What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-04 compared with 2020-08-04 · 153 added, 105 removed, 229 unchanged (53% of the section changed)

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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 as well as related donor management software.

“Blood Center” includes blood collection and processing devices and disposables for red cells, platelets and whole blood.

"Hospital", which is comprised of Hemostasis Management, Cell Salvage and Transfusion Management products, includes devices and methodologies for measuring coagulation characteristics of blood, surgical blood salvage systems, specialized blood cell processing systems and disposables and blood transfusion management software.

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Recent Developments

COVID-19 Update

On October 2, 2020, we received U.S.

Food and Drug Administration ("FDA") 510(k) clearance for our NexSys PCS® with Persona technology.

NexSys PCS with Persona technology uses a percent plasma nomogram that customizes plasma collection based on an individual donor's body composition.

The new, proprietary Persona technology strengthens the NexSys PCS value proposition and reinforces our commitment to supporting the plasma industry.

We continue to closely manage the impacts of the COVID-19 pandemic on our business results of operations and financial condition.

The progression of the COVID-19 pandemic during the first quarter of fiscal 2021 significantly impacted our financial results.

The progression of the COVID-19 pandemic during the first half of fiscal 2021 significantly impacted our financial results.

While the duration and additional implications remain uncertain, the full extent of the impact will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

Our priorities continue to be business continuity, the safety of our employees and cash preservation while continuing to invest in organic growth opportunities.

Our priorities continue to be the safety of our employees, business continuity and cash preservation while continuing to invest in organic growth opportunities.

Our manufacturing and supply chain remain operational without any shutdowns or significant disruptions and we continue to operate in all of our markets.

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Under the terms of the agreement, Haemonetics retained all intellectual property rights to its proprietary blood filters currently manufactured at its Fajardo facility and GVS acquired certain assets consisting primarily of property, plant and equipment, inventory and cash and has assumed certain related liabilities.

In addition, the two parties entered into a long-term supply and development agreement that, among other things, grants GVS exclusive rights to manufacture and supply the blood filters currently produced at the Fajardo facility for Haemonetics.

Fajardo facility for Haemonetics.

This divestiture will allow Haemonetics to utilize GVS' experience and scale in filtration to deliver reliable, cost-efficient products to its customers.

Refer to Note 5, Divestitures , to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information.

Blood Donor Management Software

On July 1, 2020, we sold certain U.S.

blood donor management software solution assets within our Blood Center business unit to the GPI Group for an upfront cash payment of $14.0 million ($13.6 million, net of working capital adjustments).

In addition to the cash received upon closing, we may also receive up to an additional $14.0 million, contingent upon the achievement of certain performance measures.

This divestiture better positions Haemonetics for sustainable growth by enabling the Company to focus on its core capabilities while delivering quality products and services where it brings distinct value.

Refer to Note 5, Divestitures , to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information

Inlog Holdings France

On July 23, 2020, we entered into a definitive agreement to sell our wholly-owned subsidiary Inlog Holdings France SAS to Abénex Capital ("Abénex"), a private equity firm based in France.

On September 18, 2020, we sold our wholly-owned subsidiary Inlog Holdings France SAS to Abénex Capital ("Abénex"), a private equity firm based in France for $30.5 million ($24.5 million, net of cash transferred) and recognized a gain of $19.8 million.

Inlog Holdings France SAS, through its subsidiary In Log SAS, develops and sells blood bank and hospital software solutions used predominantly in France and in several other countries outside of the U.S.

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blood donor management software better position us to focus on our growth segments.

This transaction is expected to close in the second quarter of fiscal 2021, subject to Abénex's receipt of financing and the satisfaction of other customary closing conditions.

Refer to Note 5, Divestitures , to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information pertaining to these divestitures.

Restructuring Program

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Savings from the 2020 Program are targeted to reach $80 million to $90 million on an annualized basis once the program is completed.

During the three months ended June 27, 2020, we incurred $3.5 million of restructuring and turnaround costs under this program.

During the three and six months ended September 26, 2020, we incurred $4.4 million and $8.0 million, respectively, of restructuring and turnaround costs under this program.

