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Item 7. Management’s Discussion and Analysis

2021-05-26 compared with 2020-05-20 · 282 added, 220 removed, 277 unchanged (64% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Haemonetics is a global healthcare company dedicated to providing a suite of innovative hematology products and solutions to customers to help improve patient care and reduce the cost of healthcare.

Our technology addresses important medical markets including blood and plasma component collection, the surgical suite, and hospital transfusion services.

Haemonetics 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” and “the Company” mean Haemonetics.

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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.

"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.

We believe that Plasma and Hospital have growth potential, while Blood Center competes in challenging markets which 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.

“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, Transfusion Management and Vascular Closure products, includes devices and methodologies for measuring coagulation characteristics of blood, surgical blood salvage systems, specialized blood cell processing systems and disposables, blood transfusion management software and vascular closure devices.

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

We are closely managing the impacts of the COVID-19 pandemic on our business results of operations and financial condition.

As a result of the timing of the pandemic relative to our fiscal year end, we experienced only limited effects of COVID-19 in fiscal 2020.

While the duration and implications remain uncertain, we believe our business operations will experience a higher impact from COVID-19 in fiscal 2021.

The extent of such 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 immediate response to the COVID-19 pandemic has been to focus on business continuity and the safety of our employees.

This includes prioritizing employee safety with remote work and travel restrictions, and limiting exposure for our manufacturing and customer facing employees, including field service and sales teams, to ensure supplies and services for our customers.

We have been able to continue to supply our products to our customers worldwide and all of our manufacturing facilities continue to operate.

While we currently do not anticipate any material interruptions in our manufacturing process, it is possible that the COVID-19 pandemic and response efforts may have an impact on our future ability to manufacture our products or to have our products reach all markets.

We are also focused on preserving cash and have implemented a number of actions to help us protect cash flow and allocate capital such as reducing non-essential spending, delaying certain compensation-related items, inventory management, reviewing capital projects and the associated costs, and restricting travel.

In April 2020, we borrowed an additional $150.0 million under our revolving credit facility, increasing our cash on hand to approximately $300 million.

Refer to Liquidity and Capital Resources within our Management's Discussion and Analysis for additional information regarding our cash position and liquidity.

We believe that demand for our products is resilient, even within an environment of constrained spending.

While we believe that our product segments are beginning to shift to recovery, with markets in Asia and parts of the U.S.

and Europe reopening, the recovery could be protracted and disrupted by additional resurgences and lockdowns.

CSL Contract Loss

In April 2021, CSL informed us of its intent not to renew its supply agreement for the use of PCS2 plasma collection system devices and the purchase of disposable plasmapheresis kits (the “Supply Agreement”) following the expiration of the current term of the Supply Agreement in June 2022.

In fiscal year 2021, revenue under this Supply Agreement was $88.6 million, or 10.2% of total revenue.

As a result of this anticipated contract loss, we recorded a $20.9 million one-time asset impairment charge relating to disposables manufacturing equipment and $5.0 million of additional expenses in the fourth quarter of fiscal 2021.

In the first quarter of fiscal 2022, we expect to incur an additional $3.4 million of accelerated depreciation expense relating to disposables manufacturing equipment previously placed into service that will cease being used.

Issuance of Convertible Senior Notes

In March 2021, we issued $500.0 million aggregate principal amount of 0% convertible senior notes due 2026 (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 “Indenture”).

The total net proceeds from the sale of the 2026 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were $486.7 million.

The 2026 Notes will mature on March 1, 2026, unless earlier converted, redeemed or repurchased.

Approximately $47.4 million of the net proceeds from the offering were used to fund the cost of entering into Capped Call Transactions and the balance was used to reduce our indebtedness under the Credit Facilities and for working capital and other general corporate purposes.

Cardiva Medical, Inc.

On March 1, 2021, we acquired Cardiva an industry-leading manufacturer of vascular closure systems based in Santa Clara, California for total consideration of $489.8 million, which consisted of upfront payments of $465.5 million ($418.2 million net of cash acquired) and the fair value of contingent consideration of $24.3 million.

The purchase price is subject to customary working capital and certain other adjustments as of the closing of the transaction and a maximum of $35.0 million in contingent consideration payable over the next two years based on sales growth.

We financed the acquisition through a combination of cash, borrowings under our Revolving Credit Facility and an additional $150.0 million term loan.

These borrowings were subsequently paid in full during the same period using the proceeds from the 2026 Notes.

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 Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K 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.

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 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 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 Item 1A of this Annual Report on Form 10-K.

On April 1, 2020, we acquired all of the outstanding equity of enicor GmbH, the manufacturer of ClotPro ® , a new generation whole blood coagulation testing system.

The acquisition of this innovative viscoelastic diagnostic device further augments our portfolio of hemostasis analyzers within our Hospital business unit.

On January 13, 2020, we purchased the technology underlying the TEG ® 6s Hemostasis Analyzer System from Cora Healthcare, Inc.

and CoraMed Technologies, LLC (the "Cora Parties") for $35.0 million.

In connection with this transaction, we acquired ownership of intellectual property previously licensed from the Cora Parties on an exclusive basis in the field of hospitals and hospital laboratories.

This acquisition will allow us to pursue site of care opportunities beyond the hospital setting.

On May 21, 2019, we transferred to CSL Plasma Inc.

(“CSL”) substantially all of the tangible assets held by Haemonetics relating to the manufacture of anti-coagulant and saline at our Union, South Carolina facility and CSL assumed certain related liabilities pursuant to the terms of a settlement, release and asset transfer agreement between the parties dated May 13, 2019.

At the closing, we received $9.8 million of proceeds and were concurrently released from our obligations to supply liquid solutions under a 2014 supply agreement with CSL.

We recognized an asset impairment in the first quarter of fiscal 2020 of $48.7 million as a result of this transaction.

Share Repurchase Programs

In May 2019, our Board of Directors authorized the repurchase of up to $500 million of Haemonetics common shares over the next two years.

In July 2019, we completed a $75.0 million repurchase of our common stock pursuant to an accelerated share repurchase agreement ("ASR") entered into with Citibank N.A.

("Citibank") in June 2019.

The total number of shares repurchased under the ASR was 0.6 million at an average price per share upon final settlement of $116.33.

In October 2019, we completed a $50.0 million repurchase of our common stock pursuant to an ASR entered into with Morgan Stanley & Co.

LLC ("Morgan Stanley") in September 2019.

The total number of shares repurchased under the ASR was 0.4 million at an average price per share upon final settlement of $124.37.

In January 2020, we completed an additional $50.0 million repurchase of our common stock pursuant to an ASR entered into with Bank of America, N.A.

("Bank of America") in December 2019.

The total number of shares repurchased under the ASR was 0.4 million at an average price per share upon final settlement of $114.73.

As of March 28, 2020 , the total remaining authorization for repurchases of the Company's common stock under the share repurchase program was $325.0 million.

