# Haemonetics Corp: Form 10-Q for the period ended Sep 30, 2023

- Company: [Haemonetics Corp](/companies/hae.md) (CIK 313143)
- Form: 10-Q
- Filed: 2023-11-02
- Accepted by EDGAR: Nov 2, 2023, 06:19 ET
- Period: 2023-09-30
- Accession: 0000313143-23-000057
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/313143/000031314323000057/hae-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/313143/000031314323000057/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-02 to 2023-09-30 | $318.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-04-02 to 2023-09-30 | $629.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-02 to 2023-09-30 | $147.7m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2023-04-02 to 2023-09-30 | $291.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-02 to 2023-09-30 | $170.5m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-04-02 to 2023-09-30 | $337.8m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-07-02 to 2023-09-30 | $12.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-04-02 to 2023-09-30 | $25.3m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-02 to 2023-09-30 | $104.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-04-02 to 2023-09-30 | $198.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-02 to 2023-09-30 | $35.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-04-02 to 2023-09-30 | $89.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-02 to 2023-09-30 | $7.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-04-02 to 2023-09-30 | $18.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-02 to 2023-09-30 | $24.9m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-04-02 to 2023-09-30 | $66.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-02 to 2023-09-30 | $0.48 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-04-02 to 2023-09-30 | $1.28 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-02 to 2023-09-30 | $0.49 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-04-02 to 2023-09-30 | $1.30 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-02 to 2023-09-30 | 51,396,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-04-02 to 2023-09-30 | 51,368,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-04-02 to 2023-09-30 | $118.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-04-02 to 2023-09-30 | $34.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2023-04-02 to 2023-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $351.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $865.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $2.01bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $264.2m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-09-30 | $748.7m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $13.6m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $893.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 38,353 characters.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with both our interim condensed consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q and our annual consolidated financial statements, notes thereto and the MD&A contained in our Annual Report on Form 10-K for the fiscal year ended April 1, 2023. The following discussion may contain forward-looking statements and should be read in conjunction with the “Cautionary Statement Regarding Forward-Looking Information” in this discussion.

### Introduction

Haemonetics Corporation is a global healthcare company dedicated to providing a suite of innovative medical products and solutions for customers to help them improve patient care and reduce the cost of healthcare. Our technology addresses important medical markets: blood and plasma component collection, the surgical suite and hospital transfusion services. When used in this report, the terms “we,” “us,” “our,” “Haemonetics” and the “Company” mean Haemonetics Corporation.

We view our operations and manage our business in three principal reporting segments: Plasma, Blood Center and Hospital. For that purpose, “Plasma” includes plasma collection devices and disposables, plasma donor management software and anticoagulant and saline sold to plasma customers. “Blood Center” includes blood collection and processing devices and disposables for red cells, platelets and whole blood. “Hospital”, which is comprised of Hemostasis Management, Vascular Closure, Cell Salvage and Transfusion Management products, includes devices and methodologies for measuring coagulation characteristics of blood, vascular closure devices, specialized blood cell processing systems and disposables, surgical blood salvage systems and blood transfusion management software.

We believe that Plasma and Hospital have growth potential, while Blood Center competes in challenging markets that require us to manage the business differently, including reducing costs, shrinking the scope of the current product line, and evaluating opportunities to exit unfavorable customer contracts.

### Recent Developments

#### Agreement to Acquire OpSens, Inc.

On October 10, 2023, the Company announced it has entered into a definitive agreement to acquire all of the issued and outstanding common shares of OpSens, Inc. (“OpSens”) for CAD $2.90 per share in an all-cash transaction, representing a fully diluted equity value of approximately USD $253.0 million at the exchange rate on the date of announcement. Completion of the acquisition is subject to the approval of OpSens shareholders, receipt of court and regulatory approval, as well as certain other closing conditions customary for transactions of this nature. The transaction is expected to close by the end of January 2024.

OpSens offers commercially and clinically validated optical technology for use primarily in interventional cardiology. OpSens’ core products include the SavvyWire® that acts as pacing and pressure monitoring wire advancing the workflow of the procedure and enabling potentially shorter hospital stays for patients, and the OptoWire®, a pressure guidewire that aims to improve clinical outcomes by accurately and consistently measuring Fractional Flow Reserve (FFR) and diastolic pressure ratio (dPR) to aid clinicians in the diagnosis and treatment of patients with coronary artery disease. OpSens also manufactures a range of fiber optic sensor solutions used in medical devices and other critical industrial applications. The addition of OpSens will expand the Hospital business unit portfolio in the interventional cardiology market.

