What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-08 compared with 2021-11-09 · 122 added, 113 removed, 234 unchanged (50% of the section changed)

18 unchanged sentences

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 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.

During the three and nine months ended January 1, 2022, the Company incurred $5.7 million and $20.2 million, respectively, of restructuring and restructuring related costs under this program.

During the three and

nine months ended December 26, 2020 , the Company incurred $3.1 million and $11.1 million, respectively, of restructuring and restructuring related costs under this program.

Total cumulative charges under this program are $47.2 million as of January 1, 2022.

CSL Contract Loss

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.

informed Haemonetics 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.

1 unchanged sentence

In the first quarter of fiscal 2022, we incurred an additional $2.8 million of accelerated depreciation expense relating to disposables manufacturing equipment that is no longer in use .

During the third quarter of fiscal 2022, we amended the Supply Agreement to allow CSL to continue to use our PCS2 devices and purchase disposables through December 2023.

The extension provides CSL the ability to utilize our devices and disposables in their collection centers on a non-exclusive basis, and we are working with them to quantify their volume requirements over the life of the agreement.

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 2022 significantly impacted our financial results.

The progression of the COVID-19 pandemic during fiscal 2022 has 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.

Our manufacturing and supply chain remain ope rational without significant disruptions an d 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 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 the MD&A 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 Six Months Ended

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

2021 September 26,

Three Months Ended Nine Months Ended

(In thousands, except per share data) January 1,

2022 December 26,

2020 % Increase/

(Decrease) October 2,

2021 September 26,

(Decrease) January 1,

2022 December 26,

2020 % Increase/

13 unchanged sentences

Net income per share - diluted $ 0.45 $ 0.62 (27.4) % $ 0.65 $ 1.77 (63.3) %

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.

Net revenues increased 8.1% and 12.8% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, net revenues increased 7.9% and 11.6% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021 .

Revenue increases in Hospital, primarily Vascular Closure, drove the overall increase in revenue during the three and nine months ended January 1, 2022.

Operating income decreased 11.8% and 44.5% during the three and nine months ended January 1, 2022, respectively, 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, an increase in the fair value o f contingent consideration and increased freight costs.

During the nine months ended January 1, 2022, costs driven by 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 nine months ended January 1, 2022, was partially offset by favorable volumes and product mix and productivity savings from the 2020 Program.

Management’s Use of Non-GAAP Measures

7 unchanged sentences

Three Months Ended

(In thousands) October 2,

2021 September 26,

(In thousands) January 1,

2022 December 26,

2020 Reported growth Currency impact Constant currency growth (1)

4 unchanged sentences

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

Six Months Ended

(In thousands) October 2,

2021 September 26,

Nine Months Ended

(In thousands) January 1,

2022 December 26,

2020 Reported growth Currency impact Constant currency growth (1)

6 unchanged sentences

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

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.

During the three and nine months ended January 1, 2022 our revenue generated outside the U.S .

was 35.6% and 36.8%, respectively, of total net revenues, as compared with 38.6% and 40.7% during the three and nine months ended December 26, 2020, respectively.

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

4 unchanged sentences

Three Months Ended

(In thousands) October 2,

2021 September 26,

(In thousands) January 1,

2022 December 26,

2020 Reported growth Currency impact Constant currency growth (1)

6 unchanged sentences

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

(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,

(2) Hospital revenue includes Hemostasis Management revenue of $33.5 million and $28.5 million during the three months ended January 1, 2022 and December 26, 2020, respectively.

Hemostasis Management revenue increas ed 17.5% in t he third quarter of fiscal 2022, as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, Hemostasis Management revenue increas ed 18.4% in t he third quarter of fiscal 2022, as compared with the same period of fiscal 2021.

Hospital revenue also includes Vascular Closure revenue of $24.3 millio n for the three months ended January 1, 2022.

Nine Months Ended

(In thousands) January 1,

2022 December 26,

2020 Reported growth Currency impact Constant currency growth (1)

6 unchanged sentences

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.

(2) Hospital revenue includes Hemostasis Management revenue o f $97.2 million and $78.5 million during the nine months ended January 1, 2022 and December 26, 2020, respectively.

Hemostasis Management revenu e increased 23.8% i n the first nine months of fiscal 2022, as compared with the same period of fiscal 2021.

Without the effect of foreign exchange, Hemostasis Management revenu e increased 23.2% in the first n ine months of fiscal 2022, as compared with the same period of fiscal 2021.

Hospital revenue also includes Vascular Closure revenue of $66.8 million for the nine months ended January 1, 2022.