Fajardo, Puerto Rico Manufacturing Operations

On June 29, 2020, we sold our Fajardo, Puerto Rico, manufacturing operations to GVS, S.p.A (“GVS”), a leading provider of advanced filtration solutions for critical applications for $15.1 million ($7.8 million, net of cash transferred).

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.

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) and recognized a $13.2 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.

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.

Inlog Holdings 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 $20.0 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.

This divestiture and the sale of our U.S.

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

Refer to Note 5, Divestitures, to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information.

Restructuring Program

In July 2019, our Board of Directors approved a new Operational Excellence Program (the "2020 Program") and delegated authority to management to determine the detail of the initiatives that will comprise the program.

In July 2019, our Board of Directors approved an Operational Excellence Program (the “2020 Program”) and delegated authority to management to determine the detail of the initiatives that will comprise the program.

The 2020 Program is designed to improve operational performance and reduce cost principally in our manufacturing and supply chain operations.

We estimate that we will incur aggregate charges between $60 million and $70 million in connection with the 2020 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 2023.

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 fiscal year ended March 28, 2020 , we incurred $ 11.9 million of restructuring and turnaround costs under this program.

Relocation of Corporate Headquarters

In December 2018, we entered into a lease for office space in Boston, MA to serve as our new corporate headquarters and replace our prior corporate headquarters located in Braintree, MA.

During the second quarter of fiscal 2020, we sold $7.8 million of real estate and other assets associated with the Braintree corporate headquarters and entered into a lease with the buyer that allowed the Company to leaseback that facility on a rent-free basis through December 31, 2019 until the completion of our relocation to Boston, MA, which occurred during the third quarter of fiscal 2020.

As a result of this transaction, we received net cash proceeds of $15.0 million and non-cash consideration of $0.9 million related to a free rent period ending in December 2019.

The transaction resulted in a net gain of $8.1 million.

Change in Reportable Segments

Effective March 31, 2019, we completed the transition of our operating structure to three global business units - Plasma, Blood Center and Hospital - and accordingly reorganized our operating and reporting structure to align with our three global business units.

This new segment structure has been realigned in accordance with the respective markets to accurately reflect the ongoing performance of each business and excludes revenue for service, maintenance and parts related to the applicable business unit.

The discussion of our results of operations that follows has been revised to reflect our new reportable segments.

We initially expected to incur aggregate charges between $60 million and $70 million by the end of fiscal 2023 and to achieve savings of $80 million to $90 million on an annualized basis once the program is completed.

We believe the 2020 Program will continue to provide future savings, however, we are currently assessing the potential impact CSL's decision not to renew its Supply Agreement on the expected timing, charges and savings.

The majority of charges will result in cash outlays, including severance and other employee costs, and will be incurred as the specific actions required to execute these initiatives are identified and approved.

During the fiscal year ended April 3, 2021, we incurred $15.1 million of restructuring and turnaround costs under this program.

Total cumulative charges under this program are $27.0 million as of April 3, 2021.

Market Trends

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• Geographical expansion of biopharmaceuticals also increases demand for plasma.

Demand for our plasma products in fiscal 2020 continued to grow in North America as collection volumes benefited from an expanding end user market for plasma-derived biopharmaceuticals with U.S.

produced plasma meeting the vast majority of plasma volume demand worldwide.

As a result, our Plasma business’ revenues are primarily from the U.S.

Despite the overall growth in the market, the number of biopharmaceutical companies that collect and fractionate the majority of source plasma is low and industry consolidation is ongoing.

During fiscal 2021 the COVID-19 pandemic significantly reduced the number of source plasma collections in the U.S., which materially reduced the demand for plasma products.

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.

Because plasma collected in the U.S.

supplies the vast majority of plasma volume demand worldwide, we anticipate continued growth in North America in future periods as collection volumes benefit from an expanding end user market for plasma-derived biopharmaceuticals.

Despite the overall growth in the market, the number of biopharmaceutical companies that collect and fractionate source plasma is low and industry consolidation is ongoing.

Significant barriers to entry exist for new entrants due to high capital outlay requirements for fractionation, long regulatory pathways to the licensing of collection centers and fractionation facilities and approval of plasma-derived biopharmaceuticals.

With these factors, we do not expect meaningful new entries or diversification.

As a result, there are relatively few customers for our Plasma products, especially in the U.S.

where 80% of the world's source plasma is collected and only a few customers provide the majority of our Plasma revenue.

where over 70% of the world's source plasma is collected and only a few customers provide the majority of our Plasma revenue.

Blood Center Market

In the Blood Center market, we sell automated blood component and manual whole blood collection systems, as well as software solutions that include blood drive planning, donor recruitment and retention, blood collection, component manufacturing and distribution.

In the Blood Center market, we sell automated blood component and manual whole blood collection systems.

While we sell products around the world, a significant portion of our sales are to a limited number of customers due to relatively limited number of blood collectors.

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• Competition in multi-unit collection technology for automated blood component collection systems has intensified and has negatively impacted our sales in markets where these collections are prevalent.

Industry consolidation through group purchasing organizations has intensified pricing competition particularly in the manual whole blood collection systems, as well as impacting our software business where switching large customers to new or emerging technology platforms has a relatively high cost.

Hospital Market

▪ Industry consolidation through group purchasing organizations has intensified pricing competition particularly in the manual whole blood collection systems.

Hospital Markets

Hemostasis Management Market - The use of routine coagulation testing is well established throughout the world in various medical procedures, including cardiovascular surgery, organ transplantation, trauma, post-partum hemorrhage and percutaneous coronary intervention.

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In addition, advanced hemostasis testing supports hospital efforts to reduce the risks, complications and costs associated with unnecessary blood component transfusions.

Haemonetics’ TEG ® and ClotPro hemostasis analyzer systems are advanced diagnostic tools that provide a comprehensive assessment of a patient’s overall hemostasis.

Haemonetics’ TEG ® , ClotPro ® and HAS hemostasis analyzer systems are advanced diagnostic tools that provide a comprehensive assessment of a patient’s overall hemostasis.

This information enables clinicians to decide the most appropriate clinical treatment for the patient to minimize blood loss and reduce clotting risk.

For example, TEG analyzers have been used to support clinical decision making in open cardiovascular surgery and organ transplantation, becoming the standard of care in liver transplants.

For example, TEG analyzers have been used to support clinical decision making in open cardiovascular surgery and organ transplantation, becoming the standard of care in

liver transplants.

In more recent years, interest has grown into the utilization of TEG in trauma and other procedures in which the risk of hemorrhage and thrombosis are high.

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Our ClotPro system is currently available in select European and Asian markets and is not available for use or sale in the U.S.

The HAS-100 is currently commercialized in China.

Cell Salvage Market - In recent years, more efficient blood use and less invasive surgeries have reduced demand for autotransfusion in these procedures and contributed to intense competition in mature markets, while increased access to healthcare in emerging economies has provided new markets and sources of growth.