#### Portfolio Rationalization Initiatives

In November 2023, the Company announced its plans to end of life the ClotPro system within the Hospital business unit and whole blood inline collection products within the Blood Center business unit, and the associated manufacturing operations. We do not envision these product rationalization initiatives to materially impact our fiscal 2024 results.

### Financial Summary

*(In thousands, except per share data)*

|  | Three Months Ended September 30, 2023 | October 1, 2022 | % Increase/ (Decrease) | Six Months Ended September 30, 2023 | October 1, 2022 | % Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net revenues | $318,183 | $297,485 | 7.0% | $629,515 | $558,943 | 12.6% |
| **Gross profit** | $170,510 | $157,878 | 8.0% | $337,775 | $300,141 | 12.5% |
| % of net revenues | 53.6% | 53.1% |  | 53.7% | 53.7% |  |
| Operating expenses | $135,207 | $111,146 | 21.6% | $248,813 | $222,642 | 11.8% |
| Operating income | $35,303 | $46,732 | (24.5)% | $88,962 | $77,499 | 14.8% |
| % of net revenues | 11.1% | 15.7% |  | 14.1% | 13.9% |  |
| Interest and other expense, net | $(2,471) | $(5,673) | (56.4)% | $(4,540) | $(10,946) | (58.5)% |
| **Income before provision for income taxes** | $32,832 | $41,059 | (20.0)% | $84,422 | $66,553 | 26.8% |
| Provision for income taxes | $7,924 | $7,862 | 0.8% | $18,472 | $13,479 | 37.0% |
| % of pre-tax income | 24.1% | 19.1% |  | 21.9% | 20.3% |  |
| **Net income** | $24,908 | $33,197 | (25.0)% | $65,950 | $53,074 | 24.3% |
| % of net revenues | 7.8% | 11.2% |  | 10.5% | 9.5% |  |
| Net income per share - basic | $0.49 | $0.65 | (24.6)% | $1.30 | $1.04 | 25.0% |
| Net income per share - diluted | $0.48 | $0.64 | (25.0)% | $1.28 | $1.03 | 24.3% |

Net revenues increased 7.0% and 12.6% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. Without the effects of foreign exchange, net revenues increased 7.6% and 13.6% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. Revenue increases in our Plasma and Hospital businesses, primarily related to volume and price benefits, drove the overall increase in revenue during the three and six months ended September 30, 2023.

Operating income decreased 24.5% and during the three months ended September 30, 2023 and increased 14.8% during the six months ended September 30, 2023 as compared with the same periods of fiscal 2023. The decrease during the three months ended September 30, 2023 was primarily due to continuous growth investments, impairments of intangible assets and digital transformation costs related to the upgrade of our enterprise resource planning system, partially offset by increased revenues in Plasma and Hospital. The increase during the six months ended September 30, 2023 was due to increased revenues in Plasma and Hospital and operating leverage, partially offset by continuous growth investments, impairments of intangible assets and digital transformation costs.

### Management’s Use of Non-GAAP Measures

Management uses non-GAAP financial measures, in addition to financial measures in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), to monitor the financial performance of the business, make informed business decisions, establish budgets and forecast future results. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with U.S. GAAP. Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency conversion rate. We have provided this non-GAAP financial measure because we believe it provides meaningful information regarding our results on a consistent and comparable basis for the periods presented.

### RESULTS OF OPERATIONS

### Net Revenues by Geography

*(In thousands)*

|  | Three Months Ended September 30, 2023 | October 1, 2022 | Reported growth | Currency impact | Constant currency growth (1) |
| --- | ---: | ---: | ---: | ---: | ---: |
| United States | $236,345 | $211,724 | 11.6% | —% | 11.6% |
| International | 81,838 | 85,761 | (4.6)% | (2.2)% | (2.4)% |
| Net revenues | $318,183 | $297,485 | 7.0% | (0.6)% | 7.6% |
|  | **Six Months Ended** |  |  |  |  |
| (In thousands) | **September 30, 2023** | **October 1, 2022** | **Reported growth** | **Currency impact** | **Constant currency growth (1)** |
| United States | $473,418 | $393,720 | 20.2% | —% | 20.2% |
| International | 156,097 | 165,223 | (5.5)% | (3.0)% | (2.5)% |
| Net revenues | $629,515 | $558,943 | 12.6% | (1.0)% | 13.6% |
| (1) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency. See “Management’s Use of Non-GAAP Measures.” |  |  |  |  |  |

