What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-02-02 compared with 2020-11-04 · 149 added, 130 removed, 252 unchanged (53% of the section changed)

12 unchanged sentences

Recent Developments

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

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

Cardiva Medical, Inc.

On January 17, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cardiva Medical, Inc., (“Cardiva”), an industry-leading manufacturer of vascular closure systems based in Santa Clara, California.

In connection with this acquisition, we will pay upfront consideration of $475.0 million in cash, subject to customary working capital and certain other adjustments as of the closing of the transaction, as well as up to $35.0 million in additional contingent consideration payable over the next two years based on sales growth.

The transaction is not subject to a financing contingency, and we expect to finance the transaction through a combination of our cash on hand, revolving credit facility and an additional $150.0 million term loan anticipated to be borrowed under our existing credit facility.

The transaction is expected to close in the fourth quarter of fiscal 2021.

Cardiva’s portfolio includes two catheter-based vascular access site closure devices.

The VASCADE ® vascular closure system is designed for “small-bore” femoral arterial and venous closure, generally used in interventional cardiology and peripheral vascular procedures.

The VASCADE MVP ® vascular closure system is designed for “mid-bore” multi-access femoral venous closure, generally used in electrophysiology procedures, and is the only U.S.

Food and Drug Administration (“FDA”) approved closure device for use following cardiac ablation procedures requiring two or more access sites within the same vessel.

The addition of the VASCADE portfolio to our Hospital business unit includes products with demonstrated benefits and enhances penetration into the large and growing interventional cardiology and electrophysiology markets.

HAS Intellectual Property

In January 2021, we entered into an agreement to acquire certain intellectual property owned by HemoAssay Science and Technology (Suzhou) Co.

Ltd., a China-incorporated company, and its affiliates (collectively, “HemoAssay”) underlying their HAS viscoelastic diagnostic devices, related assays and disposables.

We previously entered into exclusive manufacturing and distribution agreements with HemoAssay pursuant to which we have exclusive rights to commercialize HemoAssay’s HAS devices in China.

In connection with the transaction, we have agreed to pay up to $15.0 million to HemoAssay in contingent consideration based on certain developmental and manufacturing based milestones.

These products augment our portfolio of hemostasis analyzers within the Hospital business unit.

On April 1, 2020, we acquired enicor GmbH (“enicor”), the manufacturer of ClotPro ® , a new generation whole blood coagulation testing system that is currently available in select European and Asia Pacific markets, for total consideration of $20.5 million, which consisted of upfront payments of $16.6 million and the fair value of contingent consideration of $3.9 million.

The contingent consideration, which could total a maximum of $4.5 million, consists of payments related to the achievement of certain revenue and regulatory milestones.

The acquisition of this viscoelastic diagnostic device augments the Company's portfolio of hemostasis analyzers within the Hospital business unit.

Refer to Note 4, Acquisitions , to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information.

On October 2, 2020, we received 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.

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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 half of fiscal 2021 significantly impacted our financial results.

The progression of the COVID-19 pandemic during 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 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.

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

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

Although the pace and timing of the recovery is uncertain, we remain confident in the long term strength of the end markets that we serve across our three business units.

For additional information regarding the expected impacts to our business units and the various risks posed by the COVID-19 pandemic, refer to Results of Operations within Management's Discussion and Analysis and Risk Factors contained in this Quarterly Report on Form 10-Q.

On April 1, 2020, we acquired enicor GmbH ("enicor"), the manufacturer of ClotPro ® , a new generation whole blood coagulation testing system that is currently available in select European and Asia Pacific markets, for total consideration of $20.5 million, which consisted of upfront payments of $16.6 million and the fair value of contingent consideration of $3.9 million.

The contingent consideration, which could total a maximum of $4.5 million, consists of payments related to the achievement of certain revenue and regulatory milestones.

The acquisition of this viscoelastic diagnostic device augments the Company's portfolio of hemostasis analyzers within the Hospital business unit.

Refer to Note 4, Acquisition, to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information.

Fajardo, Puerto Rico Manufacturing Operations

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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.

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

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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) and recognized an $11.7 million gain on the sale.

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.

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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 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.

During the three and nine months ended December 26, 2020, we incurred $3.1 million and $11.1 million, respectively, of restructuring and turnaround costs under this program.

