and overseeing the Company as a global enterprise.

## TOTAL DIRECT ANNUAL COMPENSATION TARGETS FOR 2022

For 2022, the Committee established the following total direct annual compensation targets for our named executive officers based on their roles and responsibilities, prior year performance, experience in their current positions and competitive market data:

| NAME | 2022 TOTAL DIRECT ANNUAL COMPENSATION TARGET ($) |
| --- | --- |
| Joseph F. Woody | 6,683,147 |
| Michael C. Greiner | 2,584,000 |
| Mojirade James | 1,837,000 |
| David E. Ball | 1,262,500 |
| William D. Haydon | 1,368,000 |
| Kerr W. Holbrook | 1,368,000 |

These 2022 total direct annual compensation amounts differ from the amounts shown in the Summary Compensation Table in the following ways:

- Annual cash incentive compensation included in the total value in the table above represents the target level, while the Summary Compensation Table reflects the actual amounts earned for 2022; and
- In setting total direct annual compensation targets, the Compensation Committee does not include deferred compensation earnings or other compensation, while those amounts are required to be included in the Summary Compensation Table.

AVANOS

2023 Notice and Proxy Statement ▲ 45

COMPENSATION DISCUSSION AND ANALYSIS

# EXECUTIVE COMPENSATION FOR 2022

To help achieve the objectives discussed above, our executive officer compensation program for 2022 consisted of fixed and performance-based components, as well as short-term and long-term components.

## BASE SALARY

To attract and retain high-caliber executives, we pay our executive officers an annual fixed salary that we believe to be competitive in the marketplace.

The Compensation Committee annually reviews salary ranges and individual salaries for executive Salary adjustments generally are made effective on April 1 of each year. In determining individual salaries, the Compensation Committee considers salary levels for similar positions at our peer group companies, as well as the executive officer's performance and experience in his or her position. This performance evaluation is based on how the executive officer performed during the prior year against results-based objectives established

at the beginning of the prior year. In general, an experienced executive officer who is performing at a satisfactory level will receive a base salary at or around the median of our peer group. However, the Compensation Committee may set an executive officer's base salary above or below the median depending on the officer's experience and performance. From time to time, if warranted, executive officers may receive additional salary increases because of promotions, changes in duties and responsibilities, retention concerns, or market conditions.

The following table shows the 2022 base salaries in effect for each named executive officer during the year.

| NAME | 2022 BASE SALARY BEFORE APRIL 1 ($) | 2022 BASE SALARY AFTER APRIL 1 ($) |
| --- | --- | --- |
| Joseph F. Woody | 967,064 | 1,015,417 |
| Michael C. Greiner | 494,400 | 520,000 |
| Mojirade James | 425,000 | 445,000 |
| David E. Ball | 412,000 | 425,000 |
| William D. Haydon | 385,000 | 405,000 |
| Kerr W. Holbrook | 385,000 | 405,000 |

## 2022 ANNUAL CASH INCENTIVE PROGRAM

Consistent with our pay-for-performance compensation objective, our executive compensation program includes an annual cash incentive program to motivate and reward executives to achieve annual performance objectives established by the Compensation Committee.

*Target Payment Amounts and Range Of Possible Payouts For 2022 Annual Cash Incentive Program*

At the beginning of the year, the Compensation Committee set each executive officer's target

payment amount (expressed as a percentage of base salary) under the 2022 annual cash incentive program. Depending on the level of achieved performance against predetermined performance goals, our executive officers could earn between 0% and 200% of their target payment amount. The Committee determined target payment amounts and range of payout based principally on competitive market data.

The following table shows the target payment amounts and range of possible payouts for each executive officer in 2022:

46 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION DISCUSSION AND ANALYSIS

| Name | Target Payment Amount (1) | Range of Potential Payout |
| --- | --- | --- |
| Joseph F. Woody | 115% of base salary | 0% - 200% of target payment amount |
| Michael C. Greiner | 70% of base salary | 0% - 200% of target payment amount |
| Mojirade James | 60% of base salary | 0% - 200% of target payment amount |
| David E. Ball | 50% of base salary | 0% - 200% of target payment amount |
| William D. Haydon | 60% of base salary | 0% - 200% of target payment amount |
| Kerr W. Holbrook | 60% of base salary | 0% - 200% of target payment amount |

$^{(1)}$ Target Payment Amount is a percentage of actual base salary paid to the executive during the year.

Payment amounts under the annual cash incentive program depend on achieved performance measured against performance goals generally established at the beginning of the year by the Compensation Committee. These performance goals are derived from our financial goals and business objectives.

For 2022, the Committee approved the following performance measures for the annual cash incentive program (not all measures applied to all named executive officers): (i) adjusted net

sales; (ii) adjusted EBITDA; (iii) strategic initiatives; (iv) North American Pain Franchise net sales; (v) Global Pain Franchise net sales; (vi) North American Chronic Care net sales; and (vii) Global Chronic Care net sales. The Committee decided to use strategic initiatives to promote a focus on the key longer-term success elements of the Company’s strategic plan.

The following table below shows the 2022 performance goals and weights established for each named executive officer.

|  | Joseph F. Woody | Michael C. Greiner | Mojirade James | David E. Ball | William D. Haydon | Kerr W. Holbrook |
| --- | --- | --- | --- | --- | --- | --- |
| Adjusted Net Sales | 40% | 40% | 40% | 40% | 25% | 25% |
| Adjusted EBITDA | 40% | 40% | 40% | 40% | 25% | 25% |
| Strategic Initiatives | 20% | 20% | 20% | 20% | 20% | 20% |
| NA Pain Franchise | -% | -% | -% | -% | 20% | -% |
| Global Pain Franchise | -% | -% | -% | -% | 10% | -% |
| NA Chronic Care | -% | -% | -% | -% | -% | 20% |
| Global Chronic Care | -% | -% | -% | -% | -% | 10% |

For 2022, the Committee set the following financial goals and corresponding payout percentages at the indicated level of performance:

| Measure | Range of Performance Levels |  |  |
| --- | --- | --- | --- |
|  | Threshold | Target | Maximum |
| Adjusted net sales (millions) | $815 | $835 | $860 |
| Adjusted EBITDA (millions) | $115 | $130 | $145 |
| Initial payout percentage | 0% | 100% | 200% |

The following table explains how the Compensation Committee determined adjusted net sales and adjusted EBITDA and the rationale

for the Committee’s selection of the 2022 performance measures.

AVANOS

2023 Notice and Proxy Statement 47

COMPENSATION DISCUSSION AND ANALYSIS

| 2022 Goal | Explanation | Reason for use as a Performance Measure |
| --- | --- | --- |
| Adjusted net sales | Adjusted net sales for 2022 on a constant currency basis. | To promote a focus on overall growth, which ultimately drives profitability. |
| Adjusted EBITDA | EBITDA adjusted for incremental expenses arising from the COVID-19 pandemic, restructuring expenses, post-divestiture transition charges, certain litigation costs and acquisition and integration charges. | To manage profitability and to focus on controlling costs to generate free cash flow. |
| Strategic initiatives | Designed to be consistent with key activities and easily measured at the end of the year | To promote a focus on the key longer-term success elements of the Company's strategic plan. |

For 2022, the Compensation Committee set the Strategic Initiatives and the corresponding initial payout percentages at the following levels:

| Strategic Initiative |
| --- |
| Deliver > 200 bps improvement in gross margins; identifying and executing on SKU rationalization; and continuing to implement pricing initiatives. |
| Execute on ESG and sustainability metrics by overseeing and reviewing the Company's progress against its ESG plans (including diversity and environmental metrics). |
| Execute on the Company's portfolio optimization strategy by successfully integrating OrthogenRX into the Company's operations; identifying and announcing at least one acquisition transaction; and executing other product portfolio initiatives. |

The Compensation Committee reviewed the Company's execution against the three strategic initiatives to collectively and holistically determine the achieved payout, with a payout range of 0% to 150%. In addition, the Compensation Committee had the discretion to determine the award amount for strategic initiatives based upon final results at the end of 2022.

#### Actual results and actual payout percentages

For 2022, the Compensation Committee determined that the Company's adjusted net sales were $828 million and its adjusted EBITDA was $136 million, resulting in a 67% payout on the adjusted net sales factor and a 136% payout on the adjusted EBITDA factor. Further the Committee determined that the Company exceeded its 2022 strategic objectives, resulting in a 150% payout on the strategic initiative component. As a whole then, the Committee

determined that the 2022 payout percentage for Mr. Woody, Mr. Greiner, Ms. James and Mr. Ball, whose cash incentive was based on these corporate metrics, was 111.2%. For Messrs. Haydon and Holbrook, whose cash incentive was based in part on the performance of the Pain Franchise and the Chronic Care Franchise, respectively, the actual performance of those product portfolios resulted in a 2022 payout percentage of 80.8% and 120.1%, respectively.

#### Annual Cash Incentive Payouts for 2022

The following table shows the payout opportunities and the actual payouts of annual cash incentives for 2022 for each of our named executive officers. Payouts were based on the payout percentages for each element, weighted for each executive as shown above.

48 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION DISCUSSION AND ANALYSIS

| NAME | ANNUAL INCENTIVE TARGET OPPORTUNITY |  | ANNUAL INCENTIVE MAXIMUM OPPORTUNITY |  | ACTUAL 2022 ANNUAL INCENTIVE PAYOUT |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | % OF BASE SALARY | AMOUNT ($) | % OF TARGET | AMOUNT ($) | % OF TARGET | AMOUNT ($) |
| Joseph F. Woody | 115% | 1,153,839 | 200% | 2,307,678 | 111.2% | 1,282,870 |
| Michael C. Greiner | 70% | 359,523 | 200% | 719,046 | 111.2% | 399,728 |
| Mojirade James | 60% | 264,002 | 200% | 528,004 | 111.2% | 293,525 |
| David E. Ball | 50% | 145,407 | 200% | 290,814 | 111.2% | 161,668* |
| William D. Haydon | 60% | 240,000 | 200% | 480,000 | 80.8% | 194,014 |
| Kerr W. Holbrook | 60% | 240,000 | 200% | 480,000 | 120.1% | 288,308 |

The Compensation Committee believes that the 2022 annual incentive payout is consistent with

the pay-for-performance objective of our executive officer compensation program.

## LONG-TERM EQUITY INCENTIVE COMPENSATION

Our executive officers receive annual long-term equity incentive grants as part of their overall compensation package. These awards are consistent with the objectives of aligning our senior leaders' interests with the financial interests of our stockholders, focusing on our long-term success, supporting our performance-oriented environment, and offering competitive compensation packages.

Prior to April 29, 2021, all long-term equity incentive grants were made under the Avanos Medical, Inc. Equity Participation Plan (the 'Prior Plan'). All long-term equity incentive grants made since April 29, 2021 have been and will be made under the Avanos Medical, Inc. 2021 Long Term Incentive Plan (the '2021 Plan'). The Prior Plan and the 2021 Plan are collectively referred to herein as the 'Equity Participation Plans.'

Information regarding long-term equity incentive awards granted to our named executive officers can also be found under 'Summary Compensation' and 'Grants of Plan-Based Awards.'

### 2022 Grants

In determining the 2022 long-term equity incentive award grants for our named executive officers, the following factors were considered by the Committee, among others: the specific responsibilities and performance of the executive, business performance, retention needs, stock price performance, peer group compensation data and other market factors. Equity grants made in

prior years were not considered when the Committee determined the 2022 target values or awards.

#### *Determination of Target Value for 2022 Equity Awards*

Based on the factors discussed above, and consistent with its commitment to return to a long-term incentive mix with a higher proportion of PRSUs, the Committee approved the following allocation of target grant value between TRSUs and PRSUs for each executive officer's 2022 equity awards:

- TRSUs - 60% of the target grant value.

Historically, the Company granted a mix of equity awards composed of PRSUs and stock options. However, in 2020, the Company changed this mix to TRSUs and stock options. The change from PRSUs to TRSUs was due to the difficulty of setting meaningful and fair long-term performance targets on account of the economic uncertainty caused by the COVID-19 pandemic. In 2021, consistent with its commitment to return to a long-term incentive mix with a higher proportion of PRSUs, the Committee granted a mix of 75% TRSUs and 25% PRSUs. The Committee continued this trend in 2022, granting a mix of 60% TRSUs and 40% PRSUs. The Compensation Committee believes this mix supports the pay-for-performance and stockholder alignment objectives of our executive officer compensation program.

In 2022, the Compensation Committee approved the following annual long-term equity incentive awards to our named executive officers:

\* Pursuant to the Retention Incentive Agreement dated as of May 20, 2022 by and between the Company and Mr. Ball (the 'Ball Retention Incentive Agreement'), Mr. Ball was entitled to a pro rata portion of his 2022 annual cash incentive payout through September 6, 2022, the date his employment with the Company terminated as a result of his retirement.

AVANOS

2023 Notice and Proxy Statement 49

## COMPENSATION DISCUSSION AND ANALYSIS

| NAME | TARGET GRANT VALUE OF LTI AWARDS ($) | TRSUs Awarded ($) | TRSUs Awarded (#) | TARGET PRSUs Awarded ($) | TARGET PRSUs Awarded (#) |
| --- | --- | --- | --- | --- | --- |
| Joseph F. Woody | $4,500,000 | $2,700,000 | 80,933 | $1,800,000 | 53,955 |
| Michael C. Greiner | $1,700,000 | $1,020,000 | 30,575 | $680,000 | 20,383 |
| Mojirade James | $1,125,000 | $675,000 | 20,233 | 450,000 | 13,489 |
| David E. Ball | $625,000 | $375,000 | 11,241 | $250,000 | 7,494 |
| William D. Haydon | $720,000 | $432,000 | 12,949 | 288,000 | 8,633 |
| Kerr W. Holbrook | $720,000 | $432,000 | 12,949 | 288,000 | 8,633 |

The Compensation Committee used the following methodology to determine the number of TRSUs and PRSUs to grant to each named executive officer: (i) the number of TRSUs granted equaled the quotient of a named executive officer's TRSUs target value divided by the average closing price of the Company's common stock over 10 trading days up to and including the grant date and (ii) the number of target PRSUs granted equaled the quotient of a named executive officer's PRSUs target value divided by the average closing price of the Company's common stock over 10 trading days up to and including the grant date.

The 2022 target equity amounts differ from the amounts shown in the 'Summary Compensation Table' because the annual cash incentive compensation included in the table above represents the value used by the Committee to determine the number of TRSUs and PRSUs to

grant, while the Summary Compensation Table reflects the grant date value of these awards for accounting purposes.

One-third of the 2022 TRSUs will vest on each of the first, second and third anniversary of their award date, meaning such TRSUs will be fully vested on March 4, 2025, conditioned upon the grantee's continuing employment with the Company on the applicable vesting date.

The 2022 PRSUs will vest on March 4, 2025, conditioned upon the grantee's continuing employment with the Company through that date. The actual number of shares to be received upon vesting of the 2022 PRSUs will be determined as described below.

Each executive officer will receive one share of Company common stock for each vested TRSU and PRSU at the time of settlement.

### PRSU Performance Goals and Potential Payouts 2022 PRSUs

For the PRSUs granted in 2022, the actual number of shares to be received by our named executive officers can range from zero to 200 percent of the target level established by the Compensation Committee for each executive, depending on the degree to which the performance objectives for these awards are met over the three-year period from 2022 through 2024. The performance goals of the PRSUs granted in 2022 are based on year-over-year net sales growth and return on invested capital ('ROIC'). The 2022 PRSUs will vest on March 4, 2025.

The annual performance goals and potential payouts at varying levels of net sales growth and ROIC performance for the 2022 PRSUs were set by the Compensation Committee in March 2022.

Performance against the goals is measured annually, with a specified increase in each year's actual ROIC performance serving as the baseline for the following year's ROIC performance objective.

The 2022 performance goals and potential payouts at varying levels of performance for the 2022 PRSUs are as described below, with payouts between the levels determined on a straight-line basis. Each goal (year-over-year net sales growth and year-over-year ROIC) is weighted equally. In February 2023, the Compensation Committee evaluated the results of the Company's 2022 performance for year-over-year net sales growth and ROIC. The following table shows the actual performance against the goals.

50 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION DISCUSSION AND ANALYSIS

| 2022 Goal for 2022 PRSUs | Weight | Threshold | Target | Maximum | Actual Performance | Projected Payout |
| --- | --- | --- | --- | --- | --- | --- |
| Year-over-year net sales growth | 50% | 2.0% | 3.5% | 5.0% | 2.3% | 30% |
| Payout (% of target) |  | 50% | 100% | 200% |  |  |
| Year-over-year ROIC | 50% | 4.0% | 5.0% | 6.0% | 5.8% | 90% |
| Payout (% of target) |  | 50% | 100% | 200% |  |  |
| Projected Total Payout |  |  |  |  | 120% |  |

As a result of the Company's performance in 2022, the 2022 portion of the 2022 PRSUs will vest at 120% percent of target when the 2022 PRSUs vest in March 2025. The 2022 performance will be combined with the 2023 and 2024 performance to determine the final payout at the end of the 2022 PRSUs' three-year vesting period.

### 2021 PRSUs

The PRSUs granted in 2021 were similar to the PRSUs granted in 2022, with a payout range from zero to 200 percent of the target level established by the Compensation Committee for each executive. Performance of the 2021 PRSUs is measured over the three-year period from 2021 through 2023. The performance goals of the 2012 PRSUs are based on year-over-year net sales growth and ROIC. The 2021 PRSUs will vest on March 17, 2024.

The 2022 performance goals and potential payouts at varying levels of performance for the 2021 PRSUs were the same as the 2022 performance goals and potential payouts for the 2022 PRSUs, as described above.

As a result of the Company's performance in 2021, the 2021 portion of the 2021 PRSUs will vest at 119.5% percent of target when the 2021 PRSUs vest in March 2024. As a result of the Company's performance in 2022, the 2022 portion of the 2021 PRSUs will vest at 120% percent of target when the 2021 PRSUs vest in March 2024. The 2021 and 2022 performance will be combined with the 2023 performance to determine the final payout at the end of the 2021 PRSUs' three-year vesting period.

## Benefits and Other Compensation

### Retirement Benefits

In 2022, the Company contributed on behalf of each named executive officer certain amounts to the Avanos Medical, Inc. 401(k) Plan (the "401(k) Plan") and certain credits to the Avanos Medical, Inc. Non-Qualified 401(k) Plan (the "Non-Qualified 401(k) Plan"). The Company does not have a defined benefit pension plan in the United States, and none of our named executive officers participate in any Company defined benefit pension plans.

The 401(k) Plan and Non-Qualified 401(k) Plan are consistent with those maintained by our peer group companies and are necessary to remain competitive for recruiting and retaining executive talent. The Committee believes that these retirement benefits are important parts of our compensation program. For more information, see "Non-Qualified Defined Compensation - Overview of Qualified and Non-Qualified Plans."

### Other Compensation

We believe the perquisites provided to our executive officers are minimal and well below the median of those provided by our peer group. In addition, the Company does not provide tax

reimbursement or gross-ups for perquisites offered to executive officers, except for certain relocation benefits.

### Severance Pay Plan

Our Severance Pay Plan provides severance benefits to most of our U.S. hourly and salaried employees, including our named executive officers, in the event they are involuntarily terminated under the circumstances described in

the plan. The objective of this plan is to facilitate the employee's transition to his or her next position, and not as a reward for the employee's past service.

AVANOS

2023 Notice and Proxy Statement ▲ 51

COMPENSATION DISCUSSION AND ANALYSIS

### Executive Severance Plan

Our Executive Severance Plan provides severance benefits to eligible executives, including our named executive officers, in the event of a qualified termination of employment (as defined in the plan) in connection with a change of control. For an eligible employee to receive a payment under this plan: (i) a change of control of the Company must occur and (ii) the executive must have been involuntarily terminated without cause or have resigned for good reason (as defined in the

plan) within two years of the change of control (often referred to as a “double trigger”). The objective of this plan is to encourage the executive to stay with the Company in the event of a change of control transaction to ensure a smooth transition. Each of our named executive officers participates in the Executive Severance Plan (other than David E. Ball, whose employment with the company terminated on September 6, 2022 as a result of his retirement).

## Additional Information About Our Compensation Practices

As a matter of sound governance, we follow certain practices with respect to our Covered Officer compensation program. We regularly review and

evaluate our Covered Officer compensation practices in light of regulatory developments, market standards and other considerations.

### Use of Independent Compensation Consultant

The Compensation Committee engaged Meridian as its independent consultant to assist it in determining the appropriate Covered Officer compensation under our compensation policies described above. Consistent with the Committee’s policy in which its independent consultant may provide services only to the Committee, Meridian

had no other business relationship with the Company and received no payments from us other than fees and expenses for services to the Committee. See “Corporate Governance-Compensation Committee” for information about the use of compensation consultants.

### Role of the Chief Executive Officer in Compensation Decisions

Our CEO makes a recommendation to the Compensation Committee each year on the appropriate target annual compensation for each of the other Covered Officers. The Committee makes the final determination of the target annual compensation for each such Covered Officer, including our CEO. While our CEO typically attends

Committee meetings, none of the other Covered Officers is present during the portion of the Committee’s meetings when compensation for such Covered Officers is set. In addition, our CEO is not present during the portion of the Committee’s meetings when his compensation is set.

### Adjustment of Financial Measures for Annual and Long-Term Equity Incentives

Financial measures for the annual and long-term incentive programs are developed based on expectations about our planned activities and reasonable assumptions about the performance of our key business drivers for the applicable period. From time to time, however, discrete items or events may arise that were not contemplated by these plans or assumptions. These could include accounting and tax law changes, tax credits from items not within the ordinary course of our business operations, restructuring and write-off charges, significant acquisitions or dispositions, and significant gains or losses from litigation matters.

Under the Compensation Committee’s exception guidelines regarding our annual incentive program measures, the Committee may adjust in the future the calculation of financial measures for the incentive programs to eliminate the effect of the

types of items or events described above. In making these adjustments, the Committee’s policy is to seek to neutralize the impact of the unexpected or unplanned items or events, whether positive or negative, in order to provide consistent and equitable incentive opportunities that the Committee believes are reflective of our performance. In considering whether to make a particular adjustment under its guidelines, the Committee will review whether the item or event was one for which management was responsible and accountable, treatment of similar items in prior periods, the extent of the item’s or event’s impact on the financial measure, and the item’s or event’s characteristics relative to normal and customary business practices. Generally, the Committee will apply an adjustment to all compensation that is subject to that financial measure.

52 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION DISCUSSION AND ANALYSIS

### Pricing and Timing of Stock Option Grants and Timing of Performance-Based Equity Grants

Our policies and our Equity Participation Plans require stock options to be granted at no less than the closing price of our common stock on the date of grant. PRSU, TRSU and/or stock option grants to our executive officers are generally made annually at a meeting of the Committee that is scheduled at least one year in advance, and the grants are effective on the date of such meeting. However, if the meeting occurs during a period when we do not permit insiders to trade Company common stock (a “Blackout Period”), the stock option grants will not be effective until the first business day following the end of the Blackout Period. Our Blackout Periods end at 11:59 p.m. on

the day we issue our quarterly earnings press releases. Our executives are not permitted to choose the grant date for their individual PRSU, TRSU or stock option grants.

Our CEO has been delegated the limited authority to approve equity grants, including stock options, to employees for recruiting and special employee recognition and retention purposes. These grants were capped at 125,000 shares in 2022 and may not exceed 125,000 shares in calendar year 2023. Our CEO is not permitted to make any grants to any of our executive officers.

### Incentive Compensation Clawbacks

As described in detail above, certain elements of our executive officer compensation are incentive-based. The determination of the extent to which the incentive objectives are achieved is based in part on our published financial results. The Compensation Committee has the right to reassess its determination of the performance awards if the financial statements on which it relied are restated. The Compensation Committee has the right to direct management to seek to recover from any executive officer any amounts determined to have been inappropriately received by the individual executive officer. In addition, under the Company’s Equity Participation Plans, the Compensation Committee may require awards with performance goals under the Plan to be subject to any policy we may adopt relating to the recovery of that award to the extent it is

determined that performance goals relating to the awards were not actually achieved. Further, the Sarbanes-Oxley Act of 2002 mandates that our CEO and our Chief Financial Officer reimburse us for any bonus or other incentive-based or equity-based compensation paid to them in a year following the issuance of financial statements that are later required to be restated as a result of misconduct. In October 2022, the SEC adopted final rules on clawbacks under the Dodd-Frank Act. Under the rules, companies listed on the NYSE, such as the Company, will be required to comply with the NYSE’s revised listing standards in relation to clawbacks. The new SEC’s clawback rules are not expected to take effect until the second half of 2023. We will approve a clawback policy that conforms to the new rules once the NYSE has adopted its revised listing standards.

### Stock Ownership Guidelines

We strongly believe that the financial interests of our board members and our executive officers should be aligned with those of our stockholders.

Accordingly, we have established the following stock ownership guidelines for our board members and executive officers:

### TARGET STOCK OWNERSHIP AMOUNTS

| Position | Ownership Level |
| --- | --- |
| Board Members | Five times annual cash retainer amount |
| Chief Executive Officer | Five times annual base salary |
| Other named executive officers | Two times annual base salary |

In determining whether our stock ownership guidelines have been met, any restricted share units and TRSUs held are counted as owned, but PRSUs are excluded until they vest. The Committee annually reviews executive officer stock ownership levels for compliance with these guidelines.

Our Board members and executive officers have five years within which to come into compliance with stock ownership guidelines. Currently, all our Outside Directors (other than Dr. Lisa Egbuonu-Davis, who was appointed to the Board effective March 6, 2023), our CEO and three of our other named executive officers meet the guideline requirements. The Committee expects that all of

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 53

COMPENSATION DISCUSSION AND ANALYSIS

our executive officers will meet them as well based on annual grants under the Equity Participation Plans. However, the performance of our stock price and the failure of PRSUs to vest may cause one or more of the executive officers not to meet the guidelines. In response, the Committee instituted a policy requiring our executive officers to retain at least 50% of the shares acquired under our Equity Participation Plans, whether through the

vesting of restricted share units or the exercise of vested stock options, until such time as the executive officer meets our share ownership guidelines. Executive officers subject to this retention policy will be permitted to surrender shares upon vesting or exercise for payment of taxes and to pay the exercise price and taxes on stock options.

### Other Policies Relating to Transactions in Company Securities

We require all executive officers to pre-clear transactions involving our common stock (and other securities related to our common stock) with our Legal Department.

We do not permit our executive officers to engage in transactions that hedge an executive officer’s economic risk of owning shares of our common stock. Thus, our executive officers may not engage in hedging transactions in the Company’s shares

such as puts, calls, prepaid variable forwards, equity swaps, collars and other derivative securities on an exchange or in any other organized market. Our executive officers also may not engage in short sales of the Company’s shares, meaning sales of shares that are not owned at the time of sale. Additionally, our executives are not permitted to pledge shares of our common stock owned by them as collateral for loans or other obligations.

## Compensation Committee Report

In accordance with its written charter adopted by the Board, the Compensation Committee of the Company has oversight of compensation policies designed to align executive officers’ compensation with the Company’s overall business strategy, values, and management initiatives. In discharging its oversight responsibility, the Committee has retained an independent compensation consultant to advise the Committee regarding market and general compensation trends.

The Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s management, which has the responsibility for preparing the Compensation Discussion and Analysis. Based upon this review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2022.

### COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

Gary Blackford, Chair Patrick O’Leary

54 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION DISCUSSION AND ANALYSIS

## Analysis of Compensation-Related Risks

The Compensation Committee has reviewed an assessment of our compensation programs for our employees, including our executive officers, to analyze the risks arising from our compensation systems. The Committee's independent consultant assisted with the review of our executive compensation programs.

Based on this assessment, the Committee believes that the design of our compensation programs, including our executive compensation program, does not encourage our executives or employees to take excessive risks and that the risks arising from these programs are not reasonably likely to have a material adverse effect on the Company.

Several factors contributed to the Committee's conclusion, including:

- The Committee believes the Company maintains a values-driven, ethics-based culture supported by a strong tone at the top.
- The performance targets for annual cash incentive programs are selected to ensure that they are reasonably attainable in a manner consistent with the Company's business plans without encouraging executives or employees to take inappropriate risks.
- An analysis by the Committee's consultant indicated that our compensation programs are consistent with those of our peer group. In addition, the analysis noted that target levels for direct annual compensation are compared to the median of our peer group.
- The Committee believes the allocation among the components of direct annual compensation provides an appropriate balance between annual and long-term incentives, total fixed, and performance-based compensation.
- Annual cash incentives and long-term performance-based restricted share unit awards under our executive compensation program are capped at a reasonable percent of the target award, and all other material non-executive cash incentive programs are capped at reasonable levels, which the Committee believes protects against disproportionately large incentives.
- The Committee believes the performance measures and the multi-year vesting features of the long-term equity incentive compensation component encourage participants to seek sustainable growth and value creation.
- The Committee believes inclusion of share-based compensation through the long-term equity incentive compensation component encourages appropriate decision-making that is aligned with the long-term interests of stockholders.
- Our stock ownership guidelines further align the interests of management and stockholders.

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 55

# Compensation Tables

## SUMMARY COMPENSATION

The following table contains information concerning compensation awarded to, earned by, or paid to the Company's named executive officers by the Company for the years 2020 through 2022. Additional information regarding the items reflected in each column follows the table.