Our principal operations are in the United States, Europe, Japan and other parts of Asia. Our products are marketed in approximately 90 countries around the world through a combination of our direct sales force and independent distributors and agents. During the three and six months ended September 30, 2023 our revenue generated outside the U.S. was 25.7% and 24.8% of total net revenues, respectively, as compared with 28.8% and 29.6%, respectively, during the three and six months ended October 1, 2022. International sales are generally conducted in local currencies, primarily Japanese Yen, Euro and Chinese Yuan. Our results of operations are impacted by changes in foreign exchange rates, particularly in the value of the Yen and Euro relative to the U.S. Dollar. We have placed foreign currency hedges on certain foreign currencies to mitigate our exposure to foreign currency fluctuations.

Please see the section entitled “Foreign Exchange” in this discussion for a more complete explanation of how foreign currency affects our business and our strategy for managing this exposure.

### Net Revenues by Business Unit

*(In thousands)*

|  | Three Months Ended September 30, 2023 | October 1, 2022 | Reported growth | Currency impact | Constant currency growth(1) |
| --- | ---: | ---: | ---: | ---: | ---: |
| **Plasma** | **$141,900** | **$127,893** | **11.0%** | **0.3%** | **10.7%** |
| Whole Blood | 14,683 | 19,893 | (26.2)% | (0.7)% | (25.5)% |
| Apheresis | 53,415 | 53,790 | (0.7)% | (3.2)% | 2.5% |
| **Blood Center** | **68,098** | **73,683** | **(7.6)%** | **(2.5)%** | **(5.1)%** |
| Hemostasis Management | 36,998 | 34,320 | 7.8% | (0.6)% | 8.4% |
| Vascular Closure | 38,541 | 29,575 | 30.3% | (0.2)% | 30.5% |
| Other(2) | 27,604 | 26,961 | 2.4% | (0.5)% | 2.9% |
| **Hospital** | **103,143** | **90,856** | **13.5%** | **(0.5)%** | **14.0%** |
| **Net business unit revenues** | **313,141** | **292,432** | **7.1%** | **(0.7)%** | **7.8%** |
| Service | 5,042 | 5,053 | (0.2)% | 1.1% | (1.3)% |
| **Net revenues** | **$318,183** | **$297,485** | **7.0%** | **(0.6)%** | **7.6%** |
|  | **Six Months Ended** |  |  |  |  |
| (In thousands) | **September 30, 2023** | **October 1, 2022** | **Reported growth** | **Currency impact** | **Constant currency growth (1)** |
| **Plasma** | **$280,510** | **$230,274** | **21.8%** | **0.1%** | **21.7%** |
| Whole Blood | 34,724 | 39,488 | (12.1)% | (1.1)% | (11.0)% |
| Apheresis | 100,714 | 99,889 | 0.8% | (3.6)% | 4.4% |
| **Blood Center** | **135,438** | **139,377** | **(2.8)%** | **(2.8)%** | **—%** |
| Hemostasis Management | 74,818 | 67,816 | 10.3% | (1.1)% | 11.4% |
| Vascular Closure | 76,162 | 59,143 | 28.8% | (0.1)% | 28.9% |
| Other(2) | 51,771 | 52,390 | (1.2)% | (1.3)% | 0.1% |
| **Hospital** | **202,751** | **179,349** | **13.0%** | **(0.9)%** | **13.9%** |
| **Net business unit revenues** | **618,699** | **549,000** | **12.7%** | **(1.0)%** | **13.7%** |
| Service | 10,816 | 9,943 | 8.8% | 0.1% | 8.7% |
| **Net revenues** | **$629,515** | **$558,943** | **12.6%** | **(1.0)%** | **13.6%** |
| (1) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency. See “Management’s Use of Non-GAAP Measures.” |  |  |  |  |  |
| (2) Other includes the Cell Salvage and Transfusion Management product lines of the Hospital business unit. |  |  |  |  |  |

#### Plasma

Plasma revenue increased 11.0% and 21.8% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. Without the effects of foreign exchange, Plasma revenue increased 10.7% and 21.7% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. The increases during the three and six months ended September 30, 2023 were primarily driven by volume and price.