Financial Summary

Three Months Ended Six Months Ended

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

2020 September 28,

Three Months Ended Nine Months Ended

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

2020 December 28,

2019 % Increase/

(Decrease) September 26,

2020 September 28,

(Decrease) December 26,

2020 December 28,

2019 % Increase/

6 unchanged sentences

Interest and other expense, net $ (3,051) $ (3,078) (0.9) % $ (10,612) $ (12,152) (12.7) %

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

Income before provision for income taxes $ 37,374 $ 37,829 (1.2) % $ 100,310 $ 65,192 53.9 %

Provision for income taxes $ 5,492 $ 7,934 (30.8) % $ 9,800 $ 6,290 55.8 %

% of pre-tax income 14.7 % 21.0 % 9.8 % 9.6 %

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

Net income $ 31,882 $ 29,895 6.6 % $ 90,510 $ 58,902 53.7 %

% of net revenues 13.3 % 11.5 % 14.0 % 7.9 %

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.

Net income per share - basic $ 0.63 $ 0.59 6.8 % $ 1.79 $ 1.16 54.3 %

Net income per share - diluted $ 0.62 $ 0.58 6.9 % $ 1.77 $ 1.13 56.6 %

Net revenues decreased 7.2% and 13.9% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, net revenues decreased 8.5% and 14.5% during the three and nine months ended December 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 nine months ended December 26, 2020.

Operating income decreased during the three months ended December 26, 2020, as compared with the same period of fiscal 2020, due to 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.

Operating income increased during the nine months ended December 26, 2020, as compared with the same period of fiscal 2020, due to the gains on divestitures, incremental savings from the 2020 Program and the absence of impairment charges associated with the divestiture of our plasma liquid solutions operations in the prior year.

Management's Use of Non-GAAP Measures

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Three Months Ended

(In thousands) September 26,

2020 September 28,

(In thousands) December 26,

2020 December 28,

2019 Reported growth Currency impact Constant currency growth (1)

4 unchanged sentences

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

Six Months Ended

(In thousands) September 26,

2020 September 28,

Nine Months Ended

(In thousands) December 26,

2020 December 28,

2019 Reported growth Currency impact Constant currency growth (1)

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Our revenue generated outside the U.S.

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.

was 38.6% and 40.7%, respectively, of total net revenues during the three and nine months ended December 26, 2020, as compared with 35.4% and 35.3%, respectively, during the three and nine months ended December 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) September 26,

2020 September 28,

(In thousands) December 26,

2020 December 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 $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,

(2) Hospital revenue includes Hemostasis Management revenue of $28.5 million and $24.7 million during the three months ended December 26, 2020 and December 28, 2019, respectively.

Hemostasis Management revenue increased 15.2% in the third quarter of fiscal 2021, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, Hemostasis Management revenue increased 14.2% in the third quarter of fiscal 2021, as compared with the same period of fiscal 2020.

Nine Months Ended

(In thousands) December 26,

2020 December 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 $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 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.

(2) Hospital revenue includes Hemostasis Management revenue of $78.5 million and $73.9 million during the nine months ended December 26, 2020 and December 28, 2019, respectively.

Hemostasis Management revenue increased 6.2% in the first nine months of fiscal 2021, as compared with the same period of fiscal 2020.

Without the effect of foreign exchange, Hemostasis Management revenue increased 7.7% in the first nine months of fiscal 2021, as compared with the same period of fiscal 2020.

Plasma revenue decreased 15.4% and 28.3% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, Plasma revenue decreased 15.6% and 28.3% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

This revenue decrease during the three and nine months ended December 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 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 nine months ended December 26, 2020.

While we experienced growth rate improvements during the three months ended December 26, 2020 compared with the second quarter of fiscal 2021, the timing of plasma collection recovery remains uncertain and we anticipate a continued negative impact from COVID-19 on our fiscal 2021 Plasma results.

We continue to view the impacts of the pandemic on plasma collection as temporary and remain confident in the strength of the plasma end market growth as the long-term global demand for plasma-derived pharmaceuticals is expected to continue.

Blood Center revenue decreased 3.0% and 3.1% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, Blood Center revenue decreased 5.7% and 5.1% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

These decreases were primarily driven by continued declines in whole blood disposables and the divestiture of certain blood donor management software solution assets, partially offset by increases in apheresis revenue, including distributor stocking orders in the first quarter of fiscal 2021, despite certain customers conversions to alternative sources of supply.