Financial Summary

Three Months Ended

(In thousands, except per share data) June 27,

2020 June 29,

Three Months Ended Six Months Ended

(In thousands, except per share data) September 26,

2020 September 28,

2019 % Increase/

(Decrease) September 26,

2020 September 28,

2019 % Increase/

Net revenues $ 209,486 $ 252,566 (17.1) % $ 405,063 $ 491,017 (17.5) %

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Operating expenses $ 46,962 $ 77,261 (39.2) % $ 125,277 $ 206,469 (39.3) %

Operating income (loss) $ 11,715 $ (13,302) n/m

Operating income $ 58,782 $ 49,739 18.2 % $ 70,497 $ 36,437 93.5 %

% of net revenues 28.1 % 19.7 % 17.4 % 7.4 %

Interest and other expense, net $ (3,826) $ (4,651) (17.7) % $ (7,561) $ (9,074) (16.7) %

Income (loss) before provision for income taxes $ 7,980 $ (17,725) n/m

Benefit for income taxes $ (2,547) $ (9,246) (72.5) %

Income before provision for income taxes $ 54,956 $ 45,088 21.9 % $ 62,936 $ 27,363 n/m

Provision (benefit) for income taxes $ 6,855 $ 7,602 (9.8) % $ 4,308 $ (1,644) n/m

% of pre-tax income 12.5 % 16.9 % 6.8 % (6.0) %

Net income (loss) $ 10,527 $ (8,479) n/m

Net income $ 48,101 $ 37,486 28.3 % $ 58,628 $ 29,007 n/m

% of net revenues 23.0 % 14.8 % 14.5 % 5.9 %

Net income (loss) per share - basic $ 0.21 $ (0.17) n/m

Net income (loss) per share - diluted $ 0.21 $ (0.17) n/m

Net revenues decreased 18.0% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, net revenues decreased 17.5% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

Revenue decreases in Plasma and Hospital due to the COVID-19 pandemic primarily drove the overall decrease in revenue during the three months ended June 27, 2020.

Operating income increased for the three months ended June 27, 2020, as compared with the same period of fiscal 2020, primarily due to impairment charges associated with the divestiture of our plasma liquid solutions operations to CSL in the prior year and incremental savings from the 2020 Program.

The increase was partially offset by the impact of the COVID-19 pandemic on revenue and gross margin, net of savings in operating expenses from cost containment actions taken to offset these negative effects.

Net income per share - basic $ 0.95 $ 0.74 28.4 % $ 1.16 $ 0.57 n/m

Net income per share - diluted $ 0.94 $ 0.72 30.6 % $ 1.15 $ 0.56 n/m

Net revenues decreased 17.1% and 17.5% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, net revenues decreased 17.7% and 17.6% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Revenue decreases in Plasma due to the COVID-19 pandemic primarily drove the overall decrease in revenue during the three and six months ended September 26, 2020.

Operating income increased during the three months ended September 26, 2020, as compared with the same period of fiscal 2020, due to the gains on divestitures and incremental savings from the 2020 Program.

The absence of impairment charges associated with the divestiture of our plasma liquid solutions operations to CSL in the prior year also contributed to the increase during the six months ended September 26, 2020.

These increases were partially offset by the impact of the COVID-19 pandemic on revenue and gross margin, net of savings in operating expenses from cost containment actions taken to offset these negative effects.

Management's Use of Non-GAAP Measures

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Three Months Ended

(In thousands) June 27,

2020 June 29,

(In thousands) September 26,

2020 September 28,

2019 Reported growth Currency impact Constant currency growth (1)

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See "Management's Use of Non-GAAP Measures."

Six Months Ended

(In thousands) September 26,

2020 September 28,

2019 Reported growth Currency impact Constant currency growth (1)

United States $ 234,993 $ 318,255 (26.2) % — % (26.2) %

International 170,070 172,762 (1.6) % 0.7 % (2.3) %

Net revenues $ 405,063 $ 491,017 (17.5) % 0.1 % (17.6) %

(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 U.S, Europe, Japan and other parts of Asia.

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Our revenue generated outside the U.S.

was 43.2% of total net revenues during the three months ended June 27, 2020, as compared with 34.4% during the three months ended June 29, 2019.

was 40.8% and 42.0%, respectively, of total net revenues during the three and six months ended September 26, 2020, as compared with 35.9% and 35.2%, respectively, during the three and six months ended September 28, 2019.