During the third quarter of fiscal 2023, we amended our supply agreement with CSL, which was scheduled to expire in December 2023, to extend the term through December 2025. CSL has a minimum purchase commitment under the non-exclusive supply agreement that slightly exceeds $100.0 million in fiscal 2024, and we expect that CSL will continue to provide a meaningful contribution to our Plasma business revenue in fiscal 2025.

#### Blood Center

Blood Center revenue decreased 7.6% and 2.8% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. Without the effects of foreign exchange, Blood Center revenue decreased 5.1% during the three months ended September 30, 2023 as compared with the same period of fiscal 2023 and was flat for the six months ended September 30, 2023 as compared with the same period of fiscal 2023. The decreases during the three and six months ended September 30, 2023 were primarily driven by declines in our Whole Blood business.

#### Hospital

Hospital revenue increased 13.5% and 13.0% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. Without the effects of foreign exchange, Hospital revenue increased 14.0% and 13.9% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. The increases during the three and six months ended September 30, 2023 were primarily attributable to increased Vascular Closure and Hemostasis Management revenue.

### Gross Profit

*(In thousands)*

|  | Three Months Ended September 30, 2023 | October 1, 2022 | % Increase | Six Months Ended September 30, 2023 | October 1, 2022 | % Increase |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Gross profit | $170,510 | $157,878 | 8.0% | $337,775 | $300,141 | 12.5% |
| % of net revenues | 53.6% | 53.1% |  | 53.7% | 53.7% |  |

Gross profit increased 8.0% and 12.5% for the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. Without the effects of foreign exchange, gross profit increased 10.2% and 14.5% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. The increases during the three and six months ended September 30, 2023 were primarily driven by price, volume and geographic and product mix, partially offset by increases in inventory reserves, investments in operations and increased depreciation expense.

### Operating Expenses

*(In thousands)*

|  | Three Months Ended September 30, 2023 | October 1, 2022 | % Increase/ (Decrease) | Six Months Ended September 30, 2023 | October 1, 2022 | % Increase/ (Decrease) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $12,665 | $10,896 | 16.2% | $25,313 | $21,798 | 16.1% |
| % of net revenues | 4.0% | 3.7% |  | 4.0% | 3.9% |  |
| Selling, general and administrative | $104,901 | $92,029 | 14.0% | $198,386 | $184,256 | 7.7% |
| % of net revenues | 33.0% | 30.9% |  | 31.5% | 33.0% |  |
| Amortization of acquired intangible assets | $7,222 | $8,221 | (12.2)% | $14,695 | $16,588 | (11.4)% |
| % of net revenues | 2.3% | 2.8% |  | 2.3% | 3.0% |  |
| Impairment of intangible assets | $10,419 | $— | n/m | $10,419 | $— | n/m |
| % of net revenues | 3.3% | —% |  | 1.7% | —% |  |
| Total operating expenses | $135,207 | $111,146 | 21.6% | $248,813 | $222,642 | 11.8% |
| % of net revenues | 42.5% | 37.4% |  | 39.5% | 39.8% |  |

#### Research and Development

Research and development expenses increased 16.2% and 16.1% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. Without the effects of foreign exchange, research and development expenses increased 15.5% and 15.6% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. The increases during the three and six months ended September 30, 2023 were due to increased investments into product innovation across our product portfolio.

#### Selling, General and Administrative

Selling, general and administrative expenses increased 14.0% and 7.7% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. Without the effects of foreign exchange, selling, general, and administrative expenses increased 13.9% and 7.7% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. The increases during the three and six months ended September 30, 2023 were primarily driven by higher investments in sales and marketing, costs associated with the upgrade of our enterprise resource planning system and litigation-related charges, partially offset by operating leverage.

#### Amortization of Acquired Intangible Assets

We recognized amortization expense related to our acquired intangible assets of $7.2 million and $14.7 million during the three and six months ended September 30, 2023, respectively, and $8.2 million and $16.6 million during the three and six months ended October 1, 2022, respectively. The decreases were primarily the result of intangible assets that became fully amortized during fiscal 2023.

#### Impairment of Intangible Assets

We recognized a $10.4 million impairment of intangible assets in the second quarter of fiscal 2024 related to the enicor GmbH acquisition completed in fiscal 2021 within our Hospital business unit.