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SafeTrace Tx ® 's leading market share in the U.S.

remains steady with potential opportunity to expand internationally.

remains steady and in fiscal 2021 launched in the United Kingdom.

We continue to explore opportunities to expand the portfolio internationally.

Vascular Closure Market - Our target market, coronary and peripheral procedures and electrophysiology procedures, are highly concentrated in the U.S.

The mature market of coronary and peripheral procedures consists of interventions to diagnose and treat vascular diseases.

Electrophysiology procedures consist of catheter-based interventions to diagnose and treat cardiac arrhythmias.

This procedure category is expected to grow based on the increasing incidence and prevalence of cardiac arrhythmias, mainly in the U.S.

Financial Summary

(In thousands, except per share data)

% Increase/(Decrease)

(In thousands, except per share data) 2021 2020 2019 % Increase/(Decrease)

20 % Increase/(Decrease)

Net revenues $ 870,463 $ 988,479 $ 967,579 (11.9) % 2.2 %

Gross profit $ 397,838 $ 484,513 $ 417,536 (17.9) % 16.0 %

% of net revenues 45.7 % 49.0 % 43.2 %

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% of net revenues 10.3 % 10.5 % 8.6 %

Gain on divestiture

Interest and other expense, net $ (16,834) $ (16,199) $ (9,912) 3.9 % 63.4 %

Income before taxes

Income before (benefit) provision for income taxes $ 72,913 $ 87,152 $ 73,633 (16.3) % 18.4 %

(Benefit) provision for income taxes $ (6,556) $ 10,626 $ 18,614 n/m (42.9) %

% of pre-tax income (9.0) % 12.2 % 25.3 %

Net income $ 79,469 $ 76,526 $ 55,019 3.8 % 39.1 %

% of net revenues 9.1 % 7.7 % 5.7 %

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Our fiscal year ends on the Saturday closest to the last day of March.

Fiscal 2020 , 2019 and 2018 include 52 weeks with each quarter having 13 weeks.

Fiscal year 2021 included 53 weeks with each of the first three quarters having 13 weeks and the fourth quarter having 14 weeks.

Fiscal year 2020 and 2019 included 52 weeks with each quarter having 13 weeks.

Net revenues for fiscal 2021 de creased 11.9% compared with fiscal 2020.

Without the effects of foreign exchange, net revenues decreased 12.9% compared with fiscal 2020.

Revenue decreases in Plasma due to the COVID-19 pandemic primarily drove the overall decrease in revenue during the fiscal year ended April 3, 2021.

Net revenues for fiscal 2020 increased 2.2% compared with fiscal 2019.

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This increase was partially offset by declines in our Blood Center business unit.

Net revenues for fiscal 2019 increased 7.0% compared with fiscal 2018 both with and without the effects of foreign exchange, as revenue increases in Plasma and Hospital were partially offset by declines in our Blood Center business unit.

Operating income decreased during fiscal 2021 as compared with fiscal 2020, primarily due to the impact of the COVID-19 pandemic on revenue and gross margin, offset by gain on divestitures, incremental savings from the 2020 Program and lower asset impairment charges and depreciation expense.

Operating income increased during fiscal 2020 as compared with fiscal 2019, primarily due to favorable pricing, product mix and incremental savings from both the 2020 Program and the Complexity Reduction Initiative (the “2018 Program”).

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Impairment charges associated with the divestiture of our plasma liquid solutions operations to CSL partially offset these increases during fiscal 2020.

Operating income increased during fiscal 2019 as compared with fiscal 2018 , primarily due to increased revenue volumes, favorable price and product mix, lower restructuring and turnaround costs and annualized savings as a result of the prior year restructuring initiatives.

This increase was partially offset by asset impairments, accelerated depreciation related to PCS2 ® devices, higher freight, fuel and carrier fees and increased investments within our Plasma and Hospital business units.

Management's Use of Non-GAAP Measures

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Net Revenues by Geography

Fiscal 2020 versus 2019

Fiscal 2019 versus 2018

(In thousands)

Reported Growth

Currency impact

Constant currency growth (1)

Reported Growth

Currency impact

Constant currency growth (1)

Fiscal Year Fiscal 2021 versus 2020 Fiscal 2020 versus 2019

(In thousands) 2021 2020 2019 Reported Growth Currency impact Constant currency growth (1)

Reported Growth Currency impact Constant currency growth (1)

United States $ 522,607 $ 646,204 $ 606,845 (19.1) % — % (19.1) % 6.5 % — % 6.5 %

International 347,856 342,275 360,734 1.6 % 3.0 % (1.4) % (5.1) % (1.9) % (3.2) %

Net revenues $ 870,463 $ 988,479 $ 967,579 (11.9) % 1.0 % (12.9) % 2.2 % (0.6) % 2.8 %

(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.

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The percentage of revenue generated in our principle operating regions is summarized below:

2021 2020 2019

United States 60.0 % 65.4 % 62.7 %

Japan 8.9 % 7.2 % 7.2 %

Europe 18.3 % 15.5 % 17.0 %

Asia 12.2 % 11.1 % 12.3 %

Other 0.6 % 0.8 % 0.8 %

Total 100.0 % 100.0 % 100.0 %

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

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We have placed foreign currency hedges to mitigate our exposure to foreign currency fluctuations.

Please see 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.

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

Fiscal 2020 versus 2019

Fiscal 2019 versus 2018

(In thousands)

Reported Growth

Currency impact

Constant currency growth (1)

Reported Growth

Currency impact

Constant currency growth (1)

Fiscal Year Fiscal 2021 versus 2020 Fiscal 2020 versus 2019

(In thousands) 2021 2020 2019 Reported Growth Currency impact Constant currency growth (1)

Reported Growth Currency impact Constant currency growth (1)

Plasma $ 332,236 $ 458,681 $ 426,650 (27.6)% —% (27.6)% 7.5% (0.4)% 7.9%

Blood Center 307,452 317,761 329,727 (3.2)% 2.4% (5.6)% (3.6)% (0.7)% (2.9)%

210,632 193,437 192,270 8.9% 0.7% 8.2% 0.6% (1.4)% 2.0%

Service 20,143 18,600 18,932 8.3% 3.6% 4.7% (1.8)% (1.4)% (0.4)%

Net revenues $ 870,463 $ 988,479 $ 967,579 (11.9)% 1.0% (12.9)% 2.2% (0.6)% 2.8%

(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.

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Without the effect of foreign exchange, Hemostasis Management revenue increased 13.5% during fiscal 2020 as compared with fiscal 2019.

Plasma revenue decreased 27.6% during fiscal 2021 as compared with fiscal 2020.

There was no foreign exchange impact on Plasma revenue during fiscal 2021.

This revenue decrease was primarily 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.

Declines in software revenue due to a one-time favorable impact in the prior year period also contributed to the decrease.

We continue experiencing the negative impact of COVID-19 on our business.

While the timing of plasma collection recovery remains uncertain, we believe the impacts of the pandemic on plasma collection are temporary and anticipate volumes to recover by the end of fiscal 2022.

