HAEMONETICS CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with both our interim condensed consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q and our annual consolidated financial statements, notes thereto and the MD&A contained in our Annual Report on Form 10-K for the fiscal year ended April 3, 2021. 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. Introduction 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”, “Haemonetics” and the “Company” mean Haemonetics Corporation. We view our operations and manage our business in three principal reporting segments: Plasma, Blood Center and Hospital. 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. “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 Operational Excellence Program During the second quarter of fiscal 2022, our Board of Directors approved the revised Operational Excellence Program (the “2020 Program”). The revised program is designed to improve product and service quality, reduce cost principally in our manufacturing and supply chain operations and ensure sustainability while helping to offset impacts from a previously announced customer loss, rising inflationary pressures and effects of the COVID-19 pandemic. We now expect to incur aggregate charges between $95 million and $105 million by the end of fiscal 2025 and to achieve total gross savings of $115 million to $125 million on an annualized basis once the program is completed. 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 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 24 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 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. 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 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. COVID-19 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 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 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 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 Nine Months Ended (In thousands, except per share data) January 1, 2022 December 26, 2020 % Increase/ (Decrease) January 1, 2022 December 26, 2020 % Increase/ (Decrease) Net revenues $ 259,769 $ 240,371 8.1 % $ 728,194 $ 645,434 12.8 % Gross profit $ 138,565 $ 120,257 15.2 % $ 369,191 $ 316,031 16.8 % % of net revenues 53.3 % 50.0 % 50.7 % 49.0 % Operating expenses $ 102,914 $ 79,832 28.9 % $ 307,640 $ 205,109 50.0 % Operating income $ 35,651 $ 40,425 (11.8) % $ 61,551 $ 110,922 (44.5) % % of net revenues 13.7 % 16.8 % 8.5 % 17.2 % Interest and other expense, net $ (4,263) $ (3,051) 39.7 % $ (13,249) $ (10,612) 24.8 % Income before provision for income taxes $ 31,388 $ 37,374 (16.0) % $ 48,302 $ 100,310 (51.8) % Provision for income taxes $ 8,156 $ 5,492 48.5 % $ 14,668 $ 9,800 49.7 % % of pre-tax income 26.0 % 14.7 % 30.4 % 9.8 % Net income $ 23,232 $ 31,882 (27.1) % $ 33,634 $ 90,510 (62.8) % % of net revenues 8.9 % 13.3 % 4.6 % 14.0 % Net income per share - basic $ 0.45 $ 0.63 (28.6) % $ 0.66 $ 1.79 (63.1) % Net income per share - diluted $ 0.45 $ 0.62 (27.4) % $ 0.65 $ 1.77 (63.3) % 25 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 Management uses non-GAAP financial measures, in addition to financial measures in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), to monitor the financial performance of the business, make informed business decisions, establish budgets and forecast future results. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with U.S. GAAP. Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency conversion rate. We have provided this non-GAAP financial measure because we believe it provides meaningful information regarding our results on a consistent and comparable basis for the periods presented. RESULTS OF OPERATIONS Net Revenues by Geography Three Months Ended (In thousands) January 1, 2022 December 26, 2020 Reported growth Currency impact Constant currency growth (1) United States $ 167,270 $ 147,607 13.3 % — % 13.3 % International 92,499 92,764 (0.3) % 0.6 % (0.9) % Net revenues $ 259,769 $ 240,371 8.1 % 0.2 % 7.9 % (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. ” Nine Months Ended (In thousands) January 1, 2022 December 26, 2020 Reported growth Currency impact Constant currency growth (1) United States $ 460,404 $ 382,600 20.3 % — % 20.3 % International 267,790 262,834 1.9 % 3.0 % (1.1) % Net revenues $ 728,194 $ 645,434 12.8 % 1.2 % 11.6 % (1) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency. See “ Management’s Use of Non-GAAP Measures. ” Our principal operations are in the U.S, Europe, Japan and other parts of Asia. 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 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. Our results of operations are impacted by changes in foreign exchange rates, particularly in the value of the Yen, Euro and Australian Dollar relative to the U.S. Dollar. We have placed foreign currency hedges to mitigate our exposure to foreign currency fluctuations. 26 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 Three Months Ended (In thousands) January 1, 2022 December 26, 2020 Reported growth Currency impact Constant currency growth (1) Plasma $ 96,460 $ 101,934 (5.4) % (0.1) % (5.3) % Blood Center 75,692 80,920 (6.5) % 0.8 % (7.3) % Hospital (2) 82,273 52,651 56.3 % (0.6) % 56.9 % Service 5,344 4,866 9.8 % 0.5 % 9.3 % Net revenues $ 259,769 $ 240,371 8.1 % 0.2 % 7.9 % (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 $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) Plasma $ 250,244 $ 248,553 0.7 % 0.3 % 0.4 % Blood Center 225,379 233,622 (3.5) % 2.0 % (5.5) % Hospital (2) 237,074 148,468 59.7 % 1.5 % 58.2 % Service 15,497 14,791 4.8 % 3.1 % 1.7 % Net revenues $ 728,194 $ 645,434 12.8 % 1.2 % 11.6 % (1) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency. See “ Management’s Use of Non-GAAP Measures. ” (2) Hospital revenue includes Hemostasis Management revenue 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 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. 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. 