## SUMMARY COMPENSATION TABLE

| NAME AND PRINCIPAL POSITION | YEAR (1) | SALARY ($) | BONUS ($) | STOCK AWARDS ($) | OPTION AWARDS ($) | NON-EQUITY INCENTIVE PLAN COMPENSATION ($) | CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED COMPENSATION EARNINGS ($) | ALL OTHER COMPENSATION ($) | TOTAL (6) ($) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Joseph F. Woody Chief Executive Officer | 2022 | 1,003,338 | - | 4,499,864 | - | 1,282,870 | - | 86,301 | 6,872,373 |
|  | 2021 | 960,027 | - | 3,801,785 | - | 574,096 | - | 142,279 | 5,478,186 |
|  | 2020 | 938,897 | - | 3,748,770 | 1,327,497 | 1,479,232 | - | 56,334 | 7,550,729 |
| Michael C. Greiner (1) Senior Vice President and Chief Financial Officer | 2022 | 513,605 | - | 1,699,959 | - | 399,728 | - | 27,120 | 2,640,411 |
|  | 2021 | 490,802 | - | 1,013,835 | - | 178,652 | - | 41,667 | 1,724,957 |
|  | 2020 | 480,000 | 40,000 | 1,558,995 | 374,996 | 460,320 | - | 325,892 | 3,240,203 |
| Mojirade James (2) Senior Vice President, General Counsel | 2022 | 440,004 | - | 1,124,966 | - | 293,525 | - | 26,005 | 1,884,500 |
|  | 2021 | - | - | - | - | - | - | - | - |
| David E. Ball (3) Senior Vice President, Global Supply Chain and Procurement | 2022 | 290,832 | 100,000 | 625,000 | - | 161,668 | - | 26,779 | 1,204,279 |
|  | 2021 | 409,000 | - | 304,132 | - | 106,340 | - | 38,080 | 857,552 |
|  | 2020 | 400,000 | - | 238,264 | 84,373 | 274,000 | - | 23,000 | 1,019,637 |
| William D. Haydon (4) Senior Vice President and General Manager, Pain Franchise | 2022 | 400,000 | - | 719,976 | - | 194,014 | - | 17,450 | 1,331,440 |
|  | 2021 | 385,001 | - | 608,263 | - | 86,856 | - | 125,429 | 1,205,549 |
|  | 2020 | 129,792 | 50,000 | 200,005 | - | 104,197 | - | 53,370 | 537,364 |
| Kerr W. Holbrook (5) Senior Vice President and General Manager, Chronic Care | 2022 | 400,000 | - | 719,976 | - | 288,308 | - | 28,564 | 1,436,848 |
|  | 2021 | 357,501 | 55,000 | 608,263 | - | 168,894 | - | 30,146 | 1,219,804 |

(1) Mr. Greiner joined the Company in 2020. On January 11, 2023, Mr. Greiner assumed the additional role of Chief Transformation Officer.

(2) Ms. James joined the Company in July 2021.

(3) The employment of Mr. Ball terminated on September 6, 2022 as a result of his retirement.

(4) Mr. Haydon joined the Company in 2020. On January 10, 2023, the Company and Mr. Haydon entered into a Severance and Separation agreement pursuant to which Mr. Haydon's employment with the Company will terminate effective March 31, 2023.

(5) Mr. Holbrook joined the Company in May 2019 and became a named executive officer in 2021. On January 11, 2023, Mr. Holbrook was appointed to the position of Senior Vice President and Chief Commercial Officer.

(6) Totals may not add due to rounding.

**Salary.** The amounts in this column represent base salary earned during the year and, with respect to Mr. Ball, accrued but unused vacation that was paid out in cash upon his retirement.

**Bonus.** The amounts in this column reflect: (i) cash payments to Messrs. Greiner and Haydon in connection with assuming their respective new positions in 2020; (ii) a cash payment to Ms. James in connection with assuming her new position in 2021; (iii) a cash payment to Mr. Holbrook for his outstanding performance in 2021; and (iv) a retention incentive bonus to Mr. Ball for his achievement of certain performance metrics between May 20, 2022, the date on which Mr. Ball and the Company entered into the Ball Retention Incentive Agreement, and September 6, 2022, when Mr. Ball's employment with the Company terminated upon his retirement.

**Stock Awards and Option Awards.** The amounts in these columns reflect the grant date fair value, computed in accordance with ASC Topic 718, of restricted share unit awards and stock options, respectively,

56 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION TABLES

granted under the Prior Plan in 2022, 2021, and 2020. See Note 12 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for the assumptions used in valuing and expensing these restricted share units and stock option awards in accordance with ASC Topic 718.

The value of PRSUs, which are subject to performance conditions, is set forth below: (i) based on their grant date value and (ii) assuming that the highest level of performance conditions is achieved.

| NAME | YEAR (1) | STOCK AWARDS AT GRANT DATE VALUE (2) ($) | STOCK AWARDS AT HIGHEST LEVEL OF PERFORMANCE CONDITIONS ($) |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  | Joseph F. Woody | 2022 | 1,800,000 | 3,600,000 |
| 2021 | 937,500 |  | 1,875,000 |  |  |
| Michael C. Greiner | 2022 | 680,000 | 1,360,000 |  |  |
|  | 2021 | 250,000 | 500,000 |  |  |
| David E. Ball | 2022 | 250,000 | 500,000 |  |  |
|  | 2021 | 75,000 | 150,000 |  |  |
| William D. Haydon | 2022 | 288,000 | 576,000 |  |  |
|  | 2021 | 150,000 | 300,000 |  |  |
| Kerr W. Holbrook | 2022 | 288,000 | 576,000 |  |  |
|  | 2021 | 150,000 | 450,000 |  |  |
| Mojirade James | 2022 | 450,000 | 900,000 |  |  |
|  | 2021 | - | - |  |  |

$^{(1)}$ No PRSUs were granted in 2020.

$^{(2)}$ The grant date value of the PRSUs awarded in 2021 and 2022 was based on the closing price of the Company’s common stock over the 10 trading days up to and including the grant date.

**Non-Equity Incentive Plan Compensation.** The amounts in this column are the annual cash incentive payments described above in “Compensation Discussion and Analysis.” These amounts were earned during the years indicated and were paid to the Company’s named executive officers in the following year. Pursuant to the Ball Retention Incentive Agreement, in March 2023 Mr. Ball received a pro rata portion of his 2022 annual cash incentive payout through September 6, 2022, the date his employment with the Company terminated as a result of his retirement.

**Change in Pension Value and Nonqualified Deferred Compensation Earnings.** Each of the Company’s named executive officers participated in the Company’s Non-Qualified 401(k) Plan, a non-qualified defined contribution plan. Earnings on this plan are not included in the Summary Compensation Table because the earnings were not above-market or preferential. See “Nonqualified Defined Compensation” below for a discussion of this plan and each named executive officer’s earnings under the plan in 2022.

**All Other Compensation.** All other compensation consists of the following:

| NAME | YEAR | PERQUISITES ($) (1) | DEFINED CONTRIBUTION PLAN AMOUNTS ($) (2) | SEPARATION- RELATED PAYMENTS | TAX REIMBURSEMENTS ($) (3) | TOTAL ($) (4) |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  | Joseph F. Woody |  |  |  | 2022 | - | 86,301 | - | - | 86,301 |
| 2021 | - | 142,279 |  | - | - | 142,279 |  |  |  |  |  |  |
| 2020 | - | 56,334 |  | - | - | 56,334 |  |  |  |  |  |  |
| Michael C. Greiner | 2022 | - | 27,120 | - | - | 27,120 |  |  |  |  |  |  |
|  | 2021 | - | 41,667 | - | - | 41,667 |  |  |  |  |  |  |
|  | 2020 | 146,662 | 31,200 | - | 148,030 | 325,892 |  |  |  |  |  |  |
| Mojirade James | 2022 | - | 26,005 | - | - | 26,005 |  |  |  |  |  |  |
|  | 2021 | - | - | - | - | - |  |  |  |  |  |  |
| David E. Ball | 2022 | - | 26,779 | - | - | 26,779 |  |  |  |  |  |  |
|  | 2021 | - | 38,080 | - | - | 38,080 |  |  |  |  |  |  |
|  | 2020 | - | 23,000 | - | - | 23,000 |  |  |  |  |  |  |

AVANOS

2023 Notice and Proxy Statement ▲ 57

# COMPENSATION TABLES

| NAME | YEAR | PERQUISITES ($) (1) | DEFINED CONTRIBUTION PLAN AMOUNTS ($) (2) | SEPARATION- RELATED PAYMENTS | TAX REIMBURSEMENTS ($) (3) | TOTAL ($) (4) |
| --- | --- | --- | --- | --- | --- | --- |
| William D. Haydon | 2022 | - | 17,450 | - | - | 17,450 |
|  | 2021 | 60,727 | 20,370 | - | 44,332 | 125,429 |
|  | 2020 | 15,280 | 10,788 | - | 27,303 | 53,370 |
| Kerr W. Holbrook | 2022 | - | 28,564 | - | - | 28,564 |
|  | 2021 | 621 | 29,427 | - | 98 | 30,146 |

(1) Perquisites for Messrs. Greiner, Holbrook and Haydon included reimbursement for expenses in connection with their relocation to the Atlanta area to assume their management roles.

(2) Matching contributions were made under the Avanos Medical 401(k) Plan and Non-Qualified 401(k) Plan in each year for each named executive officer.

(3) The amounts shown for Messrs. Greiner, Haydon and Holbrook reflect tax reimbursement under our executive relocation program in connection with their relocation to the Atlanta area to assume their new roles, as applicable.

(4) Totals may not add due to rounding.

## GRANTS OF PLAN-BASED AWARDS

The following table sets forth Company plan-based awards granted to the Company's named executive officers during 2022 on a grant-by-grant basis.

| NAME | GRANT TYPE | DATE COMMITTEE TOOK ACTION | GRANT DATE (2) | ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS (1) |  |  | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS |  |  | ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF STOCK OR UNITS (3) (#) | ALL OTHER OPTION AWARDS: NUMBER OF SECURITIES UNDERLYING OPTIONS (#) | EXERCISE OR BASE PRICE OF OPTION AWARDS ($ / SH) | GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS ($) (3)(4) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  | THRESHOLD ($) | TARGET ($) | MAXIMUM ($) | THRESHOLD (#) | TARGET (#) | MAXIMUM (#) |  |  |  |  |
| Joseph F. Woody | Performance-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | 53,955 | 107,910 | - | - | - | 1,799,939 |
|  | Time-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | - | - | 80,933 | - | - | 2,699,925 |
|  | Annual cash incentive award | - | - | 1,153,839 | 2,307,678 | - | - | - | - | - | - | - | - |
| Michael C. Greiner | Performance-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | 20,383 | 40,766 | - | - | - | 679,977 |
|  | Time-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | - | - | 30,575 | - | - | 1,019,982 |
|  | Annual cash incentive award | - | - | 359,523 | 719,046 | - | - | - | - | - | - | - | - |
| Mojirade James | Performance-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | 13,489 | 26,978 | - | - | - | 449,993 |
|  | Time-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | - | - | 20,233 | - | - | 674,973 |
|  | Annual cash incentive award | - | - | 264,000 | 528,000 | - | - | - | - | - | - | - | - |
| David E. Ball | Performance-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | 7,494 | 14,988 | - | - | - | 250,000 |
|  | Time-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | - | - | 11,241 | - | - | 375,000 |
|  | Annual cash incentive award | - | - | 145,407 | 290,814 | - | - | - | - | - | - | - | - |
| William D. Haydon | Performance-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | 8,633 | 17,266 | - | - | - | 287,997 |
|  | Time-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | - | - | 12,949 | - | - | 431,979 |
|  | Annual cash incentive award | - | - | 240,000 | 480,000 | - | - | - | - | - | - | - | - |

58 ▲ 2023 Notice and Proxy Statement

AVANOS

COMPENSATION TABLES

| NAME | GRANT TYPE | DATE COMMITTEE TOOK ACTION | GRANT DATE (2) | ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS (1) |  |  | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS |  |  | ALL OTHER STOCK AWARDS: NUMBER OF STORES OR UNITS (3) (#) | ALL OTHER OPTION AWARDS: NUMBER OF SECURITIES UNDERLYING OPTIONS (#) | EXERCISE OR BASE PRICE OF OPTION AWARDS ($ / SH) | GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS ($) (2)(4) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  | THRESHOLD ($) | TARGET ($) | MAXIMUM ($) | THRESHOLD (#) | TARGET (#) | MAXIMUM (#) |  |  |  |  |
| Kerr W. Holbrook | Performance-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | 8,633 | 17,266 | - | - | - | 287,997 |
|  | Time-based RSUs | 3/4/2022 | 3/4/2022 | - | - | - | - | - | - | 12,949 | - | - | 431,979 |
|  | Annual cash incentive award |  |  | - | 240,000 | 480,000 | - | - | - | - | - | - | - |

(1) Represents the potential annual performance-based incentive cash payments each named executive officer could earn in 2022. These awards were granted under the Company's annual cash incentive program. Actual amounts earned in 2022 were based on the 2022 objectives established by the Compensation Committee. See "Compensation Discussion and Analysis." At the time of the grant, the incentive payment could range from the threshold amount (i.e., zero) to the maximum amount depending on the extent to which the 2022 objectives were met. See "Target Payment Amounts And Range Of Possible Payouts For 2022 Annual Cash Incentive Program." The actual amounts paid in 2023 based on the 2022 objectives are set forth in the Summary Compensation Table under the column entitled "Non-Equity Incentive Plan Compensation."

(2) The grant date for each equity award is the effective date of each grant approved by the Compensation Committee. If the date on which the Committee takes action to approve a grant occurs during a blackout period, the grant is made effective as of a later date when the blackout period has expired. Our blackout periods typically expire at 11:59 p.m. Eastern Time on the day after we publicly release the results of the prior quarter.

(3) The number of TRSUs awarded was determined using an average closing price of the Company's common stock over the 10 trading days up to and including the grant date.

(4) The grant date fair value for each equity award is determined in accordance with ASC Topic 718. See Note 12 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for the assumptions used in valuing and expensing these restricted share units and stock option awards in accordance with ASC Topic 718.

## DISCUSSION OF SUMMARY COMPENSATION AND PLAN-BASED AWARDS TABLES

The Company's executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table

and the Grants of Plan-Based Awards in 2022 table was paid or awarded, are described in the "Compensation Discussion and Analysis" above.

## OUTSTANDING EQUITY AWARDS

The following table provides information about outstanding Company equity awards for the named executive officers as of December 31,

2022. All amounts shown in the table reflect outstanding equity awards granted under the Prior Plan.

AVANOS

2023 Notice and Proxy Statement ▲ 59

COMPENSATION TABLES

# OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2022

| NAME | GRANT DATE | OPTION AWARDS (1) |  |  |  | STOCK AWARDS |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) UNEXERCISABLE | OPTION EXERCISE PRICE ($) (2) | OPTION EXPIRATION DATE | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (#) (3) | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED ($) (4) | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED (#) (5) | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS, OR OTHER RIGHTS THAT HAVE NOT VESTED ($) (6) |
| Joseph F. Woody | 3/4/2022 | - | - | - | - | - | - | 53,955 | 1,460,022 |
|  | 3/4/2022 | - | - | - | - | 80,933 | 2,190,047 | - | - |
|  | 3/17/2021 | - | - | - | - | - | - | 19,826 | 536,492 |
|  | 3/17/2021 | - | - | - | - | 59,477 | 1,609,448 | - | - |
|  | 5/7/2020 | 81,109 | 54,074 | 28.87 | 5/7/2030 | - | - | - | - |
|  | 5/7/2020 | - | - | - | - | 129,850 | 3,513,741 | - | - |
|  | 5/8/2019 | 122,069 | - | 43.59 | 5/8/2029 | - | - | - | - |
|  | 5/3/2018 | 103,433 | - | 52.10 | 5/3/2028 | - | - | - | - |
|  | 5/3/2018 | 25,566 | - | 52.10 | 5/3/2028 | - | - | - | - |
|  | 6/26/2017 | 149,053 | - | 39.93 | 6/26/2027 | - | - | - | - |
| Michael C. Greiner | 3/4/2022 | - | - | - | - | - | - | 20,383 | 551,564 |
|  | 3/4/2022 | - | - | - | - | 30,575 | 827,360 | - | - |
|  | 3/17/2021 | - | - | - | - | - | - | 5,287 | 143,066 |
|  | 3/17/2021 | - | - | - | - | 15,861 | 429,199 | - | - |
|  | 5/7/2020 | 22,911 | 15,276 | 28.87 | 5/7/2030 | - | - | - | - |
|  | 5/7/2020 | - | - | - | - | 24,454 | 661,725 | - | - |
|  | 5/7/2020 | - | - | - | - | 12,227 | 330,863 | - | - |
|  | 1/2/2020 | - | - | - | - | 14,702 (5) | 397,836 | - | - |
| Mojirade James | 3/4/2022 | - | - | - | - | - | - | 13,489 | 365,012 |
|  | 3/4/2022 | - | - | - | - | 20,233 | 547,505 | - | - |
|  | 7/20/2021 | - | - | - | - | 4,897 (6) | 132,513 | - | - |
| David E. Ball | 3/4/2022 | - | - | - | - | - | - | 7,494 | 202,788 |
|  | 3/4/2022 | - | - | - | - | 11,241 | 304,182 | - | - |
|  | 3/17/2021 | - | - | - | - | - | - | 1,586 | 42,917 |
|  | 5/7/2020 | 8,592 | - | 28.87 | 46,636 | - | - | - | - |
|  | 5/8/2019 | 7,759 | - | 43.59 | 46,636 | - | - | - | - |
| William D. Haydon | 3/4/2022 | - | - | - | - | - | - | 8,633 | 233,609 |
|  | 3/4/2022 | - | - | - | - | 12,949 | 350,400 | - | - |
|  | 3/17/2021 | - | - | - | - | - | - | 3,172 | 85,834 |
|  | 3/17/2021 | - | - | - | - | 9,516 | 257,503 | - | - |
|  | 8/31/2020 | - | - | - | - | 6,173 (7) | 167,041 | - | - |
| Kerr W. Holbrook | 3/4/2022 | - | - | - | - | - | - | 8,633 | 233,609 |
|  | 3/4/2022 | - | - | - | - | 12,949 | 350,340 | - | - |
|  | 3/17/2021 | - | - | - | - | - | - | 3,172 | 85,834 |
|  | 3/17/2021 | - | - | - | - | 9,516 | 257,503 | - | - |
|  | 5/7/2020 | 3,551 | 2,368 | 28.87 | 47,610 | - | - | - | - |
|  | 5/7/2020 | - | - | - | - | 5,685 | 153,836 | - | - |

(1) Stock options become exercisable in three annual installments of 30 percent, 30 percent and 40 percent, beginning on the first anniversary of the grant date. All options become exercisable for three years upon death or total and permanent disability and for the earlier of five years or the remaining term of the options, upon retirement of the officer. In addition, options generally become exercisable upon a termination of employment following a change of control, and options granted to the named

60 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION TABLES

executive officers are subject to the Executive Severance Plan. See “Potential Payments on Termination or Change of Control” below. The options may be transferred by the officers to family members or certain entities in which family members have interests.

(2) The option price per share is equal to the closing price per share of the Company’s common stock on the grant date.
(3) The amounts shown reflect outstanding TRSUs. The values are based on the closing price of our common stock on December 30, 2022 of $27.06 per share.
(4) The amounts shown reflect outstanding PRSUs. The values in these columns are based on the closing price of our common stock on December 30, 2022 of $27.06 per share. The values assume the performance-based restricted share units will payout at target. As of December 31, 2022, the PRSUs issued in 2021 were on pace to pay out at 122% and the performance-based share units issued in 2022 were on pace to pay out at 125%.
(5) TRSUs granted under the Prior Plan to Mr. Greiner on January 2, 2020 as a signing bonus when he was appointed as the Company’s Chief Financial Officer.
(6) TRSUs granted under the 2021 Plan to Ms. James on July 20, 2021 as a signing bonus when she was appointed as the Company’s Senior Vice President, General Counsel and Secretary.
(7) TRSUs granted under the Prior Plan to Mr. Haydon on August 31, 2020 as a signing bonus when he was appointed as the Company’s Senior Vice President and General Manager, Pain Franchise.

## Option Exercises and Stock Vested

The following table sets forth information concerning Company stock options exercised and

stock awards vested during 2022 for the Company’s named executive officers.

# OPTION EXERCISES AND STOCK VESTED IN 2022:

| NAME (1) | OPTION AWARDS |  | STOCK AWARDS |  |
| --- | --- | --- | --- | --- |
|  | NUMBER OF SHARES ACQUIRED ON EXERCISE (#) | VALUE REALIZED ON EXERCISE ($) | NUMBER OF SHARES ACQUIRED ON VESTING (#) | VALUE REALIZED ON VESTING ($) (2) |
| David E. Ball | - | - | 10,666 | 254,597 |
| Kerr W. Holbrook | - | - | 4,567 | 116,494 |
| Mojirade James | - | - | 2,411 | 66,086 |

(1) Messrs. Woody, Greiner and Haydon are not included on this table because they had no stock awards vest or options exercised in the year ended December 31, 2022.
(2) The dollar amount in this column reflects the total pre-tax value received by Messrs. Ball and Holbrook and Ms. James upon the vesting of time-based RSUs (i.e., the number of shares vested multiplied by the closing price of the Company’s common stock on the vesting date), including cash paid in lieu of fractional shares.

## Pension Benefits

The Company does not offer a pension plan in the United States, and none of the Company’s

executive officers participate in a Company pension plan.

## Nonqualified Defined Compensation

The following table sets forth information concerning the Company’s non-qualified defined

contribution plan for the Company’s named executive officers during 2022.

| NAME | PLAN | COMPANY CONTRIBUTIONS IN 2022 ($) (1) | AGGREGATE EARNINGS IN 2022 ($) (2) | AGGREGATE BALANCE AT DECEMBER 31, 2022 |
| --- | --- | --- | --- | --- |
| Joseph F. Woody | Non-Qualified 401(k) Plan | 73,808 | (78,376) | 444,388 |
| Michael C. Greiner | Non-Qualified 401(k) Plan | 21,935 | (3,675) | 71,370 |
| Mojirade James | Non-Qualified 401(k) Plan | 10,755 | 209 | 11,292 |
| David E. Ball | Non-Qualified 401(k) Plan | 11,529 | (2,225) | 46,554 |
| William D. Haydon | Non-Qualified 401(k) Plan | 9,899 | 318 | 20,066 |
| Kerr W. Holbrook | Non-Qualified 401(k) Plan | 14,821 | 353 | 29,429 |

(1) Contributions consist of amounts accrued but not yet paid by the Company under the Non-Qualified 401(k) Plan. These amounts are included in the Summary Compensation Table and represent a portion of the Defined Contribution Plan Payments included in All Other Compensation.
(2) The amounts in this column show the changes in the aggregate account balance for the Company’s named executive officers during 2022 that are not attributable to company contributions. Aggregate earnings are not included in the Summary Compensation Table because the earnings are not above-market or preferential.

AVANOS

2023 Notice and Proxy Statement ▲ 61

COMPENSATION TABLES

# **Overview of Qualified and Non-Qualified Plans.**  
The following is an overview of the Company's

qualified and non-qualified plans offered to our executive officers as of December 31, 2022.

|  | Avanos Medical 401(k) Plan | Avanos Medical Non-Qualified 401(k) Plan |
| --- | --- | --- |
| Purpose | To assist employees in saving for retirement. | To provide benefits to the extent necessary to fulfill the intent of the 401(k) Plan without regard to the limitations imposed by the Code on qualified defined contribution plans. |
| Eligible participants | Most employees. | Salaried employees impacted by limitations imposed by the Code on the 401(k) Plan. |
| Is the plan qualified under the Code? | Yes. | No. |
| Can employees make contributions? | Yes. | No. |
| Does the Company make contributions or match employee contributions? | The Company matches 100% of employee contributions on the first 4% of eligible compensation and 50% of the next 2%. | The Company provides credit to the extent the Company's contributions to the 401(k) Plan are limited by the Code. |
| When do account balances vest? | Immediately. | Immediately. |
| How are account balances invested? | Account balances are invested in certain designated investment options selected by the participant. | Account balances are credited with earnings and losses as if such account balances were invested in certain designated investment options selected by the participant. |
| When are account balances distributed? | Distributions of the participant's vested account balance are only available after termination of employment. Loans, hardship and certain other withdrawals are allowed prior to termination of employment for certain vested amounts under the 401(k) Plan. | Distributions of the participant's vested account balance are payable after termination of employment. |

The Non-Qualified 401(k) Plan is not funded and represents a general obligation of the Company.

## POTENTIAL PAYMENTS ON TERMINATION OR CHANGE OF CONTROL

The Company's executive officers are eligible to receive certain benefits in the event of termination of employment, including following a change of control of the Company. This section describes

various termination scenarios as well as the payments and benefits payable under those scenarios.

### Severance Benefits

The Company maintains two severance plans that cover its executive officers, depending on the circumstances that result in their termination. Those plans are the Executive Severance Plan, which is applicable when an executive officer's employment terminates following a change of

control, and the Severance Pay Plan, which is applicable in the event of certain other involuntary terminations. An executive officer may not receive severance payments under more than one of the plans described below.

62 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION TABLES

**Executive Severance Plan.** The Compensation Committee is responsible for determining which key executives and other officers are eligible to participate in the Executive Severance Plan. Each of the Company's named executive officers participates in the Executive Severance Plan. Under the Executive Severance Plan, in the event of a "Qualified Termination of Employment" (as described below), participating officers will each receive a cash payment in an amount equal to the sum of:

- For the CEO, two times the sum of annual base salary and the target full annual cash incentive award for the year in which the Qualified Termination of Employment occurs, and for any other executive officer, one and one-half times the sum of annual base salary and the target full annual cash incentive award for the year in which the Qualified Termination of Employment occurs;1
- The value of the employer match each executive officer would have received if he or she had remained employed for an additional two years under the 401(k) Plan and the Non-Qualified 401(k) Plan; and
- For the CEO, two times the value of the amount of COBRA premiums for medical and dental coverage and for any other executive officer, one and one-half times the value of the amount of COBRA premiums for medical and dental coverage.
- In addition, any outstanding RSUs and stock option awards will become fully vested (with any performance-based vesting requirements deemed to have been achieved at target).

A "Qualified Termination of Employment" is a separation from service within two years following a change of control of the Company (as defined in the plan) either involuntarily without cause or by the participant with good reason (as defined in the plan). In addition, any involuntary separation from service without cause within one year before a change of control will also be determined to be a Qualified Termination of Employment if it is in connection with, or in anticipation of, a change of control.

The Executive Severance Plan provides that the executive officers are not entitled to a tax gross-up if they incur an excise tax due to the application of Section 280G of the Code. Instead, payments and benefits payable to an executive officer will be

reduced to the extent doing so would result in the officer retaining a larger after-tax amount, taking into account the income, excise and other taxes imposed on the payments and benefits.

The form of Separation Agreement to be entered into with the executive officers in the event of a Qualified Termination of Employment provides that they will retain in confidence any confidential information known to them concerning the Company and the Company's business so long as such information is not publicly disclosed.

**Severance Pay Plan.** The Company's Severance Pay Plan generally provides eligible employees (including the Company's named executive officers) severance payments and benefits in the event of certain involuntary terminations. Benefits under the Severance Pay Plan depend on the participants' employee classification.

Under the Severance Pay Plan, if an executive officer's employment was involuntarily terminated, he or she would receive:

- For the CEO, two times the sum of annual base salary and the target full annual cash incentive award for the year in which the termination occurs, and for any other executive officer, one and one-half times the sum of annual base salary and the target full annual cash incentive award for the year in which the termination occurs,
- Six months of COBRA premiums for medical coverage, and
- Six months of outplacement services and three months of participation in Avanos Medical's employee assistance program.

Severance pay under the Severance Pay Plan will not be paid to any participant who is terminated for cause (as defined in the plan), is terminated during a period in which the participant is not actively at work for more than 25 weeks (except to the extent otherwise required by law), voluntarily quits or retires, dies or is offered a comparable position (as defined in the plan).

A named executive officer must execute a full and final release of claims against the Company within a specified period of time following termination to receive severance benefits under the Severance Pay Plan. If the release has been timely executed, severance benefits are payable as a lump sum cash payment no later than 60 days following the participant's termination date.

1 In February 2023, the Compensation Committee approved an amendment to the Executive Severance Plan pursuant to which the payout multiple for our CEO was increased from two times to two and one-half times the sum of annual base salary and the target full annual cash incentive award for the year in which the Qualified Termination of Employment occurs.

AVANOS

2023 Notice and Proxy Statement ▲ 63

COMPENSATION TABLES

# Retirement, Death and Disability

**Retirement.** Retirement is defined as separation from service on or after the age of 60 with five years of service, or on or after age 55 with ten years of service. Years of service at Kimberly-Clark prior to our spin-off from that company are considered years of service for the definition of retirement. In the event of retirement, the Company's named executive officers are entitled to receive:

- Accelerated vesting of unvested stock options, and the options will be exercisable until the earlier of five years or the remaining term of the options,
- PRSUs outstanding more than six months after the date of grant will vest pro rata based on attainment of the performance goal at the end of the performance period,
- TRSUs will vest pro rata, based on the number of full days of employment during the restricted period prior to the participant's termination of employment, payable within 70 days following the end of the performance period,
- Annual incentive award payment under the annual cash incentive program as determined by the Compensation Committee in its discretion.

**Death.** In the event of death while an active employee, the following benefits are payable:

- Accelerated vesting of unvested stock options, and the options will be exercisable until the earlier of three years or the remaining term of the options,
- PRSUs outstanding more than six months after the date of grant will vest pro rata based on attainment of the performance goal at the end of the restricted period, payable within 70 days following the end of the performance period,
- TRSUs will vest pro rata based on the number of full days of employment during the restricted period prior to the participant's termination of employment, payable within 70 days following the end of the restricted period,
- Annual incentive award payment under the annual cash incentive program, as determined by the Compensation Committee in its discretion, and
- Payment of benefits under the Company's group life insurance plan (which is available to all salaried employees in the United

States) equal to two times the participant's annual pay, up to $1 million (plus any additional coverage of three, four, five or six times the participant's annual pay, in increments of up to $1 million each, purchased by the participant at group rates). The Company-provided and employee-purchased benefits cannot exceed $6 million.