### Interest and Other Expense, Net

Interest and other expenses decreased 56.4% and 58.5% during the three and six months ended September 30, 2023, respectively, as compared with the same periods of fiscal 2023. The decreases were primarily driven by increased interest income on investments due to higher interest rates and foreign currency impact due to market and rate volatility, partially offset by higher interest incurred on our term loan.

### Income Taxes

We conduct business globally and report our results of operations in a number of foreign jurisdictions in addition to the United States. Our reported tax rate is impacted by the jurisdictional mix of earnings in any given period as the foreign jurisdictions in which we operate have tax rates that differ from the U.S. statutory tax rate.

For the three and six months ended September 30, 2023, the Company reported income tax expense of $7.9 million and $18.5 million, respectively, representing effective tax rates of 24.1% and 21.9%, respectively. The effective tax rate for the three months ended September 30, 2023, includes $0.1 million of discrete tax benefit primarily related to stock compensation windfalls. The effective tax rate for the six months ended September 30, 2023 includes $1.3 million of discrete tax benefit primarily related to stock compensation windfalls.

For the three and six months ended October 1, 2022, the Company reported income tax expense of $7.9 million and $13.5 million, respectively, representing effective tax rates of 19.1% and 20.3%, respectively. The effective tax rate for the three months ended October 1, 2022, include a discrete tax benefit of $0.5 million related to tax rate changes enacted in the quarter and $0.3 million of discrete tax benefit relating to stock compensation windfalls. The effective tax rate for the six months ended October 1, 2022 includes a discrete tax benefit of $0.5 million related to tax rate changes enacted in the period and $0.3 million of discrete tax expense relating to stock compensation shortfalls.

### Liquidity and Capital Resources

The following table contains certain key performance indicators we believe depict our liquidity and cash flow position:

*(Dollars in thousands)*

|  | September 30, 2023 | April 1, 2023 |
| --- | ---: | ---: |
| Cash and cash equivalents | $351,005 | $284,466 |
| Working capital | $601,529 | $517,906 |
| Current ratio | 3.3 | 3.1 |
| Net debt position(1) | $(411,223) | $(481,420) |
| Days sales outstanding (DSO) | 49 | 53 |
| Inventory turnover | 1.8 | 1.8 |

(1) Net debt position is the sum of cash and cash equivalents less total debt.

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations and our revolving credit facility. We believe these sources are sufficient to fund our cash requirements over at least the next twelve months. In addition to the approximately $253.0 million acquisition of OpSens expected to close by January 2024, our expected cash outlays relate primarily to additional acquisitions, investments, capital expenditures, including enhancements to our North American manufacturing facilities, share repurchases and cash principal and interest payments under our revised credit agreement.

The Company has $500.0 million aggregate principal amount of 0% convertible senior notes due in 2026, or the 2026 Notes. The 2026 Notes are governed by the terms of the Indenture between the Company and U.S. Bank National Association, as trustee. The total net proceeds from the sale of the 2026 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were approximately $486.7 million. The 2026 Notes will mature on March 1, 2026, unless earlier converted, redeemed or repurchased. The 2026 Notes have an effective interest rate of 0.5% as of September 30, 2023.

As of September 30, 2023, we had $351.0 million in cash and cash equivalents, the majority of which is held in the U.S. or in countries from which it can be repatriated to the U.S. On July 26, 2022, we entered into an amended and restated credit agreement with certain lenders to refinance our prior credit agreement entered into on June 15, 2018, which consisted of a $350.0 million term loan and a $350.0 million revolving credit facility (together, as amended from time to time, the “2018 Credit Facilities”), and extend the maturity date through June 2025. Our Revised Credit Facilities include a $280.0 million senior unsecured term loan, the proceeds of which have been used to retire the balance of the term loan under the 2018 Credit Facilities, and a $420.0 million senior unsecured revolving credit facility. Loans under the Revised Credit Facilities bear interest at an annual rate equal to the Adjusted Term SOFR Rate (as specified in the amended and restated credit agreement), which is subject to a floor of 0%, plus an applicable rate ranging from 1.125% to 1.750% based on the Company’s consolidated net leverage ratio (as specified in the amended and restated credit agreement) at the applicable measurement date. Adjusted Term SOFR Rate loans are also subject to a credit spread adjustment of 0.10% per annum. The revolving credit facility carries an unused fee that ranges from 0.125% to 0.250% annually based on the Company’s consolidated net leverage ratio at the applicable measurement date. Under the Revised Credit Facilities, the Company is required to maintain certain leverage and interest coverage ratios specified in the amended and restated credit agreement as well as other customary non-financial affirmative and negative covenants. The Revised Credit Facilities mature on June 15, 2025. The principal amount of the term loan under the Revised Credit Facilities is repayable quarterly through the maturity date at a rate of 2.5% for the first year and 5% thereafter, with the unpaid balance due at maturity.