The expected impact of the loss of this apheresis business is an incremental revenue decline of approximately $17.0 million in fiscal 2021 as compared with fiscal 2020.

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,

Hospital revenue increased 4.7% and 0.5% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, Hospital revenue increased 3.1% and 0.9% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

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

and equipment sales in Europe.

These increases were partially offset by declines in Cell Salvage revenue.

The divestiture of certain blood bank and hospital software solution assets also contributed to the decline during the three months ended December 26, 2020.

During the nine months ended December 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 and third quarters of fiscal 2021 in both markets as restrictions in China eased and hospitals in the U.S.

experienced an increase in procedure volume.

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 in future periods.

Three Months Ended Nine Months Ended

(In thousands) December 26,

2020 December 28,

2019 % Increase/

(Decrease) September 26,

2020 September 28,

(Decrease) December 26,

2020 December 28,

2019 % Increase/

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% of net revenues 50.0 % 49.4 % 49.0 % 49.5 %

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.

Gross profit decreased 6.1% and 14.8% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, gross profit decreased 8.4% and 15.6% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

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

unfavorable product mix, higher operational costs and the impact of the COVID-19 pandemic and recent divestitures.

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

Operating Expenses

Three Months Ended Six Months Ended

(In thousands) September 26,

2020 September 28,

Three Months Ended Nine Months Ended

(In thousands) December 26,

2020 December 28,

2019 % Increase/

(Decrease) September 26,

2020 September 28,

(Decrease) December 26,

2020 December 28,

2019 % Increase/

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Research and Development

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.

Research and development expenses increased 7.2% and 0.5% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, research and development expenses increased 6.9% and 0.6% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

The increase during the three and nine months ended December 26, 2020 was due to continued investments, primarily in our Hospital Business unit as well as increased spend related to a recent acquisition.

The increases were partially offset by cost savings primarily related to the 2020 Program.

Selling, General and Administrative

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.

Selling, general and administrative expenses decreased 6.2% and 6.3% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

Without the effect of foreign exchange, selling, general, and administrative expenses decreased 7.3% and 6.5% during the three and nine months ended December 26, 2020, respectively, as compared with the same periods of fiscal 2020.

These decreases were due to cost containment actions taken to offset the negative effects related to the COVID-19 pandemic, a reduction in variable compensation and incremental productivity savings from the 2020 Program.

These decreases were partially offset by continued investments and higher transaction costs.

Impairment of assets

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.

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

There were no impairments recognized during the three months ended December 26, 2020.

During the nine months ended December 28, 2019 we recognized $50.6 million of impairment charges primarily in connection with the sale of our Union, South Carolina facility.

During the three months ended December 28, 2019, we recognized an additional $1.9 million of other asset impairments.

Gains on divestitures

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

We recognized gains on divestitures of $1.1 million and $32.6 million, respectively, during the three and nine months ended December 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.

We recognized gains on sale of assets of $8.1 million during the nine months ended December 28, 2019 due to the sale of assets associated with our Braintree corporate headquarters.

There were no gains on sale of assets during the three months ended December 28, 2019.

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 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%.

During the three and nine months ended December 26, 2020, our interest expense associated with this debt declined by $1.6 million and $4.8 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 December 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 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.

For the three and nine months ended December 26, 2020, we reported income tax expense of $5.5 million and $9.8 million, respectively, representing effective tax rates of 14.7% and 9.8%, respectively.

The effective tax rate for the three and nine months ended December 26, 2020 includes discrete tax benefits recognized from excess stock compensation deductions of $1.0 million and $5.1 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.

During the three and nine months ended December 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.

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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.

For the three and nine months ended December 28, 2019, we reported an income tax provision of $7.9 million and $6.3 million, respectively, representing effective tax rates of 21.0% and 9.6%, respectively.

The effective tax rate for the three and nine months ended December 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 $3.1 million and $12.4 million, respectively.

2 unchanged sentences

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

(Dollars in thousands) September 26,

(Dollars in thousands) December 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 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.

During the three and nine months ended December 26, 2020, we incurred $3.1 million and $11.1 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.