**Disability.** In the event of a separation from service due to a total and permanent disability, as defined in the applicable plan, the Company's named executive officers are entitled to receive:

- Accelerated vesting of unvested stock options, and the options will be exercisable until the earlier of three years or the remaining term of the options,
- PRSUs outstanding more than six months after the date of grant will vest pro rata based on attainment of the performance goal at the end of the restricted period, payable within 70 days following the end of the performance period,
- TRSUs will vest pro rata based on the number of full days of employment during the restricted period prior to the participant's termination of employment, payable within 70 days following the end of the performance period,
- Annual incentive award payment under the annual cash incentive program, as determined by the Compensation Committee in its discretion,
- Continuing coverage under the Company's group life insurance plan (available to all U.S. salaried employees), with no requirement to make monthly contributions toward coverage during disability, and
- Payment of benefits under the Company's Long-Term Disability Plan (available to all U.S. salaried employees). Long-term disability under the plan would provide income protection of monthly base pay, ranging from a minimum monthly benefit of $50 to a maximum monthly benefit of $20,000. Benefits are reduced by the amount of any other Company or government-provided income benefits received (but will not be lower than the minimum monthly benefit).

# Potential Payments on Termination or Change of Control Table

The following table presents for each of our named executive officers (other than David E. Ball, whose

64 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION TABLES

employment with the Company terminated on September 6, 2022 as a result of his retirement) the approximate value of: (1) the severance benefits under the Executive Severance Plan if a Qualified Termination of Employment had occurred on December 31, 2022; (2) the severance benefits under the Severance Pay Plan if an involuntary termination had occurred on December 31, 2022; (3) the benefits that would have been payable in the event of such named executive officer’s death on December 31, 2022; and (4) the benefits that would have been payable in the event of such named executive officer’s total and permanent disability on December 31, 2022. If applicable, amounts in the table were calculated using the closing price of the Company’s common stock on December 30, 2022 of $27.06 per share.

Because none of the Company’s named executive officers were eligible to retire as of December 31, 2022, potential payments assuming retirement on that date are not included.

The value of benefits that already were vested as of December 31, 2022, such as vested but unexercised stock options and the balances of the executive officers’ accounts under the 401(k) Plan and Non-Qualified 401(k) Plan, are not included in the table. The amounts presented in the table are in addition to such amounts. For information about these previously earned and accrued amounts, see the “Summary Compensation Table,” “Outstanding Equity Awards,” “Option Exercises and Stock Vested,” and “Nonqualified Deferred Compensation.”

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 65

# COMPENSATION TABLES

| NAME | CASH PAYMENT ($) | EQUITY WITH ACCELERATED VESTING (1) ($) | ADDITIONAL RETIREMENT BENEFITS (2) ($) | CONTINUED BENEFITS AND OTHER AMOUNTS (3)(4) ($) | TOTAL ($) |
| --- | --- | --- | --- | --- | --- |
| Joseph F. Woody |  |  |  |  |  |
| Qualified Termination of Employment in connection with a Change in Control (5) | 5,520,133 | 9,309,749 | 172,602 | 9,540 | 15,012,024 |
| Involuntary termination absent a Change in Control (6) | 5,520,133 | - | - | 13,540 | 5,533,673 |
| Death (7)(8) | 2,282,870 | 5,386,079 | - | - | 7,668,949 |
| Disability | 1,282,870 | 5,386,079 | - | - | 6,668,949 |
| Michael C. Greiner |  |  |  |  |  |
| Qualified Termination of Employment in connection with a Change in Control (5) | 2,127,524 | 2,943,776 | 54,240 | 13,414 | 5,138,953 |
| Involuntary termination absent a Change in Control (6) | 2,127,524 | - | - | 17,414 | 2,144,938 |
| Death (7)(8) | 1,388,528 | 1,596,874 | - | - | 2,985,402 |
| Disability | 399,728 | 1,596,874 | - | - | 1,996,602 |
| Mojirade James |  |  |  |  |  |
| Qualified Termination of Employment in connection with a Change in Control (5) | 1,688,003 | 1,045,030 | 52,010 | 8,500 | 2,793,543 |
| Involuntary termination absent a Change in Control (6) | 1,688,003 | - | - | 12,500 | 1,700,503 |
| Death (7)(8) | 1,143,525 | 314,735 | - | - | 1,458,260 |
| Disability | 293,525 | 314,735 | - | - | 608,260 |
| William D. Haydon |  |  |  |  |  |
| Qualified Termination of Employment in connection with a Change in Control (5) | 1,536,001 | 1,094,388 | 34,900 | 13,414 | 2,678,703 |
| Involuntary termination absent a Change in Control (6) | 1,536,001 | - | - | 17,414 | 1,553,415 |
| Death (7)(8) | 964,014 | 495,103 | - | - | 1,459,117 |
| Disability | 194,014 | 495,103 | - | - | 689,117 |
| Kerr W. Holbrook |  |  |  |  |  |
| Qualified Termination of Employment in connection with a Change in Control (5) | 1,536,001 | 1,081,182 | 57,128 | 13,414 | 2,687,725 |
| Involuntary termination absent a Change in Control (6) | 1,536,001 | - | - | 17,414 | 1,553,415 |
| Death (7)(8) | 948,308 | 501,137 | - | - | 1,449,445 |
| Disability | 288,308 | 501,137 | - | - | 789,445 |

(1) Assumes that PRSUs would vest at target level.

(2) Includes the value of two additional years of employer contributions under the 401(k) Plan and the Non-Qualified 401(k) Plan, pursuant to the terms of the Executive Severance Plan.

(3) For a Qualified Termination of Employment in connection with a Change in Control, includes an amount equal to 24 months of COBRA medical and dental coverage for Mr. Woody and 18 months of COBRA medical and dental coverage for the other named executive officers.

(4) For an involuntary termination absent a Change in Control, includes six months of COBRA medical coverage and outplacement services and three months of employee assistance program.

(5) Represents amounts payable under the Executive Severance Plan.

(6) Benefits payable under the Severance Pay Plan.

66 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION TABLES

(7) Balances in each executive's accounts under the 401(k) Plan and the Non-Qualified 401(k) Plan are excluded because the payout of those balances upon death is a benefit available to all U.S. salaried employees.
(8) For death, includes the payment of benefits under the Company's group life insurance plan (which is available to all U.S. salaried employees). For death and disability, assumes the Compensation Committee would approve payment under the annual cash incentive program for 2022 at the actual award level discussed in Compensation Discussion and Analysis. The cost of continued coverage under the Company's group life insurance plans has been excluded from the table because the benefit is available to all U.S. salaried employees and does not discriminate in scope or terms or operation in favor of our named executive officers. Figures also do not include benefits payable under Avanos Medical's Long-Term Disability Plan (which is available to all U.S. salaried employees), the value of which would be dependent on the life span of the Company's named executive officer and the value of any Company or government-provided income benefits received.

## PAY VERSUS PERFORMANCE

Item 402(v) of the SEC's Regulation S-K, which was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires disclosure of information that demonstrates the relationship between executive "compensation actually paid" and our performance against several specific financial metrics. We have included the table and disclosure below in accordance with the final rule, which was effective on October 11, 2022. For further information regarding our executive compensation programs, the metrics the Compensation Committee used to set executive compensation

for 2022 (which are different than the financial metrics we are required to include in the tables and discussion below) and our pay-for-performance philosophy, please refer to "Compensation Discussion and Analysis."

The following table provides information regarding the relationship between total executive compensation, executive "compensation actually paid" and the Company's performance during the fiscal years ended December 31, 2022, 2021 and 2020.

| YEAR | SUMMARY COMPENSATION TABLE TOTAL FOR PEO (1) ($) | COMPENSATION ACTUALLY PAID TO PEO (1)(2) ($) | AVERAGE SUMMARY COMPENSATION TABLE TOTAL FOR NON-PEO NEOs (1) ($) | AVERAGE COMPENSATION ACTUALLY PAID TO NON-PEO NEOs (1)(2) ($) | VALUE OF INITIAL FIXED $100 INVESTMENT BASED ON: |  | NET INCOME (LOSS) ($ MILLIONS) | COMPANY- SELECTED MEASURE (ADJUSTED EBITDA) ($ MILLIONS) (3) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  | TOTAL SHAREHOLDER RETURN ($) | PEER GROUP TOTAL SHAREHOLDER RETURN ($) (3) |  |  |
| 2022 | 6,872,373 | 3,044,683 | 1,699,496 | 1,173,629 | 80.30 | 143.37 | 50.5 | 135.8 |
| 2021 | 5,478,186 | 411,369 | 1,251,965 | 744,420 | 102.88 | 156.59 | 6.3 | 96.1 |
| 2020 | 7,550,729 | 11,184,189 | 1,630,304 | 1,908,512 | 136.14 | 119.60 | (29.0) | 87.0 |

(1) Joseph F. Woody was the Company's principal executive officer ("PEO") for the fiscal years ended December 31, 2022, 2021 and 2020.

(2) The Company's named executive officers other than the PEO (the "Non-PEO NEOs") for the fiscal years ended December 31, 2022, 2021 and 2020 are set forth below:

Fiscal Year 2022

Michael C. Greiner
Mojirade James
David E. Ball
William D. Haydon
Kerr W. Holbrook

Fiscal Year 2021

Michael C. Greiner
David E. Ball
William D. Haydon
Kerr W. Holbrook

Fiscal Year 2020

Michael C. Greiner
David E. Ball
Arjun R. Sarker
William D. Haydon
John W. Wesley

(3) The following table shows, for the amounts disclosed above under "Compensation Actually Paid to PEO" and "Average Compensation Actually Paid to Non-PEO NEOs," each of the amounts deducted and added to calculate: (i) the "compensation actually paid" to our PEO and (ii) the average "compensation actually paid" to our Non-PEO NEOs for each of the fiscal years ended December 31, 2022, 2021 and 2020:

AVANOS

2023 Notice and Proxy Statement ▲ 67

# COMPENSATION TABLES

|  | FISCAL YEAR 2022 |  | FISCAL YEAR 2021 |  | FISCAL YEAR 2020 |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | PEO | AVERAGE NON-PEO NEO COMPENSATION | PEO | AVERAGE NON-PEO NEO COMPENSATION | PEO | AVERAGE NON-PEO NEO COMPENSATION |
| Total Compensation | $6,872,373 | $1,699,496 | $5,478,186 | $1,251,965 | $7,550,729 | $1,630,304 |
| Adjustments for Defined Benefit and Actuarial Plans |  |  |  |  |  |  |
| Pension Value | $ - | $ - | $ - | $ - | $ - | $ - |
| Current Year Pension Value and Change in Pension Value Attributable to Amendments Made in the Current Year | $ - | $ - | $ - | $ - | $ - | $ - |
| Total Adjustments for Defined Benefit and Actuarial Plans | $ - | $ - | $ - | $ - | $ - | $ - |
| Adjustments for Stock and Option Awards |  |  |  |  |  |  |
| Summary Compensation Table Amounts | $(4,500,000) | $(913,826) | $(3,801,785) | $(633,623) | $(5,076,267) | $(684,909) |
| Unvested Value of Equity Granted During the Fiscal Year | $3,650,069 | $732,449 | $2,794,114 | $465,680 | $9,180,281 | $943,602 |
| Change in Fair Value of Equity Outstanding at the Beginning and End of the Period | $(1,876,784) | $(199,872) | $(3,052,995) | $(303,967) | $645,042 | $22,314 |
| Change in Value for Awards Vested During the Fiscal Year | $(1,100,975) | $(50,413) | $(1,006,151) | $(35,635) | $(1,115,596) | $90,146 |
| Awards Forfeited During the Fiscal Year | $ - | $(94,205) | $ - | $ - | $ - | $(92,945) |
| Total Adjustments for Stock and Option Awards | $(3,827,690) | $(525,867) | $(5,066,817) | $(507,545) | $3,633,460 | $278,208 |
| Actual Compensation Paid | $3,044,683 | $1,173,629 | $411,369 | $744,420 | $11,184,189 | $1,908,512 |

(4) The fair value of each equity award was re-measured on each vesting date and/or year-end, as applicable, in accordance with Accounting Standards Codification (ASC) Topic 718. The assumptions used in the valuation of each type of award are summarized below:

- Time-based restricted stock units: The fair value of TRSUs was based on the Company's closing stock price on each measurement date.
- Non-qualified stock options: The fair value of non-qualified stock options was determined using a Black-Scholes option pricing model with the following assumptions:

| Year | 2019 | 2020 | 2021 | 2022 |
| --- | --- | --- | --- | --- |
| Volatility | 30% | 41% | 43% | 44% |
| Risk Free Rate | 1.6% to 2.7% | 0.3% to 2.7% | 0.3% to 2.8% | 0.3% to 2.3% |
| Expected Term | 4 years | 4 years | 5 years | 5 years |
| Dividend Yield | -% | -% | -% | -% |
| Fair Values | $4.09 to $7.51 | $6.47 to $22.85 | $11.22 to $19.77 | $7.67 to $10.26 |

- Performance-based restricted stock units: PRSU awards for which vesting was conditioned on meeting a defined measure of total shareholder return ("TSR") were issued in 2018 and 2019. Such PRSUs would have vested at the end of 2020 and 2021, respectively, had the relevant TSR measures been met. None of such PRSUs vested. The fair value for PRSUs was determined using a Monte Carlo simulation using the following assumptions:

| Year | 2019 | 2020 | 2021 |
| --- | --- | --- | --- |
| Peer group average volatility | 31% | 51% | n/a |
| Risk Free Rate | 1.6% | 0.1% | n/a |
| Fair Values | $2.27 to $15.42 | $0 to $33.65 | $0 |

(5) For purposes of determining the TSR of the Company's peer group, the Company uses the S&P MidCap 400 Index, which is one of the published industry indexes used by the Company to report on the performance of its common stock in its Annual Report on Form 10-K for the year ended December 31, 2022.

(6) The "Company-Selected Measure" is adjusted EBITDA, which in the Company's assessment represents the most important financial performance measure (that is not otherwise required to be disclosed in the above table) used by the Company to link compensation actually paid to the Company's named executive officers, for the year ended December 31, 2022, to Company performance. Adjusted EBITDA is a non-GAAP financial measure. A description of this measure and a reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measures is provided in Appendix A to this proxy statement.

68 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION TABLES

## LIST OF MOST IMPORTANT FINANCIAL MEASURES

The three other financial performance measures which in the Company's assessment represent the most important financial performance measures used by the Company to link compensation actually paid to the Company's named executive officers, for the year ended December 31, 2022, to Company performance are:

- Adjusted EBITDA;
- Net sales;
- Adjusted diluted earnings per share ("Adjusted EPS"); and
- Return on invested capital ("ROIC").

Adjusted EPS and ROIC are non-GAAP financial measures. A reconciliation of Adjusted EPS to the most directly comparable GAAP financial measures is provided in Appendix A to this proxy statement. A reconciliation of ROIC to the most directly comparable GAAP financial measures is provided in Appendix B to this proxy statement.

Set forth below is a table which shows the following for the year ended December 31, 2022: (i) net sales; (ii) Adjusted EPS; (iii) ROIC; and (iv) adjusted EBITDA (the Company-selected measure).

| YEAR | NET SALES ($ MILLIONS) | ADJUSTED EPS ($) | RETURN ON INVESTED CAPITAL (%) | COMPANY-SELECTED MEASURE (ADJUSTED EBITDA) ($ MILLIONS) |
| --- | --- | --- | --- | --- |
| 2022 | $820.0 | $1.65 | 5.8% | $135.8 |

## RELATIONSHIPS BETWEEN COMPENSATION ACTUALLY PAID AND TSR, NET INCOME AND ADJUSTED EBITDA

The following charts describe the relationships:

- Between: (i) the executive compensation actually paid by the Company to the PEO and the average of the executive compensation actually paid to the Non-PEO NEOs; (ii) the Company's cumulative TSR across the fiscal years ended December 31, 2020, 2021 and 2022 and (iii) the cumulative TSR of our peer group across the fiscal years ended December 31, 2020, 2021 and 2022;
- Between: (i) the compensation actually paid by the Company to the PEO and the average

of the executive compensation actually paid to the Non-PEO NEOs and (ii) the Company's net income over the fiscal years ended December 31, 2020, 2021 and 2022; and

- Between: (i) the executive compensation actually paid by the Company to the PEO and the average of the executive compensation actually paid to the Non-PEO NEOs and (ii) the Company's adjusted EBITDA (the Company's company-selected measure) over the fiscal years ended December 31, 2020, 2021 and 2022.

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 69

# COMPENSATION TABLES

![img-0.jpeg](img-0.jpeg)

![img-1.jpeg](img-1.jpeg)

70 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

COMPENSATION TABLES

![img-2.jpeg](img-2.jpeg)

## RATIO OF CEO COMPENSATION TO MEDIAN EMPLOYEE COMPENSATION

The 2022 compensation disclosure ratio of the median annual total compensation of all Company

employees worldwide to the annual total compensation of the Company’s CEO is as follows:

| Category | 2022 Total Compensation and Ratio ($) |
| --- | --- |
| Annual total compensation of Mr. Woody (A) | 6,872,373 |
| Median annual total compensation of all employees worldwide (excluding Mr. Woody) (B) | 6,786 |
| Ratio of A to B | 1,013:1 |

For 2022, we used the same median employee who was identified in 2020 (and again in 2021) since there has been no change in our employee population or employee compensation arrangements that we reasonably believe would result in a significant change in the pay ratio disclosure. The Company identified the median employee in 2020 by examining the following compensation elements for all individuals, excluding Mr. Woody: current base salary, 2020 bonus paid in 2021, grant date value of 2020 long-term incentive grants, trailing 12 months of commissions, and overtime.

The Company determined the median employee based on its workforce as of December 31, 2020,

and included all full-time and part-time employees. After identifying the median employee, who is based in Mexico, the Company calculated annual total compensation for such employee using the same methodology used for named executive officers as set forth in the Summary Compensation Table. The Company’s compensation disclosure ratio may not be comparable to those disclosed by other companies based on a number of factors, including differences in employee populations, different geographic distributions of employees, and the nature of the companies’ businesses.

AVANOS

2023 Notice and Proxy Statement ▲ 71

## PROPOSAL 5.

# APPROVAL OF AMENDMENT TO OUR 2021 LONG TERM INCENTIVE PLAN

We are seeking stockholder approval of an amendment to the Avanos Medical, Inc. 2021 Equity Participation Plan (the “2021 Plan”) to increase the number of shares of our common stock reserved for issuance thereunder by 1,250,000 shares. Except for the proposed increase in the number of shares authorized under the 2021 Plan, the amendment does not change any provisions of the 2021 Plan, which was approved by stockholders at the 2021 Annual Meeting. On February 14, 2023, the Compensation Committee unanimously adopted and approved this amendment to the 2021 Plan, subject to obtaining the approval of our stockholders at the 2023 Annual Meeting.

The 2021 Plan serves as the successor to our Amended and Restated Equity Participation Plan (the “Prior Plan”). The Company will not grant any additional awards under the Prior Plan.

A total of 1,000,000 shares were originally reserved for issuance pursuant to the grant of new awards under the 2021 Plan, plus shares underlying awards that were outstanding as of the effective date of the 2021 Plan and are subsequently forfeited. In addition, between the adoption of the 2021 Plan and March 1, 2023, shares underlying approximately 488,485 awards made under the Prior Plan had been forfeited and were therefore available for grants of awards under the 2021 Plan. As of March 6, 2023, awards with respect to approximately 1,304,890 shares of our common stock had been made under the 2021 Plan.

As of March 6, 2023, approximately 195,481 shares of our common stock were available for

future awards under the 2021 Plan. The Compensation Committee believes the number of shares available for future awards under the 2021 Plan will not be sufficient to make the grants needed over the next few years to provide adequate long-term equity incentives to our key employees, consultants, and advisors. Considering our historical grant practices, we believe we have been judicious in our share usage under the Prior Plan and the 2021 Plan, and mindful of potential stockholder dilution.

If this proposal is approved, the total number of shares of our common stock available for future awards under the 2021 Plan at March 6, 2023 would increase from 195,481 shares (or 0.4% of the Company’s outstanding common stock as of that date) to 1,445,481 shares (or 3.1% of the Company’s outstanding shares as of that date). The Compensation Committee has considered the potential dilution resulting from the proposed amendment to the 2021 Plan and believes such potential dilution levels are within normal competitive ranges.

Approval of the proposed amendment will enable the Company to continue making equity compensation grants that serve as incentives to recruit and retain key employees and to continue aligning the interests of its employees with stockholders.

A summary of the 2021 Plan is set out below. This summary is qualified in its entirety by the full text of the 2021 Plan, which is attached to this proxy statement as Appendix C.

72 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

PROPOSAL 5. APPROVAL OF AMENDMENT TO OUR 2021 LONG TERM INCENTIVE PLAN

## Key Data Relating to Outstanding Equity Awards and Shares Available for Issuance

The following table includes information regarding outstanding equity awards and shares available for future awards under the 2021 Plan as of March 6, 2023:

| Shares reserved for issuance under 2021 Plan (1,000,000 shares plus forfeitures under Prior Plan since adoption of 2021 Plan) | 1,488,485 |
| --- | --- |
| Shares underlying TRSUs awarded under 2021 Plan (1) | 787,943 |
| Shares underlying PRSUs awarded under 2021 Plan (2) | 505,061 |
| Shares underlying options awarded under 2021 Plan (3) | 0 |
| Total shares currently available for grant of new awards (1)(2) | 195,481 |
| Shares of common stock outstanding as of March 6, 2023 | 46,604,128 |
| Market price of common stock as of March 6, 2023 | $28.84 |

(1) As of March 6, 2023, approximately 440,815 TRSUs were outstanding under the Prior Plan.

(2) As of March 6, 2023, approximately 52,574 PRSUs were outstanding under the Prior Plan. Assumes PRSUs will vest and pay out at the target level.

(3) As of March 6, 2023, approximately 1,105,080 stock options were outstanding under the Prior Plan with a weighted average exercise price of $39.12 and a weighted average remaining contractual life of 4.36 years.

## Data Relating to Historical Equity Grants

We manage our equity incentive plans by limiting the number of shares subject to equity awards that the Company grants annually, commonly referred to as the burn rate. Burn rate shows how rapidly a company is depleting its shares reserved for issuance under its equity compensation plans. We define burn rate as the number of TRSUs,

PRSUs and stock options granted under the Prior Plan and the 2021 Plan, divided by the weighted average number of shares of Common Stock outstanding at the end of the relevant fiscal year. The following table sets forth the burn rate under the Prior Plan and the 2021 Plan for the past three fiscal years:

|  | TRSU Grants | PRSU Grants | Stock Option Grants | Total Shares Granted | Weighted Average Shares Outstanding | Burn Rate |
| --- | --- | --- | --- | --- | --- | --- |
| Fiscal 2022 | 362,561 | 192,525 | - | 555,086 | 46,931,064 | 1.18% |
| Fiscal 2021 | 307,077 | 62,887 | - | 369,964 | 48,096,482 | 0.77% |
| Fiscal 2020 | 528,246 | - | 360,491 | 888,734 | 47,809,731 | 1.86% |
| Average | 399,295 | 85,137 | 120,164 | 604,596 | 47,612,426 | 1.27% |

An additional metric we use to measure the cumulative impact of the Prior Plan and the 2021 Plan is overhang. We define overhang as the sum of the number of unvested TRSUs, PRSUs and stock options granted under the Prior Plan and the 2021 Plan plus the number of shares available to be granted under the 2021 Plan, divided by the sum of the total number of shares of Common Stock outstanding, plus the number of unvested TRSUs, PRSUs and stock options granted under the Prior Plan and the 2021 Plan plus the number of shares available to be granted under the 2021 Plan. If this proposal is approved, our overhang would increase from approximately 3.9% to approximately 6.3%, and then would be expected to decline as TRSUs, PRSUs and stock options vest.

Based upon historical grant practices, we expect that the 1,250,000 shares to be added to the 2021 Plan, in combination with the shares that currently remain available for issuance plus shares added back to the 2021 Plan from forfeitures of awards previously granted under the Prior Plan or the 2021 Plan, should satisfy the Company's equity compensation needs for approximately two to three years. The Compensation Committee is committed to effectively managing the number of shares reserved for issuance under the 2021 Plan while minimizing stockholder dilution.

AVANOS

2023 Notice and Proxy Statement ▲ 73

PROPOSAL 5. APPROVAL OF AMENDMENT TO OUR 2021 LONG TERM INCENTIVE PLAN

## Purpose of the Proposed Amendment

We believe the ability to grant competitive equity awards is a necessary and powerful recruiting and retention tool for us to hire and retain the highly qualified personnel we need to move our business forward. We believe that without an increase in the shares available for issuance under the 2021 Plan, our ability to attract and retain highly qualified personnel would be adversely affected, which in turn could hamper our plans for growth and adversely affect our ability to operate our business. In addition, if we are unable to grant competitive equity awards, we may be required to offer additional cash- based incentives to replace equity as a means of competing for talent.

## Summary of the 2021 Plan

**Purpose and Eligibility.** The 2021 Plan is intended to aid in attracting and retaining highly qualified personnel and to encourage those persons who materially contribute to the success of the Company (by managerial, scientific or other innovative means) to acquire an ownership interest in the Company, thereby increasing their motivation for and interest in the Company's long-term success. As of March 1, 2023, approximately 200 employees, consultants and advisors are eligible to participate in the 2021 Plan.

**Administration.** The 2021 Plan is administered by the Compensation Committee. The Committee has the power, in its discretion, to grant awards under the 2021 Plan, to select the individuals to whom awards are granted, to determine the number of shares of common stock subject to each award and the terms of the grants, to interpret the provisions of the 2021 Plan and to otherwise administer the 2021 Plan. The Committee may delegate all or any of its responsibilities and powers under the 2021 Plan to a special committee consisting of one or more directors who may not need not be officers of the Company, except its authority or responsibility with regard to awards to persons subject to Section 16 of the Exchange Act.

**Permissible Awards.** The 2021 Plan authorizes the granting of awards in any of the following forms:

- Market-priced options to purchase shares of our common stock, which may be designated under the Internal Revenue Code of 1986, as amended from time to time (the Code), as non- statutory stock options (which may be granted to all participants) or incentive stock options (which may be

The amended 2021 Plan will be effective on the date stockholder approval is obtained. We intend to register the additional shares authorized for issuance under the amended 2021 Plan under the Securities Act of 1933, as amended. If our stockholders do not approve the proposed amendment, the current version of the 2021 Plan will remain in effect.

Our named executive officers have an interest in this proposal because they are eligible to receive awards under the 2021 Plan.

granted to officers and employees, but not to participants who are not employees);

- Stock appreciation rights, which give the holder the right to receive the difference (payable in cash or stock, as specified in the award agreement) between the fair market value per share of our common stock on the date of exercise over the base price of the award (which cannot be less than the fair market value of the underlying stock as of the grant date);
- Restricted stock, which is subject to restrictions on transferability and subject to forfeiture on terms set by the Committee;
- Restricted stock units, which represent the right to receive shares of common stock (or an equivalent value in cash or other property as specified in the award agreement) at a designated time in the future and subject to any vesting requirement as may be set by the Committee;
- Performance awards, which represent the right to receive payment of a number of shares of common stock or an amount in cash, based on achievement of specified performance goals during a specified performance period, as established by the Committee and
- Other stock-based awards that are payable or valued, in whole or in part, by reference to, or otherwise based on, shares of Common Stock, or other rights or securities that are convertible or exchangeable into shares of common stock, on such terms and conditions as the Committee determines.

74 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

PROPOSAL 5. APPROVAL OF AMENDMENT TO OUR 2021 LONG TERM INCENTIVE PLAN

**Shares Available for Awards.** The total number of shares of common stock currently available for issuance under the 2021 Plan is 1,000,000 shares, plus a number of additional shares (not to exceed 2,489,976) underlying awards outstanding as of April 29, 2021 (the effective date of the 2021 Plan) under the Prior Plan that thereafter terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason. The amendment to the 2021 Plan would add another 1,250,000 shares to the 2021 Plan. In addition, the amendment to the 2021 Plan would increase the maximum number of shares that may be issued upon exercise of incentive stock options from 1,000,000 to 2,250,000. Shares of common stock issued under the 2021 Plan may be either authorized but unissued shares, treasury shares or shares acquired on the open market.

**Share Counting.** Shares subject to awards that terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason, and shares underlying awards that are ultimately settled in cash, will again be available for future grants of awards under the 2021 Plan. To the extent that the full number of shares subject to a full-value award is not issued for any reason, including by reason of failure to achieve maximum performance goals, the unissued shares originally subject to the award will be added back to the plan share reserve. Shares delivered by the participant or withheld from an award to satisfy tax withholding requirements, and shares delivered or withheld to pay the exercise price of an option, will not replenish the plan share reserve. For SARs settled in shares, the full number of shares underlying the award (rather than any lesser number based on the net number of shares actually delivered upon exercise) will count against the plan share reserve. The Committee may grant awards under the 2021 Plan in substitution for awards held by employees of another entity who become employees of the Company as a result of a business combination, and such substitute awards will not count against the plan share reserve.

**Minimum Vesting Requirements.** Except in the case of awards issued in lieu of fully-vested cash awards and substitute awards granted in a business combination, full-value awards, options and SARs issued under the 2021 Plan are subject to a minimum vesting period of one year. However, the Committee may at its discretion, grant full-value awards, options and SARs without the minimum vesting requirements described above with respect to awards covering 5% or fewer of the total number of shares authorized under the 2021 Plan. In addition, the minimum vesting requirement does not apply to accelerated

exercisability or vesting of any award in cases of death, disability, a change in control, or a qualifying termination following a change in control.

# **Treatment of Awards upon a Change in Control.**

The 2021 Plan provides that, if pending a Change of Control, the Committee determines that the Company's common stock will cease to exist without an adequate replacement security that preserves the economic rights and positions of the participants in the 2021 Plan (for example, as a result of the failure of the acquiring company to assume outstanding awards), then all options and SARs will become exercisable, in a manner deemed fair and equitable by the Committee, immediately prior to the consummation of the Change of Control. In addition, the restrictions on all restricted shares will lapse and all RSUs, performance awards and other stock-based awards will vest immediately prior to the consummation of the Change of Control and will be settled upon the Change of Control (with any performance-based awards deemed earned at the target level).