As of September 30, 2023, $269.5 million was outstanding under the term loan with an effective interest rate of 6.7%. There were no borrowings outstanding on the revolving credit facility. We also had $19.0 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of September 30, 2023. Additionally, the Company was in compliance with the leverage and interest coverage ratios specified in the credit agreement as well as all other bank covenants as of September 30, 2023.

The Company has scheduled principal payments of $7.0 million required during the remainder of fiscal 2024.

During fiscal 2022, our Board of Directors approved a revised Operational Excellence Program. We estimate that we will incur aggregate charges between $95 million and $105 million in connection with the Operational Excellence Program. These charges, the majority of which will result in cash outlays, including severance and other employee costs, will be incurred as the specific actions required to execute these initiatives are identified and approved and are expected to be substantially completed by the end of fiscal 2025. During the three and six months ended September 30, 2023, we incurred $2.0 million and $4.2 million, respectively, of restructuring and restructuring related costs under this program.

### Cash Flows

*(In thousands)*

| Net cash provided by (used in): | Six Months Ended September 30, 2023 | October 1, 2022 |
| --- | ---: | ---: |
| Operating activities | $118,210 | $129,032 |
| Investing activities | (40,396) | (89,282) |
| Financing activities | (7,770) | (49,081) |
| Effect of exchange rate changes on cash and cash equivalents(1) | (3,505) | (8,965) |
| Net change in cash and cash equivalents | $66,539 | $(18,296) |

(1) The balance sheet is affected by spot exchange rates used to translate local currency amounts into U.S. Dollars. In accordance with U.S. GAAP, we have eliminated the effect of foreign currency throughout our cash flow statement, except for its effect on our cash and cash equivalents.

Net cash provided by operating activities decreased by $10.8 million during the six months ended September 30, 2023, as compared with the six months ended October 1, 2022. The decrease in cash provided by operating activities was primarily the result of an increase in inventory, partially offset by a decrease in accounts receivable and an increase in net income.

Net cash used in investing activities decreased by $48.9 million during the six months ended September 30, 2023, as compared with the six months ended October 1, 2022. The decrease in cash used in investing activities was primarily the result of lower capital expenditures driven by NexSys PCS device placements that occurred during fiscal 2023 and decreased other investments compared to the six months ended October 1, 2022.

Net cash used in financing activities decreased by $41.3 million during the six months ended September 30, 2023, as compared with the six months ended October 1, 2022, primarily due to share repurchases and higher contingent consideration payments in fiscal 2023, which were partially offset by the draw down on the revolving credit facility during the six months ended October 1, 2022.

### Concentration of Credit Risk

Concentrations of credit risk with respect to trade accounts receivable are generally limited due to our large number of customers and their diversity across many geographic areas. Certain markets and industries, however, can expose us to concentrations of credit risk. For example, in the Plasma business unit, sales are concentrated with several large customers. As a result, accounts receivable extended to any one of these biopharmaceutical customers can be significant at any point in time. In addition, a portion of our trade accounts receivable outside the U.S. include sales to government-owned or supported healthcare systems in several countries, which are subject to payment delays and local economic conditions. Payment is dependent upon the financial stability and creditworthiness of those countries’ national economies.

We have not incurred significant losses on trade accounts or other receivables. We continually evaluate all receivables for potential collection risks associated with the availability of government funding and reimbursement practices. If the financial condition of customers or the countries’ healthcare systems deteriorate such that their ability to make payments is uncertain, allowances may be required in future periods.

### Inflation

We continue to monitor inflationary pressures generally and raw materials indices that may affect our procurement and production costs. Increases in the price of petroleum derivatives could result in corresponding increases in our costs to procure plastic raw materials. Historically, we have been able to limit the impact of the effects of inflation by improving our manufacturing and purchasing efficiencies, by increasing employee productivity and by adjusting the selling prices of products, but we may not be able to fully mitigate these increases in our operational costs in the future.