Plasma revenue decreased 5.4% and increased 0.7% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, Plasma revenue decreased 5.3% and increased 0.4% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

The decrease during the three months ended January 1, 2022, as compared with the same period of fiscal 2021 was primarily driven by a decline in plasma liquid solutions and a large stocking order in the prior period.

The i ncrease during the nine months ended January 1, 2022 was 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.

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

However, the exact timing of the recovery remains uncertain and is expected to 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 pharmaceuticals is expected to continue.

In early April 2021, CSL Plasma, Ltd.

1 unchanged sentence

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

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.

During the third quarter of fiscal 2022, we amended the Supply Agreement to allow CSL to continue to use our PCS2 devices and purchase disposables through December 2023.

Blood Center revenue decreased 6.5% and 3.5% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, Blood Center revenue decreased 7.3% and 5.5% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

The decrease during the three and nine months ended January 1, 2022 as compared with the same periods of fiscal 2021 was primarily driven by continued declines in whole blood disposables and the impact of previously discontinued customer contracts in North America as well as an apheresis stocking order in the prior year period.

The divestiture of certain blood donor management software solution assets in fiscal 2021 also contributed to the decline during the nine months ended January 1, 2022, as compared with the same period of fiscal 2021.

We have not yet experienced the reversal of the large stocking orders made by distributors and blood collectors during the first quarter of fisc al 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 Six Months Ended

(In thousands) October 2,

2021 September 26,

2020 % Increase October 2,

2021 September 26,

Hospital revenue increased 56.3% and 59.7% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, Hospital revenue increased 56.9% and 58.2% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

The increase during the three and nine months ended January 1, 2022 was primarily attributable to Vascular Closure revenue resulting from the acquisition of Cardiva and an increase in TEG disposables revenue in the U.S.

The increase during the nine months ended January 1, 2022 also reflected the impact of the COVID-19 pandemic on the prior year period, partially offset by the divestiture of certain blood bank and hospital software solution assets during the same period of fiscal 2021.

W e 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.

Three Months Ended Nine Months Ended

(In thousands) January 1,

2022 December 26,

2020 % Increase January 1,

2022 December 26,

2020 % Increase

1 unchanged sentence

% of net revenues 53.3 % 50.0 % 50.7 % 49.0 %

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.

Gross profit increased 15.2% and 16.8% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, gross profit increased 14.4% and 14.3% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021 .

The increase during the three and nine months ended January 1, 2022 was primarily driven by the addition of Vascular Closure, favorable volumes and product mix, lower expenses related to the COVID-19 pandemic, currency translation, and productivity savings from the 2020 Program.

The increase was partially offset by recent divestitures in fiscal 2021 and inflationary pressures and higher freight costs in our global supply chain.

The increase during the nine months ended January 1, 2022 was also partially offset by pricing adjustments, the amortization of the fair value inventory step-up related to the acquisition of Cardiva and asset impairments.

Operating Expenses

Three Months Ended Six Months Ended

(In thousands) October 2,

2021 September 26,

2020 % Increase October 2,

2021 September 26,

Three Months Ended Nine Months Ended

(In thousands) January 1,

2022 December 26,

2020 % Increase January 1,

2022 December 26,

2020 % Increase/

5 unchanged sentences

% of net revenues 4.7 % 3.2 % 4.9 % 3.8 %

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

Gains on divestitures and sale of assets $ — $ (1,115) n/m $ (9,603) $ (32,613) (70.6) %

% of net revenues — % (0.5) % (1.3) % (5.1) %

2 unchanged sentences

Research and Development

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.

Research and development expenses increased 33.8% and 52.6% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, research and development expenses increased 33.4% and 51.5% during the three and nine months ended January 1, 2022, 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 compliance with the European Union Medical Device Regulation (“MDR”) and In Vitro Diagnostic Regulation (“IVDR”) requirements.

The increase during the three and nine months ended January 1, 2022, was partially offset by cost savings related to the 2020 Program.

Selling, General and Administrative

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.

Sell ing, general and administrative expenses increased 23.0% and 29.4% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

Without the effect of foreign exchange, selling, general, and administrative expenses increased 23.1% and 27.9% during the three and nine months ended January 1, 2022, respectively, as compared with the same period of fiscal 2021.

The increase during three and nine months ended January 1, 2022 was primarily due to spend related to the acquisition of Cardiva, including the increase in the fair value of contingent consideration.

Higher freight costs also contributed to these increases, which were partially offset by cost savings related to the 2020 Program.

Amortization of Intangible Assets

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.