In the event a participant's employment or service is terminated within two years following a Change of Control, other than by reason of death or disability, a termination by us for 'cause,' or a resignation by the participant without 'good reason' (as such terms are defined in the 2021 Plan), any option held by the participant will become exercisable immediately.

If any amounts payable under the Plan constitute a parachute payment under Section 280G of the tax code, the Plan provides that the amounts will be reduced to the extent necessary to provide the participant with the greatest aggregate net after tax receipt.

**Adjustments.** In the event there are any changes in the common stock or the capitalization of the Company through a merger, acquisition, consolidation, reorganization, spin-off, stock dividend, extraordinary cash dividend or other corporate transaction, appropriate adjustments and changes shall be made by the Committee, to the extent necessary to preserve the benefit to the participant, to reflect such changes in; (i) the aggregate and maximum number of shares subject to the Plan, Plan; (ii) the number of shares and the option price or grant price per share of all shares of common stock subject to outstanding options and SARs; (iii) the maximum number of shares of common stock covered by awards which may be granted pursuant to delegated authority within any calendar year period; (iv) the number of restricted shares, RSUs, performance awards

ΔVΔNOS

2023 Notice and Proxy Statement ▲ 75

PROPOSAL 5. APPROVAL OF AMENDMENT TO OUR 2021 LONG TERM INCENTIVE PLAN

and other stock-based awards awarded to participants; and (v) any other provisions of the Plan and individual awards as may be necessary and equitable to carry out the foregoing purposes.

*Amendment and Termination of the 2021 Plan.*

The Committee may at any time amend, suspend, or discontinue the 2021 Plan, or alter any awards and award agreements under the 2021 Plan, the to extent permitted by law and the rules of any stock exchange on which the Common Stock is listed. However, no such amendment, suspension or discontinuance may be made without first obtaining stockholder approval, if required. No amendment, suspension or discontinuance of the 2021 Plan may, without the consent of the participant, adversely alter or change the any of the rights or obligations under any awards or other rights previously granted the participant.

*Prohibition on Repricing.* Without the prior consent of the Company's stockholders, outstanding stock options and SARs cannot be repriced, directly or indirectly, nor may stock options or SARs be cancelled in exchanged for

## Federal Income Tax Consequences

The U.S. federal income tax discussion set forth below is intended for general information only and does not purport to be a complete analysis of all of the potential tax effects of the 2021 Plan. It is based upon laws, regulations, rulings, and decisions now in effect, all of which are subject to change. State, local, and ex-U.S. income tax consequences are not discussed and may vary from jurisdiction to jurisdiction.

*Nonqualified Stock Options.* There will be no federal income tax consequences to the optionee or to the Company upon the grant of a nonqualified stock option under the 2021 Plan. When the optionee exercises a nonqualified option, however, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of the stock received upon exercise of the option at the time of exercise over the exercise price and the Company will be allowed a corresponding federal income tax deduction, subject to any applicable limitations under Code Section 162(m). Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain depending on how long the shares were held.

*Incentive Stock Options.* There will be no federal income tax consequences to the optionee or to the Company upon the grant of an incentive stock option. If the optionee holds the option shares for the required holding period of at least two years

stock options or SARs with an exercise or base price that is less than the exercise price or base price of the original stock options or SARs. In addition, the Company may not, without the prior approval of stockholders, repurchase an option or stock appreciation right for value from a participant if the current market value of the underlying stock is lower than the exercise price per share of the option or stock appreciation right.

*Limitations on Transfer.* Awards granted under the 2021 Plan generally are not transferable other than by will or the laws of descent and distribution, and may be exercisable only by the participant during his or her lifetime. Except as determined by the Committee, no benefit payable under or interest in the 2021 Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge.

*Clawback Policy.* Awards under the 2021 Plan are subject to any compensation recoupment policy of the Company as adopted from time to time.

after the date the option was granted and one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term capital gain or loss and the Company will not be entitled to a federal income tax deduction. If the optionee disposes of the option shares in a sale, exchange, or other disqualifying disposition before the required holding period ends, he or she will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise over the exercise price and the Company will be allowed a federal income tax deduction equal to such amount, subject to any applicable limitations under Code Section 162(m). While the exercise of an incentive stock option does not result in current taxable income, the excess of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment for purposes of determining the optionee's alternative minimum taxable income.

*Stock Appreciation Rights.* A participant receiving a stock appreciation right under the 2021 Plan will not recognize income, and the Company will not be allowed a tax deduction, at the time the award is granted. When the participant exercises the stock appreciation right, the amount of cash and the fair market value of any shares of stock received will be ordinary

76 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

PROPOSAL 5. APPROVAL OF AMENDMENT TO OUR 2021 LONG TERM INCENTIVE PLAN

income to the participant and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).

**Restricted Stock.** Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below, a participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock award is granted, provided the award is nontransferable and is subject to a substantial risk of forfeiture. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the stock as of that date (less any amount he or she paid for the stock) and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). If the participant files an election under Code Section 83(b) within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less any amount paid for the stock) and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m). Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be able to recover the tax previously paid pursuant to the Code Section 83(b) election.

**Restricted Stock Units.** A participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock unit award is granted. Upon receipt of shares of stock (or the equivalent value in cash or other property) in settlement of a stock unit award, a participant will recognize ordinary income equal to the fair market value of the stock or other property as of that date (less any amount he or she paid for the stock or property) and the Company will be

allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).

**Performance Awards.** A participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a performance award is granted (for example, when the performance goals are established). Upon receipt of cash, stock, or other property in settlement of a performance award, the participant will recognize ordinary income equal to the value of the cash, stock, or other property received and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).

**Code Section 409A.** The 2021 Plan permits the grant of various types of incentive awards, which may or may not be exempt from Code Section 409A. If an award is subject to Code Section 409A, and if the requirements of Section 409A are not met, the taxable events as described above could apply earlier than described and could result in the imposition of additional taxes and penalties. Restricted stock awards, and stock options and stock appreciation rights that comply with the terms of the 2021 Plan, are designed to be exempt from the application of Code Section 409A. Restricted stock units and performance awards granted under the 2021 Plan would be subject to Code Section 409A unless they are designed to satisfy the short-term deferral exemption from such law. If not exempt, such awards must be specially designed to meet the requirements of Code Section 409A in order to avoid early taxation and penalties.

**Tax Withholding.** The Company has the right to deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of restriction, or other taxable event arising as a result of the 2021 Plan.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY UNDER THE 2021 PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF AN EMPLOYEE'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH AN EMPLOYEE MAY RESIDE.

A complete copy of the 2021 Plan, including the proposed amendment, is attached to this proxy statement as Annex A.

The Board of Directors unanimously recommends a vote **FOR** the approval of the proposed amendment to the 2021 Long Term Incentive Plan.

AVANOS

2023 Notice and Proxy Statement ▲ 77

# Other Information

## SECURITY OWNERSHIP INFORMATION

The following table shows the number of shares of our common stock beneficially owned as of March 1, 2023, by each director and nominee, by each named executive officer, and by all directors, nominees and executive officers as a group.

Applicable percentage ownership is based on 47,182,244 shares of our common stock outstanding on March 1, 2023, adjusted as required by the rules promulgated by the SEC.

| NAME | NUMBER OF SHARES (1)(2) | PERCENT OF CLASS |
| --- | --- | --- |
| Gary D. Blackford (3) | 51,212 | * |
| John P. Byrnes (3) | 41,240 | * |
| Michael C. Greiner (4)(5)(7) | 143,013 | * |
| William D. Haydon (4) | 41,761 | * |
| Kerr W. Holbrook (4)(5)(7) | 52,166 | * |
| Mojirade James (6)(7) | 40,367 | * |
| Dr. Lisa Egbuonu-Davis (8) | - | * |
| Patrick J. O'Leary (3) | 46,262 | * |
| Dr. Julie Shimer (3) | 41,212 | * |
| Joseph F. Woody (4)(5)(7) | 851,254 | 1.80% |
| All directors, nominees and executive officers as a group (12 persons) | 1,366,742 | 2.90% |

\* Represents less than one percent of the outstanding shares of our common stock.

(1) The directors, nominees and executive officers have sole voting and investment power with respect to the shares listed.

(2) A portion of the shares owned by certain executive officers and directors may be held in margin accounts at brokerage firms. Under the terms of the margin account agreements, stocks and other assets held in these accounts may be pledged to secure margin obligations. As of the date of this proxy statement, none of the executive officers or directors have any outstanding margin obligations under any of these accounts.

(3) For each Outside Director, share amounts include restricted share units granted under our Outside Directors' Compensation Plan. These awards are restricted and may not be transferred, pledged or sold until the Outside Director retires from or otherwise terminates service on the Board.

(4) Share amounts for the individuals named below include unvested restricted share units granted to the following named executive officers, as indicated below. The TRSUs granted in 2020 and 2021: (i) were granted on May 7, 2020 and March 17, 2021, respectively (other than the TRSUs awarded to Mr. Haydon in 2020, which were granted on August 31, 2020); (ii) are subject to three-year cliff vesting; and (iii) will vest on May 7, 2023 and March 17, 2024, respectively (other than the TRSUs awarded to Mr. Haydon in 2020, which will vest on August 31, 2023). The TRSUs granted in 2022 were granted on March 4, 2022. One-third of the TRSUs granted in 2022 will vest on each of March 4, 2023, March 4, 2024 and March 4, 2025. The PRSUs granted in 2021 and 2022: (i) were granted on March 17, 2021 and March 4, 2022, respectively and (ii) will vest on March 17, 2024 and March 4, 2025, respectively. The PRSUs in the table below represent the target levels of such awards.

| Name | TRSUs (#) |  |  | Target PRSUs (#) |  |
| --- | --- | --- | --- | --- | --- |
|  | 2020 | 2021 | 2022 | 2021 | 2022 |
| Michael C. Greiner | 36,681 | 15,861 | 30,575 | 5,287 | 20,383 |
| William D. Haydon | 6,173 | 9,516 | 12,949 | 3,172 | 8,633 |
| Kerr W. Holbrook | 5,685 | 9,516 | 12,949 | 3,172 | 8,633 |
| Joseph F. Woody | 129,850 | 59,477 | 80,933 | 19,826 | 53,955 |

78 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

Other Information

(5) Share amounts for the individuals named below include the following shares issuable upon the exercise of stock options which were vested and exercisable as of March 1, 2023 or within 60 days thereafter:

| Name | Number of Shares |
| --- | --- |
| Michael C. Greiner | 22,912 |
| Kerr W. Holbrook | 7,497 |
| Joseph F. Woody | 481,231 |
| All directors, nominees, and executive officers as a group | 524,014 |

(6) Share amounts for Ms. James include: (i) 7,308 TRSUs granted on July 20, 2021; (ii) 20,233 TRSUs granted on March 4, 2022; and (iii) 13,489 PRSUs granted on March 4, 2022. One-third of the TRSUs granted in 2021 vested on July 20, 2022 and one-third will vest on each of July 20, 2023 and July 20, 2024. One-third of the TRSUs granted in 2022 will vest on each of March 4, 2023, March 4, 2024 and March 4, 2025. The PRSUs granted to Ms. James in 2022 will vest on March 4, 2025; such PRSUs represent the target level of such award.
(7) Share totals reflect shares deemed sold upon the vesting of TRSUs to satisfy the holder's tax withholding obligations.
(8) Dr. Egbuonu-Davis was appointed to the Board effective as of March 6, 2023. On that date, she received a grant of 5,433 restricted share units pursuant to the Outside Directors' Compensation Plan.

The following table sets forth the information, as of March 1, 2023, regarding persons or groups known to us to be beneficial owners of more than five percent of our common stock.

| Name and Address of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percentage of Common Stock Outstanding |
| --- | --- | --- |
| Blackrock, Inc (1) 55 East 52nd Street New York, NY 10055 | 7,571,048 | 16.25% |
| The Vanguard Group (2) 100 Vanguard Boulevard Malvern, PA 19355 | 5,500,000 | 11.80% |
| RGM Capital, LLC (3) 9010 Strada Stell Court Suite 105 Naples, FL 34109 | 2,653,104 | 5.69% |
| Paradice Investment Management LLC (4) 250 Fillmore Street, Suite 425 Denver, CO 80206 | 2,343,232 | 5.03% |
| Dimensional Fund Advisors LP (5) 6300 Bee Cave Road, Building One Austin, TX 78746 | 2,891,836 | 6.21% |

(1) The address, number and percentage of shares of our common stock beneficially owned by BlackRock, Inc. ("BlackRock") are based on the Schedule 13G/A filed by BlackRock with the SEC on January 26, 2023. According to the filing, Blackrock had sole voting power with respect to 7,464,674 shares, sole dispositive power with respect to 7,571,048 shares, shared voting power with respect to 0 shares and shared dispositive power with respect to 0 shares.
(2) The address, number and percentage of shares of our common stock beneficially owned by The Vanguard Group are based on the Schedule 13G/A filed by The Vanguard Group with the SEC on February 9, 2023. According to the filing, The Vanguard Group had sole dispositive power with respect to 5,418,410 shares, shared voting power with respect to 35,606 shares, shared dispositive power with respect to 81,590 shares and sole voting power with respect to 0 shares.
(3) The address, number and percentage of shares of our common stock beneficially owned by RGM Capital, LLC ("RGM") are based on the Schedule 13G/A filed by RGM with the SEC on February 13, 2023. According to the filing, RGM had shared voting power with respect to 2,653,104 shares, shared dispositive power with respect to 2,653,104 shares, sole voting power with respect to 0 shares and sole dispositive power with respect to 0 shares.
(4) The address, number and percentage of shares of our common stock beneficially owned by Paradice Investment Management LLC ("Paradice") are based on the Schedule 13G/A filed by Paradice with the SEC on February 8, 2023. According to the filing, Paradice had shared voting power with respect to 1,071,849 shares, shared dispositive power with respect to 2,343,232 shares, sole voting power with respect to 0 shares and sole dispositive power with respect to 0 shares.
(5) The address, number and percentage of shares of our common stock beneficially owned by Dimensional Fund Advisors LP ("Dimensional") are based on the Schedule 13G filed by Dimensional with the SEC on February 10, 2023. According to the filing, Dimensional had sole voting power with respect to 2,834,753 shares, sole dispositive power with respect to 2,891,836 shares, shared voting power with respect to 0 shares and shared dispositive power with respect to 0 shares.

AVANOS

2023 Notice and Proxy Statement ▲ 79

Other Information

# TRANSACTIONS WITH RELATED PERSONS

The Board has adopted written procedures for reviewing any transactions between the Company and certain “related persons” that involve amounts above certain thresholds. A related person is defined under the SEC’s rules and includes our directors, executive officers and five percent stockholders.

The Board’s procedures provide that:

- The Governance Committee is best suited to review, approve and ratify related person transactions involving any director, nominee for director, any five percent stockholder, or any of their immediate family members or related firms.
- The Audit Committee is best suited to review, approve and ratify related person transactions involving executive officers (or their immediate family members or related firms), other than any executive officer who is also a Board member.
- Either the Governance Committee or the Audit Committee may, in its sole discretion, refer its consideration of related person transactions to the full Board.

Each director, director nominee and named executive officer is required to promptly provide written notification of any material interest that he or she (or an immediate family member) has or will have in a transaction with the Company. Based on a review of the transaction, a determination

will be made as to whether the transaction constitutes a related person transaction under the SEC’s rules. As appropriate, the Governance Committee or the Audit Committee, as applicable, will then review the terms and substance of the transaction to determine whether to ratify or approve the related person transaction.

In determining whether the transaction is consistent with the Company’s best interests, the Governance Committee or the Audit Committee, as applicable, may consider any factors deemed relevant or appropriate, including:

- Whether the transaction is on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party;
- Whether the transaction constitutes a conflict of interest under our Code of Conduct, the nature, size or degree of any conflict, and whether mitigation of the conflict is feasible;
- The impact of the transaction on a director’s independence; and
- Whether steps have been taken to ensure fairness to the Company.

Based on SEC rules, the Board’s written procedures, and the factors listed above, there were no related party transactions in 2022 and there are no currently proposed related party transactions.

# STOCKHOLDERS SHARING THE SAME HOUSEHOLD

As permitted by SEC rules, multiple stockholders sharing the same address who hold their stock through a bank, broker or other holder of record may receive a single copy of our annual report to stockholders and this proxy statement. Upon written or oral request, we will promptly deliver a separate copy of our 2022 Annual Report and this proxy statement to any stockholder at a shared address to which a single copy of each document was delivered. Please contact Stockholder Services by mail at 5405 Windward Parkway,

Suite 100 South, Alpharetta, GA 30004, by telephone at 678-425-9273, or by e-mail at stockholder.services@avanos.com. In addition, any stockholder who wants to receive separate copies of the proxy statement or the Annual Report to Stockholders in the future, or who is currently receiving multiple copies and would like to receive only one copy for his or her household, should contact his or her bank, broker or other nominee record holder.

# 2024 STOCKHOLDER PROPOSALS

Proposals by stockholders for inclusion in our proxy statement and form of proxy pursuant to SEC Rule 14a-8 for the Annual Meeting of Stockholders to be held in 2024 should be addressed to the Corporate Secretary, Avanos Medical, Inc. 5405 Windward Parkway, Suite 100 South, Alpharetta, GA 30004, and must be received at such address no later than

November 17, 2023; provided that if the date of the 2024 Annual Meeting of Stockholders is more than 30 days before or after April 27, 2024 (the anniversary date of the 2023 Annual Meeting), the deadline will be a reasonable time before we begin to print and send our proxy materials to

80 ▲ 2023 Notice and Proxy Statement

AVANOS

Other Information

stockholders. Upon receipt of a proposal, we will determine whether or not to include the proposal in the proxy statement and form of proxy in

accordance with applicable law. It is suggested that proposals be forwarded by certified mail, return receipt requested.

## STOCKHOLDER NOMINATIONS FOR BOARD OF DIRECTORS

Under our Bylaws, a stockholder who wishes to nominate a candidate for election to the Board is required to give written notice to our Corporate Secretary at our principal executive office. We must receive this notice at least 90 days, but not more than 120 days, before the anniversary of the prior year's annual meeting of stockholders (unless (i) the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date, in which case the notice must be received at least 90 days, but not more than 120 days, before the annual meeting date or (ii) we give less than 100 days' notice of the annual meeting date, in which case the notice must be received within 10 days after the annual meeting date is announced). For the 202 Annual Meeting of Stockholders, our Corporate Secretary must receive the nomination, which must conform to the notice requirements in our Bylaws, between December 28, 2023 and January 27, 2024. For a special meeting, we must receive the written nomination at least 90 days, but not more than 120 days, before the special meeting date (unless we give less than 100 days' notice of the special meeting date, in which case the notice must be received within 10 days after the meeting date and the nominees proposed by the Board to be elected at the meeting are announced).

Our Bylaws specify the information that the notice must contain about both the nominee and the nominating stockholder, including information sufficient to allow the Governance Committee to determine if the candidate meets the director nominee criteria described in this proxy statement.

The notice must contain:

- The name and address of the nominating stockholder;
- Information about certain Company stock holdings of the nominating stockholder, including shares of stock, derivative holdings, arrangements under which the nominating stockholder has a right to vote shares, short interest, dividend rights that are separated or separable from the underlying shares, shares held through

general or limited partnerships, and certain performance-related fees;

- Information about any interests of the nominating stockholder in contracts with the Company, its affiliates or principal competitors, as well as any significant equity interests, derivative holdings or short interest in the Company's principal competitors;
- As to the nominee and the nominating stockholder, any information that would be required to be disclosed in connection with a proxy solicitation (and whether a proxy solicitation will be conducted);
- Information about certain related-person transactions, as well as contact and related information regarding the nominee; and
- Information about any compensation and other understandings during the past three years, and other material relationships, between the nominating stockholder and the nominee.
- Information required by Rule 14a-19(b) of the Exchange Act, including a statement that the nominating stockholder intends to solicit the holders of shares representing at least 67% of the voting power of shares entitled to vote in the election of directors, in support of the nominee.

The notice must be accompanied by each nominee's written consent to being named in the proxy statement and to serving as a director if elected, and a completed and signed questionnaire, representation and agreement as required by our Bylaws.

A nomination that does not comply with the requirements set forth in our Bylaws will not be considered for presentation at the annual meeting, but will be considered by the Governance Committee for any vacancies arising on the Board between annual meetings in accordance with the process described in "Proposal 1. Election of Directors - Process and Criteria for Nominating Directors."

AVANOS

2023 Notice and Proxy Statement ▲ 81

Other Information

## ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS

Our Bylaws require advance notice for any business to be brought by a stockholder before an annual meeting of stockholders. In general, for business to be properly brought before an annual meeting by a stockholder (other than in connection with the election of directors; see “Other Information - Stockholder Nominations for Board of Directors,” and other than pursuant to SEC Rule 14a-8), written notice of the stockholder proposal must be received by our Corporate Secretary at our principal executive offices not less than 90 days or more than 120 days prior to the first anniversary of the preceding year’s annual meeting of stockholders (unless (i) the date of the annual meeting is more than 30 days before or more than 60 days after the anniversary date, in which case the notice must be received at least 90 days, but not more than 120 days, before the annual meeting date or (ii) we give less than 100 days’ notice of the annual meeting date, in

## ANNUAL REPORT

Copies of our Annual Report on Form 10-K for the year ended December 31, 2022 may be obtained without charge by: (i) writing to Avanos Medical, Inc., Attn: Corporate Secretary, 5405 Windward Parkway, Suite 100 South,

which case the notice must be received within 10 days after the meeting date is announced). For the 2024 Annual Meeting, our Corporate Secretary must receive the proposal, which must conform to the notice requirements in our Bylaws, between December 28, 2023 and January 27, 2024.

Under our Bylaws, the stockholder’s notice to the Corporate Secretary must contain certain information regarding the stockholder, including name and address, shares held, derivative positions, dividend rights that are separate or separable from the underlying shares and certain performance-related fees. Additional information concerning the advance notice requirements and a copy of our Bylaws may be obtained from the Corporate Secretary of the Company at the address provided below. A copy of our Bylaws is also available in the Investors section of our website at www.avanos.com.

Alpharetta, Georgia 30004; (ii) accessing the Investors section of our website at www.avanos.com; or (iii) accessing the SEC’s EDGAR database at www.sec.gov.

82 ▲ 2023 Notice and Proxy Statement

AVANOS

# OTHER MATTERS TO BE PRESENTED
AT THE ANNUAL MEETING

Our management does not know of any other matters to be presented at the 2023 Annual Meeting. Should any other matter requiring a vote

Avanos Medical, Inc.
5405 Windward Parkway, Suite 100 South
Alpharetta, Georgia 30004
Telephone (678) 425-9273
March 17, 2023

of the stockholders arise at the meeting, the persons named in the proxy will vote the proxies in accordance with their best judgment.

By Order of the Board of Directors.

**Mojirade James**

Senior Vice President, General Counsel and Secretary

AVANOS

2023 Notice and Proxy Statement ▲ 83

# APPENDIX A

Adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) are financial measures that have not been

calculated in accordance with accounting principles generally accepted in the U.S., or GAAP, and are therefore referred to as non-GAAP financial measures.

## Adjusted Net Income and Adjusted Diluted Earnings (Loss) Per Share

Adjusted net income and adjusted diluted earnings (loss) per share exclude the following items, as applicable, for the relevant time periods indicated in the following non-GAAP reconciliation to the most directly comparable GAAP financial measures:

- Incremental expenses associated with altering operations in response to the COVID-19 pandemic.
- Expenses associated with restructuring activities, including IT-related charges.
- Expenses associated with post-divestiture transition activities.
- The amortization of intangible assets associated with prior business acquisitions.
- Expenses associated with certain litigation matters.
- Certain acquisition and integration charges.

- Compliance with the European Union Medical Device Regulation (the “EU MDR”).
- Expenses associated with evaluating transformation strategies and asset impairment for canceled research and development projects.
- The tax effects of certain adjusting items.
- The benefit associated with tax effects of the CARES Act.
- The positive or negative effect of changes in currency exchange rates during the year.

The reconciliation of adjusted net income and adjusted diluted earnings per share to the most directly comparable GAAP measures, which are net income (loss) and diluted earnings (loss) per share, is presented in the following table (in millions, except per share amounts):

| Year Ended December 31, | 2022 | 2021 |
| --- | --- | --- |
| Net income (loss), as reported | $50.5 | $6.3 |
| Diluted earnings (loss) per share, as reported | 1.07 | 0.13 |
| COVID-19 related expenses | - | 0.3 |
| 2020 Restructuring charges | - | 12.4 |
| Post-Divestiture restructuring and transition charges | - | 14.1 |
| Acquisition and integration-related charges | 3.4 | 1.6 |
| EU MDR Compliance | 6.9 | 4.0 |
| Other items | 3.8 | - |
| Litigation and legal | - | 15.0 |
| Intangibles amortization | 25.7 | 16.7 |
| Loss on extinguishment of debt | 1.1 | - |
| Tax effects of adjusting items | (9.9) | (11.9) |
| Tax effects of the CARES Act and other | (3.3) | (1.6) |
| Net income, as adjusted (non-GAAP) | $78.2 | $56.9 |
| Diluted earnings per share, as adjusted (non-GAAP) | $1.65 | $1.17 |
| Diluted weighted average shares outstanding | 47.3 | 48.6 |

A-1 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

APPENDIX A

# Adjusted EBITDA

Adjusted EBITDA excludes the following items, as applicable, for the relevant time periods indicated in the following non-GAAP reconciliation to the most directly comparable GAAP financial measures:

- Incremental expenses associated with altering operations in response to the COVID-19 pandemic.
- Expenses associated with restructuring activities, including IT-related charges.
- Expenses associated with post-divestiture transition activities.
- Certain acquisition and integration charges related to the acquisitions of OrthogenRx,

Inc., CoolSystems, Inc., NeoMed, Inc., Summit Medical Products, Inc. and Endoclear LLC.

- Expenses associated with EU Medical Device Regulation compliance.
- Expenses associated with evaluating transformation strategies and asset impairment for canceled research and development projects.
- Expenses associated with certain litigation matters.
- Amortization of intangible assets associated with prior business acquisitions.

The reconciliation of adjusted EBITDA to the most directly comparable GAAP measures, which is net income (loss), is presented in the following table (in millions):

| Year Ended December 31, | 2022 | 2021 |
| --- | --- | --- |
| Net income (loss), as reported | $50.5 | $6.3 |
| Interest expense, net | 8.8 | 3.1 |
| Income tax provision | 14.7 | 1.0 |
| Depreciation and amortization | 47.7 | 38.3 |
| EBITDA, as reported | 121.7 | 48.7 |
| COVID-19 related expenses | - | 0.3 |
| 2020 Restructuring charges | - | 12.4 |
| Post-Divestiture restructuring and transition charges | - | 14.1 |
| Acquisition and integration-related charges | 3.4 | 1.6 |
| EU MDR Compliance | 6.9 | 4.0 |
| Other items | 3.8 | - |
| Litigation and legal | - | 15.0 |
| Adjusted EBITDA | $135.8 | $96.1 |

AVANOS

2023 Notice and Proxy Statement ▲ A-2

# APPENDIX B

Return on Invested Capital (“ROIC”) is a calculation using adjusted operating profit and an adjusted effective tax rate which is derived from adjusted income before income tax and adjusted

tax provision. All of these are financial measures are not calculated in accordance with GAAP and are therefore referred to as non-GAAP financial measures.

ROIC is calculated as follows:

$$2022 \text{ ROIC} = \frac{\text{Adjusted operating profit} \times (1 - \text{Adjusted tax rate})}{\text{Average of (Long-term debt + Stockholders' Equity) at beginning and end of the period}}$$

ROIC is calculated below (dollars in millions):

| Adjusted operating profit | $114 |
| --- | --- |
| Adjusted tax rate | 26.3% |
| Adjusted operating profit after tax | $84 |
| Average Long-term debt and Stockholders' equity | $1,460 |
| ROIC | 5.8% |

The reconciliations for the non-GAAP measures used to calculate ROIC to their most comparable GAAP measures are provided below:

Adjusted Operating Profit, Adjusted Income before Income Tax, Adjusted Tax Provision and Adjusted Effective Tax Rate

Adjusted operating profit and adjusted income before income tax exclude the following items, as applicable, for the year ended December 31, 2022, as indicated in the following non-GAAP reconciliation to the most directly comparable GAAP financial measures:

- Certain acquisition and integration charges related to the acquisitions of OrthogenRx, Inc. and CoolSystems, Inc.

- Expenses associated with EU Medical Device Regulation compliance.
- Expenses associated with evaluating transformation strategies and asset impairment for canceled research and development projects.
- Amortization of intangible assets associated with prior business acquisitions.
- Loss associated with early-extinguishment of debt.
- The tax effects of adjusting items.
- The benefit associated with tax effects of the CARES Act.

| Year Ended December 31, 2022 | Adjusted Operating Profit | Adjusted Income before Income Taxes | Adjusted Tax Provision |
| --- | --- | --- | --- |
| As reported | $74 | $65 | $(15) |
| Acquisition and integration-related charges | 3 | 3 | - |
| EU MDR Compliance | 7 | 7 | - |
| Other items | 4 | 4 | - |
| Intangibles amortization | 26 | 26 | - |
| Loss on extinguishment of debt | - | 1 | - |
| Tax effects of adjusting items | - | - | (10) |
| Tax effects of the CARES Act and other | - | - | (3) |
| As adjusted, non-GAAP | $114 | $106 | $(28) |
| Effective tax rate, as reported |  |  | 22.5% |
| Effective tax rate, as adjusted |  |  | 26.3% |

B-1 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

# APPENDIX C
## Avanos Medical, Inc. 2021 Long Term Incentive Plan

As amended February 17, 2023, subject to stockholder approval

### 1. PURPOSE

This 2021 Equity Participation Plan (the “Plan”) of AVANOS MEDICAL, INC. (the “Corporation”) is intended to aid in attracting and retaining highly qualified personnel and to encourage those persons who materially contribute to the success of the Corporation or of an Affiliate (by managerial, scientific or other innovative means) to acquire an ownership interest in the Corporation, thereby increasing their motivation for and interest in the Corporation’s or Affiliate’s long-term success.