### Foreign Exchange

During the three and six months ended September 30, 2023, 25.7% and 24.8%, respectively, of our sales were generated outside the U.S., generally in foreign currencies, yet our reporting currency is the U.S. Dollar. We also incur certain manufacturing, marketing and selling costs in international markets in local currency. Our primary foreign currency exposures relate to sales denominated in Japanese Yen, Euro and Chinese Yuan. We also have foreign currency exposure related to manufacturing and other operational costs denominated in Swiss Francs, Canadian Dollars, Mexican Pesos and Malaysian Ringgit. The Yen, Euro and Yuan sales exposure is partially mitigated by costs and expenses for foreign operations and sourcing products denominated in foreign currencies.

Since our foreign currency denominated Yen, Euro and Yuan sales exceed the foreign currency denominated costs, whenever the U.S. Dollar strengthens relative to the Yen, Euro or Yuan, there is an adverse effect on our results of operations and, conversely, whenever the U.S. Dollar weakens relative to the Yen, Euro or Yuan, there is a positive effect on our results of operations. For Swiss Francs, Canadian Dollars Mexican Pesos and Malaysian Ringgit our primary cash flows relate to product costs or costs and expenses of local operations. Whenever the U.S. Dollar strengthens relative to these foreign currencies, there is a positive effect on our results of operations. Conversely, whenever the U.S. Dollar weakens relative to these currencies, there is an adverse effect on our results of operations.

We have a program in place that is designed to mitigate our exposure to changes in foreign currency exchange rates. That program includes the use of derivative financial instruments to minimize, for a period of time, the unforeseen impact on our financial results from changes in foreign exchange rates. We utilize forward foreign currency contracts to hedge the anticipated cash flows from transactions denominated in foreign currencies, primarily Japanese Yen and Euro, and to a lesser extent Swiss Franc and Mexican Peso. This does not eliminate the volatility of foreign exchange rates, but because we generally enter into forward contracts one year out, rates are fixed for a one-year period, thereby facilitating financial planning and resource allocation. These contracts are designated as cash flow hedges. The final impact of currency fluctuations on the results of operations is dependent on the local currency amounts hedged and the actual local currency results.

### Recent Accounting Pronouncements

There are currently no recent accounting pronouncements that we expect to have a material impact on our financial position and results of operations.

### Cautionary Statement Regarding Forward-Looking Information

Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q and incorporated by reference into this report, constitute “forward looking-statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements do not relate strictly to historical or current facts and reflect management’s assumptions, views, plans, objectives and projections about the future. Forward-looking statements may be identified by the use of words such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “foresees,” “potential” and other words of similar meaning in conjunction with, among other things: discussions of future operations; expected operating results and financial performance; the Company’s strategy for growth; product development, commercialization and anticipated performance and benefits; regulatory approvals; impacts of acquisitions or dispositions; and market position and expenditures.

Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of the Company’s control. Investors should realize that if underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, the Company’s actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements. Investors are therefore cautioned not to rely on these forward-looking statements.

The following are some important factors that could cause our actual results to differ from our expectations in any forward-looking statements. For further discussion of these and other factors, see Item 1A. Risk Factors in our most recent Annual Report on Form 10-K.