We 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.

In early April 2021, CSL informed us of its intent not to renew its supply agreement for the use of PCS2 plasma collection system devices and the purchase of disposable plasmapheresis kits following the expiration of the current term of the Supply Agreement in June 2022.

In fiscal 2021, revenue under this Supply Agreement was $88.6 million.

Plasma revenue increased 7.5% during fiscal 2020 as compared with fiscal 2019.

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This increase was partially offset by declines in plasma liquid solutions during fiscal 2020 due to certain strategic exits within our plasma liquid solutions business, including the divestiture of our Union, South Carolina facility during fiscal 2020.

We expect continued declines in our plasma liquid solutions revenue in connection with these strategic exits.

However, we will continue to supply liquid solutions to our customers on an as needed basis using contract manufacturers.

Due to the timing of COVID-19 relative to our fiscal year end, our Plasma business unit experienced limited effects from the pandemic in fiscal 2020.

We anticipate higher impacts from COVID-19 on our fiscal 2021 Plasma results as factors like stay-at-home orders, transportation restrictions and donor safety concerns, combined with reduced collection capacity due to shutdowns and social distancing requirements, will continue to impact our revenue throughout the COVID-19 pandemic and recovery.

We believe these challenges will begin to subside when we see some easing of these containment measures.

Despite the current challenges, we continue to believe that the Plasma business unit has growth potential as recessionary pressures have historically contributed to greater donor availability and growth in the long-term global demand for plasma-derived pharmaceuticals is expected to continue.

Plasma revenue increased 17.5% during fiscal 2019 as compared with fiscal 2018 .

There was no foreign exchange impact on Plasma revenue during fiscal 2019 .

This revenue growth was primarily driven by an increase in volume of plasma disposables due to continued strong performance in the U.S.

and favorable NexSys PCS pricing during fiscal 2019 .

Increases in sales of liquid solutions also contributed to the growth during fiscal 2019 .

Blood Center revenue decreased 3.2% during fiscal 2021 as compared with fiscal 2020.

Without the effect of foreign exchange, Blood Center revenue decreased 5.6% during fiscal 2021 primarily due to continued declines in whole blood disposables and the divestiture of certain blood donor management software solution assets.

These declines were partially offset by increases in apheresis revenue, despite certain customers' conversions to alternative sources of supply, due to the impact distributor stocking orders in the first quarter and the 53 rd week in fiscal 2021.

The 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.

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, but we may experience a reversal in future periods.

Blood Center revenue decreased 3.6% during fiscal 2020 as compared with fiscal 2019.

Without the effect of foreign exchange, Blood Center revenue decreased 2.9% during fiscal 2020.

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Apheresis also contributed to the overall decline 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 $17 million in fiscal 2021.

Our Blood Center business unit experienced limited effects from the COVID-19 pandemic in fiscal 2020 due to the timing of the pandemic relative to our fiscal year end.

During fiscal 2020, the impact of COVID-19 on the Blood Center business unit was limited as an initial decline in donations was followed by a rapid increase in demand, as blood collectors sought to replenish their blood product inventories and safety stocks.

During fiscal 2021, there may be a greater impact on Blood Center revenue caused by an imbalance in the supply and demand for blood products.

However, we expect that the demand for blood will normalize with procedure volumes.

Blood Center revenue decreased 3.5% during fiscal 2019 as compared with fiscal 2018 .Without the effect of foreign exchange, Blood Center revenue decreased 3.4% during fiscal 2019 .

This decrease was primarily driven by lower whole blood revenue due to continued market declines, the strategic exit of certain contracts, products and markets, including unfavorable order timing associated with these exits, as well as product recalls.

Declines in software revenue in the U.S and platelet revenue driven by the continued shift toward double dose collection techniques in Japan also contributed to the decrease.

Hospital revenue increased 0.6% during fiscal 2020 as compared with fiscal 2019 .

Hospital revenue increased 8.9% during fiscal 2021 as compared with fiscal 2020 despite the negative impact of COVID-19, primarily in China and the U.S, early in the fiscal year.

Without the effect of foreign exchange, Hospital revenue increased 8.2% during fiscal 2021.

This increase was primarily attributable to the growth of disposables associated with TEG ® diagnostic systems, principally in the U.S.

In May 2019, we received FDA clearance for the use of TEG 6s in adult trauma settings.

In January 2020, we purchased the technology underlying the TEG 6s system which will allow us to pursue site of care opportunities beyond the hospital setting.

In addition, on April 1, 2020, we acquired enicor GmbH, the manufacturer of ClotPro ® , a new generation whole blood coagulation testing system which further augmented our portfolio of diagnostic devices.

The revenue increase during fiscal 2020 was partially offset by declines due to the discontinuance of sales of our OrthoPAT products effective March 31, 2019 and the impact of COVID-19, primarily in China, due to declines of elective surgeries, a reduction of trauma cases, restricted vendor access at customer sites and the reallocation of hospital resources to critical intensive care needs.

We expect a continued negative impact on our Hospital business unit throughout the COVID-19 pandemic and recovery.

However, we believe the end-market for our product portfolio is inherently strong and demand for our hospital products will normalize as hospitals address the backlog of elective procedures coupled with the return of non-elective procedures to pre-pandemic levels.

This increase was primarily attributable to a recent acquisition, TEG ® disposable revenue in the U.S.

and equipment sales in Europe.

The increases were partially offset by declines in Cell Salvage revenue and the divestiture of certain blood bank and hospital software solution assets.

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 during fiscal 2022.

Hospital revenue increased 0.6% during fiscal 2020 as compared with fiscal 2019.

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This increase was primarily attributable to the growth of disposables associated with TEG diagnostic systems, principally in the U.S.

The increase during fiscal 2019 was partially offset by the continued decline in OrthoPAT ® revenue.

(In thousands)

% Increase/(Decrease)

(In thousands) 2021 2020 2019 % Increase/(Decrease)

20 % Increase/(Decrease)

Gross profit $ 397,838 $ 484,513 $ 417,536 (17.9) % 16.0 %

% of net revenues 45.7 % 49.0 % 43.2 %

Gross profit decreased 17.9% during fiscal 2021 as compared with fiscal 2020.

Without the effects of foreign exchange, gross profit decreased 19.6% during fiscal 2021.

The decrease in the gross profit margin during fiscal 2021 was primarily due to unfavorable volumes and product mix, asset impairments, higher operational costs from the impact of the COVID-19 pandemic, recent divestitures and the amortization of the fair value inventory step-up related to the acquisition of Cardiva.

The decline was partially offset by lower depreciation expense and productivity savings from the 2020 Program, the 53rd week in fiscal 2021 and recent acquisitions.

Gross profit increased 16.0% during fiscal 2020 as compared with fiscal 2019.

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The increase in the gross profit margin during fiscal 2020 was primarily due to favorable pricing driven by the annualization of NexSys PCS device conversions, incremental savings from both the 2020 Program and the complexity reduction initiative, product mix, and the absence of impairment charges that were incurred in the prior year.

Gross profit increased 1.4% during fiscal 2019 as compared with fiscal 2018 .

Without the effects of foreign exchange, gross profit increased 0.5% during fiscal 2019 .

Gross profit margin percentage decreased by 240 basis points for fiscal 2019 as compared with fiscal 2018.

The decrease in the gross profit margin during fiscal 2019 was primarily due to increased depreciation expense primarily due to Plasma devices and asset impairments.

This decrease was partially offset by favorable price and volume mix as well as savings as a result of the prior year restructuring initiative.

Operating Expenses

(In thousands)

% Increase/(Decrease)

(In thousands) 2021 2020 2019 % Increase/(Decrease)

20 % Increase/(Decrease)

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% of net revenues 31.5 % 28.5 % 28.3 %

Impairment of assets

Amortization of intangible assets $ 32,830 $ 25,746 $ 24,803 27.5 % 3.8 %

% of net revenues 3.8 % 2.6 % 2.6 %

Impairment of assets $ 1,028 $ 50,599 $ — (98.0) % n/m

% of net revenues 0.1 % 5.1 % — %

Gains on divestitures and sale of assets $ (32,812) $ (8,083) $ — n/m n/m

% of net revenues (3.8) % (0.8) % — %

Total operating expenses $ 308,091 $ 381,162 $ 333,991 (19.2) % 14.1 %

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Research and Development

Research and development expenses increased 6.4% during fiscal 2021 as compared with fiscal 2020.

Without the effects of foreign exchange, research and development expenses increased 6.1% during fiscal 2021.

The increase in fiscal 2021 was primarily due to increased spend related to European Medical Device Regulation costs, recent acquisitions and continued investments in our Plasma and Hospital Business units.

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

Research and development expenses decreased 13.5% during fiscal 2020 as compared with fiscal 2019.

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The decrease in fiscal 2020 was primarily driven by investments made in clinical programs in the prior year period in order to support FDA clearance for the use of TEG 6s in adult trauma settings, which was received in May 2019.

Research and development expenses decreased 9.0% during fiscal 2019 as compared with fiscal 2018 .

Without the effects of foreign exchange, research and development expenses decreased 8.4% during fiscal 2019 .

The decrease in fiscal 2019 was primarily driven by lower restructuring and turnaround costs partially offset by our continued investment of resources in clinical programs, primarily in our Hospital business unit, as well as continued investment in our Plasma business unit.

Selling, General and Administrative

Selling, general and administrative expenses decreased 2.8% during fiscal 2021 as compared with fiscal 2020.

Without the effects of foreign exchange, selling, general and administrative expenses decreased 3.5% during fiscal 2021.

The decrease in fiscal 2021 was primarily due to cost containment actions taken to offset the negative effects related to the COVID-19 pandemic, incremental productivity savings from the 2020 Program and a reduction in restructuring and turnaround costs.

The decrease was partially offset by higher transaction and integration costs, increased deal amortization expense as a result of recent acquisitions and higher share-based and variable compensation expense.

Selling, general and administrative expenses increased 3.1% during fiscal 2020 as compared with fiscal 2019.

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The increase in fiscal 2020 was primarily due to an increase in investments, share-based compensation expense, restructuring and turnaround costs and PCS2 related costs.

This increase was partially offset by the gain recognized on the sale of assets associated with the Braintree corporate headquarters and incremental savings from both the 2020 Program and the 2018 Program.

Selling, general and administrative expenses decreased 5.8% during fiscal 2019 as compared with fiscal 2018 .

Without the effects of foreign exchange, selling, general and administrative expenses decreased 5.6% during fiscal 2019 .

The decrease in fiscal 2019 was primarily the result of lower restructuring and turnaround costs and annualized savings from restructuring initiatives.

This decrease was partially offset by increased investments within our Plasma and Hospital business units, higher freight, fuel and carrier fees and an increase in variable compensation and share-based compensation expense.

This increase was partially offset by incremental savings from both the 2020 Program and the complexity reduction initiative.

Amortization of Intangible Assets

We recognized amortization expense of $32.8 million and $25.7 million during fiscal 2021 and fiscal 2020, respectively.

The increase in fiscal 2021 was primarily driven by an increase in intangible assets resulting from recent acquisitions.

Impairment of Assets

We recognized impairment charges of $ 50.6 million during fiscal 2020 primarily as a result of the transfer to CSL of substantially all of our tangible assets related to the manufacture of anti-coagulant and saline at our Union, South Carolina facility.

Refer to Note 5 , Divestiture , to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for information pertaining to this agreement.

We recognized impairment charges of $1.0 million during fiscal 2021 in connection with the sale of our Fajardo, Puerto Rico, manufacturing operations.

We recognized impairment charges of $50.6 million during fiscal 2020 in connection with the sale of our Union, South Carolina facility.

Refer to Note 5, Divestitures , to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for information pertaining to these agreements.

Gains on Divestitures

We recognized gains on divestitures of $32.8 million during fiscal 2021.

Refer to Note 5, Divestitures , to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for information pertaining to these divestitures.

We recognized gains of $8.1 million due to the sale of assets associated with our Braintree corporate headquarters during fiscal 2020.

Interest and Other Expense, Net

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Without the effects of foreign exchange, interest and other expenses increased 4.8% during fiscal 2021.

The increase is primarily driven by a reduction in capitalized interest, realized losses on interest rate swaps due to declining rates, and an increase in interest expense from borrowings under our $350.0 million term loan and $350.0 million revolving loan.

The increase is primarily driven by realized losses on interest rate swaps due to declining rates, interest and debt issuance costs incurred in connection with short-term financing for the Cardiva acquisition and amortization of the debt discount associated with the 2026 Notes partially offset by a reduction in interest expense from borrowings under our $350.0 million term loan and $350.0 million revolving loan.

The effective interest rate on total debt outstanding for the fiscal year ended April 3, 2021 was 1.4%.

Interest and other expenses increased 63.4% during fiscal 2020 as compared with fiscal 2019.

Without the effects of foreign exchange, interest and other expenses increased 68.3% during fiscal 2020.

The increase was primarily driven by a reduction in capitalized interest, realized losses on interest rate swaps due to declining rates, and an increase in interest expense from borrowings under our $350.0 million term loan and $350.0 million revolving loan.

The effective interest rate on total debt outstanding for the fiscal year ended March 28, 2020 was 2.9%.

Interest expense increased $4.9 million during fiscal 2019 as compared with fiscal 2018 due to an increase in the Term Loan balance as well as an increase in the effective interest rate.

2021 2020 2019 % Increase/(Decrease)

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Reported Tax Rate

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

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

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.

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We have assessed, on a jurisdictional basis, the available means of recovering deferred tax assets, including the ability to carry-back net operating losses, the existence of reversing temporary differences, the availability of tax planning strategies and available sources of future taxable income.

As of March 28, 2020 , we maintain a valuation allowance against certain U.S.

deferred tax assets that are not more-likely-than-not realizable and have a full valuation allowance against the net deferred tax assets of certain foreign subsidiaries.

For the year ended March 28, 2020 , we recorded an income tax provision of $10.6 million on our worldwide pre-tax income of $87.2 million, resulting in a reported tax rate of 12.2%.

Our effective tax rate for the year ended March 28, 2020 is lower than our effective tax rates of 25.3% and 23.6% for the years ended March 30, 2019 and March 31, 2018 , respectively.

As of April 3, 2021, we maintain a valuation allowance against certain U.S.

state deferred tax assets that are not more-likely-than-not realizable and have a full valuation allowance against the net deferred tax assets of certain foreign subsidiaries.

For the year ended April 3, 2021, we recorded an income tax benefit of $6.6 million on our worldwide pre-tax income of $72.9 million, resulting in a reported tax rate of (9.0)%.

Our effective tax rate for the year ended April 3, 2021 is lower than our effective tax rates of 12.2% and 25.3% for the years ended March 28, 2020 and March 30, 2019, respectively.

The decrease in our tax rate for fiscal 2021, as compared with fiscal 2020, is primarily the result of a deferred tax asset recorded related to the U.S.

purchase of intellectual property, a non-recurring tax benefit from the release of a portion of the valuation allowance due to

taxable temporary differences acquired with the acquisition of Cardiva being available as a source of income to realize certain pre-existing deferred tax assets, favorable changes in the jurisdictional mix of earnings, and a decrease in the global intangible low taxed income inclusion due to legislation enacted during the year, offset by lower tax benefits associated with windfall stock compensation deductions as compared to fiscal 2020.

Our decrease in tax rate for fiscal 2020, as compared with fiscal 2019, is primarily the result of tax benefits associated with windfall stock compensation deductions and favorable changes in the jurisdictional mix of earnings partially offset by the impact of changes in valuation allowance, tax reserves and increased nondeductible executive compensation.

The rate was higher than the fiscal 2018 tax rate due to the impact of U.S.

tax reform provisions that became effective in fiscal 2019 , including global intangible low taxed income and nondeductible executive compensation, partially offset by windfall tax benefits on stock compensation deductions.

Income Tax Acts

Beginning in fiscal 2019, we incorporated the certain provisions of the Tax Cuts and Jobs Act (the “Act”) in the calculation of the tax provision and effective tax rate, including the provisions related to global intangible low taxed income (“GILTI”), foreign derived intangible income (“FDII”), base erosion anti abuse Tax (“BEAT”), as well as other provisions which limit tax deductibility of expenses.

For fiscal 2020 , the GILTI provisions have the most significant impact.

Under the new law, U.S.

Under the GILTI provisions, U.S.

taxes are imposed on foreign income in excess of a deemed return on tangible assets of its foreign subsidiaries.

The ability to

benefit from a deduction and foreign tax credits against a portion of the GILTI income may be limited under the GILTI rules as a result of the utilization of net operating losses, foreign sourced income, and other potential limitations within the foreign tax credit calculation.

Interpretive guidance on the accounting for GILTI states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only.

The Company has made the accounting policy election to recognize GILTI as a period expense.

The ability to benefit from a deduction and foreign tax credits against a portion of the GILTI income may be limited under the GILTI rules as a result of the utilization of net operating losses, foreign sourced income, and other potential limitations within the foreign tax credit calculation.

In July 2020, the U.S.

Treasury issued final regulations and additional proposed regulations that address the application of the high-taxed exclusion from GILTI.

Under these regulations, the Company can make an annual election to exclude from its GILTI calculation, income from its foreign subsidiaries whose effective income tax rate exceeds 18.9% for that year.

The regulations must be applied for tax years beginning after July 23, 2020 but companies have the option to apply them retroactively for tax years beginning after December 31, 2017 and before July 23, 2020.

The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted in the United States on March 27, 2020.

The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19.

While the CARES Act provides extensive tax changes in response to the COVID-19 pandemic, the provisions are not expected to have a significant impact on the Company’s financial results.

While the CARES Act provides extensive tax changes in response to the COVID-19 pandemic, the provisions did not have a significant impact on the Company’s financial results.

Liquidity and Capital Resources

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

(In thousands)

(In thousands) April 3,

2021 March 28,

Cash and cash equivalents $ 192,305 $ 137,311

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Net debt position (1)

$ (515,303) $ (245,182)

Days sales outstanding (DSO) 51 62

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

In July 2019, our Board of Directors approved the 2020 Program.

We estimate that we will incur aggregate charges between $60 million and $70 million in connection with the 2020 Program.

During the fiscal year ended March 28, 2020 , we incurred $11.9 million 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.

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations, our Revolving Credit Facility 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, restructuring and turnaround initiatives, capital expenditures, including investments in our manufacturing facilities and production of NexSys PCS devices, share repurchases and cash payments under the loan agreement.

As of March 28, 2020 , we had $137.3 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 and the build out of our new manufacturing facility in Clinton, PA, cash payments under the loan agreement and restructuring and turnaround initiatives.

In March 2021, we issued $500.0 million aggregate principal amount of 0% convertible senior notes due 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 4.21% as of April 3, 2021.

As of April 3, 2021, we had $192.3 million in cash and cash equivalents, the majority of which is held in the U.S.

or in countries from which it can be freely repatriated to the U.S.

On June 15, 2018, we entered into a five-year credit agreement which provided for a $350.0 million term loan and a $350.0 million revolving loan.

Interest on the term loan and revolving loan is established using LIBOR plus 1.13% - 1.75%, depending on our leverage ratio.

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, all of which we were in compliance with as of March 28, 2020.

As of March 28, 2020 , $323.8 million was outstanding under the Term Loan and $60.0 million was outstanding on the Revolving Credit Facility, both, with an effective interest rate of 2.9% .

We also had $25.6 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of March 28, 2020 .

On June 15, 2018, we entered into a five-year credit agreement which provided for a $350.0 million Term Loan and a $350.0 million Revolving Credit Facility, which we refer to together as the Credit Facilities.

Interest on the Term Loan and Revolving Credit Facility is established using LIBOR plus 1.13% - 1.75%, depending on our leverage ratio.

During the fourth quarter of fiscal 2021, the Company entered into an additional $150.0 million term loan under the existing Credit Facilities and borrowed $290.0 million under the Revolving Credit Facility in connection with the acquisition of Cardiva.

Both of these borrowings were subsequently paid in full during the same period using the proceeds from the 2026 Notes.

In connection with the additional $150 million term loan borrowing, the Company and its lenders also agreed to increase the maximum consolidated leverage ratio the Company is required to maintain for the four consecutive quarters immediately following the closing of the Cardiva acquisition to 4.25:1.0, after which the maximum consolidated leverage ratio the Company is required to maintain will revert to 3.5:1.0.

As of April 3, 2021, $301.9 million was outstanding under the Term Loan and no borrowings were outstanding on the Revolving Credit Facility, both, with an effective interest rate of 1.4%.

We also had $25.7 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of April 3, 2021.

During fiscal 2021, we paid $21.9 million in scheduled principal repayments for the Term Loan.

We have scheduled principal repayments of $301.9 million required through fiscal 2024.

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 March 28, 2020 .

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

While the duration and impacts of the pandemic remain uncertain, we are focused on preserving cash and have implemented a number of actions to help us protect cash flow and allocate capital such as reducing non-essential spending, delaying certain compensation-related items, inventory

management, reviewing capital projects and the associated costs, and restricting travel.

In April 2020, we borrowed an additional $150.0 million under the Revolving Credit Facility, increasing our cash on hand to approximately $300 million.

Our leverage ratio remains low subsequent to the incremental $150.0 million of borrowings, and we have an additional $131.7 million of undrawn capacity remaining under the revolving credit line.

Cash Flow Overview

(In thousands)

% Increase/(Decrease)

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 April 3, 2021.

In July 2019, our Board of Directors approved the 2020 Program.

We estimate that we will incur aggregate charges between $60 million and $70 million in connection with the 2020 Program.

During fiscal 2021 and 2020, we incurred $15.1 million and $11.9 million of restructuring and turnaround costs under this program, respectively.

In May 2019, our Board of Directors authorized the repurchase of up to $500.0 million of Haemonetics common shares over the two year period ending May 2021.

As of April 3, 2021, the total remaining authorization for repurchases of the Company's common stock under the share repurchase program was $325.0 million.

We did not make any additional share repurchases under this program which expired in May 2021.

(In thousands) 2021 2020 2019 Increase/(Decrease)

20 Increase/(Decrease)

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Effect of exchange rate changes on cash and cash equivalents (1)

Net (decrease) increase in cash and cash equivalents

4,179 (1,873) (3,323) 6,052 1,450

Net change in cash and cash equivalents $ 54,994 $ (32,040) $ (10,818)

(1) The balance sheet is affected by spot exchange rates used to translate local currency amounts into U.S.

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Net cash provided by operating activities was $108.8 million during fiscal 2021, a decrease of $49.4 million as compared with fiscal 2020.

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, partially offset by a decrease in working capital outflow 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 payment for a compensation-related liability paid at the closing of the Cardiva acquisition.

Net cash provided by operating activities was $158.2 million during fiscal 2020, a decrease of $1.1 million as compared with fiscal 2019.

The decrease in cash provided by operating activities was primarily due to a working capital outflow driven by an increase in inventory build to support the launch of the NexSys PCS devices and decreases in accounts payable and accrued payroll.

Net income, as adjusted for depreciation, amortization and other non-cash charges and a decrease in accounts receivable due to the timing of collections partially offset the decrease in operating activities.

Net cash provided by operating activities was $159.3 million during fiscal 2019 , a decrease of $61.1 million as compared with fiscal 2018 .

The decrease in cash provided by operating activities was primarily due to a working capital outflow driven largely by an increase accounts receivable due to higher revenue growth and collections timing, an increase in inventory and prepaid expenses to support the launch of the NexSys PCS device and decreases in accrued payroll due to severance payments associated with the 2018 Program.

Net income, as adjusted for depreciation, amortization and other non-cash charges, partially offset the decrease in operating activities.

Investing Activities

Net cash used in investing activities was $425.4 million during fiscal 2021, an increase of $368.3 million as compared with fiscal 2020.

The increase in cash used in investing activities was primarily the result of cash paid for acquisitions.

The increase was partially offset by an increase in proceeds received relating to divestitures and a decrease in capital expenditures.

Net cash used in investing activities was $57.2 million during fiscal 2020, a decrease of $59.0 million as compared with fiscal 2019.

The decrease in cash used in investing activities was primarily the result of a decrease in capital expenditures in the current year period due to the NexSys PCS launch and manufacturing capacity expansion projects in our Plasma business unit in the prior year period.

Proceeds received related to the divestiture of our plasma liquid solutions operations and sale of real estate and other assets associated with the Braintree corporate headquarters in the current period also contributed to the decrease in cash used in investing activities.

The decrease in cash used in investing activities was primarily the result of a decrease in capital expenditures in fiscal 2020 due to the NexSys PCS launch and manufacturing capacity expansion projects in our Plasma business unit in fiscal 2019.

Proceeds received related to the divestiture of our plasma liquid solutions operations and sale of real estate and other assets associated with the Braintree corporate headquarters in fiscal 2020 also contributed to the decrease in cash used in investing activities.

This decrease was partially offset by the acquisition of the technology underlying the TEG 6s system during fiscal 2020.

Net cash used in investing activities was $116.1 million during fiscal 2019 , an increase of $53.1 million as compared with fiscal 2018 .

The increase in cash used in investing activities was primarily the result of an increase in capital expenditures in fiscal 2019 due to the NexSys PCS launch and manufacturing capacity expansion projects in our Plasma business unit and proceeds received related to the divestiture of our SEBRA product line in fiscal 2018.

Financing Activities

Net cash provided by financing activities was $367.5 million during fiscal 2021, an increase of $498.7 million as compared with fiscal 2020.

The increase in cash provided by financing activities was primarily due to the $500.0 million of proceeds related to the 2026 Notes entered into in March 2021 and a decrease in share repurchases compared with the prior year period.

The increase was partially offset by the repayment of borrowings on our revolving credit facility, the purchase of the Capped Call on the 2026 Notes and higher payments on our term loan.

Net cash used in financing activities was $131.2 million during fiscal 2020, an increase of $80.6 million as compared with fiscal 2019.

The increase was primarily due to lower borrowings, net of payments, on our Credit Facilities and increased share repurchases in the current period.

Net cash used in financing activities was $50.6 million during fiscal 2019 , a decrease of $70.0 million as compared with fiscal 2018 .

Cash used in financing activities included the repayment of the $253.7 remaining outstanding balance on our 2012 credit agreement, as amended in fiscal 2014, as well as $160.0 million of share repurchases during fiscal 2019.

This use in cash was partially offset by proceeds resulting from the $350.0 million Term Loan entered into in June 2018.

The increase in cash used in financing activities was primarily due to lower borrowings, net of payments, on our Credit Facilities and increased share repurchases in fiscal 2020.

Contractual Obligations

A summary of our contractual and commercial commitments as of March 28, 2020 is as follows:

A summary of our contractual and commercial commitments as of April 3, 2021 is as follows:

Payments Due by Period

(In thousands)

Less than 1 year

More than 5 years

(In thousands) Total Less than 1 year 1-3 years 3-5 years More than 5 years

Convertible senior notes $ 500,000 $ — $ — $ 500,000 $ —

Debt 301,875 17,500 284,375 — —

Interest payments (1)

6,369 4,000 2,369 — —

Operating leases 89,965 10,769 17,730 14,324 47,142

Purchase commitments (2)

139,695 139,695 — — —

Expected retirement plan benefit payments 14,326 1,629 2,801 2,537 7,359

1 unchanged sentence

(1) Interest payments reflect the contractual interest payments on our outstanding debt and exclude the impact of interest rate swap agreements.

Interest payments are projected using interest rates in effect as of March 28, 2020.

Interest payments are projected using interest rates in effect as of April 3, 2021.

Certain of these projected interest payments may differ in the future based on changes in market interest rates.

16 unchanged sentences

In accordance with U.S.

GAAP, we record a liability in our consolidated financial statements for these matters when a loss is known or considered probable and the amount may be reasonably estimated.

GAAP, we record a liability in our consolidated financial statements for legal matters when a loss is known or considered probable and the amount may be reasonably estimated.

Actual settlements may be different than estimated and could have a material impact on our consolidated earnings, financial position and/or cash flows.

26 unchanged sentences

Standards to be Implemented

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification ("ASC") Update No.

2016-13, Financial Instruments – Credit Losses (Topic 326).

ASC Update No.

2016-13 is intended to replace the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates.

ASC Update No.

2016-13 is effective for annual periods beginning after December 15, 2019, and is applicable to us in fiscal 2021.

We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

In August 2018, the FASB issued ASC Update No.

2018-15, Intangibles, Goodwill and Other - Internal-Use Software (Subtopic 350-40).

The new guidance will align the accounting implementation costs incurred in a cloud computing arrangement that is a service contract with the accounting for internal-use software licenses.

The guidance is effective for annual periods beginning after December 15, 2019 and is applicable to us in fiscal 2021.

Early adoption is permitted for all entities, including interim periods.

The impact of adopting ASC Update No.

2018-15 is not expected to have a material effect on our consolidated financial statements.

In December 2019, the FASB issued ASC Update No.

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

2019-12, Income Taxes (Topic 740).

1 unchanged sentence

ASC Update No.

2019-12 is effective for annual periods beginning after December 15, 2020, and is applicable to

us in fiscal 2022.

2019-12 is effective for annual periods beginning after December 15, 2020, and is applicable to us in fiscal 2022.

We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

Critical Accounting Policies

In August 2020, the FASB issued ASC ASU Update No.

2020-06 Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40).

The amendments simplify the complexity associated with applying U.S.

GAAP for certain financial instruments with characteristics of liabilities and equity.

2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

We early adopted ASC Update No.

2020-06 effective April 4, 2021 using the modified retrospective method, which will result in a decrease of approximately $81.3 million to additional paid-in capital and an increase of approximately $80.3 million to non-current convertible notes, net, on the Consolidated Balance Sheets.

Additionally, retained earnings will be adjusted to remove amortization expense recognized in prior periods related to the debt discount and the convertible notes will no longer have a debt discount that will be amortized.

The impact to retained earnings on the Consolidated Balance Sheets as of April 4, 2021 is an increase of approximately $1.0 million.

While we do not expect a material impact to our consolidated statements of operations and consolidated statements of cash flows upon adoption, non-cash interest expense associated with the amortization of debt discounts will be reduced in future periods.

Critical Accounting Policies and Estimates

Our significant accounting policies are summarized in Note 2, Summary of Significant Accounting Policies , to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

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Actual results may differ from those estimates.

The accounting policies identified as critical are as follows:

We consider an estimate to be a “critical

accounting estimate” when (i) the nature of the estimate is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change;

and (ii) the impact of the estimate on financial condition or operating performance is material.

The accounting policies and estimates identified as critical are as follows:

Revenue Recognition

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In circumstances where we provide upfront rebate payments to customers, we capitalize the rebate payments and amortize the resulting asset as a reduction of revenue using a systematic method over the life of the contract.

See Note 2 , Summary of Significant Accounting Policies and Note 8 , Revenue , to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for further information.

Refer to Note 2, Summary of Significant Accounting Policies and Note 8, Revenue , to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for further information.

Goodwill and Intangible Assets

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Conditions indicating that an impairment exists include but are not limited to a change in the competitive landscape, internal decisions to pursue new or different technology strategies, a loss of a significant customer or a significant change in the marketplace including prices paid for our products or the size of the market for our products.

See Note 2, Summary of Significant Accounting Policies and Note 11 , Goodwill & Intangible Assets , to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information.

Refer Note 2, Summary of Significant Accounting Policies and Note 11, Goodwill & Intangible Assets, to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information.

Inventory Provisions

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When we are initially unable to develop a best estimate of loss, we record the minimum amount of loss, which could be zero.

As information becomes known, additional loss provision is recorded when either a best estimate can be made or the minimum loss amount is increased.

As information becomes known, an additional loss provision is recorded when either a best estimate can be made or the minimum loss amount is increased.

When events result in an expectation of a more favorable outcome than previously expected, our best estimate is changed to a lower amount.

Business Combinations

We record tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting.

Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the dates of acquisition.

The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions including forecasted cash flows, revenues attributable to existing technology and existing customer attrition.

When estimating the significant assumptions to be used in the valuation we included a consideration of current industry information, market and economic trends, historical results of the acquired business, and other relevant factors.

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

We allocate any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed to goodwill.

Contingent consideration is recorded at fair value as measured on the date of acquisition using an appropriate valuation model, such as the Monte Carlo simulation model.

The value recorded is based on estimates of future financial projections under various potential scenarios, in which the model runs many simulations based on comparable companies' growth rates and their implied volatility.

Our estimates of forecasted revenues in the earn out period include a consideration of current industry information, market and economic trends, historical results of the acquired business, and other relevant factors.

These cash flow

projections are discounted with a risk adjusted rate.

Each quarter until such contingent amounts are earned, the fair value of the liability is remeasured at each reporting period and adjusted as a component of operating expenses based on changes to the underlying assumptions.

The estimates used to determine the fair value of the contingent consideration liability are subject to significant judgment and given the inherent uncertainties in making these estimates, actual results are likely to differ from the amounts originally recorded and could be materially different.

Convertible Senior Notes

Significant judgment is required in determining the liability component of the related convertible senior notes as well as the balance sheet classification of the elements of the convertible senior notes.

We account for convertible senior notes as separate liability and equity components, determining the fair value of the respective liability components based on an estimate of the fair value of a similar liability without a conversion option and assigning the residual value to the equity component.

We estimate the fair value of the liability component of the convertible senior notes using a discounted cash flow model with a risk adjusted yield for similar debt instruments, absent any embedded conversion feature.

In estimating the risk adjusted yield, we utilize both an income and market approach.

For the income approach, we use a convertible bond pricing model, which include several assumptions including volatility and the risk-free rate.

For the market approach, we perform an evaluation of issuances of convertible debt securities issued by other comparable companies.

Additionally, a detailed analysis of the terms of the convertible senior notes transactions is required to determine existence of any derivatives that may require separate mark-to-market accounting under applicable accounting guidance.

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-K

Item 7. Management’s Discussion and Analysis