### 2. EFFECTIVE DATE

The Plan was adopted by the Board on February 11, 2021, and will become effective on the date that it is adopted by the stockholders of the Corporation (the “Effective Date”).

### 3. DEFINITIONS

“Affiliate” means any domestic or foreign corporation at least fifty percent (50%) of whose shares normally entitled to vote in electing directors is owned directly or indirectly by the Corporation or other Affiliates (collectively, the “Affiliates”), provided, however, that “at least twenty percent (20%)” shall replace “at least fifty percent (50%)” where there is a legitimate business criteria for using such lower percentage.

“Award” has the meaning set forth in Section 6 of the Plan.

“Award Agreement” means an agreement entered into between the Corporation and a Participant setting forth the terms and conditions applicable to the Award granted to the Participant. The Committee may provide for the use of electronic, internet or other non-paper Award Agreements, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.

“Board” means the Board of Directors of the Corporation.

“Cause” means any of the following: (i) the commission by the Participant of a felony; (ii) the Participant’s dishonesty, habitual neglect or incompetence in the management of the affairs

of the Corporation; or (iii) the refusal or failure by the Participant to act in accordance with any lawful directive or order of the Corporation, or an act or failure to act by the Participant which is in bad faith and which is detrimental to the Corporation.

“Change of Control” means and includes the occurrence of any one of the following events but shall specifically exclude a public offering of any class or series of the Corporation’s equity securities pursuant to a registration statement filed by the Corporation under the Securities Act of 1933:

- (i) during any consecutive 12-month period, individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director after the beginning of such 12-month period and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Corporation as a result of an actual or threatened election contest with respect to the election or removal of directors (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or
- (ii) any individual, entity or group, within the meaning of Section 3(a)(9) of the Exchange Act and as used in Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”), other than a broker, underwriter or financial institution that acquires such shares as part of a firm commitment or similar underwriting or distribution process pursuant to which

AVANOS

2023 Notice and Proxy Statement ▲ C-1

APPENDIX C

the subject shares of stock are being held for further distribution (an “Underwriter”), becomes a “Beneficial Owner” under the meaning given such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act, directly or indirectly, of either (A) 30% or more of the then-outstanding shares of common stock of the Corporation (“Corporation Common Stock”) or (B) securities of the Corporation representing 30% or more of the combined voting power of the Corporation’s then outstanding securities eligible to vote for the election of directors (the “Corporation Voting Securities”); provided, however, that for purposes of this subsection (ii), the following acquisitions of Corporation Common Stock or Corporation Voting Securities shall not constitute a Change in Control: (w) an acquisition directly (or indirectly through Underwriters) from the Corporation, (x) an acquisition by the Corporation or a Subsidiary, (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any Subsidiary, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (iii) below); or

(iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Corporation or a Subsidiary (a “Reorganization”), or the sale or other disposition of all or substantially all of the Corporation’s assets (a “Sale”) or the acquisition of assets or stock of another corporation or other entity (an “Acquisition”), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the outstanding Corporation Common Stock and outstanding Corporation Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Reorganization, Sale or Acquisition (including, without limitation, an entity

which as a result of such transaction owns the Corporation or all or substantially all of the Corporation’s assets or stock either directly or through one or more subsidiaries, the “Surviving Entity”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Corporation Common Stock and the outstanding Corporation Voting Securities, as the case may be, and (B) no person (other than (x) the Corporation or any Subsidiary, (y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing) is the Beneficial Owner, directly or indirectly, of 30% or more of the total common stock or 30% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Entity, and (C) at least a majority of the members of the board of directors of the Surviving Entity were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

(iv) approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation.

“Code” means the Internal Revenue Code of 1986 and the regulations thereunder, as amended from time to time.

“Committee” means the Compensation Committee of the Board, provided that if the requisite number of members of the Compensation Committee are not Disinterested Persons, the Plan shall be administered by a committee, all of whom are Disinterested Persons, appointed by the Board and consisting of two or more directors with full authority to act in the matter. The term “Committee” shall mean the Compensation Committee or the committee appointed by the Board, as the case may be. Furthermore, the term “Committee” shall include any delegate to the extent authority is delegated pursuant to Section 4 hereunder.

“Committee Rules” means the interpretative guidelines approved by the Committee providing the foundation for administration of the Plan.

C-2 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

APPENDIX C

“Common Stock” means the common stock, par value $.01 per share, of the Corporation and shall include both treasury shares and authorized but unissued shares and shall also include any security of the Corporation issued in substitution, in exchange for, or in lieu of the Common Stock.

“Disinterested Person” means a person who is a “Non-Employee Director” for purposes of Rule 16b-3 under the Exchange Act, or any successor provision.

“Effective Date” has the meaning set forth in section 2 of the Plan.

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations thereunder, as amended from time to time.[{"box_2d": [110, 343, 481, 500, "label": "text", "caption": "“Fair Market Value” means (a) the reported closing price of the Common Stock, on the relevant date as reported on the composite list used by The Wall Street Journal for reporting stock prices, or if no such sale shall have been made on that day, on the last preceding day on which there was such a sale, or (b) if clause (a) is not applicable, the value determined by the Committee using such reasonable method of valuation that complies with Section 409A of the Code and the regulations thereunder."}]

“Grant Price” has the meaning set forth in subsection 8(b) of the Plan.

“Incentive Stock Option” means an Option which is so defined for purposes of Section 422 of the Code or any successor section.

“Nonqualified Stock Option” means any Option which is not an Incentive Stock Option.

“Option” means a right to purchase a specified number of shares of Common Stock at a fixed option price equal to no less than one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the Award is granted, except with respect to substitute Awards made pursuant to Section 17 of the Plan.

“Other Stock-Based Award” has the meaning set forth in Section 12 of the Plan.

“Option Price” has the meaning set forth in subsection 7(b) of the Plan.

“Participant” means an employee, consultant or advisor who the Committee selects to participate in and receive Awards under the Plan (collectively, the “Participants”).

“Performance Award” shall mean any right granted under Section 11 of the Plan.

“Performance Goal” means the specific performance objectives as established by the Committee, which, if achieved, will result in the amount of payment, or the early payment, of the Award. The Committee may establish Performance Goals for Performance Awards which may be based on any criteria selected by the Committee. The Performance Goals may be described in terms that are related to the individual Participant, to the Corporation as a whole, or to a subsidiary, division, department, region, function or business unit of the Corporation. In addition, the Performance Goals may be specified in absolute terms, in percentages, or in terms of growth from period to period or growth rates over time, as well as compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. Performance Goals need not be based upon an increase or positive result under a business criterion and could include, for example, the maintenance of the status quo or the limitation of economic losses (measured, in each case, by reference to a specific business criterion).

The Committee may provide that any evaluation of performance will exclude or otherwise be objectively adjusted for any specified circumstance or event that occurs during a performance period, including for example: (i) asset write-downs or impairment charges; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) accruals for reorganization and restructuring programs; (v) unusual or infrequently occurring items as described in Accounting Standards Codification Topic 225-20 (or any successor pronouncements thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Corporation’s annual report to stockholders for the applicable year; (vi) acquisitions or divestitures; (vii) any other specific, unusual or nonrecurring events, or objectively determinable category thereof; (viii) foreign exchange gains and losses; (ix) discontinued operations; and (x) a change in the Corporation’s fiscal year. The Committee, in its discretion, may change or modify the Performance Goals.

“Prior Plan” means the Corporation’s Amended and Restated Equity Participation Plan, effective November 1, 2015.

“Qualified Termination of Service” means the termination of a Participant’s employment or

AVANOS

2023 Notice and Proxy Statement ▲ C-3

APPENDIX C

service, as the case may be, with the Corporation and/or its Affiliates within the two (2) year period following a Change of Control of the Corporation for any reason unless such termination is by reason of death or disability or unless such termination is (i) by the Corporation for Cause or (ii) by the Participant without Good Reason. Subject to the definition of “Termination by the Participant for Good Reason,” transfers of employment or service for administrative purposes among the Corporation and its Affiliates shall not be deemed a Qualified Termination of Service.

“Restricted Period” shall mean the period of time during which Awards remain unvested and the Transferability Restrictions applicable to Awards will be in force.

“Restricted Share” shall mean a share of Common Stock which is subject to a risk of forfeiture and may not be traded or sold, until the date the Transferability Restrictions expire.

“Restricted Share Unit” means the right, as described in Section 10, to receive an amount, payable in either cash or shares of Common Stock, equal to the value of a specified number of shares of Common Stock. No certificates shall be issued with respect to such Restricted Share Unit, except as provided in subsection 10(d), and the Corporation shall maintain a bookkeeping account in the name of the Participant to which the Restricted Share Unit shall relate.

“Retirement” and “Retires” means the voluntary termination of employment or service on or after the date the Participant has attained age 60, provided that the Participant has had at least 5 years of employment or service with the Corporation; or the termination of employment or service on or after the date the Participant has attained age 55, provided that the Participant has had at least 10 years of employment or service with the Corporation. For purposes of this definition, service with Kimberly-Clark Corporation prior to the Corporation’s spin-off shall be considered service with the Corporation.

“Stock Appreciation Right (SAR)” has the meaning set forth in Section 8 of the Plan.

“Termination by the Participant for Good Reason” shall mean the separation from service during the two year time period following the initial existence (without the Participant’s express written consent) of any one of the following conditions:

(a) A material diminution in the Participant’s base compensation;

(b) A material diminution in the Participant’s authority, duties, or responsibilities;
(c) A material diminution in the authority, duties, or responsibilities of the supervisor to whom the Participant is required to report, including a requirement that a Participant report to a corporate officer or employee instead of reporting directly to the board of directors of the Corporation;
(d) A material diminution in the budget over which the Participant retains authority;
(e) A change, by more than 50 miles, in the geographic location at which the Participant must perform the services; or
(f) Any other action or inaction that constitutes a material breach by the Corporation of any agreement under which the Participant provides services.

The Participant must provide notice to the Corporation of the existence of any of the above conditions within a period not to exceed 90 days of the initial existence of the condition, upon the notice of which the Corporation must be provided a period of at least 30 days during which it may remedy the condition and not be required to pay the amount.

The Participant’s right to terminate the Participant’s employment or service for Good Reason shall not be affected by the Participant’s incapacity due to physical or mental illness. The Participant’s continued employment or service shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

“Total and Permanent Disability” means a condition arising out of injury or disease which causes the Participant to terminate employment or service and which the Corporation determines is permanent and prevents the Participant from engaging in any occupation or perform any work for any kind of compensation of financial value. The disability must be certified by a licensed Doctor of Medicine to be such as can reasonably be expected to continue during the remainder of the Participant’s lifetime.

“Transferability Restrictions” means the restrictions on transferability imposed on Awards of Restricted Shares or Restricted Share Units.

## 4. ADMINISTRATION

The Plan and all Awards granted pursuant thereto shall be administered by the Committee. The

C-4 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

APPENDIX C

Committee, in its absolute discretion, shall have the power to interpret and construe the Plan and any Award Agreements. Any interpretation or construction of any provisions of the Plan or the Award Agreements by the Committee shall be final and conclusive upon all persons. No member of the Board or the Committee shall be liable for any action or determination made in good faith.

The Committee shall have the power to promulgate Committee Rules and other guidelines in connection with the performance of its obligations, powers and duties under the Plan, including its duty to administer and construe the Plan and the Award Agreements.

The Committee may authorize persons other than its members to carry out its policies and directives subject to the limitations and guidelines set by the Committee, and may delegate its authority under the Plan. The foregoing delegation of authority shall be limited as follows: (a) the delegation of authority to grant Awards shall be limited to grants by a special committee, consisting of one or more directors who may but need not be officers of the Corporation, to which the Board or the Committee expressly delegates such authority by resolution; and (b) the special committee shall not have the authority to grant Awards to the members thereof, or to persons who are subject to Section 16 of the Exchange Act. The members of such special committee shall continue to be eligible to receive Awards under the Plan.

## 5. ELIGIBILITY

The Committee shall from time to time select the Participants from those employees, consultants or advisors whom the Committee determines either to be in a position to contribute materially to the success of the Corporation or Affiliate or to have in the past so contributed. Only employees (including officers and directors who are employees), consultants and advisors of the Corporation and its Affiliates are eligible to participate in the Plan.

## 6. FORM OF GRANTS

All Awards under the Plan shall be made in the form of Options, Stock Appreciation Rights, Restricted Shares, Restricted Share Units, Performance Awards, Other Stock-Based Awards or any combination thereof. Notwithstanding anything in the Plan to the contrary, any Awards shall contain the restriction on assignability in subsection 20(f) of the Plan to the extent required under Rule 16b-3 of the Exchange Act.

ΔVΔNOS

## 7. STOCK OPTIONS

The Committee or its delegate shall determine and designate from time to time those Participants to whom Options are to be granted, the number of shares of Common Stock to be granted/awarded to each and the periods the Option shall be exercisable. Such Options may be in the form of Incentive Stock Options or in the form of Nonqualified Stock Options. The Committee in its discretion at the time of grant may establish Performance Goals that may affect the grant, exercise and/or settlement of an Option. After granting an Option to a Participant, the Committee shall cause to be delivered to the Participant an Award Agreement evidencing the granting of the Option. The Award Agreement shall be in such form as the Committee shall from time to time approve. The terms and conditions of all Options granted under the Plan need not be the same, but all Options must meet the applicable terms and conditions specified in subsections 7(a) through 7(g).

- (a) Period of Option. The Period of each Option shall be no more than 10 years from the date it is granted.
- (b) Option Price. The Option price shall be determined by the Committee, but shall not in any instance, except with respect to substitute Awards made pursuant to Section 17 of the Plan, be less than the Fair Market Value of the Common Stock at the time that the Option is granted (the "Option Price").
- (c) No Repricings. No Option may be re-priced, replaced, re-granted through cancellation, or modified (except in connection with a change in the Common Stock or the capitalization of the Corporation as provided in Section 16 hereof) if the effect would be to reduce the exercise price for the shares underlying such Option. In addition, no Option may be repurchased or otherwise cancelled in exchange for cash or other Awards (except in connection with a change in the Common Stock or the capitalization of the Corporation as provided in Section 16 hereof) if the Option Price is equal to or greater than the Fair Market Value of the Common Stock at the time of such repurchase or exchange. Notwithstanding anything herein to the contrary, the Committee may take any such action set forth in this subsection 7(c) subject to the approval of the stockholders.

2023 Notice and Proxy Statement ▲ C-5

APPENDIX C

(d) Exercise; Notice Thereof. Options shall be exercised by delivering to the Corporation, or an agent designated by the Corporation, subject to any applicable rules or regulations adopted by the Committee, notice of the number of shares with respect to which Option rights are being exercised and by paying in full the Option Price of the shares at the time being acquired. Exercise methods and processes for paying the Option Price shall be as determined by the Committee, or its delegate, and may include payment in cash, a check payable to the Corporation, in shares of Common Stock transferable to the Corporation and having a fair market value on the transfer date equal to the amount payable to the Corporation or such other methods, including “cashless exercise” arrangements permitted by the Committee in its sole discretion. A Participant shall have none of the rights of a stockholder with respect to shares covered by such Option until the Participant becomes the record holder of such shares.

(e) Purchase for Investment. It is contemplated that the Corporation will register shares sold to Participants pursuant to the Plan under the Securities Act of 1933. In the absence of an effective registration, however, a Participant exercising an Option hereunder may be required to give a representation that he/she is acquiring such shares as an investment and not with a view to distribution thereof.

(f) No Deferrals or Dividend Equivalents. No Option shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Option. No Option shall provide for dividend equivalents.

(g) Limitations on Incentive Stock Option Grants.

(i) An Incentive Stock Option shall be granted only to an individual who, at the time the Option is granted, is employed by the Corporation or a qualifying parent or subsidiary (such terms having the meaning set forth in Section 424(f) of the Code) and does not own stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or Affiliates.

(ii) The aggregate Fair Market Value of all shares with respect to which Incentive Stock Options are exercisable by a Participant for the first time during any year shall not exceed $100,000. The aggregate Fair Market Value of such shares shall be determined at the time the Option is granted.

(iii) If all of the requirements of Section 422 of the Code (including the above) are not met, the Option shall automatically become a Nonqualified Stock Option.

## 8. STOCK APPRECIATION RIGHTS

The Committee or its delegate may from time to time designate those Participants who shall receive Awards of Stock Appreciation Rights. Subject to the terms of the Plan and any applicable Award Agreement, a SAR granted under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the excess of the difference between the Grant Price of the SAR and the Fair Market Value of the Common Stock on the date of conversion.

(a) Grant. A SAR may be granted in addition to any other Award under the Plan.

(b) Grant Price. The grant price shall be determined by the Committee, provided, however, that such price shall not be less than one hundred percent (100%) of the Fair Market Value of one share of Common Stock on the date of grant of the SAR, except with respect to substitute Awards made pursuant to Section 17 of the Plan (the “Grant Price”).

(c) Term. The term of each SAR shall be such period of time as is fixed by the Committee; provided, however, that the term of any SAR shall not exceed ten (10) years from the date of grant. The Committee in its discretion at the time of grant may establish Performance Goals that may affect the grant, exercise and/or settlement of a SAR.

(d) Time and Method of Exercise. The Committee shall establish in the applicable Award Agreement the time or times at which a SAR may be exercised in whole or in part.

C-6 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

APPENDIX C

(e) Form of Payment. Payment may be made to the Participant in respect thereof in cash or in shares of Common Stock, or any combination thereof, as the Committee in its sole discretion, shall determine and provide in the relevant Award Agreement. If stock-settled SARs are issued and paid, the gross amount of the Award shall be counted against the Plan.

(f) No Repricings. No SAR may be re-priced, replaced, re-granted through cancellation, or modified (except in connection with a change in the Common Stock or the capitalization of the Corporation as provided in Section 16 hereof) if the effect would be to reduce the exercise price for the shares underlying such SAR. In addition, no SAR may be repurchased or otherwise cancelled in exchange for cash or other Awards (except in connection with a change in the Common Stock or the capitalization of the Corporation as provided in Section 16 hereof) if the Grant Price of the SAR is equal to or greater than the Fair Market Value of the Common Stock at the time of such repurchase or exchange. Notwithstanding anything herein to the contrary, the Committee may take any such action set forth in this subsection 8(f) subject to the approval of the stockholders.

(g) No Deferrals or Dividend Equivalents. No SAR shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the SAR. No SAR shall provide for dividend equivalents.

periods during which the award is subject to vesting and the Transferability Restrictions applicable to the Restricted Shares will be in force (the “Restricted Period”). Unless otherwise determined by the Committee at the time of grant, the Restricted Period shall be for a minimum of three years and shall not exceed ten years from the date of grant, as determined by the Committee at the time of grant. The Restricted Period may be the same for all Restricted Shares granted at a particular time to any one Participant or may be different with respect to different Participants or with respect to various of the Restricted Shares granted to the same Participant, all as determined by the Committee at the time of grant.

(b) Transferability Restrictions. During the Restricted Period, Restricted Shares may not be sold, assigned, transferred or otherwise disposed of, or mortgaged, pledged or otherwise encumbered. Furthermore, a Participant’s right, if any, to receive Common Stock upon termination of the Restricted Period may not be assigned or transferred except by will or by the laws of descent and distribution. In order to enforce the limitations imposed upon the Restricted Shares the Committee may (i) cause a legend or legends to be placed on any such certificates, and/or (ii) issue “stop transfer” instructions as it deems necessary or appropriate. Holders of Restricted Shares limited as to sale under this subsection 9(b) shall have rights as a stockholder with respect to such shares to receive dividends in cash or other property or other distribution or rights in respect of such shares, and to vote such shares as the record owner thereof; provided that Restricted Shares that constitute Performance Awards will have such dividend rights as set forth in Section 11. With respect to each grant of Restricted Shares, the Committee shall determine the vesting conditions and Transferability Restrictions which will apply to the Restricted Shares for all or part of the Restricted Period. By way of illustration but not by way of limitation, the Committee may provide (i) that the Participant will not be entitled to receive any shares of Common Stock unless he or she is still a service provider of the Corporation or its Affiliates at the end of the Restricted Period, (ii) that the

## 9. RESTRICTED SHARES

The Committee or its delegate may from time to time designate those Participants who shall receive Awards of Restricted Shares. Each grant of Restricted Shares under the Plan shall be evidenced by an agreement which shall be executed by the Corporation and the Participant. The agreement shall contain such terms and conditions, not inconsistent with the Plan, as shall be determined by the Committee and shall indicate the number of Restricted Shares awarded and the following terms and conditions of the award.

(a) Grant of Restricted Shares. The Committee shall determine the number of Restricted Shares to be included in the grant and the conditions and period or

AVANOS

2023 Notice and Proxy Statement ▲ C-7

APPENDIX C

Participant will become vested in Restricted Shares according to a schedule determined by the Committee, or under other terms and conditions, including Performance Goals, determined by the Committee, and (iii) how any Transferability Restrictions will be applied, modified or accelerated in the case of the Participant's death or Total and Permanent Disability.

(c) Manner of Holding and Delivering Restricted Shares. If the Corporation issues physical certificates for Restricted Shares, each such certificate shall be registered in the name of the Participant and deposited with the Corporation or its designee. These certificates shall remain in the possession of the Corporation or its designee until the end of the applicable Restricted Period or, if the Committee has provided for earlier termination of the Transferability Restrictions following a Participant's death, Total and Permanent Disability or earlier vesting of the shares of Common Stock, such earlier termination of the Transferability Restrictions. At whichever time is applicable, certificates representing the number of shares to which the Participant is then entitled shall be delivered to the Participant free and clear of the Transferability Restrictions; provided that in the case of a Participant who is not entitled to receive the full number of Shares evidenced by the certificates then being released from escrow because of the application of the Transferability Restrictions, those certificates shall be returned to the Corporation and canceled and a new certificate representing the shares of Common Stock, if any, to which the Participant is entitled pursuant to the Transferability Restrictions shall be issued and delivered to the Participant, free and clear of the Transferability Restrictions.

## 10. RESTRICTED SHARE UNITS

The Committee or its delegate shall from time to time designate those Participants who shall receive Awards of Restricted Share Units. The Committee shall advise such Participants of their Awards by a letter indicating the number of Restricted Share Units awarded and the following terms and conditions of the award.

(a) Restricted Share Units may be granted to Participants as of the first day of a

Restricted Period. The number of Restricted Share Units to be granted to each Participant and the Restricted Period shall be determined by the Committee in its sole discretion.

(b) Transferability Restrictions. During the Restricted Period, Restricted Share Units may not be sold, assigned, transferred or otherwise disposed of, or mortgaged, pledged or otherwise encumbered. Furthermore, a Participant's right, if any, to receive cash or Common Stock upon termination of the Restricted Period may not be assigned or transferred except by will or by the laws of descent and distribution. With respect to each grant of Restricted Share Units, the Committee shall determine the vesting conditions and Transferability Restrictions which will apply to the Restricted Share Units for all or part of the Restricted Period. By way of illustration but not by way of limitation, the Committee may provide (i) that the Participant will forfeit any Restricted Share Units unless he or she is still a service provider of the Corporation or its Affiliates at the end of the Restricted Period, (ii) that the Participant will forfeit any or all Restricted Share Units unless he or she has met the Performance Goals according to the schedule determined by the Committee, (iii) that the Participant will become vested in Restricted Share Units according to a schedule determined by the Committee, or under other terms and conditions, including Performance Goals, determined by the Committee, and (iv) how any Transferability Restrictions will be applied, modified or accelerated in the case of the Participant's death or Total and Permanent Disability.
(c) Unless otherwise determined by the Committee, (i) during the Restricted Period, Participants will be credited with dividend equivalents equal in value to those declared and paid on shares of Common Stock, on all Restricted Share Units granted to them, (ii) these dividends will be regarded as having been reinvested in Restricted Share Units on the date of the Common Stock dividend payments based on the then Fair Market Value of the Common Stock thereby increasing the number of Restricted Share Units held by a Participant, and (iii) such dividend equivalents will be paid only to the extent the underlying Awards vest. Holders of Restricted Share Units under this

C-8 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

APPENDIX C

subsection 10(c) shall have none of the rights of a stockholder with respect to such shares. Holders of Restricted Share Units are not entitled to receive distribution of rights in respect of such shares, nor to vote such shares as the record owner thereof.

(d) Payment of Restricted Share Units. The payment of Restricted Share Units shall be made in cash or shares of Common Stock, or a combination of both, as determined by the Committee at the time of grant. The payment of Restricted Share Units shall be made promptly following the end of the Restricted Period, but not later than March 15 of the year following the year in which the Restricted Period ends.

## 11. PERFORMANCE AWARDS

The Committee or its delegate may from time to time designate those Participants who shall receive Performance Awards. Performance Awards include arrangements under which the grant, issuance, retention, vesting and/or transferability of any Award is subject to such Performance Goals, Transferability Restrictions and such additional conditions or terms as the Committee may designate. Subject to the terms of the Plan and any applicable Award Agreement, a Performance Award granted under the Plan:

- (a) may be denominated or payable in cash, Common Stock (including, without limitation, Restricted Shares), other securities, or other Awards;
- (b) shall confer on the holder thereof rights valued as determined by the Committee and payable to, or exercisable by, the holder of the Performance Award, in whole or in part, upon the achievement of such Performance Goals during such performance periods as the Committee shall establish; and
- (c) as specified in the relevant Award Agreement, the Committee may provide that Performance Awards denominated in shares earn dividend equivalents. Unless otherwise determined by the Committee, dividend equivalents for Performance Awards will accrue and will not be paid unless and until the underlying Awards vest.

## 12. OTHER STOCK-BASED AWARDS

The Committee or its delegate may from time to time designate those Participants who shall receive

ΔVΔNOS

such other Awards (“Other Stock-Based Awards”) that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Common Stock (including, without limitation, securities convertible into Common Stock), as are deemed by the Committee to be consistent with the purposes of the Plan, provided, however, that such grants must comply with applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions, including Performance Goals and Transferability Restrictions, of such Awards. Common Stock or other securities delivered pursuant to a purchase right granted under this Section 12 shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms, including, without limitation, cash, Common Stock, other securities, or other Awards, or any combination thereof, as the Committee shall determine, the value of which consideration, as established by the Committee shall not be less than the Fair Market Value of such Common Stock or other securities as of the date such purchase right is granted except with respect to substitute Awards made pursuant to Section 17 of the Plan.

## 13. VESTING

Notwithstanding any other provision of the Plan to the contrary, equity-based Awards granted under the Plan shall vest no earlier than the first anniversary of the date the Award is granted; provided, that the following Awards shall not be subject to the foregoing minimum vesting requirement: any (i) substitute Awards granted pursuant to Section 17, (ii) shares of Common stock delivered in lieu of fully-vested cash Awards, and (iii) any additional Awards the Committee may grant, up to a maximum of five percent (5%) of the available share reserve authorized for issuance under the Plan pursuant to Section 15 (subject to adjustment under Section 16); and, provided, further, that the foregoing restriction does not apply to accelerated exercisability or vesting of any Award in cases of death, disability, a Change in Control, or a Qualified Termination of Service.

## 14. CHANGE OF CONTROL, GOVERNMENT SERVICE, LEAVES OF ABSENCE AND OTHER TERMINATIONS

- (a) If, pending a Change of Control, the Committee determines the Common Stock

2023 Notice and Proxy Statement ▲ C-9

APPENDIX C

will cease to exist without an adequate replacement security that preserves Participants' economic rights and positions, or the Surviving Entity does not assume or otherwise equitably convert or substitute Awards in a manner approved by the Committee, then, by action of the Committee, the following shall occur with respect to such Awards:

- (i) All Options and SARs shall become exercisable immediately prior to the consummation of the Change of Control in such manner as is deemed fair and equitable by the Committee. For purposes of any Option or SAR subject to performance conditions, the Award will be deemed earned at the target performance level.
- (ii) The restrictions on all Restricted Shares shall lapse, and all Restricted Share Units, Performance Awards and Other Stock-Based Awards shall vest immediately prior to consummation of the Change of Control in such manner as is deemed fair and equitable by the Committee. For purposes of any Restricted Share, Restricted Share Unit, Performance Award or Other Stock-Based Award subject to performance conditions, the Award will be deemed earned at the target level.
- (iii) Notwithstanding the foregoing, any Award that is required to meet the requirements of Section 409A of the Code and the regulations thereunder shall be settled in a manner that complies with Section 409A of the Code and the regulations thereunder.
(b) With respect to Awards assumed by the Surviving Entity or otherwise equitably converted or substituted in connection with a Change in Control, in the event of a Qualified Termination of Service, the following shall occur with respect to Awards:
- (i) All Options and SARs shall become exercisable upon the Qualified Termination of Service. For purposes of any Option or SAR subject to performance conditions, the Award will be deemed earned at the target performance level.
- (ii) The restrictions on all Restricted Shares shall lapse, and all Restricted Share Units, Performance Awards and Other Stock-Based Awards shall vest upon the Qualified Termination of Service. For purposes of any Restricted Share, Restricted Share Unit, Performance Award or Other Stock-Based Award subject to performance conditions, the Award will be deemed earned at the target level.
- (iii) Notwithstanding the foregoing, any Award that is required to meet the requirements of Section 409A of the Code and the regulations thereunder shall be settled in a manner that complies with Section 409A of the Code and the regulations thereunder.
(c) A termination of employment or service shall not be deemed to have occurred while a Participant is on military leave or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Participant retains a right to reemployment or return to service with the Corporation or an Affiliate under an applicable statute or by contract; provided, however, that for purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Corporation is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonqualified Stock Option. For purposes of this subparagraph, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Corporation or an Affiliate. If the period of leave exceeds six months and the Participant does not retain a right to reemployment or return to service under an applicable statute or by contract, the employment or service relationship is deemed to terminate on the first date immediately following such six-month period. Notwithstanding the foregoing sentence, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be

C-10 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

APPENDIX C

expected to last for a continuous period of not less than six months, where such impairment causes the Participant to be unable to perform the duties of his or her position of employment or service or any substantially similar position of employment or service, a 29-month period of absence is substituted for such six-month period in determining whether a termination of employment or service shall be deemed to have occurred. A termination of employment or service with the Corporation or an Affiliate to accept immediate reemployment or return to service with the Corporation or an Affiliate likewise shall not be deemed to be a termination of employment or service for purposes of the Plan. Notwithstanding anything in the Plan to the contrary, a termination of employment or service with respect to any Awards that are required to meet the requirements of Section 409A of the Code and the regulations thereunder shall not be deemed to be a termination of employment or service for purposes of the Plan if it is anticipated that the level of bona fide services the Participant would perform after such date would continue at a rate equal to more than 20 percent (20%) of the average level of bona fide services performed over the immediately preceding 36-month period (or the full period of services to the Corporation or an Affiliate if the Participant has been providing such services less than 36 months).