We recognized amortization expense of $12.2 million and $35.9 million during the three and nine months ended January 1, 2022, respectively and $7.8 million and $24.2 million during the three and nine months ended December 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 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.

We recognized gains on divestitures of $9.6 million during the nine months ended January 1, 2022.

We recognized gains on divestitures of $1.1 million and $32.6 million during the three and nine months ended December 26, 2020, respectively.

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.

Interest and Other Expense, Net

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%.

Interest and other expenses increased 39.7% and 24.8% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

Without the effects of foreign exchange, interest and other expenses increased 40.6% and 24.0% during the three and nine months ended January 1, 2022, respectively, as compared with the same periods of fiscal 2021.

The increase during the three and nine months ended January 1, 2022 wa s primarily driven by realized losses due to foreign currency and the amortization of deferred financing fees associated with our March 2021 issuance of $500 million in aggregate principal amount of 0% convertible senior 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 our term loan and revolving loan as of January 1, 2022 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.

1 unchanged sentence

statutory tax rate.

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.

For the three and nine months ended January 1, 2022, we reported income tax expense of $8.2 million and $14.7 million, respectively, representing effective tax rates of 26.0% and 30.4%, respectively.

The effective tax rate for the nine months ended January 1, 2022 includes discrete tax expense relating to stock compensation shortfalls of $0.9 million, with no discrete tax expense relating to stock compensation shortfalls recorded in the three months ended January 1, 2022.

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

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

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

During the three and nine months ended December 26, 2020, the Company sold its Fajardo, Puerto Rico manufacturing operations, certain U.S.

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

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

Liquidity and Capital Resources

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

(Dollars in thousands) October 2,

(Dollars in thousands) January 1,

2022 April 3,

6 unchanged sentences

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

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations, 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 ope rations, our revolving credit line that expires in the first quarter of fiscal 2024 and proceeds from employee stock option exerci ses.

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 acquisitions, investments, capital expenditures and the build out of our new manufacturing facility in Clinton, PA, cash payments under the loan agreement and restructuring initiatives.

In March 2021, we issued $500.0 million aggregate principal amount of 0% convertible senior notes due 2026, or the 2026 Notes.

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

In March 2021, the Company 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.

2 unchanged sentences

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 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.

The 2026 Notes have an effective interest rate of 0.5% as of January 1, 2022.

As of January 1, 2022, we had $236.9 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.

3 unchanged sentences

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

As of January 1, 2022, $288.8 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 $25.6 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 October 2, 2021.

We also had $24.7 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of January 1, 2022.

The Company has scheduled principal payments of $4.4 million and $214.4 million required during the remainder of fiscal 2022 and during fiscal 2023, respectively.

The Company was in compliance with the leverage and interest coverage ratios specified in the credit agreement as well as all other bank covenants as of January 1, 2022.

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

1 unchanged sentence

These charges, the majority of which will result in cash outlays, including severance and other employee costs, will be incurred as the specific actions required to execute these initiatives are identified and approved and are expected to be substantially completed by the end of fiscal 2025.

During the three and six months ended 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,

During the three and nine months ended January 1, 2022, we incurred $5.7 million and $20.2 million, respectively, of restructuring and restructuring related costs under this program.

Nine Months Ended

(In thousands) January 1,

2022 December 26,

Net cash provided by (used in):

7 unchanged sentences

GAAP, we have removed the effect of foreign currency throughout our cash flow statement, except for its effect on our cash and cash equivalents.

Net cash provided by operating activities increased by $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.

Net cash provided by operating activities decreased by $3.0 million during the nine months ended January 1, 2022, as compared with the nine months ended December 26, 2020 .

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

Net cash used in investing activities increased by $55.5 million during the nine months ended January 1, 2022, as compared with the nine months ended December 26, 2020.

The increase in cash used in investing activities was primarily the result of an increase in capital expenditures in the current year and lower proceeds received from various divestitures during fiscal 2021 as compared to fiscal 2022, partially offset by decreased acquisition spend.

Net cash used in financing activities increased by $58.3 million during the nine months ended January 1, 2022, as compared with the nine months ended December 26, 2020 , primarily due to a repayment of the revolving credit facility in fiscal 2021.

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 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 experienced rising inflationary pressures in our global supply chain that had an impact on our results of operations during the nine months ended January 1, 2022.

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.

We expect the inflationary pressures we have experienced in our global supply chain to continue into fiscal 2023.

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

Foreign Exchange

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.

During the three and nine months ended January 1, 2022, 35.6% and 36.8%, 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.

67 unchanged sentences

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