We believe these sources are sufficient to fund our cash requirements over at least the next twelve months.

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 September 26, 2020, we had $279.2 million in cash and cash equivalents, the majority of which is held in the U.S.

Our expected cash outlays relate primarily to acquisitions, investments, capital expenditures, including production of the NexSys PCS and the build out of our new manufacturing facility in Clinton, PA, cash payments under the loan agreement and restructuring and turnaround initiatives.

As of December 26, 2020, we had $189.0 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.

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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 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.

At December 26, 2020, $310.6 million was outstanding under the term loan with an effective interest rate of 1.4%.

There were no borrowings outstanding 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 December 26, 2020.

We expect to finance the Cardiva acquisition through a combination of cash on hand, revolving credit facility and an additional $150.0 million term loan under our existing credit facility.

The transaction is expected to close in the fourth quarter of fiscal 2021.

We have scheduled principal payments of $8.7 million required during the remainder of fiscal 2021.

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

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

While the duration and impacts of the pandemic remain uncertain, we have been successful in preserving cash by implementing a number of actions including restricting travel, reducing certain compensation-related items and non-essential spending and delaying hiring.

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 capital allocation strategy continues to prioritize organic investments followed by inorganic opportunities and share repurchases.

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,

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

We do not expect to make additional share repurchases prior to the expiration of the share repurchase program in May 2021.

Nine Months Ended

(In thousands) December 26,

2020 December 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 $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 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.

Net cash provided by operating activities decreased by $4.6 million during the nine months ended December 26, 2020, as compared with the nine months ended December 28, 2019.

The decrease in cash provided by operating activities was primarily the result of a reduction in net income, as adjusted for depreciation, amortization and other non-cash charges compared with the prior year period.

A decrease in working capital as compared with the prior year period due to lower inventory growth, primarily related to NexSys PCS devices, a decline 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, partially offset this decrease.

Net cash provided by investing activities increased by $15.7 million during the nine months ended December 26, 2020, as compared with the nine months ended December 28, 2019.

The increase in cash provided by investing activities was primarily the result of cash received from divestitures.

This was partially offset by the cash paid for an acquisition during fiscal 2021 and proceeds received related to the divestiture of our plasma liquid solutions operations and Braintree headquarter facility in the prior year period, as well as a reduction in capital expenditures.

Net cash used in financing activities decreased by $77.3 million during the nine months ended December 26, 2020, as compared with the nine months ended December 28, 2019, primarily due to a decrease in share repurchases compared with the prior year period, partially offset by a reduction 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 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.

During the three and nine months ended December 26, 2020, 38.6% and 40.7%, 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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Standards to be Implemented

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification ("ASC") Update No.

In May 2020,the Securities and Exchange Commission (“SEC”) issued a final rule that amends the financial statement requirements for acquisitions and dispositions of businesses.

The amendments primarily relate to disclosures required by Rule 3-05 and Article 11 of Regulation S-X and modifies the tests provided in Rule 1-02(w) of Regulation S-X used to determine whether a subsidiary or an acquired or disposed business is significant and modifies the number of years of audited financial statements required for acquisitions with significance levels greater than specified percentages.

The amendments are effective for annual periods beginning after January 1, 2021 but early adoption is permitted.

We plan to early adopt the amendments during the fourth quarter of fiscal 2021.

In December 2019, the FASB issued ASC Update No.

2019-12, Income Taxes (Topic 740) .

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regulatory approvals;

impact of planned acquisitions or dispositions;

impact of planned acquisitions or dispositions, including the Company's pending acquisition of Cardiva;

market position and expenditures.

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• 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 any planned or completed acquisition or divestiture by the Company may not be realized or may take longer to realize than expected;

• The potential that the expected strategic benefits and opportunities from the Company's pending acquisition of Cardiva and any other planned or completed acquisition or divestiture 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.

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• Costs and risks associated with product liability and other litigation claims;

• Our ability to meet our existing debt obligations and raise additional capital when desire on terms reasonably acceptable to us;

• Our ability to meet our debt obligations, including from the increased amount of debt we anticipate incurring to fund our pending acquisition of Cardiva, and raise additional capital when desired on terms reasonably acceptable to us;

• The potential effect of foreign currency fluctuations and interest rate fluctuations on our net sales, expenses, and resulting margins;

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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