(d) If any amounts payable under the Plan would constitute a parachute payment under Section 280G(b)(2) of the Code then such amounts shall be reduced to the extent necessary to provide the Participant with the greatest aggregate net after tax receipt as determined by the Committee or by applying the procedures, if any, set forth in Committee Rules.

## 15. SHARES SUBJECT TO THE PLAN

(a) The number of shares of Common Stock available with respect to all Awards that may be issued under the Plan shall not exceed 2,250,000 in the aggregate, plus a number of Shares (not to exceed 2,489,976) underlying awards outstanding as of the Effective Date under the Prior Plan that thereafter terminate

or expire unexercised or are cancelled, forfeited or lapse for any reason, in each case subject to the adjustment provision set forth in Section 16 hereof. The maximum number of shares of Common Stock that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 2,250,000. From and after the Effective Date, no further awards shall be granted under the Prior Plan and the Prior Plan shall remain in effect only so long as awards granted thereunder shall remain outstanding.

(b) Shares covered by an Award shall be subtracted from the Plan share reserve as of the grant date, but shall be added back to the Plan share reserve in accordance with this subsection 15(b).
(i) To the extent that all or a portion of an Award is canceled, terminates, expires, is forfeited or lapses for any reason, including by reason of failure to meet time-based and/or performance-based vesting requirements, any unissued or forfeited shares originally subject to the Award will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.
(ii) Shares subject to Awards settled in cash will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.
(iii) The full number of shares subject to an Option shall count against the number of shares remaining available for issuance pursuant to Awards made under the Plan, even if the exercise price of an Option is satisfied through net-settlement or by delivering shares to the Corporation (by either actual delivery or attestation).
(iv) The full number of shares subject to a SAR that is settled in shares shall count against the number of shares remaining available for issuance pursuant to Awards made under the Plan (rather than the net number of shares actually delivered upon exercise).
(v) Shares withheld from an Award to satisfy tax withholding requirements shall count against the number of

AVANOS

2023 Notice and Proxy Statement ▲ C-11

APPENDIX C

shares remaining available for issuance pursuant to Awards granted under the Plan, and shares delivered by a participant to satisfy tax withholding requirements shall not be added to the Plan share reserve.

(vi) Shares repurchased by the Corporation on the open market with the proceeds of an Option exercise shall not be added to the Plan share reserve.

(vii) Substitute Awards granted pursuant to Section 17 of the Plan shall not count against the Shares otherwise available for issuance under the Plan under subsection 15(a).

(viii) Subject to applicable Exchange requirements, shares available under a stockholder-approved plan of a company acquired by the Corporation (as appropriately adjusted to shares of Corporation Common Stock to reflect the transaction) may be issued under the Plan pursuant to Awards granted to individuals who were not employees of the Corporation or its Affiliates immediately before such transaction and will not count against the maximum share limitation specified in subsection 15(a).

(c) The shares of Common Stock subject to the Plan may consist in whole or in part of authorized but unissued shares or of treasury shares, as the Board may from time to time determine.

## 16. CHANGES IN CAPITALIZATION

a. In the event there are any changes in the Common Stock or the capitalization of the Corporation through a corporate transaction, such as any merger, any acquisition through the issuance of capital stock of the Corporation, any consolidation, combination, or exchange of shares, any separation of the Corporation (including a spin-off, split-up or other distribution of stock of the Corporation), any reorganization of the Corporation (whether or not such reorganization comes within the definition of such term in Section 368 of the Code), or any partial or complete liquidation by the Corporation, recapitalization, stock

dividend, stock split, extraordinary cash dividend or other change in the corporate structure, appropriate adjustments and changes shall be made by the Committee, to the extent necessary to preserve the benefit to the Participant contemplated hereby, to reflect such changes in (a) the maximum number of shares subject to the Plan, (b) the number of shares and the Option Price per share of all shares of Common Stock subject to outstanding Options, (c) the number of shares and the Grant Price per share of all shares of Common Stock subject to outstanding SARs, (d) the maximum number of shares of Common Stock covered by Awards which may be granted by the special committee within any calendar year period, (e) the number of Restricted Shares, Restricted Share Units, Performance Awards and Other Stock-Based Awards awarded to Participants, and (f) such other provisions of the Plan and individual Awards as may be necessary and equitable to carry out the foregoing purposes. For avoidance of doubt, with respect to any “equity restructuring” event that could result in an additional compensation expense pursuant to the provisions of FASB ASC Topic 718 if adjustments to Awards with respect to such event were discretionary, the Committee shall equitably adjust the number and type of shares covered by each outstanding Award and the terms and conditions, including the exercise price and performance criteria (if any), of such Award to equitably reflect such event, and will adjust the number and type of shares (or other securities or property) with respect to which Awards may be granted under the Plan after such event.

b. Upon the occurrence or in anticipation of any corporate event or transaction involving the Corporation (including, without limitation, any merger, reorganization, recapitalization, combination or exchange of shares, or any transaction described in subsection 16(b)), the Committee may, in its sole discretion, provide (i) that Awards will be settled in cash rather than shares of Common Stock, (ii) that Awards will be assumed by another party to a transaction or otherwise be equitably converted or substituted in connection with such transaction, (iii) that outstanding Awards

C-12 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

APPENDIX C

may be settled by payment in cash or cash equivalents equal to the excess of the fair market value of the underlying Common Stock, as of a specified date associated with the transaction (or the per-share transaction price), over the Option Price or Grant Price of the Award, (iv) that performance targets and performance periods for Performance Awards will be modified, or (v) any combination of the foregoing. The Committee's determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated.

## 17. SUBSTITUTE AWARDS

The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Corporation or an Affiliate as a result a merger or consolidation of the former employing entity with the Corporation or an Affiliate or the acquisition by the Corporation or an Affiliate of property or stock of the former employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.

## 18. EFFECT ON OTHER PLANS

All payments and benefits under the Plan shall constitute special compensation and shall not affect the level of benefits provided to or received by any Participant (or the Participant's estate or beneficiaries) as part of any employee benefit plan of the Corporation or an Affiliate. The Plan shall not be construed to affect in any way a Participant's rights and obligations under any other plan maintained by the Corporation or an Affiliate on behalf of employees.

## 19. TERM OF THE PLAN

Unless earlier terminated as provided herein, the Plan shall continue in effect until the tenth anniversary of the Effective Date or, if the stockholders approve an amendment to the Plan that increases the number of shares of Common Stock subject to the Plan, the tenth anniversary of the date of such approval. No Award may be granted or awarded after the termination date of the Plan, but Awards theretofore granted or awarded shall continue in force beyond that date pursuant to their terms.

AVANOS

## 20. GENERAL PROVISIONS

(a) No Right of Continued Service. Neither the establishment of the Plan nor the payment of any benefits hereunder nor any action of the Corporation, its Affiliates, the Board of Directors of the Corporation or its Affiliates, or the Committee shall be held or construed to confer upon any person any legal right to be continued in the employ of the Corporation or its Affiliates, and the Corporation and its Affiliates expressly reserve the right to discharge any Participant without liability to the Corporation, its Affiliates, the Board of Directors of the Corporation or its Affiliates or the Committee, except as to any rights which may be expressly conferred upon a Participant under the Plan.

(b) Binding Effect. Any decision made or action taken by the Corporation, the Board or by the Committee arising out of or in connection with the construction, administration, interpretation and effect of the Plan shall be conclusive and binding upon all persons. Notwithstanding anything in Section 3 to the contrary, the Committee may determine in its sole discretion whether a termination of employment or service for purposes of the Plan is caused by disability, retirement or for other reasons.

(c) Modification of Awards. Subject to Section 13, The Committee may in its sole and absolute discretion, by written notice to a Participant, (i) accelerate the exercisability or vesting of any Options or SARs granted under the Plan; (ii) accelerate the Restricted Period with respect to the Restricted Shares, Restricted Share Units, Performance Awards and Other Stock-Based Awards granted under the Plan, (iii) subject any Performance-Based Award or any other Award subject to Performance Goals to any policy adopted by the Corporation relating to the recovery of such Award to the extent it is determined that the Performance Goals were not actually achieved and/or (iv) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Common Stock, other securities or other Awards, or canceled, forfeited, or suspended, and the method or methods by which Awards may be

2023 Notice and Proxy Statement ▲ C-13

APPENDIX C

settled, exercised, canceled, forfeited, or suspended. Provided however, that any Restricted Share Units, Performance Awards and Other Stock-Based Awards that are required to meet the requirements of Section 409A of the Code and the regulations thereunder shall be settled in a manner that complies with Section 409A of the Code and the regulations thereunder. Except as provided in this subsection and in subsection 20(d) no amendment, suspension, or termination of the Plan or any Awards under the Plan shall, without the consent of the Participant, adversely alter or change any of the rights or obligations under any Awards or other rights previously granted the Participant.

(d) Nonresident Aliens. In the case of any Award granted to a Participant who is not a resident of the United States or who is employed by an Affiliate other than an Affiliate that is incorporated, or whose place of business is, in a State of the United States, the Committee may (i) waive or alter the terms and conditions of any Awards to the extent that such action is necessary to conform such Award to applicable foreign law, (ii) determine which Participants, countries and Affiliates are eligible to participate in the Plan, (iii) modify the terms and conditions of any Awards granted to Participants who are employed outside the United States, (iv) establish subplans, each of which shall be attached as an appendix hereto, modify Option exercise procedures and other terms and procedures to the extent such actions may be necessary or advisable, and (v) take any action, either before or after the Award is made, which is deemed advisable to obtain approval of such Award by an appropriate governmental entity; provided, however, that no action may be taken hereunder if such action would (i) materially increase any benefits accruing to any Participants under the Plan, (ii) increase the number of shares of Common Stock which may be issued under the Plan, (iii) modify the requirements for eligibility to participate in the Plan, or (iv) result in a failure to comply with applicable provisions of the Securities Act of 1933, the Exchange Act or the Code.

(e) No Segregation of Cash or Stock. The Restricted Share Unit accounts established for Participants are merely a bookkeeping

convenience and neither the Corporation nor its Affiliates shall be required to segregate any cash or stock which may at any time be represented by Awards. Nor shall anything provided herein be construed as providing for such segregation. Neither the Corporation, its Affiliates, the Board nor the Committee shall, by any provisions of the Plan, be deemed to be a trustee of any property, and the liability of the Corporation or its Affiliates to any Participant pursuant to the Plan shall be those of a debtor pursuant to such contract obligations as are created by the Plan, and no such obligation of the Corporation or its Affiliates shall be deemed to be secured by any pledge or other encumbrance on any property of the Corporation or its Affiliates.

(f) Non-transferability. During the Participant's lifetime, Options and SARs shall be exercisable only by such Participant. Awards shall not be transferable other than by will or the laws of descent and distribution upon the Participant's death. Notwithstanding anything in this subsection 20(f) to the contrary, the Committee may grant to designated Participants the right to transfer Awards, to the extent allowed under Rule 16b-3 of the Exchange Act, subject to the terms and conditions of the Committee Rules.

Except as otherwise provided in the Plan, no benefit payable under or interest in the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such attempted action shall be void and no such benefit or interest shall be in any manner liable for or subject to debts, contracts, liabilities, engagements, or torts of any Participant or beneficiary.

(g) Delaware Law to Govern. All questions pertaining to the construction, interpretation, regulation, validity and effect of the provisions of the Plan shall be determined in accordance with the laws of the State of Delaware.
(h) Purchase of Common Stock. The Corporation and its Affiliates may purchase from time to time shares of Common Stock in such amounts as they may determine for purposes of the Plan. The Corporation and its Affiliates shall

C-14 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

APPENDIX C

have no obligation to retain, and shall have the unlimited right to sell or otherwise deal with for their own account, any shares of Common Stock purchased pursuant to this paragraph.

(i) Use of Proceeds. The proceeds received by the Corporation from the sale of Common Stock pursuant to the exercise of Options shall be used for general corporate purposes.

(j) Withholding. The Committee shall require the withholding of all taxes as required by law. In the case of exercise of an Option or payments of Awards whether in cash or in shares of Common Stock or other securities, withholding shall be as required by law and the procedures, if any, set forth in the Committee Rules.

(k) Amendments. The Committee may at any time amend, suspend, or discontinue the Plan or alter or amend any or all Awards and Award Agreements under the Plan to the extent (1) permitted by law, (2) permitted by the rules of any stock exchange on which the Common Stock or any other security of the Corporation is listed, and (3) permitted under applicable provisions of the Securities Act of 1933, as amended, the Exchange Act (including Rule 16b-3 thereof); provided, however, that if any of the foregoing requires the approval by stockholders of any such amendment, suspension or discontinuance, then the Committee may take such action subject to the approval of the stockholders. Except as provided in subsections 21(c) and 21(d) no such amendment, suspension, or termination of the Plan shall, without the consent of the Participant, adversely alter or change any of the rights or obligations under any Awards or other rights previously granted the Participant.

(l) Section 409A of the Code.

a. General. To the extent that any Award is subject to Section 409A of the Code, such Award and the Plan is intended to comply with the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. Such Award shall be paid in a manner that will comply with Section 409A of the Code, including the final treasury regulations or any other official guidance issued by the

Secretary of the Treasury or the Internal Revenue Service with respect thereto. Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not warranted or guaranteed. Neither the Corporation, its Affiliates nor their respective directors, officers, employees or advisers (other than in his or her capacity as a Participant) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award.

b. Six-Month Delay in Certain Circumstances. Notwithstanding anything in the Plan or in any Award Agreement to the contrary, if any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code (“Non-Exempt Deferred Compensation”) would otherwise be payable or distributable under this Plan or any Award Agreement by reason of a Participant’s separation from service during a period in which the Participant is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes): (a) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following the Participant’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following the Participant’s separation from service (or, if the Participant dies during such period, within 30 days after the Participant’s death) (in either case, the “Required Delay Period”); and (b) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.

For purposes of this Plan, the term “Specified Employee” has the meaning given such term in Code Section 409A and

ΔVΔNOS

2023 Notice and Proxy Statement ▲ C-15

APPENDIX C

the final regulations thereunder, provided, however, that, as permitted in such final regulations, the Corporation’s Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board or any committee of the Board, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Corporation, including this Plan.

(iii) Installment Payments. If, pursuant to an Award, a Participant is entitled to a series of installment payments,

such Participant’s right to the series of installment payments shall be treated as a right to a series of separate payments and not to a single payment. For purposes of the preceding sentence, the term “series of installment payments” has the meaning provided in Treas. Reg. Section 1.409A-2(b)(2)(iii) (or any successor thereto).

(m) Awards under the Plan shall be subject to any compensation recoupment policy that the Company may adopt from time to time that is applicable by its terms to the Participant.

C-16 ▲ 2023 Notice and Proxy Statement

ΔVΔNOS

# 2022 ANNUAL REPORT

ON FORM 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

# FORM 10-K

(Mark One)

☑

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

For the fiscal year ended December 31, 2022

OR

☐

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

For the transition period from __________ to __________
Commission file number: 001-36440

![img-0.jpeg](img-0.jpeg)

Avanos Medical, Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

46-4987888

(I.R.S. Employer Identification No.)

5405 Windward Parkway

Suite 100 South

Alpharetta, Georgia 30004

(Address of principal executive offices) (Zip code)

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

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

Common Stock-$0.01 Par Value

(Title of each class)

AVNS

(Trading Symbol)

New York Stock Exchange

(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑

Non-accelerated filer ☐

Accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

The aggregate market value of common stock held by non-affiliates or registrant on June 30, 2022 was $1,279,134,708.

As of February 14, 2023, there were 46,598,895 shares of Avanos Medical, Inc. common stock outstanding.

# DOCUMENTS INCORPORATED BY REFERENCE

Certain information contained in the definitive Proxy Statement for the Avanos Annual Meeting of Stockholders to be held on April 27, 2023 is incorporated by reference into Part III.

# **AVANOS MEDICAL, INC.**
**TABLE OF CONTENTS**

|  | Page |
| --- | --- |
| Part I |  |
| Item 1. Business | 1 |
| Item 1A. Risk Factors | 7 |
| Item 1B. Unresolved Staff Comments | 16 |
| Item 2. Properties | 16 |
| Item 3. Legal Proceedings | 16 |
| Item 4. Mine Safety Disclosures | 16 |
| Part II |  |
| Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 16 |
| Item 6. [Reserved] | 17 |
| Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 26 |
| Item 8. Financial Statements and Supplementary Data | 28 |
| Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 61 |
| Item 9A. Controls and Procedures | 61 |
| Item 9B. Other Information | 63 |
| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 63 |
| Part III |  |
| Item 10. Directors, Executive Officers and Corporate Governance | 63 |
| Item 11. Executive Compensation | 64 |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 65 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence | 65 |
| Item 14. Principal Accounting Fees and Services | 65 |
| Part IV |  |
| Item 15. Exhibits, Financial Statement Schedules | 66 |
| Signatures | 68 |

# PART I

## Information Concerning Forward-Looking Statements

This Annual Report on Form 10-K (this “Form 10-K”) and other materials we have filed or furnished or will file or furnish with the SEC (as well as information included in our oral or other written statements) contain, or will contain, certain “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, regarding business strategies, market potential, future financial performance and other matters. Forward-looking statements may appear throughout this Form 10-K, including without limitation, in the following sections: Item 1 “Business;” Item 1A “Risk Factors;” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “intend,” “estimate,” “anticipate,” “plan” or “continue” and similar expressions, among others. The matters discussed in these forward-looking statements are based on the current plans and expectations of our management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. These factors include, but are not limited to:

- • general economic conditions particularly in the United States;
- • fluctuations in global equity and fixed-income markets;
- • our ability to successfully execute on or achieve the expected benefits of our restructuring initiative;
- • supply chain issues and inflationary pressures;
- • risks related to the ongoing COVID-19 pandemic;
- • the competitive environment;
- • the loss of current customers or the inability to obtain new customers;
- • litigation and enforcement actions;
- • price fluctuations in key commodities;
- • fluctuations in currency exchange rates;
- • disruption in supply of raw materials or the distribution of finished goods;
- • changes in governmental regulations that are applicable to our business;
- • our ability to realize the intended benefits of acquisition or merger transactions;
- • changes in asset valuations including write-downs of assets such as inventory, accounts receivable or other assets for impairment or other reasons and
- • the other matters described in Item 1A - 'Risk Factors' in this Form 10-K.

Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of our management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Any forward-looking statement made by us in this Annual Report on Form 10-K speaks only as of the date of this report. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

## ITEM 1. BUSINESS

### Overview

Avanos Medical, Inc. is a medical technology company focused on delivering clinically superior medical device solutions that will help patients get back to the things that matter. Headquartered in Alpharetta, Georgia, we are committed to addressing some of today’s most important healthcare needs, including providing a vital lifeline for nutrition to patients from hospital to home, and reducing the use of opioids while helping patients move from surgery to recovery. We develop, manufacture and market our recognized brands globally and hold leading market positions in multiple categories across our portfolio. Unless the context indicates otherwise, the terms “Avanos,” “the Company,” “we,” “our” and “us” refer to Avanos Medical, Inc. and its consolidated subsidiaries. We were originally incorporated in Delaware in 2014. 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.

1

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. We provide a portfolio of innovative product offerings focused on chronic care and pain management to improve patient outcomes and reduce the cost of care.

*Chronic care* is a portfolio of products that include the following:

- Digestive health products such as our MIC-KEY enteral feeding tubes, Corpak patient feeding solutions and NeoMed neonatal and pediatric feeding solutions. In the year ended December 31, 2022, our legacy enteral feeding tubes, which includes our MIC-KEY enteral feeding tubes accounted for more than 10% of our consolidated net sales. In the years ended December 31, 2021 and 2020, our legacy enteral feeding tubes and our Corpak feeding solutions each accounted for more than 10% of our consolidated net sales.
- Respiratory health products such as our closed airway suction systems and other airway management devices marketed under the Ballard, Microcuff and Endoclear brands. In the years ended December 31, 2022, 2021 and 2020, our closed airway suction systems accounted for more than 10% of our consolidated net sales.

*Pain management* is a portfolio of non-opioid pain solutions including:

- Acute pain products such as ON-Q and ambIT surgical pain pumps and Game Ready cold and compression therapy systems. In the year ended December 31, 2022, none of our acute pain products individually accounted for more than 10% of our consolidated net sales. In the years ended December 31, 2021 and 2020, our surgical pain products, which includes both On-Q and ambIT pumps, accounted for more than 10% of our consolidated net sales.
- Interventional pain solutions, which provide minimally invasive pain relieving therapies, such as our COOLIEF pain therapy and OrthogenRx's knee osteoarthritis pain relief injection products. In the years ended December 31, 2022, 2021 and 2020, products associated with our COOLIEF pain therapy accounted for more than 10% of our consolidated net sales.

## **Business Acquisitions**

On January 20, 2022, we acquired all of the equity voting interests and completed the acquisition of OrthogenRx, Inc. ("OrthogenRx"), which is focused on the development and commercialization of treatments for knee pain caused by osteoarthritis. We expect the acquisition of OrthogenRx will enhance our interventional pain portfolio. The initial purchase price was $130.0 million at closing less working capital adjustments, with up to an additional $30.0 million payable in contingent cash consideration based on OrthogenRx's growth in net sales during 2022 and 2023. The purchase price was funded by available cash on hand and the proceeds of borrowings, including from the incurrence of a new incremental tranche of term loans of $125.0 million, under the Company's prior senior secured revolving credit facility. For further information regarding the acquisition of OrthogenRx, see "Business Acquisition" in Note 5 to the Consolidated financial statements in Item 8 of this Form 10-K.

During 2019, we completed the acquisition of substantially all the assets of Endoclear, LLC ("Endoclear") and Summit Medical Products, Inc. ("Summit"), and we completed the acquisition of NeoMed, Inc. ("NeoMed") (collectively, the "Acquisitions"). The aggregate purchase price for the Acquisitions was $57.5 million, net of cash acquired, plus future contingent payments of $7.2 million.

During 2018, we acquired Cool Systems, Inc. ("Game Ready") for $65.7 million, net of cash acquired, which was based on a purchase price of $65.0 million plus certain adjustments as provided in the purchase agreement.

## **Divestiture**

During 2018, we closed the sale of our Surgical and Infection Prevention ("S&IP") business (the "Divestiture") for $710.0 million plus certain adjustments as provided in the purchase agreement.

## **Sales and Marketing**

We direct our primary sales and marketing efforts toward hospitals, ambulatory care centers, and other sites of care. We engage with physicians and other healthcare providers to highlight the unique benefits and competitive differentiation of our branded products. We work directly with physicians, nurses, professional societies, hospital administrators and healthcare group purchasing organizations ("GPOs") to collaborate and educate on emerging practices and clinical techniques. These marketing programs are delivered directly to healthcare providers. Additionally, we provide marketing programs to our strategic distribution partners throughout the world.

## **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 2022,

2

approximately 44% of our net sales in North America were made through distributors. In the year ended December 31, 2022, sales to Medline Industries, McKesson Corporation, and Owens & Minor, Inc. accounted for approximately 16%, 12%, and 8% of consolidated net sales, respectively. In the year ended December 31, 2021, sales to Medline Industries, McKesson Corporation, and Owens & Minor, Inc. accounted for approximately 15%, 11%, and 10% of consolidated net sales, respectively. In the year ended December 31, 2020, sales to Medline Industries, McKesson Corporation, and Owens & Minor, Inc. accounted for approximately 12%, 12%, and 9% 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 2022, approximately 80% 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.

### Group Purchasing Organizations

Our agreements with GPOs enables us to sell our products to their members, whether sold directly by us or through independent wholesale distributors. Agreements with GPOs are generally renewed every three years. GPOs negotiate pricing and volume purchasing discounts for hospitals, physician practices and other health care providers and institutions. 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 32% of our 2022 global net sales, including sales to wholesale distributors, were contracted through GPOs.

### 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 surgical and interventional pain management and respiratory and digestive health. We face competition from these alternative treatments, as well as improvements and innovations in products and technologies by our competitors. Major competitors include, among others:

- *Digestive Health*: Boston Scientific Corporation, Cook Medical and Applied Medical Technology, Inc.
- *Respiratory Health*: Stryker Corporation, Medline Industries, Inc. and Smiths Medical
- *Acute Pain*: B. Braun Medical Inc., Pacira Pharmaceuticals, Inc., Teleflex Incorporated, Medtronic plc, Ambu A/S, Baxter International, Inc., Pajunk Medical Systems and Leventon
- *Interventional Pain*: Boston Scientific Corporation, Abbott Laboratories, Medtronic plc and Stryker Corporation

In developing and emerging markets, alternative clinical practices and different standards of care are our primary competition.

While we believe that the number of procedures using our products will grow due, in part, to increasing global access to healthcare, we expect that our ability to compete with other providers of similar products will be impacted by rapid technological advances, pricing pressures and third-party reimbursement practices. We continue to defend our market positions and launched four new products in 2022. We believe that our key product characteristics, such as proven efficacy, reliability and safety, including our ability to launch innovative new products, our efficient manufacturing processes, and our established distribution network, field sales organization and customer service group, are important factors that distinguish us from our competitors.

### 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 $30.6 million in 2022, $32.3 million in 2021 and $34.9 million in 2020. These amounts consisted primarily of salaries and related expenses for personnel, product trial costs, outside laboratory and license fees, the costs of laboratory equipment and facilities and asset write-offs for equipment associated with unsuccessful product launches. We intend to continue our research and development efforts as a key strategy for growth.

### Intellectual Property

Patents, trademarks and other proprietary rights are very important to our business. We also rely upon trade secrets, manufacturing know-how, continuing technological innovations and licensing opportunities to maintain and improve our competitive position. We review third-party proprietary rights, including patents and patent applications, as they become available, in an effort to develop an effective intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities and monitor the intellectual property owned by others.

3

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 acute pain management, interventional pain management, respiratory health and digestive health products. These patents generally expire between 2023 and 2042. 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.

### **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 assure continuity of supply while maintaining high quality and reliability. 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. Government regulation by various national, regional, federal, state and local agencies, both in the United States and other countries, addresses (among other matters) inspection of, and controls over, research and laboratory procedures, clinical investigations, product approvals and manufacturing, labeling, packaging, marketing and promotion, pricing and reimbursement, sampling, distribution, quality control, post-market surveillance, servicing, record keeping, storage and disposal practices. Our operations are also affected by trade regulations in many countries that limit the import of raw materials and finished products and by laws and regulations that seek to prevent corruption and bribery in the marketplace (including the U.S. Foreign Corrupt Practices Act and the United Kingdom Bribery Act, which provide guidance on corporate interactions with government officials) and require safeguards for the protection of personal data. In addition, we are subject to laws and regulations pertaining to healthcare fraud and abuse, including state and federal anti-kickback and false claims laws in the United States.

Compliance with these laws and regulations is costly and materially affects our business. Among other effects, healthcare regulations substantially increase the time, difficulty and costs incurred in obtaining and maintaining approval to market newly developed and existing products. For example, in the United States, before we can market a new medical product, or market a new use for, claim for or significant modification to an existing product, we generally must first receive clearance under Section 510(k) of the Food, Drug and Cosmetic Act (“510(k) clearance”) from the United States Food and Drug Administration (“FDA”). In order for us to obtain 510(k) clearance, the FDA must determine that our proposed product is substantially equivalent to a device legally on the market, known as a predicate device, with respect to intended use, technology, safety and effectiveness. Similarly, most major markets for medical devices outside the United States also require clearance, approval or compliance with certain standards before a product can be commercially marketed. For instance, the European Union, or EU, harmonized national regulations for the control of medical devices through the European Medical Device Directive (“EU MDD”) with which manufacturers must comply. 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. Medical devices without a CE mark may not be sold or distributed in the EU.

During 2021, the European Union adopted the EU Medical Device Regulation (“EU MDR”), replacing the EU MDD. The main goal of this regulation is to enhance product safety, quality and transparency for medical devices within the European Union. To achieve this, the EU MDR includes significant new requirements for medical devices, including enhanced requirements for clinical evidence and documentation, increased focus on device identification and traceability, and additional post-market surveillance and diligence. Compliance with the EU MDR requires re-certification of many of our products to the enhanced standards, during a transition period ending May 26, 2024. Complying with the EU MDR will require us to incur significant expenditures.

We expect that ensuring compliance with these regulations will continue to require significant technical expertise and capital investment. Failure to comply with applicable regulations will delay the release of a new product or result in regulatory and enforcement actions, the seizure or recall of a product, the suspension or revocation of the authority necessary for a product’s production and sale and other civil or criminal sanctions, including fines and penalties.

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 some cases, these studies have resulted, and may in the future result, in the discontinuance of, or limitations on, marketing of

4

products domestically or worldwide, and may give rise to claims for damages from persons who believe they have been injured as a result of their use.

Access to healthcare products continues to be a subject of investigation and action by governmental agencies, legislative bodies and private organizations in the United States and other countries. A major focus is cost containment. Efforts to reduce healthcare costs are also being made in the private sector, notably by healthcare payors and providers, which have instituted various cost reduction and containment measures. We expect insurers and providers to continue attempts to reduce the cost of healthcare products. 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.