International sales are generally conducted in local currencies, primarily Japanese Yen, Euro, Chinese Yuan and Australian Dollars.

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Three Months Ended

(In thousands) June 27,

2020 June 29,

(In thousands) September 26,

2020 September 28,

2019 Reported growth Currency impact Constant currency growth (1)

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See "Management's Use of Non-GAAP Measures."

(2) Hospital revenue includes Hemostasis Management revenue of $24.0 million and $24.4 million during the three months ended June 27, 2020 and June 29, 2019, respectively.

Hemostasis Management revenue decreased 1.6% in the first quarter of fiscal 2021, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, Hemostasis Management revenue increased 3.2% in the first quarter of fiscal 2021, as compared with the same period of fiscal 2020.

Plasma revenue decreased 38.2% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, Plasma revenue decreased 38.0% for the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

This revenue decrease was driven by a decline in the volume of plasma disposables, primarily in the U.S., due to the COVID-19 pandemic.

Declines in plasma liquid solutions as a result of certain strategic exits within our plasma liquid solutions business and declines in software revenue due to a one time favorable impact in the prior year period also contributed to the decrease.

We anticipate a continued negative impact from COVID-19 on our fiscal 2021 Plasma results as factors like stay at home orders, limited public transportation and border travel, college campus closures and reticence to donate will continue to impact our revenue throughout the COVID-19 pandemic and recovery.

While we expect a return to historic collection volume growth rates in the future, we anticipate that the recovery of plasma collection volumes will be protracted due to the uncertainty of COVID-19.

(2) Hospital revenue includes Hemostasis Management revenue of $26.0 million and $24.8 million during the three months ended September 26, 2020 and September 28, 2019, respectively.

Hemostasis Management revenue increased 4.9% in the second quarter of fiscal 2021, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, Hemostasis Management revenue increased 5.6% in the second quarter of fiscal 2021, as compared with the same period of fiscal 2020.

Six Months Ended

(In thousands) September 26,

2020 September 28,

2019 Reported growth Currency impact Constant currency growth (1)

Plasma $ 146,619 $ 226,347 (35.2) % (0.1) % (35.1) %

Blood Center 152,702 157,785 (3.2) % 1.5 % (4.7) %

95,817 97,399 (1.6) % (1.3) % (0.3) %

Service 9,925 9,486 4.6 % 1.8 % 2.8 %

Net revenues $ 405,063 $ 491,017 (17.5) % 0.1 % (17.6) %

(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) Hospital revenue includes Hemostasis Management revenue of $50.0 million and $49.2 million during the six months ended September 26, 2020 and September 28, 2019, respectively.

Hemostasis Management revenue increased 1.7% in the first six months of fiscal 2021, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, Hemostasis Management revenue increased 4.4% in the first six months of fiscal 2021, as compared with the same period of fiscal 2020.

Plasma revenue decreased 32.4% and 35.2% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, Plasma revenue decreased 32.4% and 35.1% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

This revenue decrease during the three and six months ended September 26, 2020 was driven by a decline in the volume of plasma disposables, primarily in the U.S., due to the COVID-19 pandemic and declines in plasma liquid solutions as a result of certain strategic exits within our plasma liquid solutions business.

Additionally, declines in software revenue due to a one time favorable impact in the prior year period also contributed to the decrease during the six months ended September 26, 2020.

While we experienced slight improvements during three months ended September 26, 2020 compared with the prior quarter, we anticipate a continued negative impact from COVID-19 on our fiscal 2021 Plasma results.

The timing of the plasma collection recovery remains uncertain as our customers respond to declines in donor traffic.

While we expect a return to historic collection volume growth rates in the future, we anticipate that the recovery of plasma collection volumes will be protracted.

We remain confident in the strength of the plasma end market as the long-term global demand for plasma-derived pharmaceuticals is expected to continue.

Blood Center revenue increased 2.6% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, Blood Center revenue increased 1.7% for the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

The increase during the three months ended June 27, 2020 was primarily driven by an increase in apheresis revenue in international indirect markets due to order timing, partially offset by declines in apheresis revenue as certain customers converted to alternative sources of supply.