- Our ability to achieve our long-term strategic and financial-improvement goals;
- Demand for and market acceptance risks for new and existing products, including material reductions in purchasing from or loss of a significant customer;
- Our ability to develop, manufacture and market new products and technologies successfully and in a timely manner and the ability of our competitors and other third parties to develop products or technologies that render our products or technologies noncompetitive or obsolete;
- Product quality or safety concerns, leading to product recalls, withdrawals, regulatory action by the FDA (or similar non-U.S. regulatory agencies), reputational damage, declining sales or litigation;
- Security breaches of our information technology systems or our products, which could impair our ability to conduct business or compromise sensitive information of the Company or its customers, suppliers and other business partners, or of customers’ patients;
- Pricing pressures resulting from trends toward healthcare cost containment, including the continued consolidation among healthcare providers and other market participants;
- The continuity, availability and pricing of plastic and other raw materials, finished goods and components used in the manufacturing of our products (including those purchased from sole-source suppliers) and the related continuity of our manufacturing, sterilization, supply and distribution;
- Our ability to obtain the anticipated benefits of restructuring programs that we have or may undertake, including the Operational Excellence Program;
- The potential that the expected strategic benefits and opportunities from the Company’s pending acquisition of OpSens and any other planned or completed acquisitions, divestitures or other strategic investments by the Company may not be realized or may take longer to realize than expected;
- The impact of enhanced requirements to obtain regulatory approval in the U.S. and around the world and the associated timing and cost of product approval;
- Our ability to comply with established and developing U.S. and foreign legal and regulatory requirements, including the U.S. Foreign Corrupt Practices Act, European Union Medical Device Regulation and In Vitro Diagnostic Regulation and similar laws in other jurisdictions, as well as U.S. and foreign export and import restrictions and tariffs;
- Our ability to meet our debt obligations and raise additional capital when desired on terms reasonably acceptable to us;
- The potential impact of our convertible senior notes and related capped call transactions;
- Geopolitical and economic conditions in China, Russia and other foreign jurisdictions where we do business;
- Our ability to execute and realize anticipated benefits from our investments in emerging economies;
- The potential effect of foreign currency fluctuations and interest rate fluctuations on our net sales, expenses and resulting margins;
- The impact of changes in U.S. and international tax laws;
- Our ability to protect intellectual property and the outcome of patent litigation;
- Costs and risks associated with product liability and other litigation claims we may be subject to now or in the future;
- The impact of actual or threatened public health emergencies;
- Our ability to retain and attract key personnel;
- Market conditions impacting our stock price and/or our share repurchase program, and the possibility that such share repurchase program may be delayed, suspended or discontinued; and
- Our ability to achieve against our corporate responsibility initiatives and meet evolving stakeholder expectations concerning corporate responsibility matters.

Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above and in Item 1A. Risk Factors in our Annual Report on Form 10-K to be a complete statement of all potential risks and uncertainties. The Company does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments.

## Market risk

As filed, 2,299 characters.

Our exposures relative to market risk are due to foreign exchange risk and interest rate risk.

### Foreign Exchange Risk

See the section above entitled Foreign Exchange for a discussion of how foreign currency affects our business. It is our policy to minimize, for a period of time, the unforeseen impact on our financial results of fluctuations in foreign exchange rates by using derivative financial instruments known as forward contracts to hedge anticipated cash flows from forecasted foreign currency denominated sales and costs. We do not use the financial instruments for speculative or trading activities.

In October 2023, we entered into a foreign currency option contract in connection with the pending OpSens transaction to mitigate the risk of foreign currency fluctuations. The foreign currency option contract is for the purchase of CAD $345.0 million at a protection rate of CAD $1.3570 to USD $1.00 and expires on January 10, 2024.

We estimate the change in the fair value of all forward contracts assuming both a 10% strengthening and weakening of the U.S. Dollar relative to all other major currencies. As of September 30, 2023, in the event of a 10% strengthening of the U.S. Dollar, the change in fair value of all forward contracts would result in a $2.9 million increase in the fair value of the forward contracts, whereas a 10% weakening of the U.S. Dollar would result in a $3.4 million decrease in the fair value of the forward contracts.

### Interest Rate Risk

Our exposure to changes in interest rates is associated with borrowings under our credit facilities, all of which is variable rate debt. Total outstanding debt under our Revised Credit Facilities as of September 30, 2023 was $269.5 million with an effective interest rate of 6.7% based on prevailing Term SOFR rates. An increase of 100 basis points in Term SOFR rates would result in additional annual interest expense of $0.5 million. As of September 30, 2023, the notional amount on our two active interest rate swap agreements to effectively convert borrowings under our Credit Facilities from a variable rate to a fixed rate were $217 million. These interest rate swaps are intended to mitigate the exposure to fluctuations in interest rates and qualify for hedge accounting treatment as cash flow hedges.

## Controls and procedures

As filed, 1,422 characters.

#### Evaluation of Disclosure Controls and Procedures

We conducted an evaluation, as of September 30, 2023, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively) regarding the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15 under the Securities Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2023.

#### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the second quarter of fiscal 2024, we implemented the first phase of a new global enterprise resource planning (“ERP”) system, which will continue to be implemented in phases through fiscal 2025. The ERP will replace existing financial systems we have historically relied on. As each phase of the implementation occurs, we will reassess our processes and procedures, which may result in changes to our internal control over financial reporting.

## Risk factors

As filed, 147 characters.

There are no material changes from the Risk Factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended April 1, 2023.

Filed Nov 2, 2023.
Source: SEC EDGAR, the filing index for accession 0000313143-23-000057. Last ingested by Listed: Nov 12, 2026, 18:11 ET. No prices; not investment advice.