We expect debate to continue during the next several years at all government levels worldwide over the marketing, availability, method of delivery, and payment for healthcare products and services. We believe that future legislation and regulation in the markets we serve could affect access to healthcare products and services, increase rebates, reduce prices or the rate of price increases for healthcare products and services, change healthcare delivery systems, create new fees and obligations, or require additional reporting and disclosure. It is not possible to predict the extent to which we or the healthcare industry in general might be affected by the matters discussed above. Such legislative or regulatory changes could have a material adverse effect on our business by reducing the prices paid for our products or imposing other requirements.

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.

Demand for many of our existing and new medical devices is, and will continue to be, affected by the extent to which government healthcare programs and private health insurers reimburse our customers for patients' medical expenses in the countries where we do business. Statutory and regulatory requirements for Medicaid, Medicare, and other government healthcare programs govern provider reimbursement levels. From time to time, legislative changes are made to government healthcare programs that impact our business, and the federal and/or state governments may continue to enact measures in the future aimed at containing or reducing reimbursement levels for medical expenses paid for in whole or in part with government funds. We cannot predict the nature of such measures or their impact on our business, results of operations, financial condition and cash flows. Any reduction in the amount of reimbursements received by our customers could have a material adverse effect on our business by reducing their selection of our products and the prices they are willing to pay.

### **Environmental, Health and Safety Matters**

Our operations are subject to federal, state, provincial and local laws, regulations and ordinances relating to various environmental, health and safety matters. We believe our operations are in compliance with, or we are taking actions designed to ensure compliance with, these laws, regulations and ordinances. However, the nature of our operations exposes us to the risk of claims concerning non-compliance with environmental, health and safety laws or standards, and there can be no assurance that material costs or liabilities will not be incurred in connection with those claims. We are not currently named as a party in any judicial or administrative proceeding relating to environmental, health or safety matters.

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. However, future events, such as changes in existing laws and regulations, or contamination of sites owned, operated or used for waste disposal by us (including currently unknown contamination and contamination caused by prior owners and operators of such sites or other waste generators) may give rise to additional costs which could have a material adverse effect on our financial condition, results of operations or liquidity.

### **Employees and Human Capital Management**

Employees are our most-valued resource and are at the center of everything we do. Their talent, diversity and commitment are crucial to our innovation and success. Our work environment fosters personal, professional and corporate growth and nurtures innovation through product development and customer solutions. Our global teams work together in a spirit of cooperation to improve health and healthcare every day.

5

Employee demographics presented in the table below represent the number of employees as of December 31, 2022:

| Global Employees | 2022 | % of Total |
| --- | --- | --- |
| United States | 964 | 23.8% |
| Mexico | 2,850 | 70.5% |
| Latin America | 11 | 0.3% |
| Europe, Middle East and Africa | 101 | 2.5% |
| Asia Pacific | 118 | 2.9% |
| Total | 4,044 |  |

### *Compensation*

We strive to compensate employees competitively and fairly in markets throughout the world. 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 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”).

### *Training and Educational Opportunities*

Because we are a medical device manufacturer, our employees are regularly trained in key areas required by the FDA and other applicable regulatory authorities, including topics such as documentation, safety, complaint handling, anti-bribery and quality, among others. In addition to regulated training, employees are educated on the Avanos Code of Conduct, which aims to ensure all our employees understand and act in alignment with our cultural and behavioral expectations.

### *Employee Engagement*

We believe that employees who are engaged in their roles, treated as partners in the business and recognized for their efforts, are more satisfied and productive. Our goal is to ensure that each of our more than 4,000 employees understands how they contribute to the Company’s innovation and growth. This is accomplished through an employee recognition program and ongoing, two-way communications, including videos and podcasts, that allow employees to engage with and hear directly from members of the executive team.

### *Employee Retention*

In 2021, we implemented a multi-tiered employee retention strategy. 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.

### *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.

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. 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.

6

## 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. 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. Our commitment is also reflected in the important role that our DE&I Council plays in our governance practices. Founded in 2021, the DE&I Council is comprised of employees from various salary levels, functional departments and geographic regions throughout Avanos. The DE&I Council includes representatives from all the global regions in which the Company operates.

The following table shows various diversity metrics for the Company as of December 31, 2022.

| Employee Diversity | 2022 |
| --- | --- |
| Women - global director and above (a) | 30.2% |
| Ethnically diverse - U.S. director and above (a) | 16.7% |
| Women - global salaried employees | 44.0% |
| Ethnically diverse - U.S. salaried employees | 29.6% |

(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. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on our corporate website as soon as reasonably practicable after we file these reports and amendments with, or furnish them to, the SEC. The information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed with the SEC. 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.

## ITEM 1A. RISK FACTORS

Our business faces many risks and uncertainties. Any of the risks discussed below, as well as factors described in other places in this Annual Report on Form 10-K, or in our other filings with the SEC, could materially adversely affect our business, consolidated financial position, results of operations or cash flows. In addition, these items could cause our future results to differ from our recent results, from our anticipated future results and from those in any of our forward-looking statements. These risks are not the only ones we face. Other risks that we do not presently know about or that we presently believe are not material could also adversely affect us.

### Risks Related to our Business and Industry

*We face strong competition. Our failure to compete effectively could have a material adverse effect on our business.*

Our industry is highly competitive. We compete with many domestic and foreign companies ranging from small start-up enterprises that might sell only a single or limited number of competitive products or compete only in a specific market segment, to companies that are larger and more established than us, have a broad range of competitive products, participate in numerous markets and have access to significantly greater financial and marketing resources than we do. We are also subject to potential competition from new technologies or new market entrants. Competitive factors include price, alternative clinical practices, innovation, quality and reputation. Our failure to compete effectively could have a material adverse effect on our business, results of operations, financial condition and cash flows.

*We may not be successful in developing, acquiring or marketing competitive products and technologies.*

Our industry is characterized by extensive research and development and rapid technological advances. The future success of our business will depend, in part, on our ability to design, acquire and manufacture new competitive products and enhance existing products. 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. Development by our competitors of improved products, technologies or enhancements may make our products, or those we develop, license or acquire in the future, obsolete or less competitive, which could negatively impact our net sales. Our failure to successfully develop, acquire or market competitive

7

new products or enhance existing products could have a material adverse effect on our business, results of operations, financial condition and cash flows.

# ***We cannot guarantee that any of our strategic acquisitions, investments or alliances will be successful.***

We intend to supplement our growth through strategic acquisitions of, investments in and alliances with new medical technologies. The success of any acquisition, investment or alliance may be affected by a number of factors, including our ability to identify and then properly assess and value the potential business opportunity or to successfully integrate any business we may acquire into our existing business. These types of transactions may require more resources and investments than originally anticipated, may divert management's attention from our existing business, may result in exposure to unexpected liabilities of the acquired business, and may not result in the expected benefits, savings or synergies. There can be no assurance that we will be able to identify and successfully make strategic acquisitions of, investments in and alliances with new medical technologies or that any past or future acquisition, investment or alliance will be cost-effective, profitable or successful.

# ***We may be unable to attract and retain key employees necessary to be competitive.***

Our ability to compete effectively depends upon our ability to attract and retain executives and other key employees, including people in technical, marketing, sales, and research and development positions. Competition for experienced employees, particularly for persons with specialized skills, can be intense. Our ability to recruit such talent will depend on a number of factors, including compensation and benefits, work location and work environment. If we cannot effectively recruit and retain qualified executives and employees, our business could be materially adversely affected.

# ***Breaches of our information technology systems could have a material adverse effect on our business.***

We rely on information technology systems to process, transmit and store electronic information in our day-to-day operations. Our information technology systems may fail to perform as anticipated, and we may encounter difficulties in implementing new systems, adapting these systems to changing technologies or expanding them to meet the future needs and growth of our business. In addition, 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- or phishing-attacks. We also store certain information with third parties that could be subject to these types of attacks. These attacks could result in our intellectual property and other confidential information, including personal health information, being lost or stolen, disruption of our operations, loss of reputation and other negative consequences, such as increased costs for security measures or remediation costs and diversion of management attention. While we will continue to implement additional protective measures to reduce the risk of and detect future cyber incidents, cyber-attacks are becoming more sophisticated and frequent, and the techniques used in such attacks change rapidly. There can be no assurances that our protective measures will prevent future attacks that 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. 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. Our ability to enforce and protect our intellectual property rights may be limited in certain countries outside of the United States in which we operate, which could make it easier for our competitors to develop or distribute similar or superior competing technologies in those jurisdictions. In addition, our competitive position may be adversely affected by expirations of our significant patents, which would allow competitors to freely use our technology to compete with us.

We operate in an industry characterized by extensive patent litigation and competitors may claim that our products infringe their intellectual property rights. Resolution of patent litigation or other intellectual property claims is inherently unpredictable, typically time consuming and costly and can result in significant damage awards and injunctions that could prevent the manufacture and sale of the affected products or require us to make significant royalty payments in order to continue selling the affected products. 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. We can expect to face additional claims of patent infringement in the future.

# ***Our customers depend on third-party coverage and reimbursements. The failure of healthcare programs to provide coverage and reimbursement, or reductions in levels of reimbursement, could have a material adverse effect on our business.***

The ability of our customers to obtain coverage and reimbursements for products they purchase from us is important to our business. Demand for many of our existing and new medical products is, and will continue to be, affected by the extent to which government healthcare programs and private health insurers reimburse our customers for patients' medical expenses in

8

the countries where we do business. 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.

In addition, as a result of their purchasing power, third-party payors are implementing cost-cutting measures such as seeking discounts, price reductions or other incentives from medical products suppliers and imposing limitations on coverage and reimbursements for medical technologies and procedures. 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.

*The ongoing COVID-19 pandemic could adversely impact our business operations, financial condition, results of operations and cash flows.*

The COVID-19 pandemic has caused significant volatility in the global financial markets, caused disruption in global supply and distribution channels, dramatically changed the way companies do business and may adversely impact our financial position, results of operations and cash flows.

While we continue to closely monitor the economic impact of the COVID-19 pandemic on our business, we currently cannot quantify the impact it will have on our future results of operations. The ongoing impact of the pandemic depends on a number of factors which are uncertain and unpredictable, including the severity, extent and duration of the pandemic and the potential severe adverse financial impact the pandemic could have on our customers. Our future results of operations and cash flows may suffer material adverse effects from delays in payments on outstanding accounts receivable, potential manufacturing, distribution and supply chain disruptions and uncertain demand, and the effects of any actions we may take to address the financial and operational challenges our customers may face. Other pandemic-related risks and uncertainties include, but are not limited to:

- postponement or cancellation of elective medical procedures and uncertainty as to whether or when they will resume;
- potential temporary or prolonged office, production facility or distribution center closures;
- the health of our employees and our ability to meet our staffing needs;
- potential new or continued governmental actions that may limit our employees' ability to work;
- civil unrest relating to government, corporate and societal responses to the pandemic;
- volatility in economic conditions and the financial markets;
- risks associated with vaccine distribution; and
- other unanticipated effects that remain unknown.

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. The duration of any such impacts cannot be predicted because of the unprecedented nature of the COVID-19 pandemic. 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.*

We depend on the availability of various components, raw materials and manufactured products supplied by others for our 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. Further, for quality assurance or cost effectiveness, we purchase from sole suppliers certain components and raw materials. Although there are other sources in the market place for these items, we may not be able to quickly establish additional or replacement sources for certain components or materials due to regulations and requirements of the FDA and other regulatory authorities regarding the manufacture of our products. The loss of any sole supplier or any sustained supply interruption that affects our ability to manufacture or deliver our products in a timely or cost effective manner could have a material adverse effect on our business, results of operations, financial condition and cash flows.

*An interruption in our ability to manufacture products may have a material adverse effect on our business.*

Many of our key products are manufactured at single locations, with limited alternate facilities. If one or more of these facilities experience damage, or if these manufacturing capabilities are otherwise 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 may not be possible to timely manufacture the relevant products at previous levels or at all. A reduction or interruption in any of these manufacturing processes could have a material adverse effect on our business, results of operations, financial condition and cash flows.

9

*We may not successfully execute on or achieve the expected benefits of our restructuring initiative.*

In January 2023, we initiated a three-year restructuring initiative pursuant to which we plan to: (i) combine our Chronic Care and Pain Management franchises into a single commercial organization focused on the Digestive Health and Orthopedic Pain & Recovery product categories; (ii) rationalize our product portfolio including certain low-margin, low-growth product categories, through targeted divestitures; (iii) undertake additional cost management activities to enhance our operating profitability; and (iv) pursue efficient capital allocation strategies, including through acquisitions that meet our strategic and financial criteria. 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. 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. 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.

*The ongoing conflict between Russia and Ukraine and the related implications could have a material adverse effect on our business and results of operations.*

As a result of the ongoing military conflict between Russia and Ukraine, the United States and other countries have imposed significant sanctions on Russia and could impose even wider sanctions. The military conflict and related sanctions could damage or disrupt international commerce and the global economy. We cannot predict the broader or longer-term consequences of the conflict or of the sanctions imposed to date or in the future, which could include embargoes, regional instability, geopolitical shifts, exchange rate fluctuations, financial market disruptions and economic recession. Further, the conflict could exacerbate supply chain challenges, lead to an increase in cyberattacks from Russia, affect the global price and availability of key commodities, reduce our sales and earnings or otherwise have an adverse effect on our business and results of operations.

In addition, the conflict between Russia and Ukraine may have the effect of heightening other risks disclosed in this Form 10-K, any of which could materially and adversely affect our business and results of operations. Such risks include but are not limited to interruptions in the transportation channels for the manufacture and global distribution of our products, heightened inflation, depressed levels of consumer and commercial spending, disruptions to our global technology infrastructure, adverse changes in international trade policies and relations, and the inability to implement and execute our business strategy. We are currently unable to predict the extent, nature or duration of any of these occurrences.

*Supply chain disruptions could have a material adverse effect on our business.*

We rely on a complex global supply chain composed of multiple external suppliers, some of which are single-source suppliers. These suppliers provide raw materials and other inputs for our production processes; supply certain components for our products; and deliver other goods and services used in our business. We cannot be certain that our current suppliers will continue to provide us with the quantities of materials that we require or satisfy our anticipated specifications and quality requirements on a timely basis or at all. In addition, any supply chain disruption in limited or sole sourced raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified.

In addition, we rely on various transportation channels for global distribution of our products through shipping ports located throughout the world. Labor unrest, political instability, the outbreak of pandemics or other health emergencies (such as the COVID-19 pandemic), trade restrictions, transport capacity and costs, port security, weather conditions, natural disasters or other events could slow port activities and could adversely affect our business by interrupting product shipments and may increase our transportation costs if we are forced to use more expensive shipping alternatives.

From time to time we may be negatively impacted by supply chain disruptions, including the following:

- Suppliers extending lead times, experiencing capacity constraints, limiting or canceling supply, allocating supply to other customers (including our competitors), delaying or canceling deliveries, going out of business or increasing prices;
- Supplier quality issues;
- The ongoing COVID-19 pandemic and other pandemics, epidemics or infectious disease outbreaks;
- Cybersecurity events, manmade or natural disasters, operational failures or other events that disrupt us or our suppliers;
- Long lead times to qualify alternate or additional suppliers, or the unavailability of qualified alternate suppliers; and
- Other events or occurrences that are beyond our control, including transportation delays, inflationary pricing pressures, work stoppages, labor shortages and governmental regulatory actions.

10

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.

*Our business, operating results, and cash flows have been affected and may continue to be adversely affected by the rising rate of inflation.*

Inflationary pressures have increased due to general macroeconomic factors as well as the global supply chain disruptions, labor shortages and other impacts of the ongoing COVID-19 pandemic. 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. 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. 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.

*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. 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. Our provision for income taxes and results of operations may be adversely affected by changes to our operating structure, changes in the mix of income and expenses in countries with differing tax rates, changes in the valuation of deferred tax assets and liabilities or changes in tax laws, regulations or administrative interpretations thereof. For example, the U.S. federal government could make changes to existing U.S. tax laws, including the Tax Cuts and Jobs Act of 2017 or the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020, which could include an increase in the corporate tax rate and the tax rate on foreign earnings. It cannot be predicted whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated, issued or amended that could result in a material adverse effect on our financial position, results of operations or cash flows.

*We face significant uncertainty in the healthcare industry due to government healthcare reform in the United States and elsewhere.*

The U.S. Congress, regulatory agencies and certain state legislatures, as well as international legislators and regulators, periodically review and assess alternative healthcare delivery systems and payment methods with an objective of ultimately reducing healthcare costs and expanding access. We cannot predict with certainty what healthcare initiatives, if any, will be implemented by states or foreign governments or what ultimate effect healthcare reform or any future legislation or regulation may have on our customers' purchasing decisions regarding our products. However, the implementation of new legislation and regulation may lower reimbursements for our products, reduce medical procedure volumes and materially adversely affect our business, results of operations, financial condition and cash flows.

*We are subject to extensive government regulation, which may require us to incur significant expenses to ensure compliance.*

Many of our products are subject to extensive regulation in the United States by the FDA and other regulatory authorities and by comparable government agencies in other countries concerning the development, design, approval, manufacture, labeling, importing and exporting and sale and marketing of many of our products. Furthermore, our facilities are subject to periodic inspection by the FDA and other federal, state and foreign government authorities, which require manufacturers of medical devices to adhere to certain regulations, including the FDA's Quality System Regulation, which requires periodic audits, design controls, quality control testing and documentation procedures, as well as complaint evaluations and investigation. Regulations regarding the development, manufacture and sale of medical products are evolving and subject to future change. We cannot predict what impact those regulatory changes may have on our business. Failure to comply with applicable regulations could lead to manufacturing shutdowns, product shortages, delays in product manufacturing, product seizures, recalls, operating restrictions, withdrawal or suspension of required licenses, and prohibitions against exporting of products to, or importing products from, countries outside the United States and may require significant resources to resolve. Any one or more of these events could have a material adverse effect on our business, results of operations, financial condition and cash flows.

11

*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.*

We are subject to various U.S. federal, state and local laws targeting fraud and abuse in the healthcare industry, including the Food Drug and Cosmetic Act and anti-kickback and false claims laws. Violations of these laws are punishable by criminal or civil sanctions, including substantial fines, imprisonment and exclusion from participation in healthcare programs such as Medicare and Medicaid. These laws and regulations are wide ranging and subject to changing interpretation and application, which could restrict our sales or marketing practices. 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.

*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.*

In the United States, before we can market a new product, or market a new use of, or claim for, or significant modification to, an existing product, we generally must first receive clearance or approval from the FDA and certain other regulatory authorities. Most major markets for medical devices outside the United States also require clearance, approval or compliance with certain standards before a product can be commercially marketed. The process of obtaining regulatory clearances and approvals to market a medical device can be costly and time consuming, involve rigorous pre-clinical and clinical testing, require changes in products or result in limitations on the indicated uses of products. There can be no assurance that these clearances and approvals will be granted on a timely basis, or at all. In addition, once a medical device has been cleared or approved, a new clearance or approval may be required before the medical device may be modified, its labeling changed or marketed for a different use. Medical devices are cleared or approved for one or more specific intended uses and promoting a device for an off-label use could result in government enforcement action. Furthermore, a product approval or clearance can be withdrawn or limited due to unforeseen problems with the medical device or issues relating to its application. The regulatory clearance and approval process may result in, among other things, the inability to bring a product to market, delayed realization of product net sales, substantial additional costs and limitations on the types of products we may bring to market or their indicated uses, any one of which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

*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. A 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.

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. Any one of these could result in significant costs and negative publicity resulting in reduced market acceptance and demand for our products and harm our reputation. In addition, a recall or injunction affecting our products could temporarily shut down production lines or place products on a shipping hold.

All of the foregoing types of legal proceedings and regulatory actions are inherently unpredictable and, regardless of the outcome, could disrupt our business, result in substantial costs or the diversion of management attention and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

*Economic conditions have affected and may continue to adversely affect our business, results of operations, financial condition and cash flows.*

Disruptions in the financial markets, economic recessions and other macro-economic challenges affecting the economy and the economic outlook of the United States, Europe, Japan, China and other parts of the world may have an adverse impact on our results of operations, financial condition and cash flows. Economic conditions and depressed levels of consumer and commercial spending have caused and may continue to cause our customers to reduce, modify, delay or cancel plans to purchase our products, and we have observed certain hospitals delaying and prioritizing purchasing decisions, which has had and may continue to have a material adverse effect on our business, results of operations, financial condition and cash flows.

In addition, as a result of economic conditions, our customers inside and outside the United States, including foreign governmental entities or other entities that rely on government healthcare systems or government funding, may be unable to pay

12

their obligations on a timely basis or to make payment in full. If our customers' cash flow or operating and financial performance deteriorate or fail to improve, or if our customers are unable to make scheduled payments or obtain credit, they may not be able to pay, or may delay payment of accounts receivable owed to us. These conditions also may have an adverse effect on certain of our suppliers who may reduce output or change terms of sales, which could cause a disruption in our ability to produce our products. Any inability of current and/or potential customers to pay us for our products or any demands by our suppliers for different payment terms may have a material adverse effect on our business, results of operations, financial condition and cash flows.

# ***Currency exchange rate fluctuations could have a material adverse effect on our business and results of operations.***

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. If the U.S. dollar strengthens in relation to the currencies of other countries where we sell our products, our U.S. dollar reported net sales and income will decrease. Additionally, we incur significant costs in foreign currencies and a fluctuation in those currencies' value can negatively impact manufacturing and selling costs. While we have in the past engaged, and may in the future engage, in various hedging transactions in attempts to minimize the effects of foreign currency exchange rate fluctuations, there can be no assurance that these hedging transactions will be effective. Changes in the relative values of currencies occur regularly and could have an adverse effect on our business, results of operations, financial condition and cash flows.

# ***We are exposed to price fluctuations of key commodities, which may negatively impact our results of operations.***

We rely on product inputs in the manufacture of our products. Prices of oil and gas affect our distribution and transportation costs. Prices of these commodities are volatile and have fluctuated significantly in recent years, which has contributed to, and in the future may continue to contribute to, fluctuations in our results of operations. Our ability to hedge commodity price volatility is limited. 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. If we cannot fully offset cost increases through other cost reductions, or recover these costs through price increases or surcharges, we could experience lower margins and profitability which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

# ***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. Although we are the sole contracted supplier to certain GPOs for certain product categories, members of the GPO are generally free to purchase from other suppliers, and such contract positions can offer no assurance that sales volumes of those products will be maintained. In addition, initiatives sponsored by government agencies and other third-party payors to limit healthcare costs, including price regulation and competitive bidding for the sale of our products, are ongoing in markets where we sell our products. Pricing pressure has also increased in our markets due to consolidation among healthcare providers, trends toward managed care, governments becoming payors of healthcare expenses and regulation relating to reimbursements. The increasing leverage of organized buying groups and consolidated customers and pricing pressure from third-party payors may reduce market prices for our products, thereby reducing our profitability and have a material adverse effect on our business, results of operations, financial condition and cash flows.

# ***We are subject to political, economic and regulatory risks associated with doing business outside of the United States.***

Most of our manufacturing facilities are located outside the United States in Mexico. We also may use contract manufacturers outside the United States from time to time and may source many of our raw materials and components from foreign suppliers. We distribute and sell our products globally. In 2022, 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. These laws and regulations include robust data privacy requirements, labor relations laws that may impede employer flexibility, tax laws, anti-competition regulations, import, customs and trade restrictions, export requirements, economic sanction laws, environmental, health and safety laws, anti-bribery laws such as the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions. Given the high level of complexity of these laws, there is a risk that some provisions may be violated inadvertently or through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal documentation requirements or otherwise. In addition, these laws are subject to changes, which may require additional resources or make it more difficult for us to comply with these laws. Violations of the laws and regulations governing our international operations could result in fines or criminal sanctions against

13

us, our officers or our employees, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to manufacture or distribute our products in one or more countries and could have a material adverse effect on our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business, results of operations, financial condition and cash flows. Our success depends, in part, on our ability to anticipate and prevent or mitigate these risks and manage difficulties as they arise.

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 the exit of the United Kingdom from the EU. These measures and disruptions may result in new or higher tariffs, import-export restrictions and taxes. 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.

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.

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.

*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 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.

*Any non-cash impairment of our long-lived assets, including intangible assets and goodwill, could have a material adverse impact on our results of operations.*

We review long-lived assets, such as property, equipment and intangible assets for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Goodwill is tested for impairment annually and whenever events and circumstances indicate that, more likely than not, impairment may have occurred. The evaluation of long-lived assets and goodwill requires us to form estimates and assumptions with respect to a number of factors, including future sales growth, cash flows, our weighted average cost of capital (WACC) and a terminal value. Our evaluation of goodwill also includes consideration of our current market capitalization. Unanticipated changes in any of the factors used in our evaluation could result in a non-cash charge for impairment in a future period, which may significantly affect our results of operations in the period of such charge.

#### **Risks Related to Ownership of Avanos Common Stock**

*We cannot guarantee that our stock price will not decline or fluctuate significantly.*

The price at which Avanos common stock trades has and may continue to fluctuate significantly. The market price, or fluctuations in price, for Avanos common stock may be negatively influenced by many factors, including:

- actual or unanticipated fluctuations in our quarterly and annual operating results,
- the outcome of litigation and enforcement actions,
- developments generally affecting the healthcare industry,
- changes in market valuations of comparable companies,

14

- the amount of our indebtedness,
- general economic, industry and market conditions,
- the depth and liquidity of the market for Avanos common stock,
- price fluctuations in key commodities,
- announcements by us or our competitors regarding performance, strategy, significant acquisitions, divestitures, strategic partnerships, joint ventures or capital commitments,
- fluctuations in interest and currency exchange rates, and
- perceptions of or speculations by the press or investment community.

These and other factors may lower the market price of Avanos common stock, regardless of our actual financial condition or operating performance.

*We have no present intention to pay dividends on Avanos common stock.*

We have no present intention to pay dividends on Avanos common stock. Any determination to pay dividends to holders of Avanos common stock will be at the discretion of our Board of Directors and will depend on many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, restrictions in our debt agreements and other factors that our Board of Directors deems relevant.

*The percentage of ownership of existing stockholders in Avanos may be diluted in the future.*

In the future, a stockholder's percentage ownership in Avanos may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that we may grant to our directors, officers and employees. In addition, our compensation committee has, and we anticipate that they will continue in the future to, grant stock options or other equity based awards to our employees. These awards will have a dilutive effect on existing stockholders and on our earnings per share, which could adversely affect the market price of shares of Avanos common stock.

In addition, our certificate of incorporation authorizes us to issue, without the approval of Avanos stockholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over Avanos common stock with respect to dividends and distributions, as our Board of Directors generally may determine. 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. 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 amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware (or if that court does not have jurisdiction, the U.S. District Court for the District of Delaware) as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors or officers.

*Certain provisions of our certificate of incorporation and by-laws and of Delaware law may make it difficult for stockholders to change the composition of our Board of Directors and may discourage hostile takeover attempts which some of our stockholders may consider to be beneficial.*

Certain provisions contained in our certificate of incorporation and by-laws and those contained in Delaware law may have the effect of delaying or preventing changes in control if our Board of Directors determines that such changes in control are not in the best interests of us and our stockholders. These provisions include, among other things, the following:

- the ability of our Board of Directors to issue shares of preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval,
- the inability of our stockholders to call a special meeting of stockholders,
- stockholder action may be taken only at a special or regular meeting of stockholders,
- advance notice procedures for nominating candidates to our Board of Directors or presenting matters at stockholder meetings,
- stockholder removal of directors only for cause and only by a supermajority vote,
- the ability of our Board of Directors, and not our stockholders, to fill vacancies on our Board of Directors, and

15

- supermajority voting requirements to amend our by-laws and certain provisions of our certificate of incorporation and to engage in certain types of business combinations.

While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our Board of Directors, they could enable the Board of Directors to hinder or frustrate a transaction that some, or a majority, of the stockholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors. We are also subject to Delaware laws that could have similar effects. One of these laws prohibits us from engaging in a business combination with a significant stockholder unless specific conditions are met.

#### **ITEM 1B. UNRESOLVED STAFF COMMENTS**

None.

#### **ITEM 2. PROPERTIES**

We own or lease operating facilities located throughout the world that handle manufacturing production, assembly, research, quality assurance testing, distribution and packaging of our products. We believe our facilities are suitable and adequate for our present operations. We lease our principal executive offices that are located in Alpharetta, Georgia. The 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 |
| Nogales | Mexico | Leased |
| Tucson, Arizona | USA | Leased |
| Magdalena | Mexico | Leased |
| Tijuana | Mexico | Leased |

#### **ITEM 3. LEGAL PROCEEDINGS**

We are subject to various legal proceedings, claims and governmental inspections, audits or investigations pertaining to issues such as contract disputes, product liability, tax matters, patents and trademarks, advertising, governmental regulations, employment and other matters. At present, although the results of litigation and claims cannot be predicted with certainty, we believe that the ultimate resolution of any pending legal proceeding to which we are a party will not have a material adverse effect on our business, financial condition, results of operations or liquidity. See “Commitments and Contingencies” in Note 13 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 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

Avanos common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “AVNS”. We did not pay any dividends on our common stock in the years ended December 31, 2022 and 2021 and we do not expect to pay any cash dividends on our common stock in the foreseeable future.

As of February 14, 2023, we had 10,135 holders of record of our common stock. No unregistered securities were sold by the Company within the past three years, and neither the Company nor any affiliated purchaser purchased any equity securities of the Company, other than repurchases described under “Share Repurchase Program” in Note 16 to the consolidated financial statements in Item 8 of this Form 10-K.

For information relating to securities authorized for issuance under equity compensation plans, see Part III, Item 12 of this Form 10-K.

#### **Performance**

The following graph compares the cumulative total return of our common stock from December 31, 2017 through December 31, 2022 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. The graph plots the change in value of an initial investment of $100 in each of our common stock, the S&P MidCap 400 Index and the S&P 500 Health Care Equipment and Services Index over the indicated time periods and assumes reinvestment of all dividends, if any, paid on the securities. We have not paid any cash

16

dividends, and therefore, the cumulative total return calculation for us is based solely upon stock price appreciation and not upon reinvestment of cash dividends. The stock price performance shown on the graph is not necessarily indicative of future price performance.

![img-0.jpeg](img-0.jpeg)

The preceding chart is based on the following data:

|  | AVNS | S&P MidCap 400 | S&P 500 Health Care Equipment and Services |
| --- | --- | --- | --- |
| December 31, 2017 | $100.00 | $100.00 | $100.00 |
| December 31, 2018 | 96.99 | 93.36 | 113.34 |
| December 31, 2019 | 72.98 | 123.57 | 145.98 |
| December 31, 2020 | 99.35 | 147.80 | 174.51 |
| December 31, 2021 | 75.08 | 193.51 | 230.55 |
| December 31, 2022 | 58.60 | 177.16 | 222.78 |

# **ITEM 6. Reserved**

17

# ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

# Introduction

Avanos is a medical technology company focused on delivering clinically superior medical device solutions that will help patients get back to the things that matter. We are committed to addressing some of today's most important healthcare needs, including providing a vital lifeline for nutrition to patients from hospital to home, and reducing the use of opioids while helping patients move from surgery to recovery. We develop, manufacture and market our recognized brands globally and hold leading market positions in multiple categories across our portfolio.

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide investors with an understanding of our recent performance, financial condition and prospects and should be read in conjunction with the consolidated financial statements contained in Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K. The following will be discussed and analyzed:

- Business Acquisition
- Subsequent Event
- Results of Operations and Related Information
- Liquidity and Capital Resources
- Critical Accounting Policies and Use of Estimates
- Legal Matters

# Business Acquisition

On January 20, 2022, we acquired all of the equity voting interests and completed the acquisition of OrthogenRx, which is focused on the development and commercialization of treatments for knee pain caused by osteoarthritis. We expect the acquisition of OrthogenRx will enhance our chronic pain portfolio. The initial purchase price was $130.0 million at closing less working capital adjustments, with up to an additional $30.0 million payable in contingent cash consideration based on OrthogenRx's growth in net sales during 2022 and 2023. The purchase price was funded by available cash on hand and the proceeds of borrowings, including from the incurrence of a new incremental tranche of term loans of $125.0 million under the Company's prior senior secured revolving credit facility. The accompanying consolidated income statement for the year ended December 31, 2022 includes $76.2 million of net sales from OrthogenRx since the closing of the acquisition. In the year ended December 31, 2022, we incurred $2.0 million of costs in connection with the OrthogenRx acquisition, which are included in "Selling and general expenses."

# Subsequent Event

In January 2023, we initiated a three-year restructuring initiative pursuant to which we plan to: (i) combine our Chronic Care and Pain Management franchises into a single commercial organization focused on the Digestive Health and Orthopedic Pain & Recovery product categories; (ii) rationalize our product portfolio including certain low-margin, low-growth product categories, through targeted divestitures; (iii) undertake additional cost management activities to enhance the Company's operating profitability; and (iv) pursue efficient capital allocation strategies, including through acquisitions that meet the Company's strategic and financial criteria (the "Transformation Process").

We expect to incur between $20.0 million and $25.0 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 organizational design and alignment and other related activities. These amounts include between $6.0 million and $8.0 million of employee severance and benefits costs.

We anticipate savings will total approximately $10.0 million in 2023. By 2025, we expect gross savings of between $45.0 million and $55.0 million, most of which will be achieved in 2024.

# 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. 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

18

alternative to, the most directly comparable GAAP financial measures. A reconciliation of the non-GAAP measure to the most directly comparable GAAP financial measures is provided under “Adjusted Operating (Loss) Profit.”

# Change in Accounting Principle

During the third quarter of 2022, we changed our method of accounting for certain inventory from the Last-In, First-Out (“LIFO”) method to the First-In, First-Out (“FIFO”) method. The FIFO method of accounting for inventory is preferable because it conforms our entire inventory to a single method of accounting and improves comparability with our peers. The effects of the change in accounting method from LIFO to FIFO have been retrospectively applied to all periods presented in all sections of this Form 10-K, including this MD&A. Refer to “Accounting Policies” in Note 1 to our consolidated financial statements in Item 8 of this Form 10-K for further information related to the change in accounting principle.

# Net Sales

Our net sales are summarized in the following table for the years ended December 31, 2022, 2021 and 2020 (in millions):

|  | Year Ended December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | Change | 2020 | Change |
| Chronic Care: |  |  |  |  |  |
| Digestive health | $340.4 | $322.2 | 5.6% | $294.1 | 9.6% |
| Respiratory health | 135.9 | 157.6 | (13.8)% | 177.1 | (11.0)% |
| Total Chronic Care | 476.3 | 479.8 | (0.7)% | $471.2 | 1.8% |
| Pain Management: |  |  |  |  |  |
| Acute pain | 160.1 | 162.7 | (1.6)% | 157.4 | 3.4% |
| Interventional pain | 183.6 | 102.1 | 79.8% | 86.2 | 18.4% |
| Total Pain Management | 343.7 | 264.8 | 29.8% | 243.6 | 8.7% |
| Total Net Sales | $820.0 | $744.6 | 10.1% | $714.8 | 4.2% |
|  | Total | Volume (a) | Pricing/Mix | Currency | Other (b) |
| Net Sales - percentage change 2022 vs. 2021 | 10.1% | 11.3% | 0.7% | (1.9)% | - % |
| Net Sales - percentage change 2021 vs. 2020 | 4.2% | 4.3% | (0.8)% | 0.6% | - % |

(a) Volume includes incremental sales from acquisitions.

(b) Other includes rounding.

# Product Category Descriptions

Chronic care is a portfolio of products that include the following:

- Digestive health products such as our MIC-KEY enteral feeding tubes, Corpak patient feeding solutions and NeoMed neonatal and pediatric feeding solutions. In the year ended December 31, 2022, our legacy enteral feeding tubes, which includes our MIC-KEY enteral feeding tubes accounted for more than 10% of our consolidated net sales. In the years ended December 31, 2021 and 2020, our legacy enteral feeding tubes and our Corpak feeding solutions each accounted for more than 10% of our consolidated net sales.
- Respiratory health products such as our closed airway suction systems and other airway management devices under the Ballard, Microcuff and Endoclear brands. In the years ended December 31, 2022, 2021 and 2020, our closed airway suction systems accounted for more than 10% of our consolidated net sales.

Pain management is a portfolio of non-opioid pain solutions including:

- Acute pain products such as ON-Q and ambIT surgical pain pumps and Game Ready cold and compression therapy systems. In the year ended December 31, 2022, none of our acute pain products individually accounted for more than 10% of our consolidated net sales. In the years ended December 31, 2021 and 2020, our surgical pain products, which includes both On-Q and ambIT pumps, accounted for more than 10% of our consolidated net sales.
- Interventional pain solutions, which provide minimally invasive pain relief therapies, such as our COOLIEF pain therapy and OrthogenRx’s knee osteoarthritis pain relief injection products. In the years ended December 31, 2022, 2021 and 2020, products associated with our COOLIEF pain therapy accounted for more than 10% of our consolidated net sales.

19

#### *Net Sales - 2022 Compared to 2021*

Net sales increased by 10.1% to $820.0 million for the year ended December 31, 2022, primarily due to incremental revenue from the OrthogenRx acquisition. Digestive health products experienced strong demand and volume, which was offset by decreased demand and volume in respiratory health products. In addition to volume, 0.7% of favorable pricing was offset by 1.9% of unfavorable foreign currency translation effects.

#### *Net Sales - 2021 Compared to 2020*

Net sales increased by 4.2% to $744.6 million for the year ended December 31, 2021. Volume was driven by our pain management franchise due to the recovery of elective surgical procedures and favorable comparison to last year's net sales which were negatively impacted by the COVID-19 pandemic. In addition, volume benefited from continued robust demand for digestive health, which was partially offset by lower volume in respiratory health due to pandemic-fueled demand experienced last year as well as by pricing/mix.

#### *Net Sales by Geographic Region*

Net sales by region is presented in the table below (in millions):

|  | Year Ended December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | Change | 2020 | Change |
| North America | $650.5 | $561.6 | 15.8% | $535.5 | 4.9% |
| EMEA | 93.7 | 105.1 | (10.8) | 108.3 | (3.0) |
| Asia Pacific and Latin America | 75.8 | 77.9 | (2.7) | 71.0 | 9.7 |
| Total Net Sales | $820.0 | $744.6 | 10.1% | $714.8 | 4.2% |

#### *Gross Profit (in millions)*

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net sales | $820.0 | $744.6 | $714.8 |
| Cost of products sold | 370.0 | 378.8 | 343.9 |
| Gross profit | 450.0 | 365.8 | 370.9 |
| Gross profit margin | 54.9% | 49.1% | 51.9% |

Cost of products sold decreased from $378.8 million to $370.0 million during the year ended December 31, 2022, primarily driven by favorable product mix and slightly improved manufacturing efficiencies, partially offset by higher costs across our supply chain. In the year ended December 31, 2022, gross profit margin increased from 49.1% to 54.9%.

Cost of products sold increased from $343.9 million to $378.8 million during the year ended December 31, 2021, primarily driven by higher freight costs, including air freight, associated with shipping products from China to the United States and delays in returning our manufacturing operations to pre-pandemic efficiency levels. We recorded inventory allowances of $6.8 million, which includes $3.4 million for Halyard-branded products and $3.4 million for inventory associated with restructuring activities. Accordingly, in the year ended December 31, 2021, gross profit margin decreased from 51.9% to 49.1%.

#### *Research and Development (in millions)*

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Research and development | $30.6 | $32.3 | $34.9 |
| Percentage of net sales | 3.7% | 4.3% | 4.9% |

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 has historically been between 4% and 6% of net sales.

20

# *Selling and General Expenses (in millions)*

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Selling and general expenses | $341.9 | $300.3 | $332.6 |
| Percentage of net sales | 41.7% | 40.3% | 46.5% |

Selling and general expenses increased from $300.3 million in 2021 to $341.9 million in 2022, driven by higher selling costs, along with consulting costs associated with evaluating and planning for the Transformation Process, compliance costs associated with the EU MDR and higher acquisition-related costs.

In the year ended December 31, 2021, selling and general expenses decreased from $332.6 million in 2020 to $300.3 million in 2021. In 2021, savings were realized from the restructuring activities undertaken in 2020 and continued discipline over spending throughout 2021. The savings realized include lower compensation costs as we reduced the size of our senior leadership team and lower operating costs as we consolidated certain operations within the pain management franchise and reduced our office space footprint. Selling and general expenses included $2.4 million of restructuring expenses in 2021 compared to $4.9 million in 2020.

# *Other Expense, net (in millions)*

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Other expense, net | $3.5 | $22.8 | $51.9 |
| Percentage of net sales | 0.4% | 3.1% | 7.3% |

Other expense, net decreased from $22.8 million in 2021 to $3.5 million in 2022 primarily due to lower legal costs and completion of the 2020 Restructuring and Post-Divestiture Restructuring plans.

Other expense, net decreased from $51.9 million in 2020 to $22.8 million in 2021 primarily due to lower restructuring costs. In 2020, other expense, net included $20.0 million of restructuring costs associated with our 2020 Restructuring. Other expense, net also includes litigation and legal costs of $15.0 million and $27.5 million in the years ended December 31, 2021 and 2020, respectively. Legal and litigation costs were incurred for matters described in 'Commitments and Contingencies' in Note 13 to the consolidated financial statements in Item 8 of this Form 10-K.

# *Operating Profit (Loss) (in millions)*

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Operating profit (loss) | $74.0 | $10.4 | $(48.5) |
| Operating profit margin | 9.0% | 1.4% | (6.8)% |

The items previously described drove operating profit to $74.0 million in the year ended December 31, 2022 compared to operating profit of $10.4 million and operating loss of $48.5 million, respectively, in the years ended December 31, 2021 and 2020.

21

### Adjusted Operating Profit (Loss)

A reconciliation of adjusted operating profit (loss), a non-GAAP measure, to operating profit (loss) is provided in the table below (in millions):

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Operating profit (loss), as reported (GAAP) | $74.0 | $10.4 | $(48.5) |
| COVID-19 related expenses | - | 0.3 | 7.9 |
| 2020 Restructuring charges | - | 12.4 | 27.6 |
| Post-Divestiture restructuring and transition charges | - | 14.1 | 17.1 |
| Acquisition and integration-related charges | 3.4 | 1.6 | 12.5 |
| EU MDR Compliance | 6.9 | 4.0 | - |
| Other items | 3.8 | - | - |
| Litigation and legal | - | 15.0 | 27.5 |
| Intangibles amortization | 25.7 | 16.7 | 19.4 |
| Adjusted Operating Profit (Loss) (non-GAAP) | $113.8 | $74.5 | $63.5 |

The items noted in the table above are described below:

On a GAAP basis, operating income increased compared to the prior year due to higher sales, lower legal costs and completion of restructuring activities, partially offset by higher selling costs.

Items impacting operating results include the following:

*COVID-19 related expenses:* As a result of the ongoing COVID-19 pandemic, we have incurred incremental expenses for additional personal protective equipment for our manufacturing employees, sanitation at our facilities and other costs. We incurred no COVID-19 related costs in the year ended December 31, 2022. We incurred $0.3 million and $7.9 million of COVID-19 related costs in the years ended December 31, 2021 and 2020, respectively.

*2020 Restructuring charges:* We incurred no 2020 Restructuring-related costs in the year ended December 31, 2022. We incurred $12.4 million and $27.6 million in the years ended December 31, 2021 and 2020, respectively, in connection with the 2020 Restructuring, which we initiated in the fourth quarter of 2020. As of December 31, 2021, restructuring activities associated with the 2020 Restructuring were substantially complete.

*Post-Divestiture restructuring and transition charges:* These charges were associated with the Post-Divestiture Restructuring Plan, a multi-phase restructuring plan intended to align our organizational structure, IT platform, supply chain and distribution channels to be more appropriate for our business following the Divestiture. We incurred no costs associated with the Post-Divestiture Restructuring Plan in the year ended December 31, 2022. We incurred $14.1 million and $17.1 million of costs in connection with the Post-Divestiture Restructuring Plan for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, these restructuring activities were substantially complete.

*Acquisition and integration-related charges:* We incurred $3.4 million, $1.6 million and $12.5 million of costs in connection with acquisition and integration activities for the years ended December 31, 2022, 2021 and 2020, respectively. Expenses incurred during 2022 were related to the acquisition of OrthogenRx. Expenses incurred in the prior periods were for integrations of earlier acquisitions. For the year ended December 31, 2020, acquisition and integration-related costs also includes $0.5 million of restructuring costs.

*EU MDR Compliance:* The 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 $6.9 million and $4.0 million of costs related to EU MDR compliance in the years ended December 31, 2022 and 2021, respectively. We expect the activities resulting in incremental costs associated with our initial compliance with the EU MDR to continue through 2024.

*Other items:* In the year ended December 31, 2022, we incurred $3.8 million of expenses in connection with evaluating and planning for the Transformation Process. These costs consisted of $2.6 million of consulting costs associated with evaluation of overall scope and alternatives for transforming our business, and $1.2 million for the impairment of certain assets associated with research and development projects that were cancelled.

*Litigation and legal:* We incurred no costs for litigation matters in the year ended December 31, 2022. We incurred $15.0 million and $27.5 million of expenses for certain litigation matters in the years ended December 31, 2021 and 2020,

22

respectively, which are included in “Other expense, net.” In 2021, costs include amounts associated with a $22.2 million payment related to a Deferred Prosecution Agreement (the “DPA”) with the United States Department of Justice (the “DOJ”), which is described in “Commitments and Contingencies” in Note 13 to the consolidated financial statements in Item 8 of this Form 10-K. In 2020, costs included incremental amounts associated with a $25.0 million payment to amicably resolve a dispute with Kimberly-Clark described in “Commitments and Contingencies” in Note 13 to the consolidated financial statements in Item 8 of this Form 10-K.

*Intangibles amortization:* Intangibles amortization is related primarily to the amortization of intangibles acquired in prior business acquisitions and was $25.7 million, $16.7 million and $19.4 million, respectively, in the years ended December 31, 2022, 2021 and 2020. The increase in amortization in the year ended December 31, 2022 is due to incremental amortization of intangibles acquired with OrthogenRx in early 2022.

Our non-GAAP measures excludes certain items, as applicable, for the relevant time periods as indicated in the “Operating Profit” table above. The excluded items include:

- Incremental expenses associated with altering operations in response to the COVID-19 pandemic.
- Expenses associated with restructuring activities, including IT-related charges.
- Expenses associated with post-Divestiture transition activities.
- Certain acquisition and integration charges related to the acquisitions of OrthogenRx, Game Ready, NeoMed, Summit and Endoclear.
- 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.

#### *Interest Expense*

Interest expense was $10.0 million, $3.3 million and $15.6 million in the years ended December 31, 2022, 2021 and 2020, respectively. In the year ended December 31, 2022, interest expense includes an early extinguishment loss of $1.1 million incurred upon terminating our Prior Credit Agreement (as defined below) on June 24, 2022. In the year ended December 31, 2020, interest expense includes an early extinguishment loss of $1.3 million incurred upon redemption of our Senior Secured Notes on October 15, 2020. In each of the years ended December 31, 2022, 2021 and 2020, $0.1 million of interest was capitalized on long-term capital projects.

Interest expense consists of interest accrued and amortization of debt discount and issuance costs on our long-term debt. Accordingly, interest expense was higher in 2022 compared to 2021 due to establishment of our new Credit Agreement (as defined below). See “Debt” in Note 8 to the consolidated financial statements in Item 8 of this Form 10-K for further discussion of our indebtedness, our Prior Credit Agreement and our new Credit Agreement.

#### *Provision for Income Taxes*

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted in March 2020, allows for the carryback of U.S. net operating losses, which were expected to be used in future years to prior years, resulting in a $3.8 million, $2.8 million and $25.1 million benefit in the years ended December 31, 2022, 2021 and 2020, respectively. As a result, as of December 31, 2022, we had $3.8 million of income tax receivables.

Our overall effective tax rate was 22.5% for the year ended December 31, 2022 compared to a rate of 13.7% in 2021 and 53.9% in 2020. The primary driver in the change in our effective tax rate was the CARES Act in 2020. See “Income Taxes” in Note 9 to the consolidated financial statements in Item 8 of this Form 10-K for further details regarding our income taxes.

### **Liquidity and Capital Resources**

#### *General*

Our primary sources of liquidity are cash on hand provided by operating activities and amounts available with our revolving credit facility under our existing credit agreement. Our operating cash flow has historically been sufficient to meet our working capital requirements and fund capital expenditures. We expect our operating cash flow will be sufficient to meet our working capital requirements and fund capital expenditures in the next twelve months. In addition, with our borrowing capacity, we

23

expect to have the ability to fund capital expenditures and other investments necessary to grow our business for the foreseeable future for both our domestic and international operations.

As of December 31, 2022, $54.7 million of our $127.7 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. 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.

Cash and equivalents increased by $9.2 million to $127.7 million as of December 31, 2022 compared to $118.5 million last year. The increase was driven by $90.9 million of cash provided by operating activities, $250.0 million of proceeds from our secured debt and $150.0 million of proceeds from our revolving credit facility partially offset by payments on our prior credit agreement including $126.6 million on our secured term loan and $170.0 million on our revolving credit facility, $116.1 million of cash used for the acquisition of OrthogenRx, $45.5 million used to repurchase shares of our common stock and $19.3 million of capital expenditures.

Cash and equivalents increased by $7.0 million to $118.5 million as of December 31, 2021 compared to $111.5 million as of December 31, 2020. The increase was driven by $87.3 million of cash provided by operating activities and $20.0 million of proceeds from our revolving credit facility partially offset by $70.0 million of repayments on our revolving credit facility, $21.0 million of capital expenditures and $11.5 million used to purchase treasury stock.

#### *Long-Term Debt*

On June 24, 2022, we entered into a credit agreement (the “Credit Agreement”) with certain lenders which established credit facilities in an aggregate principal amount of $500.0 million, consisting of a five-year senior secured term loan of $125.0 million (the “Term Loan Facility”) and a five-year senior secured revolving credit facility allowing borrowings of up to $375.0 million, with a letter of credit sub-facility in an amount of $75.0 million (the “Revolving Credit Facility”). All obligations under the Credit Agreement and certain hedging agreements and cash management arrangements thereunder are: (i) guaranteed by each of the Company’s direct and indirect, existing and future, material wholly owned domestic subsidiaries (“Guarantors”) and (ii) secured by a first priority lien on substantially all the assets of the Company and the Guarantors. The Credit Agreement contains an accordion feature that allows us to incur incremental term loans under the Term Loan Facility or under new term loan facilities or to increase the amount of the commitments under the Revolving Credit Facility, including through the establishment of one or more tranches under the Revolving Credit Facility. The Credit Agreement will mature on June 24, 2027.

Borrowings under the Term Loan Facility and Revolving Credit Facility bear interest at our option at either: (i) an adjusted term secured overnight financing rate (“SOFR”), plus a margin ranging between 1.50% to 2.00% per annum, depending on our consolidated total leverage ratio; (ii) an adjusted daily simple SOFR rate, plus a margin ranging between 1.50% to 2.00% per annum, depending on our consolidated total leverage ratio; or (iii) a base rate (calculated as the greatest of (a) the prime rate, (b) the NYFRB rate (being the greater of the federal funds effective rate or the overnight bank funding rate) plus 0.50%, and (c) the one month adjusted term SOFR rate plus 1.00%), plus a margin ranging between 0.50% to 1.00% per annum, depending on our consolidated total leverage ratio. The unused portion of the Revolving Credit Facility will be subject to a commitment fee ranging between 0.20% to 0.25% per annum, depending on our consolidated total leverage ratio. 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 6.5% as of December 31, 2022.

In connection with entering into the Credit Agreement, we terminated the Amended and Restated Credit Agreement dated as of October 30, 2018 by and among the Company, the lenders thereunder and Citibank N.A., as administrative agent (as amended and supplemented, the “Prior Credit Agreement”).

The Credit Agreement requires compliance with certain customary operational and financial covenants. As of December 31, 2022, we were in compliance with all of our debt covenants.

For further information regarding our debt arrangements, see “Debt” in Note 8 to the consolidated financial statements in Item 8 of this Form 10-K.

#### *Share Repurchase Program*

On December 15, 2021, we announced that our Board of Directors had approved a share repurchase program authorizing us to repurchase up to $30 million of our common stock. In the fourth quarter of 2021, we repurchased $10.7 million, and during the first quarter of 2022, we repurchased the remaining $19.3 million.

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

24

Rule 10b5-1 which permitted common stock to be repurchased over a twelve-month period. Under this program, during the second quarter of 2022 we repurchased $14.1 million of our common stock, and during the third quarter of 2022 we repurchased the remaining $10.9 million.

For further information, see “Share Repurchase Program” in Note 16 to the consolidated financial statements in Item 8 of this Form 10-K.

#### *Contractual Obligations*

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the 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. For obligations under our purchase arrangements which consist mostly of open purchase orders and other commitments, as of December 31, 2022, we have amounts due in less than one year of $76.3 million, $14.3 million in one to three years, and zero thereafter.

#### **Critical Accounting Policies and Use of Estimates**

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. The critical accounting policies we used in the preparation of the consolidated and financial statements are those that are important both to the presentation of our financial condition and results of operations and require significant judgments by management with regard to estimates used. The critical judgments by management relate to distributor rebate accruals, future cash flows associated with impairment testing for goodwill and long-lived assets, loss contingencies and deferred income taxes and potential tax assessments.

#### *Use of Estimates*

We prepare our consolidated financial statements in accordance with GAAP, which requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Estimates are used in accounting for, among other things, 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 deferred income taxes and potential income tax assessments. Our estimates are subject to uncertainties associated with the ongoing COVID-19 pandemic. Actual results could differ from these estimates, and the effect of the change could be material to our financial statements. Changes in these estimates are recorded when known.

#### *Revenue Recognition*

Sales revenue is recognized at the time of product shipment or delivery of our products to unaffiliated customers, depending on shipping terms. Accordingly, control of the products transfers to the customer in accordance with the transaction’s shipping terms. Sales revenue is recognized for the amount of considerations that we expect to be entitled to receive in exchange for our products. Sales are reported net of returns, rebates, incentives, each as described below, and freight allowed. Taxes imposed by governmental authorities on our revenue-producing activities with customers, such as sales taxes and value-added taxes, are excluded from net sales. Our contracts provide for forms of variable consideration including rebates, incentives and pricing tiers, each of which are described further in Note 1 “Accounting Policies” in Item 8 of this Form 10-K.

#### *Loss Contingencies*

The outcome of loss contingencies, legal proceedings, indemnification matters and claims brought against us is subject to uncertainty. An estimated loss contingency is accrued by a charge to earnings if it is probable that an asset has been impaired or a liability has been incurred and the amount can be reasonably estimated. Determination of whether to accrue a loss requires evaluation of the probability of an unfavorable outcome and the ability to make a reasonable estimate. Changes in these estimates could affect the timing and amount of accrual of loss contingencies.

#### *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.

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. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected

25

future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses. 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.

If it is determined that we would be able to realize deferred tax assets in the future in excess of our net recorded amount, an adjustment to the net deferred tax asset would increase income in the period that such determination was made. Likewise, should we determine that we would not be able to realize all or part of the net deferred tax assets in the future, an adjustment to the net deferred tax asset would decrease income in the period such determination was made. We regularly evaluate the need for valuation allowances against its deferred tax assets.

As of December 31, 2022, we have accumulated undistributed earnings generated by our foreign subsidiaries of approximately $34.5 million. Certain earnings were previously subject to tax due to the one-time transition tax of the Tax Cuts and Jobs Act of 2017. Any additional impacts due with respect to the previously-taxed earnings, if repatriated, would generally be limited to foreign withholding tax, U.S. state income tax and the tax effect of certain foreign exchange adjustments. We intend, however, to indefinitely reinvest these earnings and expect future U.S. cash generation to be sufficient to meet U.S. cash needs. 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 13 to the consolidated financial statements in Item 8 of this Form 10-K.

### **ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

We are exposed to risks such as changes in interest rates, foreign currency exchange rates and commodity prices. A variety of practices are employed to manage these risks, including derivative instruments where deemed appropriate. Derivative instruments are used only for risk management purposes and not for speculation. 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.

Presented below is a description of our risk together with a sensitivity analysis, performed annually, based on selected changes in market rates and prices. These analyses reflect management’s view of changes which are reasonably possible to occur over a one-year period. Also included is a description of our commodity price risk.

#### *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. As of December 31, 2022, 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 transactional exposures are sensitive to changes in foreign currency exchange rates. An annual test is performed to quantify the effects that possible changes in foreign currency exchange rates would have on annual operating profit based on our foreign currency transactional exposures at the current year-end. The balance sheet effect is calculated by multiplying each affiliate’s net monetary asset or liability position by a 10% change in the foreign currency exchange rate versus the U.S. dollar. The results of these sensitivity tests are presented in the following paragraph.

As of December 31, 2022, 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 $0.7 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, 2022 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. Consequently, an annual test is performed to determine if changes in currency exchange rates would have a significant effect on the translation of the balance sheets of non-U.S. operations into U.S. dollars. These translation gains or losses are recorded as unrealized translation adjustments (“UTA”) within stockholders’ equity. 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.

As of December 31, 2022, 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 $11.3 million. These

26

hypothetical adjustments in UTA are based on the difference between the December 31, 2022 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.

#### *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.

Our energy, manufacturing and transportation costs are affected by various market factors including the availability of supplies of particular forms of energy, energy prices and local and national regulatory decisions. As previously discussed in “Risk Factors,” there can be no assurance we will be fully protected against substantial changes in the price or availability of energy sources. In addition, we are subject to price risk for utilities and manufacturing inputs, which are used in our manufacturing operations.

27

# **ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

# **AVANOS MEDICAL, INC. AND SUBSIDIARIES  
CONSOLIDATED INCOME STATEMENTS  
(in millions, except per share amounts)**

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net Sales | $820.0 | $744.6 | $714.8 |
| Cost of products sold | 370.0 | 378.8 | 343.9 |
| Gross Profit | 450.0 | 365.8 | 370.9 |
| Research and development | 30.6 | 32.3 | 34.9 |
| Selling and general expenses | 341.9 | 300.3 | 332.6 |
| Other expense, net | 3.5 | 22.8 | 51.9 |
| Operating Income (Loss) | 74.0 | 10.4 | (48.5) |
| Interest income | 1.2 | 0.2 | 1.2 |
| Interest expense | (10.0) | (3.3) | (15.6) |
| Income (Loss) Before Income Taxes | 65.2 | 7.3 | (62.9) |
| Income tax (provision) benefit | (14.7) | (1.0) | 33.9 |
| Net Income (Loss) | $50.5 | $6.3 | $(29.0) |
| Earnings (Loss) Per Share |  |  |  |
| Basic Earnings (Loss) Per Share | $1.08 | $0.13 | $(0.61) |
| Diluted Earnings (Loss) Per Share | $1.07 | $0.13 | $(0.61) |

\* Certain amounts have been adjusted to reflect a change in accounting principle as described in Note 1 to our Consolidated Financial Statements.

The accompanying notes are an integral part of these Consolidated Financial Statements.

28

# **AVANOS MEDICAL, INC. AND SUBSIDIARIES**  
 **CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)**  
 (in millions)

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Net Income (Loss) | $50.5 | $6.3 | $(29.0) |
| Other Comprehensive Income (Loss), Net of Tax |  |  |  |
| Defined benefit plans | 0.3 | 0.4 | 0.2 |
| Unrealized currency translation adjustments | (2.3) | (6.1) | 3.8 |
| Cash flow hedges | - | - | (0.1) |
| Total Other Comprehensive (Loss) Income, Net of Tax | (2.0) | (5.7) | 3.9 |
| Comprehensive Income (Loss) | $48.5 | $0.6 | $(25.1) |

\* Certain amounts have been adjusted to reflect a change in accounting principle as described in Note 1 to our Consolidated Financial Statements.

The accompanying notes are an integral part of these Consolidated Financial Statements.

29

**Time limit hit – remaining pages or documents were skipped.**