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. 27 Blood Center 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 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. Gross Profit Three Months Ended Nine Months Ended (In thousands) January 1, 2022 December 26, 2020 % Increase January 1, 2022 December 26, 2020 % Increase Gross profit $ 138,565 $ 120,257 15.2 % $ 369,191 $ 316,031 16.8 % % of net revenues 53.3 % 50.0 % 50.7 % 49.0 % 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. 28 Operating Expenses Three Months Ended Nine Months Ended (In thousands) January 1, 2022 December 26, 2020 % Increase January 1, 2022 December 26, 2020 % Increase/ (Decrease) Research and development $ 10,037 $ 7,501 33.8 % $ 33,591 $ 22,014 52.6 % % of net revenues 3.9 % 3.1 % 4.6 % 3.4 % Selling, general and administrative $ 80,726 $ 65,641 23.0 % $ 247,722 $ 191,504 29.4 % % of net revenues 31.1 % 27.3 % 34.0 % 29.7 % Amortization of intangible assets $ 12,151 $ 7,805 55.7 % $ 35,930 $ 24,204 48.4 % % of net revenues 4.7 % 3.2 % 4.9 % 3.8 % 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) % Total operating expenses $ 102,914 $ 79,832 28.9 % $ 307,640 $ 205,109 50.0 % % of net revenues 39.6 % 33.2 % 42.2 % 31.8 % Research and Development 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 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 $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. 29 Gains on Divestitures 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 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%. Income Taxes We conduct business globally and report our results of operations in a number of foreign jurisdictions in addition to the United States. 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. statutory tax rate. 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) January 1, 2022 April 3, 2021 Cash & cash equivalents $ 236,877 $ 192,305 Working capital $ 374,044 $ 440,051 Current ratio 2.1 2.7 Net debt (1) $ (540,305) $ (515,303) Days sales outstanding (DSO) 54 51 Inventory turnover 1.3 1.2 (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 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, including the build out of our new manufacturing facility in Clinton, PA, cash payments under our credit agreement and restructuring initiatives. 30 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. 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 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. 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 (together with the term loan, as amended from time to time, the “Credit Facilities”). 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. 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 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 $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. 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 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. Cash Flows Nine Months Ended (In thousands) January 1, 2022 December 26, 2020 Net cash provided by (used in): Operating activities $ 104,213 $ 107,258 Investing activities (51,833) 3,658 Financing activities (6,984) (65,307) Effect of exchange rate changes on cash and cash equivalents (1) (824) 6,082 Net change in cash and cash equivalents $ 44,572 $ 51,691 (1) The balance sheet is affected by spot exchange rates used to translate local currency amounts into U.S. Dollars. In accordance with U.S. 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 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. 31 Concentration of Credit Risk Concentrations of credit risk with respect to trade accounts receivable are generally limited due to our large number of customers and their diversity across many geographic areas. Certain markets and industries, however, can expose us to concentrations of credit risk. For example, in the Plasma business unit, sales are concentrated with several large customers. As a result, accounts receivable extended to any one of these biopharmaceutical customers can be significant at any point in time. In addition, a portion of our trade accounts receivable outside the U.S. include sales to government-owned or supported healthcare systems in several countries, which are subject to payment delays and local economic conditions. Payment is dependent upon the financial stability and creditworthiness of those countries ’ national economies. We have not incurred significant losses on receivables. We continually evaluate all receivables for potential collection risks associated with the availability of government funding and reimbursement practices. 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. Inflation 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 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 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. Dollar. We also incur certain manufacturing, marketing and selling costs in international markets in local currency. Our primary foreign currency exposures relate to sales denominated in Euro, Japanese Yen, Chinese Yuan and Australian Dollars. We also have foreign currency exposure related to manufacturing and other operational costs denominated in Swiss Francs, Canadian Dollars, Mexican Pesos and Malaysian Ringgit. The Yen, Euro, Yuan and Australian Dollar sales exposure is partially mitigated by costs and expenses for foreign operations and sourcing products denominated in foreign currencies. Since our foreign currency denominated Yen, Euro, Yuan and Australian Dollar sales exceed the foreign currency denominated costs, whenever the U.S. Dollar strengthens relative to the Yen, Euro, Yuan or Australian Dollar, there is an adverse effect on our results of operations and, conversely, whenever the U.S. Dollar weakens relative to the Yen, Euro, Yuan or Australian Dollar, there is a positive effect on our results of operations. For Swiss Francs, Canadian Dollars Mexican Pesos and Malaysian Ringgit our primary cash flows relate to product costs or costs and expenses of local operations. Whenever the U.S. Dollar strengthens relative to these foreign currencies, there is a positive effect on our results of operations. Conversely, whenever the U.S. Dollar weakens relative to these currencies, there is an adverse effect on our results of operations. We have a program in place that is designed to mitigate our exposure to changes in foreign currency exchange rates. That program includes the use of derivative financial instruments to minimize, for a period of time, the unforeseen impact on our financial results from changes in foreign exchange rates. We utilize forward foreign currency contracts to hedge the anticipated cash flows from transactions denominated in foreign currencies, primarily Japanese Yen and Euro, and to a lesser extent Swiss Francs, Australian Dollars, Canadian Dollars and Mexican Pesos. This does not eliminate the volatility of foreign exchange rates, but because we generally enter into forward contracts one year out, rates are fixed for a one-year period, thereby facilitating financial planning and resource allocation. These contracts are designated as cash flow hedges. The final impact of currency fluctuations on the results of operations is dependent on the local currency amounts hedged and the actual local currency results. Recent Accounting Pronouncements There are currently no recent accounting pronouncements that we expect to have a material impact on our financial position and results of operations. 32 Cautionary Statement Regarding Forward-Looking Information 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. Forward-looking statements may be identified by the use of words such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “foresees,” “potential” and other words of similar meaning in conjunction with, among other things: discussions of future operations; expected operating results and financial performance; impacts of the COVID-19 pandemic; the Company’s strategy for growth; product development, commercialization and anticipated performance and benefits; regulatory approvals; impacts of acquisitions or dispositions; market position and expenditures. Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of the Company ’ s control. Investors should realize that if underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, the Company’s actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements. Investors are therefore cautioned not to rely on these forward-looking statements. The following are some important factors that could cause our actual results to differ from our expectations in any forward-looking statements. For further discussion of these and other factors, see Item 1A. 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. and the rest of the world, and the effectiveness of such vaccines in slowing or stopping the spread of COVID-19 and mitigating the economic effects of the pandemic; • Failure to achieve our long-term strategic and financial-improvement goals; • Demand for and market acceptance risks for new and existing products, including material reductions in purchasing from or loss of a significant customer; • Product quality or safety concerns, leading to product recalls, withdrawals, regulatory action by the FDA (or similar non-U.S. regulatory agencies), reputational damage, declining sales or litigation; • Security breaches of our information technology systems or our products, which could impair our ability to conduct business or compromise sensitive information of the Company or its customers, suppliers and other business partners, or of customers ’ patients; • Pricing pressures resulting from trends toward healthcare cost containment, including the continued consolidation among healthcare providers and other market participants; • The continuity, availability and pricing of plastic and other raw materials, finished goods and components used in the manufacturing of our products (including those purchased from sole-source suppliers) and the related continuity of our manufacturing, sterilization, supply and distribution; • Our ability to develop, manufacture and market new products and technologies successfully and in a timely manner and the ability of our competitors and other third parties to develop products or technologies that render our products or technologies noncompetitive or obsolete; • Our ability to obtain the anticipated benefits of restructuring programs that we have or may undertake, including the Operational Excellence Program; • The potential that the expected strategic benefits and opportunities from our acquisition of Cardiva and any other planned or completed acquisition or divestiture by the Company may not be realized or may take longer to realize than expected; 33 • The impact of enhanced requirements to obtain regulatory approval in the U.S. and around the world and the associated timing and cost of product approval; • Our ability to comply with established and developing 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; • Our ability to meet our debt obligations and raise additional capital when desired on terms reasonably acceptable to us; • The potential impact of our convertible senior notes and related capped call transactions; • Our ability to execute and realize anticipated benefits from our investments in emerging economies; • The potential effect of foreign currency fluctuations and interest rate fluctuations on our net sales, expenses, and resulting margins; • The impact of changes in U.S. and international tax laws; • Our ability to protect intellectual property and the outcome of patent litigation; • Costs and risks associated with product liability and other litigation claims; • Our ability to retain and attract key personnel; and • Market conditions impacting our stock price and/or share repurchase programs we may enter into from time to time, and the possibility that such share repurchase programs may be delayed, suspended or discontinued. 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 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.