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Item 1A. Risk Factors

2022-05-25 compared with 2021-05-26 · 112 added, 100 removed, 275 unchanged (44% of the section changed)

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The COVID-19 outbreak has significantly impacted economic activity and markets around the world and is negatively impacting our business, financial condition, cash flows and results of operations in numerous ways, including, but not limited to, those outlined below.

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:

We are unable to predict the extent to which COVID-19 and its related impacts will continue to negatively affect our Company, including the time it will take for vaccines to be broadly distributed and administered worldwide, and the effectiveness of such vaccines in slowing or stopping the spread of COVID-19 and its variants and mitigating the economic effects of the pandemic:

• Product Demand .

As a result of COVID-19, we have experienced both decreased demand and increased volatility in demand for our products.

Lower collection volumes at source plasma collection centers due to COVID-19 factors, including stay-at-home and other government orders designed to slow the spread of COVID-19, donor safety concerns, reduced donor collection capacity due to shutdowns and social distancing requirements, and government economic relief programs that may reduce the propensity of people to be donors, have adversely affected and likely will continue to adversely affect demand for our Plasma disposable products.

Additionally, reductions in elective surgeries and trauma cases, restrictions on vendor access at customer sites and the reallocation of hospital resources to address critical intensive care needs during the COVID-19 pandemic have reduced and will likely continue to reduce demand for our Hospital products.

We also have experienced, and may continue to experience, in certain markets rapid and unpredictable changes in demand for some of our Blood Center disposable products as blood collectors seek to replenish their blood product inventories and safety stocks.

Such changes could impact our ability to meet demand on a timely basis or could result in potential reductions in demand in future periods if safety stock levels in certain markets return to pre-COVID-19 levels or the supply of blood held by our customers significantly exceeds the demand for blood from hospitals due to declines of elective surgeries and trauma cases.

Lower collection volumes at source plasma collection centers due to COVID-19 factors, including stay-at-home and other government orders designed to slow the spread of COVID-19, donor safety concerns, reduced donor collec tion capacity due to shutdowns and social distancing requirements, and government economic relief programs that may reduce the propensity of people to be donors, have adversely affected and will likely continue to adversely affect demand for our Plasma disposable products.

While elective procedures and hospital capital purchases have increased from initially depressed levels earlier in the pandemic, demand for our Hospital products has been, and in the future may continue to be, negatively impacted by resurgences in COVID-19 and its variants that result in reductions in elective surgeries and trauma cases, restrictions on vendor access at customer sites and the reallocation of hospital resources to address critical intensive care needs.

We also have experienced, and may continue to experience, in certain markets rapid and unpredictable changes in demand for some of our Blood Center disposable products both from reductions in donation volumes relating to resurgences in COVID-19 and its variants and as blood collectors seek to replenish their blood product inventories and safety stocks.

Such changes could impact our ability to meet demand on a timely basis or could result in potential reductions in demand in future periods, including if safety stock levels in certain markets return to pre-COVID-19 levels or the supply of blood held by our customers significantly exceeds the demand for blood from hospitals due to declines of elective surgeries and trauma cases.

• Manufacturing, Supply Chain and Distribution System Disruption .

COVID-19 and its associated economic disruptions could have an adverse impact on our manufacturing capacity, supply chains and distribution systems, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking and financial difficulties experienced by our third-party manufacturers and suppliers.

COVID-19 and its associated economic disruptions could have an adverse impact on our manufacturing capacity, supply chains and distribution systems, including impacts associated with preventive and precautionary measures that we, other businesses and governments are taking, such as the recent area-wide lockdowns implemented in China;

labor shortages and other financial difficulties experienced by our third-party manufacturers and suppliers;

and challenges to our global transportation channels and other aspects of our global supply chain network, including the cost and availability of raw materials and components due to shortages and resulting cost inflation.

Although we have not experienced significant manufacturing or supply chain difficulties to date as a result of COVID-19, we may in the future.

A reduction or interruption in any of our manufacturing processes could have a material adverse effect on our business.

Delays or disruptions experienced by our suppliers and manufacturers caused by the COVID-19 pandemic and associated economic disruptions may prevent us from obtaining raw materials and component parts for our products in a timely manner.

Additionally, China implemented area-wide lockdowns in early 2022 to control the spread of COVID-19, which have disrupted and may continue to disrupt our ability to distribute certain products in China.

A protracted reduction or interruption in any of our manufacturing and distribution processes could have a material adverse effect on our business.

• Potential Liquidity and Credit Impacts .

While we have significant sources of cash and liquidity and access to committed credit lines, we may be adversely impacted by delays in payments of outstanding receivables if our customers experience financial difficulties or are unable to borrow money to fund their operations, which may adversely impact their ability to pay for our products on a timely basis, if at all, which in turn would adversely affect our financial condition.

These and other impacts of COVID-19 may also have the effect of heightening many of the other risks described in the Risk Factors section of this Annual Report on Form 10-K.

We believe the magnitude of the adverse impact of these factors on our business, financial condition, cash flows and results of operations will be primarily driven by:

the severity and duration of the COVID-19 pandemic, including the time it will take for vaccines to be broadly distributed and accepted in the U.S.

and the rest of the world;

While we have significant sources of cash and liquidity and access to committed credit lines, w e may be adversely impacted by delays in payments of outstanding receivables if our customers experience financial difficulties or are unable to borrow money to fund their operations, which may adversely impact their ability to pay for our products on a timely basis, if at all, which in turn would adversely affect our financial condition.

As these and other impacts of COVID-19 continue to adversely affect our Company, they may also have the effect of heightening many of the ot her risks described in the Risk Factors section of this Annual Report on Form 10-K.

We believe the magnitude of the adverse impact of these factors on our business, financial condition, cash flows and results of operations in the future will be primarily driven by:

the severity and duration of the COVID-19 pandemic (including the extent of future surges, variants and the efficacy of vaccinations);

global vaccine distribution and acceptance;

the timing, scope and effectiveness of governmental responses to the COVID-19 pandemic and associated economic disruptions;

general confidence about personal health and safety;

general confidence about personal health a nd safety;

and the COVID-19 pandemic’s impact on U.S.

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If we have not correctly identified the product categories with greatest growth potential, we will not allocate our resources appropriately which could have a material adverse effect on our business, financial condition or results of operations.

Further, if we are unable to reduce costs and complexity in our Blood Center business unit, we will obtain lower than expected cash flows to fund our future growth and capital needs.

This could have a material adverse effect on our liquidity and results of operations.

Material reductions in purchasing from or loss of a significant customer could adversely affect our business.

In fiscal 2021, our two largest Plasma customers each accounted for more than 10% of our net revenues and our ten largest customers accounted for approximately 49% of our net revenues.

In April 2021, one of these customers, 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 in the U.S.

following the expiration of the current term in June 2022.

In addition to the anticipated financial impact of the non-renewal of the CSL supply agreement in June 2022, we could experience an adverse effect on our results of operations or financial condition if any of our other largest customers materially reduce their purchases from us or terminate their relationship with us for any reason, including material decreases in demand for plasma or development of alternative processes.

If we are unable to negotiate competitive pricing or generate adequate disposable sales volumes from customers following conversion to our NexSys PCS platform, we may not realize the intended benefits of our investment.

We have focused heavily on the development and commercialization of our NexSys platform, comprised of both the NexSys PCS plasmapheresis system and NexLynk DMS software, and continuous platform innovation as reflected in our receipt of FDA clearance for NexSys PCS with Persona technology during fiscal 2021.

Since the commercial launch of our NexSys platform in fiscal 2019, we have entered into long-term contracts with each of our major customers that provide for conversion to NexSys within some portion of their collection network.

If we fail to receive pricing or generate disposable sales volumes from customers following conversion to our NexSys PCS platform that provide an adequate return on our investment, we may not realize the full intended benefits of our investment.

In fiscal 2022, our largest Plasma customer, CSL, accounted for more than 10% of our net revenues and our ten largest customers accounted for approximately 45% of our net revenues.

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 in the U.S.

following the expiration of the current term, which was amended in fiscal 2022 to extend on a non-exclusive basis through December 2023.

In addition to the anticipated financial impact of the expiration of the CSL supply agreement in Decembe r 2023, we could experience an adverse effect on our results of operations or financial condition if any of our other largest customers materially re duce their purchases from us or terminate their relationship with us for any reason, including material decreases in demand for plasma or development of alternative processes.

We face intense competition, and if we are unable to successfully expand our product lines through internal research and new product development or keep pace with rapid technological changes in the healthcare industry, our business may be materially and adversely affected.

A significant element of our strategy is to increase revenue growth by focusing on innovation and new product development.

The medical device markets in which we participate, however, are highly competitive.

We encounter significant competition across our product lines and in each market in which our products are sold from various medical device companies, some of whom have greater financial and marketing resources than we do.

In addition, the medical device markets in which we participate and healthcare industry generally are characterized by extensive research and development and rapid technological change.

New product development requires significant investment in research and development, clinical trials and regulatory approvals.

The results of our product development efforts may be affected by a number of factors, including our ability to anticipate customer needs, innovate and develop new products and technologies, successfully complete clinical trials, obtain regulatory approvals in the United States and abroad, manufacture products in a cost-effective manner, obtain appropriate intellectual property protection for our products, and gain and maintain market acceptance of our products.

In addition, patents attained by others could preclude or delay our commercialization of a product.

There can be no assurance that any products now in development or that we may seek to develop in the future will achieve technological feasibility, obtain regulatory approval or gain market acceptance.

If we fail to develop new products or enhance existing products, or if competitive technologies or therapeutic alternatives to plasma-derived pharmaceuticals in development, such as FcRn-targeted therapies, emerge and gain market acceptance, such events could have a material adverse effect on our business, financial condition or results of operations.

In addition, a delay in the timing of the launch of next-generation products and the overall performance of, and continued customer confidence in, those products may result in declines in our market share and have an adverse impact on our business, financial condition or results of operations.

Defects or quality issues associated with our products could adversely affect the results of operations.

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In some circumstances, such adverse events could also cause delays in regulatory approval of new products or the imposition of post-market approval requirements.

Our success depends on our ability to attract and retain key personnel needed to successfully operate the business and to plan for future executive transitions.

Our ability to compete effectively depends on our ability to attract and retain key employees, including people in senior management, sales, marketing and R&D positions, and to facilitate seamless leadership transitions for key positions.

Our ability to recruit and retain key talent will depend on a number of factors, including hiring practices of our competitors, compensation and benefits, work location, work environment, COVID-19 related health and safety protocols (including vaccine mandates) and industry economic conditions.

In December 2019, we relocated our corporate headquarters to a leased office space in Boston, Massachusetts and in response to the COVID-19 pandemic, we instituted remote working practices for many of our employees.

Although we believe our move to Boston and the steps we have taken to build a collaborative, performance driven culture and to maintain employee well-being during COVID-19 will help us to attract and retain key talent, we face intense competition for talent in our industry, particularly as employees are increasingly able to work remotely.

Vaccine mandates applicable to our employees may also lead to employee attrition, challenges securing future labor needs, inefficiencies connected to employee turnover and costs associated with implementation and on-going compliance.

If we fail to attract and r etain key personnel in senior management and other positions, or if our succession planning efforts are not effective, it could have a material adverse effect on our business, financial condition and results of operations.

We are increasingly dependent on information technology systems and subject to privacy and security laws and a cyber-attack or other breach of these systems could have a material adverse effect on our business, financial condition or results of operations.

We increasingly rely on information technology systems, including cloud-based computing, to process, transmit and store electronic information for our day-to-day operations and for our customers, including sensitive personal information and proprietary or confidential information.

Additionally, certain of our products collect data regarding patients and donors and connect to our systems for maintenance and other purposes or are actively managed by Haemonetics on behalf of specific

Similar to other large multi-national companies, the size and complexity of our information technology systems makes them vulnerable to a cyber-attack, malicious intrusion, breakdown, destruction, loss of data privacy, or other significant disruption.

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Any failure by us or third parties we work with to maintain or protect our respective information technology systems and data integrity, including from cyber-attacks, intrusions or other breaches, could result in the unauthorized access to patient data and personally identifiable information, theft of intellectual property or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations.

Any of these events, in turn, may cause us to lose existing customers, have difficulty preventing, detecting and controlling fraud, have disputes with customers, physicians and other healthcare professionals, be subject to legal claims and liability, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach or theft of intellectual property, or suffer other adverse consequences, any of which could have a material adverse effect on our business, financial condition or results of operations.

suffer other adverse consequences, any of which could have a material adverse effect on our business, financial condition or results of operations.

Additionally, the legal and regulatory environment surrounding information security and privacy is increasingly demanding, with the imposition of new and changing requirements across businesses.

We are required to comply with increasingly complex and changing legal and regulatory requirements that govern the collection, use, storage, security, transfer, disclosure and other processing of personal data in the United States and in other countries, including, but not limited to, HIPAA, HITECH, the California Consumer Privacy Act, or CCPA, and the EU’s General Data Protection Regulation, or GDPR.

We are required to comply with increasingly complex and changing legal and regulatory requirements that govern the collection, use, storage, security, transfer, disclosure and other processing of personal data in the United States and in other countries, including, but not limited to, HIPAA, HITECH, the California Consumer Privacy Act, or CCPA, the California Privacy Rights Act, effective January 1, 2023, and the EU’s General Data Protection Regulation, or GDPR.

The GDPR imposes stringent EU data protection requirements and provides for significant penalties for noncompliance.

HIPAA also imposes stringent data privacy and security requirements and the regulatory authority has imposed significant fines and penalties on organizations found to be out of compliance.

CCPA provides consumers with a private right of action against companies who have a security breach due to lack of appropriate security measures.

CCPA provides consumers with a private right of action against companies who have a security breach due to lack of appropriate security measures, and several other U.S.

states have introduced or proposed similar privacy laws.

In addition, new information security and privacy laws have also come into effect in China and other countries where the Company conducts business.

We or our third-party providers and business partners may also be subjected to audits or investigations by one or more domestic or foreign government agencies relating to compliance with information security and privacy laws and regulations, and noncompliance with the laws and regulations could results in material fines or litigation.

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We manufacture certain key disposables and devices at single locations with limited alternate facilities.

If an event occurs that results in the closure of or damage to one or more of these facilities, we may be unable to supply the relevant products at previous levels or at all for some period.

If natural disasters, strikes, terrorism attacks or other adverse events occur that result in the closure of or damage to one or more of these facilities, we may be unable to supply the relevant products at previous levels or at all for some period.

Additionally, for reasons of quality assurance or cost effectiveness, we purchase certain finished goods, components and raw materials from sole suppliers who have their own complex supply chains.

Any disruption to one or more of our suppliers’ production or delivery of sufficient volumes of components conforming to our specifications, could disrupt or delay our ability to deliver finished products to our customers.

We also use certain components in our products, including semiconductor chips, that have been the subject of recent global supply chain shortages and disruptions.

Any disruption to one or more of our suppliers’ production or delivery of sufficient volumes of components conforming to our specifications, including as a result of disruptions ca used by the COVID-19 pandemic (as described above) or otherwise, could disrupt or delay our ability to deliver finished products to our customers.

For example, we purchase components in Asia for use in manufacturing in the U.S.

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In addition, we manufacture our vascular closure devices under a shelter plan service agreement with Offshore International Incorporated (d/b/a Tetakawi), or Tetakawi, pursuant to which we lease our manufacturing facility in Guaymas, Mexico and Tetakawi is responsible for a number of ongoing services related to the facility, including provision of external security and maintenance, manufacturing personnel related human resource matters, recruiting support, government compliance, workforce transportation and cross-border shipping of raw components.

We are reliant on Tetakawi to provide these services and any disruption in these services or our failure to maintain our contractual relationship with Tetakawi could significantly harm our

ability to manufacture our vascular closure devices and maintain sufficient quality standards, which would negatively impact our business and results of operations.

We are reliant on Tetakawi to provide these services and any disruption in these services or our failure to maintain our contractual relationship with Tetakawi could significantly harm our ability to manufacture our vascular closure devices and maintain sufficient quality standards, which would negatively impact our business and results of operations.

Due to the high standards and stringent requirements of the FDA and other similar non-U.S.

regulatory agencies applicable to manufacturing our products, such as the FDA's Quality System Regulation, or QSR, and current Good Manufacturing Practice, or cGMP, regulations, we may not be able to quickly establish additional or replacement sources for certain raw materials, components or finished goods.

regulatory agencies applicable to manufacturing our products, such as the FDA's QSR and cGMP regulations, we also may not be able to quickly establish additional or replacement sources for certain raw materials, components or finished goods.

A reduction or interruption in manufacturing, or an inability to secure alternative sources of raw materials, components or finished goods on commercially reasonable terms or in a timely manner, could compromise our ability to manufacture our products on a timely and cost-competitive basis, which may have a material adverse effect on our business, financial condition and results of operations.

Plastics are the principal component of our disposables, which are the main source of our revenues.

Any change in the price, composition or availability of the plastics or resins we purchase could adversely affect our business.

Plastics and other petroleum-based products are the principal components of our disposables, which are the main source of our revenues.

Changes in the cost, composition or availability of the plastics and resins we purchase, or cost volatility associated with other raw materials and components used in our products, could adversely affect our business, financial condition and results of operations.

We face risks related to price, composition and availability of the plastic raw materials used in our business.

Climate change (including laws or regulations passed in response thereto) could increase our costs, in particular our costs of supply, energy and transportation/freight.

Material or sustained increases in the price of petroleum or petroleum derivatives could have an adverse impact on the costs to procure plastic raw materials and the costs of our transportation/freight.

Increases in the costs of other commodities also may affect our procurement costs to a lesser degree.

Material or sustained increases in the price of petroleum or petroleum derivatives could have an adverse impact on the costs to procure plastic raw materials.

Our results of operations could be negatively impacted by volatility in the cost of these and other raw

materials and components used in our products, including associated freight and energy costs that, in turn, increase the costs of producing and distributing our products.

Recently, we have experienced inflationary pressures that have increased significantly the cost of raw materials, transportation, construction, services, and energy necessary for the production and distribution of our products, which we expect will continue throughout fiscal 2023.

While we have implemented cost containment measures, selective price increases and taken other actions to offset these inflationary pressures in our global supply chain, we may not be able to completely offset all the increases in our operational costs.

Additionally, climate change (including laws or regulations passed in response thereto) could increase our costs, in particular our costs of supply, energy and transportation/freight.

The composition of the plastic we purchase is also important.

Today, we purchase plastics that contain phthalates, which are used to make plastic malleable.

Due to regulatory changes, we may be required to remove materials such as phthalates from our devices, find alternative materials which then need to be validated or obtain regulatory approvals from the regulatory authorities for a number of products.

Due to regulatory changes and evolving customer expectations, we may be required to remove materials such as phthalates from our devices, find alternative materials which then need to be validated or obtain regulatory approvals from the regulatory authorities for a number of products.

While we have not experienced significant shortages in the past, any interruption in the supply for certain plastics could have a material impact on our business by limiting our ability to manufacture and sell the products that represent a significant portion of our revenues.

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In July 2019, our Board of Directors approved a new Operational Excellence Program, also referred to in this report as the 2020 Program, and delegated authority to management to determine the detail of the initiatives that will comprise the program.

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

While cost savings from the 2020 Program to date have been consistent with our expectations, it is possible that events and circumstances, such as CSL's non-renewal of its U.S.

supply agreement in June 2022, other financial or strategic difficulties, delays and unexpected costs, including as a direct or indirect result of the COVID-19 pandemic, could result in our not realizing all of the anticipated benefits or our not realizing the anticipated benefits on our expected timetable.

During the first quarter of fiscal 2022, the Company revised the program 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 the expiration of CSL’s U.S.

Supply Agreement in December 2023, rising inflationary pressures and effects of the COVID-19 pandemic.

While cost savings from the 2020 Program to date have been consistent with our expectations, it is possible that events and circumstances, such as the aforementioned customer loss, labor shortages, sustained inflationary pressures and other financial or strategic difficulties, delays and unexpected costs, including as a direct or indirect result of the COVID-19 pandemic, could result in our not realizing all of the anticipated benefits or our not realizing the anticipated benefits on our expected timetable.

Our inability to realize all of the anticipated benefits from the 2020 Program could have a material adverse effect on our business, results of operations, cash flows and financial condition.

A significant element of our strategy is to increase revenue growth by focusing on innovation and new product development.

The medical device markets in which we participate, however, are highly competitive.

In addition, the medical device markets in which we participate and healthcare industry generally are characterized by extensive research and development and rapid technological change.

New product development requires significant investment in research and development, clinical trials and regulatory approvals.

property protection for our products, and gain and maintain market acceptance of our products.

In addition, patents attained by others could preclude or delay our commercialization of a product.

If our business development activities are unsuccessful, we may not realize the intended benefits.

We have sought and in the future may seek to supplement our organic growth through strategic acquisitions, investments and alliances.

We have also sought and in the future may seek to divest certain assets deemed non-core to our long-term strategic objectives.

Such transactions are inherently risky and require significant effort and management attention.

The success of any acquisition, investment or alliance, including our recent acquisition of Cardiva may be affected by a number of factors, including our ability to properly assess and value the potential business opportunity or to successfully integrate any business we may acquire into our existing business.

We anticipate that a significant amount of management’s attention will be required in the integration of Cardiva, and that a material factor in achieving the anticipated benefits of the Cardiva acquisition will be our ability to effectively and profitably market and sell the vascular closure devices acquired from Cardiva.

The success of any acquisition, investment or alliance, or of any divesture, may be affected by a number of factors, including our ability to properly assess and value the potential business opportunity or to successfully integrate any business we may acquire into our existing business.

For example, we anticipate that a material factor in achieving the anticipated benefits of our March 2021 acquisition of Cardiva will be our ability to effectively integrate and profitably market and sell the vascular closure devices acquired from Cardiva.

Also as a result of the Cardiva acquisition, we have entered into a new line of business.

Unlike our existing products, the VASCADE and VASCADE MVP vascular closure devices are designated as Class III medical devices, which are subject to additional and complex regulatory requirements.

Unlike our other products, the VASCADE and VASCADE MVP vascular closure devices are designated as Class III medical devices, which are subject to additional and complex regulatory requirements.

Complying with these regulations will be costly, time-consuming and complex.

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Promising partnerships and acquisitions may also not be completed for reasons such as competition among prospective partners or buyers, the inability to reach satisfactory terms, the need for regulatory approvals or the existence of economic conditions affecting our access to capital for acquisitions and other capital investments.

If our business development activities are unsuccessful, we may not realize the intended benefits of such activities, including that acquisition and integration costs may be greater than expected or the possibility that expected return on investment synergies and accretion will not be realized or will not be realized within the expected timeframe.

If our business development activities are unsuccessful, we may not realize the intended benefits of such activities, including that acquisition and integration costs may be greater than expected or the possibility that expected return on investment synergies and accretion, or on new growth opportunities funded in whole or part by divestitures, will not be realized or will not be realized within the expected timeframe.

Risks Related to Government Regulation

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For example, the EU has adopted the EU Medical Device Regulation, or EU MDR, and EU In Vitro Diagnostic Regulation, or EU IVDR, each of which impose stricter requirements for the marketing and sale of medical devices beyond those of the current medical device directives they replace, including in the area of clinical evaluation requirements, quality systems and post-market surveillance.

The EU MDR is fully applicable as of May 26, 2021 and the EU IVDR is fully applicable as of May 26, 2022.

The EU MDR became fully applicable as of May 26, 2021 and the EU IVDR is fully applicable as of May 26, 2022.

There is a transition period for devices with a notified body certificate with an expiry date after the date of full application, provided that there are no significant changes to the design or intended use.

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Complying with the requirements of these regulations may require us to incur significant expenditures.

Failure to meet these requirements could adversely impact our business in the EU and other regions that tie their product registrations to the EU requirements.

Similarly, the separation of states from participation in the EU, such as through the cessation of the UK's membership in the EU (commonly known as “Brexit”) and the separation of the Swiss and EU medical product markets with the adoption of the EU MDR (commonly referred to as “Swexit”), may result in further regulatory risk and complexity as the former EU member or participant state establishes separate laws and regulations governing medical products .

Failure to meet these requirements could adversely impact our business in the EU and other applicable regions.

If we or our suppliers fail to comply with laws and regulations governing the manufacture and production of our products, our products could be subject to restrictions or withdrawal from the market.

Any product for which we obtain clearance or approval, and the manufacturing processes, reporting requirements, post-approval clinical data and promotional activities for such product, will be subject to continued regulatory review, oversight and periodic inspection (both routine and unannounced) by the FDA and other domestic and foreign regulatory bodies.

In particular, we and our third-party suppliers must comply with the FDA's Quality System Regulation, or QSR, or current good manufacturing process, or cGMP, requirements (depending on the products at issue), which address, among other things, the methods of documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products.

In particular, we and our third-party suppliers m ust comply with the FDA's QSR or cGMP requirements (depending on the products at issue), which address, among other things, the methods of documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products.

Any future failure by us or one of our suppliers to comply with applicable statutes and regulations administered by the FDA or other regulatory authority could result in administrative actions, field actions, or civil or criminal enforcement actions.

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We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision and have established contingency reserves for material, known tax exposures.

However, the calculation of such tax exposures involves the application of complex tax laws and regulations in many jurisdictions, as well as interpretations as to the legality under various rules in certain jurisdictions.

However, the calculation of such tax exposures involves the application of complex

tax laws and regulations in many jurisdictions, as well as interpretations as to the legality under various rules in certain jurisdictions.

Therefore, there can be no assurance that we will accurately predict the outcomes of these disputes or other tax audits or that issues raised by tax authorities will be resolved at a financial cost that does not exceed our related reserves and the actual outcomes of these disputes and other tax audits could have a material impact on our results of operations or financial condition.

Changes in tax laws and regulations, or their interpretation and application, in the jurisdictions where we are subject to tax could materially impact our effective tax rate.

For example, in 2017, the U.S.

enacted the Tax Cuts and Jobs Act, or the Act, and we expect the U.S.

Treasury to issue future notices and regulations under the Act.

Certain provisions of the Act and the regulations issued thereunder could have a significant impact on our future results of operations as could interpretations made by the Company in the absence of regulatory guidance and judicial interpretations.

The change in administration and control of Congress in the U.S.

following the 2020 elections may result in additional U.S.

tax law changes that could have a material impact on our future effective tax rate.

Chang es in tax laws and regulations, or their interpretation and application, in the jurisdictions where we are subject to tax could materially impact our effective tax rate.

For example, the U.S.

Congress has recently been debating changes to U.S.

corporate income tax laws, including provisions that may alter the U.S.

taxation of the profits of foreign subsidiary corporations.

If ultimately enacted, these changes could have a material impact on our future effective tax rate.

Additionally, the U.S.

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The OECD has released its comprehensive plan to create an agreed set of international rules for fighting base erosion and profit shifting.

In addition, the OECD, the European Commission and individual countries are examining changes to how taxing rights should be allocated among countries in light of the digital economy.

In addition, the OECD, the European Commission and individual countries are examining changes to how t axing rights should be allocated among countries in light of the digital economy.

As a result, the tax laws in the U.S.

and other countries in which we and our affiliates do business could change on a prospective or retroactive basis and any such changes could materially adversely affect our business.

and other countries in which we and our affiliates do business could change on a prospective or retroactive basis and any such changes could materially adversely affect our business, results of operations or financial condition.

Risks Related to our Financial Obligations and Indebtedness

We have a significant amount of debt that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur additional debt in the future, which may adversely affect our operations and financial results.

As of April 3, 2021, we had $500 million aggregate principal amount of indebtedness under our convertible senior notes due 2026 (the “2026 Notes”) as well as $350.0 million term loan (the “Term Loan”) and access to a $350.0 million revolving loan (the “Revolving Credit Facility” and together with the Term Loan, the “Credit Facilities”).

As of April 2, 2022, we had $500 million aggregate principal amount of indebtedness under our convertible senior notes due 2026 (the “2026 Notes”) as well as a $350.0 million term loan (the “Term Loan”) and access to a $350.0 million revolving loan (the “Revolving Credit Facility” and together with the Term Loan, the “Credit Facilities”).

As of April 2, 2022, we had $284.4 million of debt outstanding under the Term Loan and no borrowings were outstanding under the Revolving Credit Facility.

Our Credit Facilities contain financial covenants that require us to maintain specified financial ratios that may limit our ability to borrow additional funds and that require us to make interest and principal payments.

As of April 3, 2021, we were in compliance with the covenants pursuant to our Credit Facilities, and we currently forecast that we will be in compliance with our Credit Facility covenants through the period ending April 2, 2022.

Our ability to pay our debt when due or refinance our indebtedness, including the Notes, depends on our future financial performance, which is subject to economic, financial, competitive, and other factors outside of our control.

If we are not able to pay our debt when due or refinance our indebtedness on desirable terms such that we default on our debt obligations, our indebtedness could become immediately payable in full which could harm our financial condition, result of operation or cost of borrowing.

As of April 2, 2022, we were in compliance with the covenants pursuant to our Cr edit Facilities, and we currently forecast that we will be in compliance with our Credit Facility covenants through the period ending April 1, 2023.

Additionally, our Credit Facilities mature on June 15, 2023 and the Company will be required to pay the scheduled remaining balance of the Term Loan over the four calendar quarters preceding the expiration of the Credit Facilities in payments of $70.0 million per quarter commencing September 30, 2022, along with any amounts outstanding under the Revolving Credit Facility as of the maturity date.

The conditional conversion feature of the 2026 Notes, if triggered, may adversely affect our financial condition and operating results.

Under certain circumstances, the noteholders may convert their 2026 Notes at their option prior to the scheduled maturities.

If one or more noteholders elect to convert their 2026 Notes, we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

In addition, holders of our 2026 Notes will have the right to require us to repurchase their 2026 Notes upon the occurrence of a fundamental change (as defined in the indenture, dated as of March 5, 2021, between U.S.

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In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to repurchase the 2026 Notes or pay the cash amounts due upon conversion.

Our failure to repurchase 2026 Notes or to pay the cash amounts due upon conversion when required will constitute a default under the Indenture.

Our failure to repurchase the 2026 Notes or to pay the cash amounts due upon conversion when required will constitute a default under the Indenture.

A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, including our Credit Facilities, which may result in that other indebtedness becoming immediately payable in full.

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We do business in over 90 countries and have distributors in approximately 80 of these countries.

This exposes us to currency fluctuation, geopolitical risk, economic volatility (such as the United Kingdom's exit from the EU, commonly referred to as "Brexit"), anti-corruption laws, export and import restrictions, local regulatory authorities and the laws and medical practices in foreign jurisdictions.

If there are sanctions or restrictions on the flow of capital that prevent product importation or receipt of payments in Russia or China, our business could be adversely affected.

This exposes us to currency fluctuation, geopolitical risk, economic volatility, anti-corruption laws, export and import restrictions, local regulatory authorities and the laws and medical practices in foreign jurisdictions.

legislation aimed at boosting competitiveness of U.S.

businesses may have unintended effects on our business.

Tariffs and other protectionist measures directed at China and other markets, as well as prolonged uncertainty regarding such measures as administrations change, may have adverse effects on our ability to source, manufacture and distribute products, or receive payments, in a timely and cost effective manner, thereby adversely affecting our business.

Additionally, the military conflict between Russia and Ukraine has resulted in the implementation of sanctions by the U.S.

and other governments against Russia and has caused significant volatility and disruptions to the global markets.

It is not possible to predict the short- and long-term implications of this conflict, which could include but are not limited to further sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, cyber-attacks, supply chain challenges and adverse effects on currency exchange rates and financial markets.

We are continuing to monitor the situation in Ukraine and globally as well as assess its potential impact on our business.

Although our business in Russia accounted for only about 2% of fiscal 2022 net revenue, a significant escalation or further expansion of the conflict's current scope or related disruptions to the global markets could have a material adverse effect on our results of operations.

Our international operations are governed by the U.S.

Foreign Corrupt Practices Act, or FCPA, and other similar anti-corruption laws in other countries.

Generally, these laws prohibit companies and their business partners or other intermediaries from making improper payments to foreign governments and government officials in order to obtain or retain business.

Generally, these laws prohibit companies and their business partners or other intermediaries from making improper payments to foreign governments and gov ernment officials in order to obtain or retain business.

Global enforcement of such anti-corruption laws has increased in recent years, including aggressive investigations and enforcement proceedings.

While we have an active compliance program and various other safeguards to discourage impermissible practices, we have distributors in approximately 80 countries, several of which are considered high risk for corruption.

As a result, our global operations carry some risk of unauthorized impermissible activity on the part of one of our distributors, employees,

agents or consultants.

As a result, our global operations carry some risk of unauthorized impermissible activity on the part of one of our distributors, employees, agents or consultants.

Any alleged or actual violation could subject us to government scrutiny, severe criminal or civil fines, or sanctions on our ability to export product outside the U.S., which could adversely affect our reputation and financial condition.

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These economies tend to have less mature product regulatory systems and more volatile financial markets.

In addition, the government controlled healthcare system's ability to invest in our products and systems may abruptly shift due to changing government priorities or funding capacity.

Our ability to sell products in these economies is dependent upon our ability to hire qualified employees or agents to represent our products locally and our ability to obtain and maintain the necessary regulatory approvals in a less mature regulatory environment.

In addition, the government controlled healthcare system's ability to invest in our products and systems may abruptly shift due to changing government priorities, geopolitical events or funding capacity.

Our ability to sell products in these economies is dependent upon, among other factors, our ability to hire qualified employees or agents to represent our products locally and our ability to obtain and maintain the necessary regulatory approvals in a less mature regulatory environment.

If we are unable to retain qualified representatives or maintain the necessary regulatory approvals, we will not be able to continue to sell products in these markets.

We are exposed to a higher degree of financial risk if we extend credit to customers in these economies.

We are also exposed to a higher degree of financial risk if we extend credit to customers in these economies.

In many of the international markets in which we do business, including certain parts of Europe, South America, the Middle East and Asia, our employees, agents or distributors offer to sell our products in response to public tenders issued by various governmental agencies.

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There is a risk that our intellectual property may be subject to misappropriation in some countries.

Certain countries, particularly China, do not enforce compliance with laws that protect intellectual property rights with the same degree of vigor as is available under the U.S.

Certain countries, particularly China and Russia, do not enforce compliance with laws that protect intellectual property rights with the same degree of vigor as is available under the U.S.

and European systems of justice.

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In addition, competitors may patent technological advances that may give them a competitive advantage or create barriers to entry.

In order to guard against the risk of infringement of intellectual property rights held by third parties we conduct freedom to operate studies through qualified counsel on all newly developed or acquired technologies.

While we believe this practice is reasonable and adequate, there is risk that third party patents or trademarks were not identified in such studies or that litigation outcomes regarding infringement or validity may be contrary to our understanding of the facts or the established law.

We operate in an industry susceptible to significant product liability claims.

Product liability claims could damage our reputation and impair our ability to market our products or obtain professional or product liability insurance, or increase the cost of such insurance.

Pending and future product liability claims and other litigation may adversely affect our financial condition and results of operations or liquidity, and they also have the potential to damage our reputation, impair our ability to market our products and impact our ability to maintain applicable insurance covera ge on reasonable terms or at all.

Our products are relied upon by medical personnel in connection with the treatment of patients and the collection of blood or blood components from donors.

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In addition, product liability claims may be asserted against us in the future based on events we are not aware of at the present time.

If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit or halt commercialization of our products.

Even successful defense would require significant financial and management resources.

Regardless of the merits or eventual outcome, such litigation could damage our reputation and, therefore, impair our ability to market our products or obtain professional or product liability insurance, or increase the cost of such insurance.

If we cannot successfully defend ourselves against pending or future product liability claims and other litigation (including class actions and stockholder derivative actions), we may incur substantial liabilities or be required to limit or halt commercialization of our products.

Even successful defenses require significant financial and management resources.

Regardless of the merits or eventual outcome, such litigation could have a material adverse effect on our financial condition, results of operations or liquidity an d further could damage our reputation and, therefore, impair our ability to market our products and make applicable insurance coverage more costly or difficult to obtain.

While we believe that our current product liability insurance coverage is sufficient, there is no assurance that such coverage will be adequate to cover incurred liabilities or that we will be able to obtain acceptable product and professional liability coverage in the future.

Additionally, we do not maintain third-party insurance coverage for all categories of potential liability, which increases our exposure to unanticipated c laims and adverse decisions and these losses could have a material adverse effect on our financial condition, results of operations or liquidity.

General Risk Factors

Our success depends on our ability to attract and retain key personnel needed to successfully operate the business.

If we fail to attract and retain key personnel in senior management and other positions, or if our succession planning efforts are not effective, it could adversely impact our business.

Our share price has been volatile and may fluctuate, and accordingly, the value of an investment in our common stock may also fluctuate.

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Share repurchase programs could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock.

We may in the future request that the Board of Directors authorize one or more share repurchase programs, our most recent of which expired in May 2021.

We may in the future request that the Board of Directors authorize one or more share repurchase programs.

Under such share repurchase programs, we are generally authorized to repurchase, from time to time, outstanding shares of common stock in accordance with applicable laws both on the open market, including under trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended and in privately negotiated transactions.

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The existence of a share repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our common stock.

There can be no assurance that any share repurchases would enhance shareholder value because the market price of our common stock may decline below the levels at which we repurchased our common stock.

There can be no assurance that any share repurchases would enhance shareholder value because the market price of our common stock may decline below the levels at

which we repurchased our common stock.

Although our share repurchase programs are intended to enhance long-term shareholder value, short-term stock price fluctuations could reduce a program’s effectiveness.

Refer to Note 7, Earnings per Share , to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K for further discussion.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors