What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-11 · 140 added, 105 removed, 207 unchanged (54% of the section changed)

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The following discussion may contain forward-looking statements and should be read in conjunction with the “Cautionary Statement Regarding Forward-Looking Information” in this discussion.

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.

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

Our technology addresses important medical markets:

blood and plasma component collection, the surgical suite and hospital transfusion services.

When used in this report, the terms “we,” “us,” “our” and “the Company” mean Haemonetics.

When used in this report, the terms “we,” “us,” “our”, “Haemonetics” and the “Company” mean Haemonetics Corporation.

We view our operations and manage our business in three principal reporting segments:

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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 three months ended July 3, 2021 and June 27, 2020, the Company incurred $9.9 million and $3.5 million, respectively, of restructuring and restructuring related costs under this program.

Total cumulative charges under this program are $36.9 million as of July 3, 2021.

During the three and six months ended October 2, 2021, the Company incurred $4.6 million and $14.5 million, respectively, of restructuring and restructuring related costs under this program.

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

Total cumulative charges under this program are $41.5 million as of October 2, 2021.

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 April 2021, CSL Plasma, Ltd.

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.

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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 contained in this Quarterly Report on Form 10-Q and Risk Factors contained in Item 1A of the Annual Report on Form 10-K for the fiscal year ended April 3, 2021.

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 contained in this Quarterly Report on Form 10-Q and Risk Factors contained in Item 1A of the Annual Report on Form 10-K for the fiscal year ended April 3, 2021.

Financial Summary

Three Months Ended

(In thousands, except per share data) July 3,

2021 June 27,

Three Months Ended Six Months Ended

(In thousands, except per share data) October 2,

2021 September 26,

2020 % Increase/

(Decrease) October 2,

2021 September 26,

2020 % Increase/

Net revenues $ 239,897 $ 209,486 14.5 % $ 468,425 $ 405,063 15.6 %

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Interest and other expense, net $ (4,588) $ (3,826) 19.9 % $ (8,986) $ (7,561) 18.8 %

(Loss) income before provision (benefit) for income taxes $ (3,008) $ 7,980 n/m

Provision (benefit) for income taxes $ 1,446 $ (2,547) n/m

Income before provision for income taxes $ 19,922 $ 54,956 (63.7) % $ 16,914 $ 62,936 (73.1) %

Provision for income taxes $ 5,066 $ 6,855 (26.1) % $ 6,512 $ 4,308 51.2 %

% of pre-tax income 25.4 % 12.5 % 38.5 % 6.8 %

Net (loss) income $ (4,454) $ 10,527 n/m

Net income $ 14,856 $ 48,101 (69.1) % $ 10,402 $ 58,628 (82.3) %

% of net revenues 6.2 % 23.0 % 2.2 % 14.5 %

Net (loss) income per share - basic $ (0.09) $ 0.21 n/m

Net (loss) income per share - diluted $ (0.09) $ 0.21 n/m

Net revenues increased 16.8% during the three months ended July 3, 2021 as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, net revenues increased 14.0% during the three months ended July 3, 2021 as compared with the same periods of fiscal 2021.

Revenue increases in Hospital primarily drove the overall increase in revenue during the three months ended July 3, 2021.

Operating income decreased during the three months ended July 3, 2021, as compared with the same period of fiscal 2021, primarily due to increased spend related to the acquisition of Cardiva Medical, Inc.

(“Cardiva”), including higher transaction and integration costs driven by an increase in the fair value of contingent consideration and the amortization of the fair value inventory step-up, as well as asset impairments and increased intangible amortization expense.

The decrease was partially offset by favorable volumes and product mix, gains on divestitures and productivity savings from the 2020 Program.

Net income per share - basic $ 0.29 $ 0.95 (69.5) % $ 0.20 $ 1.16 (82.8) %

Net income per share - diluted $ 0.29 $ 0.94 (69.1) % $ 0.20 $ 1.15 (82.6) %

Net revenues increased 14.5% and 15.6% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, net revenues increased 13.5% and 13.7% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021 .

Revenue increases in Hospital primarily drove the overall increase in revenue during the three and six months ended October 2, 2021.

Operating income decreased during the three and six months ended October 2, 2021, as compared with the same period of fiscal 2021, primarily due to increased spend related to the acquisition of Cardiva Medical, Inc.

(“Cardiva”), including higher transaction and integration costs as well as increased intangible amortization expense.

During the six months ended October 2, 2021, costs driven by an increase in the fair value o f contingent consideration and the amortization of the fair value inventory step-up related to Cardiva, asset impairments and gains on divestitures during the prior period also contributed to the decrease.

The decrease during the three and six months ended October 2, 2021, was partially offset by favorable volumes and product mix and productivity savings from the 2020 Program.

Management's Use of Non-GAAP Measures

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Three Months Ended

(In thousands) July 3,

2021 June 27,

(In thousands) October 2,

2021 September 26,

2020 Reported growth Currency impact Constant currency growth (1)

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

Six Months Ended

(In thousands) October 2,

2021 September 26,

2020 Reported growth Currency impact Constant currency growth (1)

United States $ 293,134 $ 234,993 24.7 % — % 24.7 %

International 175,291 170,070 3.1 % 2.3 % 0.8 %

Net revenues $ 468,425 $ 405,063 15.6 % 1.9 % 13.7 %

(1) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency.

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

Our principal operations are in the U.S, Europe, Japan and other parts of Asia.

Our products are marketed in approximately 90 countries around the world through a combination of our direct sales force, independent distributors and agents.

Our revenue generated outside the U.S.

was 38.3% of total net revenues during the three months ended July 3, 2021, as compared with 43.2% during the three months ended June 27, 2020.

During the three and six months ended October 2, 2021 our revenue generated outside the U.S.

was 36.6% and 37.4%, respectively, of total net revenues, as compared with 40.8% and 42.0% during the three and six months ended September 26, 2020, respectively.

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) July 3,

2021 June 27,

(In thousands) October 2,

2021 September 26,

2020 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 $32.2 million and $24.0 million during the three months ended July 3, 2021 and June 27, 2020, respectively.

Hemostasis Management revenue increased 34.3% in the first quarter of fiscal 2022, as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, Hemostasis Management revenue increased 31.1% in the first quarter of fiscal 2022, as compared with the same period of fiscal 2021.

Plasma revenue increased 5.3% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, Plasma revenue increased 4.5% during the three months ended July 3, 2021 as compared with the same periods of fiscal 2021.

These increases were primarily driven by increase in volume of plasma disposables and increase in software revenue, partially offset by pricing adjustments and declines in plasma liquid solutions as a result of certain strategic exits within our liquid solutions business.

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.

(2) Hospital revenue includes Hemostasis Management revenue of $31.5 million and $26.0 million during the three months ended October 2, 2021 and September 26, 2020, respectively.

Hemostasis Management revenue increased 21.0% in the second quarter of fiscal 2022, as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, Hemostasis Management revenue increased 21.1% in the second quarter of fiscal 2022, as compared with the same period of fiscal 2021.

Hospital revenue also includes Vascular Closure revenue of $20.8 million for the three months ended October 2, 2021.

Six Months Ended

(In thousands) October 2,

2021 September 26,

2020 Reported growth Currency impact Constant currency growth (1)

Plasma $ 153,784 $ 146,619 4.9 % 0.6 % 4.3 %

Blood Center 149,687 152,702 (2.0) % 2.6 % (4.6) %

154,801 95,817 61.6 % 2.7 % 58.9 %

Service 10,153 9,925 2.3 % 4.3 % (2.0) %

Net revenues $ 468,425 $ 405,063 15.6 % 1.9 % 13.7 %

(1) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency.

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

(2) Hospital revenue includes Hemostasis Management revenue of $63.7 million and $50.0 million during the six months ended October 2, 2021 and September 26, 2020, respectively.

Hemostasis Management revenue increased 27.4% in the first six months of fiscal 2022, as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, Hemostasis Management revenue increased 25.9% in the first six months of fiscal 2022, as compared with the same period of fiscal 2021.

Hospital revenue also includes Vascular Closure revenue of $42.6 million for the six months ended October 2, 2021.

Plasma revenue increased 4.5% and 4.9% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, Plasma revenue increased 4.2% and 4.3% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

The increase during the three and six months ended October 2, 2021 was primarily driven by an increase in volume of plasma disposables and increase in software revenue, partially offset by pricing adjustments and declines in plasma liquid solutions as a result of certain strategic exits within our liquid solutions business.

Although we continue to experience the negative impact of COVID-19 on our business, we believe the impacts of the pandemic on plasma collection are temporary and anticipate volumes to recover.

However, the exact timing remains uncertain and may occur after 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 pharmaceutic als is expected to continue.

In early April 2021, CSL Plasma, Ltd.

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.

Blood Center revenue decreased 6.2% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, Blood Center revenue decreased 9.6% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

These decreases were primarily driven by the divestiture of certain blood donor management software solution assets and continued declines in whole blood disposables.

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.

Hospital revenue increased 75.1% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, Hospital revenue increased 70.3% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

These increases were primarily attributable to Vascular Closure revenue resulting from the acquisition of Cardiva and the impact of the COVID-19 pandemic on the prior year period.

The increases were partially offset by the divestiture of certain blood bank and hospital software solution assets.

Blood Center revenue increased 2.4% and decreased 2.0% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, Blood Center revenue increased 0.7% and decreased 4.6% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

The increase during the three months ended October 2, 2021 as compared with the same period of fiscal 2021 was primarily due to higher Apheresis disposable and equipment revenue in EMEA, partially offset by continued declines in whole blood disposables and the impact of previously discontinued customer contracts in North America.

during the six months ended October 2, 2021 as compared with the same period of fiscal 2021, was driven by continued declines in whole blood disposables and the divestiture of certain blood donor management software solution assets.

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.

The timing and magnitude of potential reversals in the future periods is likely to occur over an extended period of time as customers' risk aversion returns to normal along with safety stock levels.

Hospital revenue increased 49.7% and 61.6% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, Hospital revenue increased 48.8% and 58.9% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

The increase during three and six months ended October 2, 2021 was primarily attributable to Vascular Closure revenue resulting from the acquisition of Cardiva and the impact of the COVID-19 pandemic on the prior year period.

The increase was partially offset by 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 during fiscal 2022.

Three Months Ended

(In thousands) July 3,

2021 June 27,

Three Months Ended Six Months Ended

(In thousands) October 2,

2021 September 26,

2020 % Increase October 2,

2021 September 26,

2020 % Increase

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% of net revenues 51.1 % 50.5 % 49.2 % 48.3 %

Gross profit increased 20.1% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, gross profit increased 12.5% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

These increases were primarily driven by the addition of Vascular Closure, favorable volumes and product mix, lower expenses related to the COVID-19 pandemic and productivity savings from the 2020 Program.

The increase was partially offset by pricing adjustments, the amortization of the fair value inventory step-up related to the acquisition of Cardiva, asset impairments and recent divestitures.

Gross profit increased 15.9% and 17.8% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, gross profit increased 15.7% and 14.2% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021 .

The increase during three and six months ended October 2, 2021 was primarily driven by the addition of Vascular Closure, favorable volumes and product mix, lower expenses related to the COVID-19 pandemic and productivity savings from the 2020 Program.

The increase was partially offset by pricing adjustments, recent divestitures and inflationary pressures and higher freight costs in our global supply chain.

The increase during the six months ended October 2, 2021 was also partially offset by the amortization of the fair value inventory step-up related to the acquisition of Cardiva and asset impairments.

Operating Expenses

Three Months Ended

(In thousands) July 3,

2021 June 27,

Three Months Ended Six Months Ended

(In thousands) October 2,

2021 September 26,

2020 % Increase October 2,

2021 September 26,

2020 % Increase

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% of net revenues 4.8 % 3.9 % 5.1 % 4.0 %

Gains on divestitures and sale of assets $ (9,603) $ — n/m

Gains on divestitures and sale of assets $ — $ (31,498) n/m $ (9,603) $ (31,498) n/m

% of net revenues — % (15.0) % (2.1) % (7.8) %

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Research and Development

Research and development expenses increased 63.9% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, research and development expenses increased 61.2% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

These increases were primarily due to increased spend related to investments in our Hospital Business unit, primarily driven by Vascular Closure, as well as costs related to European Medical Device Regulation.

These increases were partially offset by cost savings related to the 2020 Program and lower restructuring and restructuring related costs.

Research and development expenses increased 60.5% and 62.3% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, research and development expenses increased 60.2% and 60.8% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

These increases were primarily due to increased spend related to investments in our Hospital Business unit, primarily driven by Vascular Closure, as well as costs related to MDR and IVDR .

The increase during the three and six months ended October 2, 2021, was partially offset by cost savings related to the 2020 Program.

Selling, General and Administrative

Selling, general and administrative expenses increased 46.4% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, selling, general, and administrative expenses increased 44.4% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

These increases were primarily due to increased spend related to the acquisition of Cardiva, including higher transaction and integration costs driven by an increase in the fair value of contingent consideration, and higher share-based and variable compensation expense, partially offset by asset impairments recognized in the prior year period and lower PCS2 related costs.

Selling, general and administrative expenses increased 19.2% and 32.7% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, selling, general, and administrative expenses increa sed 20.7% and 32.3% during the three and six months ended October 2, 2021, respectively, as compared with the same period of fiscal 2021.

The increase during three and six months ended October 2, 2021 was primarily due to increased spend related to the acquisition of Cardiva, higher freight costs and increased variable compensation expense, partially offset by cost savings related to the 2020 Program.

An increase in the fair value of contingent consideration also contributed to the increase during the six months ended October 2, 2021.

Amortization of Intangible Assets

We recognized amortization expense of $12.4 million and $8.3 million during the three months ended July 3, 2021 and June 27, 2020, respectively.

We recognized amortization expense of $11.4 million and $23.8 million during the three and six months ended October 2, 2021, respectively and $8.1 million and $16.4 million during the three and six months ended September 26, 2020, respectively.

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

Gains on Divestitures

We recognized gains on divestitures of $9.6 million during the three months ended July 3, 2021.

We recognized gains on divestitures of $9.6 million during the six months ended October 2, 2021.

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

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

There were no gains on divestitures during the three months ended June 27, 2020.

Interest and Other Expense, Net

Interest and other expenses increased 17.8% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

Without the effects of foreign exchange, interest and other expenses increased 16.5% during the three months ended July 3, 2021 as compared with the same period of fiscal 2021.

The increase is primarily driven by the amortization of deferred financing fees associated with the 2026 Notes and realized losses on interest rate swaps, partially offset by a reduction in interest expense from borrowings under our $350.0 million term loan and $350.0 million revolving loan due to lower borrowings.

The effective interest rate on total debt outstanding as of July 3, 2021 was 1.9%.

Interest and other expenses increased 19.9% and 18.8% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

Without the effects of foreign exchange, interest and other expenses increased 18.1% and 17.3% during the three and six months ended October 2, 2021, respectively, as compared with the same periods of fiscal 2021.

The increase during the three and six months ended October 2, 2021 was primarily driven by realized losses due to foreign currency and the amortization of deferred financing fees 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 due to lower borrowings.

The effective interest rate on total debt outstanding as of October 2, 2021 was 1.9%.

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

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statutory tax rate.

For the three months ended July 3, 2021, we reported income tax expense of $1.4 million representing an effective tax rate of (48.1)%.

The effective tax rate for the three months ended July 3, 2021 includes $0.8 million discrete tax expense relating to stock compensation shortfalls.

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

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

The effective tax rate was also impacted by the jurisdictional mix of earnings.

For the three and six months ended October 2, 2021, we reported income tax expense of $5.1 million and $6.5 million, respectively, representing effective tax rates of 25.4% and 38.5%, respectively.

The effective tax rate for the three and six months ended October 2, 2021 includes discrete tax expense relating to stock compensation shortfalls of $0.1 million and $0.9 million, respectively.

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

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

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

Liquidity and Capital Resources

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

(Dollars in thousands) July 3,

(Dollars in thousands) October 2,

2021 April 3,

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

The 2026 Notes have an effective interest rate of 2.72% as of July 3, 2021.

As of July 3, 2021, we had $173.5 million in cash and cash equivalents, the majority of which is held in the U.S.

The 2026 Notes have an effective interest rate of 2.72% as of October 2, 2021.

As of October 2, 2021, we had $192.4 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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The Company and its lenders 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 July 3, 2021, $297.5 million was outstanding under the term loan with an effective interest rate of 1.9%.

As of October 2, 2021, $293.1 million was outstanding under the term loan with an effective interest rate of 1.9%.

There were no borrowings outstanding on the revolving loan.

We also had $25.5 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of July 3, 2021.

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 October 2, 2021.

We have scheduled principal payments of $8.8 million required during the remainder of fiscal 2022.

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 July 3, 2021.

In August 2021, our Board of Directors approved a revised 2020 Program.

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 October 2, 2021.

During the second quarter of fiscal 2022, our Board of Directors approved a revised 2020 Program.

We now estimate that we will incur aggregate charges between $95 million and $105 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 2025.

During the three months ended July 3, 2021, we incurred $9.9 million of restructuring and restructuring related costs under this program.

Three Months Ended

(In thousands) July 3,

2021 June 27,

During the three and six months ended October 2, 2021, we incurred $4.6 million and $14.5 million, respectively, of restructuring and restructuring related costs under this program.

Six Months Ended

(In thousands) October 2,

2021 September 26,

Net cash provided by (used in):

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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 used in operating activities increased by $13.5 million during the three months ended July 3, 2021, as compared with the three months ended June 27, 2020.

The increase in cash used operating activities was primarily the result of an increase in working capital due to lower collections of accounts receivable and higher inventory growth as well as a reduction in net income, as adjusted for depreciation, amortization and other non-cash charges compared with the prior year period.

Net cash used in investing activities decreased by $8.0 million during the three months ended July 3, 2021, as compared with the three months ended June 27, 2020.

The decrease in cash used in investing activities was primarily the result of higher cash paid for acquisitions during the prior year period, partially offset by an increase in capital expenditures.

Net cash used in financing activities increased by $150.6 million during the three months ended July 3, 2021, as compared with the three months ended June 27, 2020, primarily due to a reduction in borrowings on our revolving credit facility, net of payments.

Net cash provided by operating activities increased by $0.8 million during the six months ended October 2, 2021, as compared with the six months ended September 26, 2020.

The increase in cash provided by operating activities was primarily the result of an increase in net income, as adjusted for depreciation, amortization and other non-cash charges compared with the prior period, partially offset by higher working capital due to lower collections of accounts receivable.

Net cash used in investing activities increased by $49.6 million during the six months ended October 2, 2021, as compared with the six months ended September 26, 2020.

The increase in cash used in investing activities was primarily the result of proceeds received from various divestitures during the prior year period and an increase in capital expenditures in the current year, partially offset by decreased acquisition spend.

Net cash used in financing activities increased by $89.6 million during the six months ended October 2, 2021, as compared with the six months ended September 26, 2020, primarily due to a reduction in borrowings on our revolving credit facility, net of payments.

Concentration of Credit Risk

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If the financial condition of customers or the countries' healthcare systems deteriorate such that their ability to make payments is uncertain, allowances may be required in future periods.

We do not believe that inflation had a significant impact on our results of operations for the periods presented.

Historically, we believe we have been able to mitigate the effects of inflation by improving our manufacturing and purchasing efficiencies, by increasing employee productivity and by adjusting the selling prices of products.

We continue to monitor inflation pressures generally and raw materials indices that may affect our procurement and production costs.

We experienced rising inflationary pressures in our global supply chain that had an impact on our results of operations during the six months ended October 2, 2021.

We continue to monitor inflationary pressures generally and raw materials indices that may affect our procurement and production costs.

Increases in the price of petroleum derivatives could result in corresponding increases in our costs to procure plastic raw materials.

We expect the inflationary pressures we have experienced in our global supply chain to continue at least through the remainder of fiscal 2022.

Historicall y, we have been able to mitigate the effects of inflation by improving our manufacturing and purchasing efficiencies, by increasing employee productivity and by adjusting the selling prices of products.

Foreign Exchange

During the three months ended July 3, 2021, 38.3% of our sales were generated outside the U.S., generally in foreign currencies, yet our reporting currency is the U.S.

During the three and six months ended October 2, 2021, 36.6% and 37.4%, 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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Recent Accounting Pronouncements

In July 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Update No.

Leases (Topic 842).

The new guidance requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease at lease commencement if the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria ASC 842 and the lessor would have otherwise recognized a day-one loss.

ASC Update No.

2021-05 is effective for annual periods beginning after December 15, 2021, and is applicable to us in fiscal 2023.

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

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

Cautionary Statement Regarding Forward-Looking Information

Certain statements that we make from time to time, including statements contained in this Annual Report on Form 10-K and incorporated by reference into this report, constitute “forward looking-statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q and incorporated by reference into this report, constitute “forward looking-statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements do not relate strictly to historical or current facts and reflect management’s assumptions, views, plans, objectives and projections about the future.

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For further discussion of these and other factors, see Item 1A.

Risk Factors in this report.

Risk Factors in our most recent Annual Report on Form 10-K.

• The effect of the ongoing COVID-19 pandemic, or outbreaks of communicable diseases, on our business, financial conditions and results of operations, including the time it will take for vaccines to be broadly distributed and accepted in the U.S.

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• Our ability to comply with established and developing U.S.

and foreign legal and regulatory requirements, including FCPA, MDR and similar laws in other jurisdictions, as well as U.S.

and foreign legal and regulatory requirements, including FCPA, MDR/IVDR and similar laws in other jurisdictions, as well as U.S.

and foreign export and import restrictions and tariffs;

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Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above and in Item 1A.

Risk Factors to be a complete statement of all potential risks and uncertainties.

Risk Factors in our Annual Report on Form 10-K to be a complete statement of all potential risks and uncertainties.

The Company does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments.

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