Blood Center revenue decreased 8.6% and 3.2% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, Blood Center revenue decreased 10.7% and 4.7% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

The decrease during the three and six months ended September 26, 2020 was primarily driven by declines in apheresis revenue as certain customers converted to alternative sources of supply.

The expected impact of the loss of this apheresis business is an incremental revenue decline of approximately $17 million in fiscal 2021 as compared with fiscal 2020.

Declines in whole blood disposables and software revenue in the U.S.

also partially offset the overall increase in Blood Center revenue.

During the three months ended June 27, 2020, the impact of COVID-19 on the Blood Center business unit was limited as distributors and blood collectors made large stocking orders in response to the COVID-19 pandemic, particularly in Europe and the Middle East.

Despite the strong first quarter performance, we expect that the benefit of the high stocking orders may reverse as customers' risk aversion returns to normal along with safety stock levels.

While hospital procedures have resumed, we anticipate that it will take time for procedure volumes to fully revert back to pre-COVID-19 levels, which may temporarily reduce the demand for blood products in fiscal 2021.

Hospital revenue decreased 6.0% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, Hospital revenue decreased 3.4% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

The decrease during the three months ended June 27, 2020 was primarily due to a decline in Cell Salvage and TEG disposables revenue due to the COVID-19 pandemic, partially offset by an increase in TEG equipment sales, primarily in Europe.

During the three months ended June 27, 2020, revenue in the Hospital business unit was negatively impacted by several COVID-19 related factors, such as procedure declines, the diversion of hospital resources to critical ICU needs and restricted access for sales teams.

We experienced these declines primarily in China and the U.S., however, as the first quarter of fiscal 2021 progressed, we began to see some recovery in both markets as restrictions in China eased compared with the prior quarter and hospitals in the U.S.

began to reopen.

We believe that the demand for our hospital products is inherently strong and that procedure volumes will continue to improve sequentially quarter over quarter with a return to normal levels anticipated by the end of our fiscal year.

Three Months Ended

(In thousands) June 27,

2020 June 29,

The divestiture of certain U.S.

blood donor management software solution assets and continued declines in whole blood disposables also contributed to the decrease.

The decrease during the six months ended September 26, 2020 was partially offset by growth and order timing of international sales.

While we have not yet experienced the reversal of the large stocking orders made by distributors and blood collectors during the first quarter of fiscal 2021 in response to the COVID-19 pandemic, we may experience a partial reversal in future periods.

Although hospital procedures have resumed, we anticipate that it will take time for procedure volumes to fully revert back to pre-COVID-19 levels, which may temporarily reduce the demand for blood products in fiscal 2021.

Hospital revenue increased 2.6% and decreased 1.6% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, Hospital revenue increased 2.7% and decreased 0.3% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

The increase during the three months ended September 26, 2020 was primarily due to an increase in TEG disposables revenue in the U.S.

and Transfusion Management growth in Europe, partially offset by declines in Cell Salvage.

The decrease during the six months ended September 26, 2020 was primarily due to a decline in Cell Salvage revenue as a result of the COVID-19 pandemic, partially offset by increases in Transfusion Management and Hemostasis Management sales.

During the six months ended September 26, 2020, revenue in the Hospital business unit was negatively impacted by COVID-19.

We experienced these declines primarily in China and the U.S., however, we had consistent improvement in the second quarter of fiscal 2021 in both markets as restrictions in China eased and hospitals in the U.S.

experienced an increase in procedure volume compared with the prior quarter.

We believe that the demand for our hospital products is inherently strong and that procedure volumes will continue to improve with a return to normal levels anticipated by the end of our fiscal year.

Three Months Ended Six Months Ended

(In thousands) September 26,

2020 September 28,

2019 % Increase/

(Decrease) September 26,

2020 September 28,

2019 % Increase/

Gross profit $ 105,744 $ 127,000 (16.7) % $ 195,774 $ 242,906 (19.4) %

% of net revenues 50.5 % 50.3 % 48.3 % 49.5 %

Gross profit decreased 22.3% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, gross profit decreased 20.5% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

The decrease in gross profit margin during the three months ended June 27, 2020 was primarily driven by increased costs associated with enhanced safety protocols within our manufacturing and supply chain operations and other operational costs incurred as a result of the COVID-19 pandemic as well as product mix.

This decline was partially offset by lower depreciation expense and productivity savings from the 2020 Program.

Gross profit decreased 16.7% and 19.4% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, gross profit decreased 18.3% and 19.3% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

The decrease in gross profit margin during the three and six months ended September 26, 2020 was primarily driven by decreased

sales volume, unfavorable product mix and higher operational costs as a result of the COVID-19 pandemic.

The decline was partially offset by lower depreciation expense and productivity savings from the 2020 Program.

Operating Expenses

Three Months Ended

(In thousands) June 27,

2020 June 29,

Three Months Ended Six Months Ended

(In thousands) September 26,

2020 September 28,

2019 % Increase/

(Decrease) September 26,

2020 September 28,

2019 % Increase/

Research and development $ 6,763 $ 7,422 (8.9) % $ 14,513 $ 14,909 (2.7) %

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% of net revenues — % — % 0.3 % 9.9 %

Gains on divestitures and sale of assets $ (31,498) $ (8,083) n/m $ (31,498) $ (8,083) n/m

% of net revenues (15.0) % (3.2) % (7.8) % (1.6) %

Total operating expenses $ 46,962 $ 77,261 (39.2) % $ 125,277 $ 206,469 (39.3) %

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Research and Development

Research and development expenses increased 3.5% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, research and development expenses increased 4.3% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

The increase during the three months ended June 27, 2020 was driven by restructuring and turnaround costs primarily related to the 2020 Program as well as investments in the TEG portfolio.

The increase was partially offset by cost savings associated with the 2020 Program.

Research and development expenses decreased 8.9% and 2.7% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, research and development expenses decreased 9.0% and 2.3% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

The decrease during the three and six months ended September 26, 2020 was driven by cost savings primarily related to the 2020 Program, partially offset by continued investments, primarily in our Hospital Business unit.

Selling, General and Administrative

Selling, general and administrative expenses decreased 4.7% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, selling, general, and administrative expenses decreased 3.8% during the three months ended June 27, 2020, as compared with the same period of fiscal 2020.

The decrease during the three months ended June 27, 2020 was primarily due to cost containment actions taken to offset the negative effects related to the COVID-19 pandemic and incremental productivity savings from the 2020 Program.

These decreases were partially offset by share-based compensation and continued investments, primarily in the Hospital business unit.

Selling, general and administrative expenses decreased 8.0% and 6.4% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, selling, general, and administrative expenses decreased 8.3% and 6.2% during the three and six months ended September 26, 2020, respectively, as compared with the same periods of fiscal 2020.

The decrease during the three and six months ended September 26, 2020 was due to a reduction in variable compensation, cost containment actions taken to offset the negative effects related to the COVID-19 pandemic and incremental productivity savings from the 2020 Program.

Impairment of assets

We recognized impairment charges of $1.0 million during the three months ended June 27, 2020 in connection with the sale of our Fajardo, Puerto Rico, manufacturing operations.

During the three months ended June 29, 2019, we recognized $48.7 million of impairment charges in connection with the sale of our Union, South Carolina facility.

We recognized impairment charges of $1.0 million during the six months ended September 26, 2020 in connection with the sale of our Fajardo, Puerto Rico, manufacturing operations.

During the six months ended September 28, 2019, we recognized $48.7 million of impairment charges in connection with the sale of our Union, South Carolina facility.

There were no impairments recognized during the three months ended September 26, 2020 and September 28, 2019.

Gains on divestitures

We recognized gains on divestitures of $31.5 million during the three and six months ended September 26, 2020.

Refer to Note 5, Divestitures , to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information pertaining to these divestitures.

We recognized gains on sale of assets of $8.1 during the three and six months ended September 28, 2019 due to the sale of assets associated with our Braintree corporate headquarters.

Interest and Other Expense, Net

Interest expense from our $350.0 million term loan and $350.0 million revolving loan constitutes the majority of our interest and other expenses.

During the three months ended June 27, 2020, our interest expense associated with this debt declined by $1.2 million despite higher loan borrowings in the current year period due to a decrease in the effective interest rate.

The effective interest rate on total debt outstanding as of June 27, 2020 was 1.4%.

During the three and six months ended September 26, 2020, our interest expense associated with this debt declined by $2.0 million and $3.2 million, respectively, despite higher loan balances in the current year period due to a decrease in the effective interest rate.

The effective interest rate on total debt outstanding as of September 26, 2020 was 1.4%.

We conduct business globally and report our results of operations in a number of foreign jurisdictions in addition to the United States.

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statutory tax rate.

For the three months ended June 27, 2020, we reported an income tax benefit of $2.5 million, representing an effective tax rate benefit of 31.9%.

The effective tax rate for the three months ended June 27, 2020 includes discrete tax benefits recognized from excess stock compensation deductions of $4.0 million.

The effective tax rates were also impacted by the jurisdictional mix of earnings.

For the three months ended June 29, 2019, we reported an income tax benefit of $9.2 million, representing an effective tax rate of 52.2%.

The effective tax rate for the three months ended June 29, 2019 was higher than the U.S.

statutory tax rate primarily due to the jurisdictional mix of earnings, as well as the impact of the divestiture of the Union liquid solutions operation recorded in pretax income which resulted in a worldwide pretax loss for the quarter.

The tax rate for the three months ended June 29, 2019 benefited from a discrete stock compensation windfall benefit of $4.9 million.

For the three and six months ended September 26, 2020, we reported income tax expense of $6.9 million and $4.3 million, respectively, representing effective tax rates of 12.5% and 6.8%, respectively.

The effective tax rate for the three and six months ended September 26, 2020 includes discrete tax benefits recognized from excess stock compensation deductions of $0.1 million and $4.1 million, respectively.

The effective tax rates were also impacted by the jurisdictional mix of earnings including divestiture transactions.

During the three and six months ended September 26, 2020, we sold our Fajardo, Puerto Rico manufacturing operations, certain U.S.

blood donor management software solution assets, and our wholly-owned subsidiary Inlog Holdings France SAS.

The tax expense on divestitures, including the associated valuation allowance impacts, were included in the computation of the annual effective tax rate.

Refer to Note 5, Divestitures , to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for information pertaining to these divestitures.

For the three and six months ended September 28, 2019, we reported an income tax provision of $7.6 million and a benefit of $1.6 million, respectively, representing effective tax rates of 16.9% and (6.0)%, respectively.

The effective tax rate for the three and six months ended September 28, 2019 was lower than the U.S.

statutory tax rate primarily due to a discrete tax benefit recognized from excess stock compensation deductions of $4.4 million and $9.3 million, respectively.

The effective tax rates were also impacted by the jurisdictional mix of earnings and the impact of the divestiture of the Union, South Carolina facility in the first quarter of fiscal 2020.

Liquidity and Capital Resources

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

(Dollars in thousands) June 27,

(Dollars in thousands) September 26,

2020 March 28,

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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 2023.

During the three months ended June 27, 2020, we incurred $3.5 million of restructuring and turnaround costs under this program.

During the three and six months ended September 26, 2020, we incurred $4.4 million and $8.0 million, respectively, of restructuring and turnaround costs under this program.

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations, our revolving credit line and proceeds from employee stock option exercises.

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Our expected cash outlays relate primarily to investments, capital expenditures, including production of the NexSys PCS and Plasma plant capacity expansions, cash payments under the loan agreement and restructuring and turnaround initiatives.

As of June 27, 2020, we had $275.7 million in cash and cash equivalents, the majority of which is held in the U.S.

As of September 26, 2020, we had $279.2 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.

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Under the Credit Facilities, we are required to maintain certain leverage and interest coverage ratios specified in the credit agreement as well as other customary non-financial affirmative and negative covenants.

At June 27, 2020, $319.4 million was outstanding under the term loan with an effective interest rate of 1.4% and $210.0 million was outstanding on the revolving credit line.

In July 2020, we repaid $60.0 million of the outstanding balance on the revolving loan.

We also had $26.2 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of June 27, 2020.

At September 26, 2020, $315.0 million was outstanding under the term loan with an effective interest rate of 1.4% and $150.0 million was outstanding on the revolving loan.

On October 8, 2020, subsequent to the balance sheet date, we reduced our borrowings on the revolving loan by $150.0 million.

We also had $26.2 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of September 26, 2020.

We have scheduled principal payments of $13.1 million required during the remainder of fiscal 2020.

We were in compliance with the leverage and interest coverage ratios specified in the credit agreement as well as all other bank covenants as of June 27, 2020.

We were in compliance with the leverage and interest coverage ratios specified in the credit agreement as well as all other bank covenants as of September 26, 2020.

In May 2019, our Board of Directors authorized the repurchase of up to $500.0 million of Haemonetics common shares over the next two years.

As of June 27, 2020, the total remaining authorization for repurchases of the Company's common stock under the share repurchase program was $325.0 million.

As of September 26, 2020, the total remaining authorization for repurchases of the Company's common stock under the share repurchase program was $325.0 million.

We continue to manage the ongoing impacts of the COVID-19 pandemic.

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We will continue to invest in our business with a bias towards organic growth and innovation that will continue to expand our commercial capabilities.

Our commitment to our shareholders will continue to be an important element of our capital allocation strategy in fiscal 2021, however, our priority will be focused on providing the appropriate levels of funding across our organization and ensuring that we are well positioned to address any challenges that may arise over the course of the pandemic.

As a result, we do not anticipate any share repurchases in the first half of fiscal 2021.

Three Months Ended

(In thousands) June 27,

2020 June 29,

Our commitment to our shareholders will continue to be an important element of our capital allocation strategy, however, our priority will be focused on providing the appropriate levels of funding across our organization and ensuring that we are well positioned to address any challenges that may arise over the course of the pandemic.

Six Months Ended

(In thousands) September 26,

2020 September 28,

2019 Increase/

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GAAP, we have removed 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 increased by $9.2 million during the three months ended June 27, 2020, as compared with the three months ended June 29, 2019.

The increase in cash provided by operating activities was primarily the result of an increase in working capital as compared with the prior year period due to lower increases in inventory build, primarily related to NexSys PCS devices, a large payment to a key service provider in the prior year period and increased collections of accounts receivable.

Net cash provided by operating activities increased by $8.4 million during the six months ended September 26, 2020, as compared with the six months ended September 28, 2019.

The increase in cash provided by operating activities was primarily the result of a decrease in working capital as compared with the prior year period due to lower inventory growth, primarily related to NexSys PCS devices, a decrease in the build of accounts receivable due to lower sales and improved collection timing, and a large payment to a key service provider in the prior year period.

The reduction in net income, as adjusted for depreciation, amortization and other non-cash charges compared with the prior year period, partially offset this increase.

Net cash used in investing activities increased by $25.8 million during the three months ended June 27, 2020, as compared with the three months ended June 29, 2019.

The increase in cash used in investing activities was primarily the result of cash paid for the acquisition of enicor and proceeds received related to the divestiture of our plasma liquid solutions operations in the prior year period.

Net cash provided by financing activities increased by $132.9 million during the three months ended June 27, 2020, as compared with the three months ended June 29, 2019, primarily due to a decrease in share repurchases compared with the prior year period and an increase in borrowings on our revolving credit facility, net of payments.

Net cash provided by investing activities increased by $5.4 million during the six months ended September 26, 2020, as compared with the six months ended September 28, 2019.

The increase in cash used in investing activities was primarily the result of cash received related to the sale of our Fajardo, Puerto Rico manufacturing operations, certain U.S.

blood donor management software solution assets and, our wholly-owned subsidiary Inlog Holdings France SAS.

This was partially offset by the cash paid for the acquisition of enicor during fiscal 2021 and proceeds received related to the divestiture of our plasma liquid solutions operations in the prior year period.

Net cash provided by financing activities increased by $181.1 million during the six months ended September 26, 2020, as compared with the six months ended September 28, 2019, primarily due to a decrease in share repurchases compared with the prior year period and an increase in borrowings on our revolving credit facility, net of payments, during fiscal 2021.

Concentration of Credit Risk

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Foreign Exchange

During the three months ended June 27, 2020, 43.2% of our sales were generated outside the U.S., generally in foreign currencies, yet our reporting currency is the U.S.

During the three and six months ended September 26, 2020, 40.8% and 42.0%, respectively, of our sales were generated outside the U.S., generally in foreign currencies, yet our reporting currency is the U.S.

We also incur certain manufacturing, marketing and selling costs in international markets in local currency.

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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.

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 Francs, Australian Dollars, Canadian Dollars and Mexican Pesos.

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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.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis