What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-05-25 compared with 2021-05-26 · 115 added, 211 removed, 348 unchanged (48% of the section changed)

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“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.

“Hospital”, which is comprised of Hemostasis Management, Vascular Closure, Transfusion Management and Cell Salvage 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

CSL Contract Loss

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

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

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

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

Issuance of Convertible Senior Notes

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

The 2026 Notes are governed by the terms of the Indenture between the Company and U.S.

Bank National Association, as trustee (the “Indenture”).

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

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

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

Cardiva Medical, Inc.

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

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

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

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

Cardiva’s portfolio includes two catheter-based vascular access site closure devices.

The VASCADE ® vascular closure system is designed for “small-bore” femoral arterial and venous closure, generally used in interventional cardiology and peripheral

vascular procedures.

The VASCADE MVP ® vascular closure system is designed for “mid-bore” multi-access femoral venous closure, generally used in electrophysiology procedures, and is the only U.S.

Food and Drug Administration (“FDA”) approved closure device for use following cardiac ablation procedures requiring two or more access sites within the same vessel.

The addition of the VASCADE portfolio to our Hospital business unit includes products with demonstrated benefits and enhances penetration into the large and growing interventional cardiology and electrophysiology markets.

HAS Intellectual Property

In January 2021, we entered into an agreement to acquire certain intellectual property owned by HemoAssay Science and Technology (Suzhou) Co.

Ltd., a China-incorporated company, and its affiliates (collectively, “HemoAssay”) underlying their HAS viscoelastic diagnostic devices, related assays and disposables.

We previously entered into exclusive manufacturing and distribution agreements with HemoAssay pursuant to which we have exclusive rights to commercialize HemoAssay’s HAS devices in China.

In connection with the transaction, we have agreed to pay up to $15.0 million to HemoAssay in contingent consideration based on certain developmental and manufacturing based milestones.

These products augment our portfolio of hemostasis analyzers within the Hospital business unit.

On April 1, 2020, we acquired enicor GmbH (“enicor”), the manufacturer of ClotPro ® , a new generation whole blood coagulation testing system that is currently available in select European and Asia Pacific markets, for total consideration of $20.5 million, which consisted of upfront payments of $16.6 million and the fair value of contingent consideration of $3.9 million.

The contingent consideration, which could total a maximum of $4.5 million, consists of payments related to the achievement of certain revenue and regulatory milestones.

The acquisition of this viscoelastic diagnostic device augments the Company's portfolio of hemostasis analyzers within the Hospital business unit.

Refer to Note 4, Acquisitions, to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for additional information.

On October 2, 2020, we received FDA 510(k) clearance for our NexSys PCS ® with Persona technology.

NexSys PCS with Persona technology uses a percent plasma nomogram that customizes plasma collection based on an individual donor's body composition.

The new, proprietary Persona technology strengthens the NexSys PCS value proposition and reinforces our commitment to supporting the plasma industry.

Operational Excellence Program

During the first 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 years ended April 2, 2022, April 3, 2021 and March 28, 2020, the Company incurr ed $28.7 million , $15.1 million and $11.9 million , respectively, of restructuring and restructuring related costs under this program.

Total cumulative charges under this program are $55.7 million as of April 2, 2022.

We continue to closely manage the impacts of the COVID-19 pandemic on our business, results of operations and financial condition.

The progression of the COVID-19 pandemic during fiscal 2021 significantly impacted our financial results.

The continuation 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.

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For additional information regarding the expected impacts to our business units and the various risks posed by the COVID-19 pandemic, refer to Results of Operations within Management's Discussion and Analysis and Risk Factors contained in Item 1A of this Annual Report on Form 10-K.

Fajardo, Puerto Rico Manufacturing Operations

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

Under the terms of the agreement, Haemonetics retained all intellectual property rights to its proprietary blood filters currently manufactured at its Fajardo facility and GVS acquired certain assets consisting primarily of property, plant and equipment, inventory and cash and has assumed certain related liabilities.

In addition, the two parties entered into a long-term supply and development agreement that, among other things, grants GVS exclusive rights to manufacture and supply the blood filters currently produced at the Fajardo facility for Haemonetics.

This divestiture will allow Haemonetics to utilize GVS' experience and scale in filtration to deliver reliable, cost-efficient products to its customers.

Blood Donor Management Software

On July 1, 2020, we sold certain U.S.

blood donor management software solution assets within our Blood Center business unit to the GPI Group for an upfront cash payment of $14.0 million ($13.6 million, net of working capital adjustments) and recognized a $13.2 million gain on the sale.

In addition to the cash received upon closing, we may also receive up to an additional $14.0 million, contingent upon the achievement of certain performance measures.

This divestiture better positions Haemonetics for sustainable growth by enabling the Company to focus on its core capabilities while delivering quality products and services where it brings distinct value.

Inlog Holdings France

On September 18, 2020, we sold our wholly-owned subsidiary Inlog Holdings France SAS to Abénex Capital (“Abénex”), a private equity firm based in France for $30.5 million ($24.5 million, net of cash transferred) and recognized a gain of $20.0 million.

Inlog Holdings France SAS, through its subsidiary In Log SAS, develops and sells blood bank and hospital software solutions used predominantly in France and in several other countries outside of the U.S.

This divestiture and the sale of our U.S.

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

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

Restructuring Program

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

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

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

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

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

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

Market Trends

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We continue to view the impacts of the pandemic on plasma collection as temporary and remain confident in the strength of the plasma end market growth as the long-term global demand for plasma-derived pharmaceuticals is expected to continue.

Because plasma collected in the U.S.

B ecause plasma collected in the U.S.

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

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

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

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

Blood Center Market

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

While standard tests like prothrombin time, partial thromboplastin time and platelet count have limited ability to reveal a patient’s risk for bleeding, they do not provide information on the patient’s risk for thrombosis.

While standard tests like prothrombin time, partial thromboplastin time and platelet count have limited

ability to reveal a patient’s risk for bleeding, they do not provide information on the patient’s risk for thrombosis.

In addition, these routine tests do not provide specific data about clot quality or stability.

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

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

liver transplants.

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

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

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The HAS-100 is currently commercialized in China.

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

Orthopedic procedures have seen similar changes with improved blood management practices, including the use of tranexamic acid to treat and prevent postoperative bleeding, significantly reducing the number of transfusions and autotransfusion.

Geographically, the Cell Saver ® has achieved the highest market penetration in North America, Europe and Japan.

However, there are considerable growth opportunities in certain Asia Pacific and other emerging markets as addressable procedure volumes grow and the use of autotransfusion is becoming accepted as a standard of care.

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

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

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

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

Transfusion Management Market - Revenues from BloodTrack ® have increased in the U.S.

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We continue to explore opportunities to expand the portfolio internationally.

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

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

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

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

Geographically, the Cell Saver ® has achieved the highest market penetration in North America, Europe and Japan.

Financial Summary

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Income before (benefit) provision for income taxes $ 63,629 $ 72,913 $ 87,152 (12.7) % (16.3) %

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

Provision (benefit) for income taxes $ 20,254 $ (6,556) $ 10,626 n/m n/m

% of pre-tax income 31.8 % (9.0) % 12.2 %

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

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

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

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

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

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

Fiscal years 2022 and 2020 included 52 weeks with each quarter having 13 weeks.

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

Net revenues for fiscal 2022 increased 14.1% compared with fiscal 2021.

Without the effects of foreign exchange, net revenues increased 13.4% compared with fiscal 2021.

Revenue increases in Plasma and Hospital primarily drove the overall increase in revenue during the fiscal year ended March 28, 2020.

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

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

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

The gain recognized on the sale of real estate and other assets associated with the Braintree corporate headquarters also contributed to the increase.

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

Revenue increases in Hospital, primarily Vascular Closure, drove the overall increase in revenue during the fiscal year ended April 2, 2022.

Net revenues for fiscal 2021 decreased 11.9% compared with fiscal 2020.

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

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

Operating income decreased during fiscal 2022 as compared with fiscal 2021, primarily due to increased spend related to the acquisition of Cardiva Medical, Inc.

(“Cardiva”), including higher transaction and integration costs, amortization of the fair value inventory step-up, increased intangible amortization expense and an increase in the fair value of contingent consideration, as well as increased freight costs and inflationary pressures, partially offset by productivity savings from the 2020 Program.

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

Management's Use of Non-GAAP Measures

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

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

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

2022 2021 2020

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Hemostasis Management revenue increased 18.6% during fiscal 2022 as compared with fiscal 2021.

Without the effect of foreign exchange, Hemostasis Management revenue increased 12.8% during fiscal 2021 as compared with fiscal 2020.

Without the effect of foreign exchange, Hemostasis Management revenue increased 18.4% as compared with fiscal 2021.

Hemostasis Management revenue increased 12.2% during fiscal 2021 as compared with fiscal 2020.

Without the effect of foreign exchange, Hemostasis Management revenue increased 12.8% during fiscal 2021 as compared with fiscal 2020.

Hospital revenue also includes Vascular Closure revenue of $93.8 million and $7.7 million for fiscal years 2022 and 2021, respectively.

Plasma revenue increased 5.8% during fiscal 2022 as compared with fiscal 2021.

Without the effect of foreign exchange, Plasma revenue increased 5.6% during fiscal 2022 as compared with fiscal 2021.

This revenue increase was primarily driven by increase in volume of plasma disposables and an increase in software revenue, partially offset by declines in plasma liquid solutions as a result of certain strategic exits within our liquid solutions business.

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.

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

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 2022, revenue under this Supply Agreement was $102.4 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 CSL has committed to a minimum of $88.0 million of disposable purchases in fiscal 2023.

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

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

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

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

We remain confident in the strength of the plasma end market growth as the long-term global demand for plasma-derived pharmaceuticals is expected to continue.

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

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

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

Without the effect of foreign exchange, Plasma revenue increased 7.9% during fiscal 2020.

This revenue growth was primarily driven by an increase in volume of plasma disposables due to continued strong performance in the U.S., favorable NexSys PCS pricing and increases in sales of software.

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

Blood Center revenue decreased 2.9% during fiscal 2022 as compared with fiscal 2021.

Without the effect of foreign exchange, Blood Center revenue decreased 4.2% during fiscal 2022.

The decrease was primarily driven by continued declines in whole blood disposables, the divestiture of certain blood donor management software solution assets and the impact of previously discontinued customer contracts in North America as well as an apheresis stocking order in the prior year period.

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

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

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

The impact of the loss of this apheresis business is an incremental revenue decline of approximately $17.0 million in fiscal 2021 as compared with fiscal 2020.

We have not yet experienced the reversal of the large stocking orders made by distributors and blood collectors during the first quarter of fiscal 2021 in response to the COVID-19 pandemic, but we may experience a reversal in future periods.

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

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

This decrease was primarily driven by declines in whole blood disposables and software revenue.

Apheresis also contributed to the overall decline as certain customers converted to alternative sources of supply.

The impact of the loss of this apheresis business was an incremental revenue decline of approximately $17.0 million in fiscal 2021 as compared with fiscal 2020.

Hospital revenue increased 53.3% during fiscal 2022 as compared with fiscal 2021.

Without the effect of foreign exchange, Hospital revenue increased 52.7% during fiscal 2022.

The increase 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 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.

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

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

We believe that the demand for our hospital products is inherently strong and that procedure volumes will continue to improve with a return to normal levels in during fiscal 2022.

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

Without the effect of foreign exchange, Hospital revenue increased 2.0% during fiscal 2020.

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

(In thousands) 2022 2021 2020 % Increase/(Decrease)

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% of net revenues 50.9 % 45.7 % 49.0 %

Gross profit increased 27.1% during fiscal 2022 as compared with fiscal 2021.

Without the effects of foreign exchange, gross profit increased 26.0% during fiscal 2022.

The increase was primarily driven by the addition of Vascular Closure, productivity savings from the 2020 Program and favorable volume and product mix.

The increase was partially offset by inflationary pressures and higher freight costs in our global supply chain, increased restructuring and restructuring related costs, the amortization of the fair value inventory step-up related to the acquisition of Cardiva and asset impairments.

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

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

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

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

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

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

Without the effects of foreign exchange, gross profit increased 17.1% during fiscal 2020.

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

Operating Expenses

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% of net revenues 4.8 % 3.8 % 2.6 %

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

Impairment of assets $ 577 $ 1,028 $ 50,599 (43.9) % (98.0) %

% of net revenues 0.1 % 0.1 % 5.1 %

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

Gains on divestitures and sale of assets $ (9,603) $ (32,812) $ (8,083) (70.7) % n/m

% of net revenues (1.0) % (3.8) % (0.8) %

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Without the effects of foreign exchange, research and development expenses increased 41.9% during fiscal 2022.

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

The increase in fiscal 2022 was 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 EU MDR and EU IVDR requirements, partially offset by cost savings related to the 2020 Program.

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

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

The increase in fiscal 2021 was primarily due to increased spend related to EU MDR and EU IVDR costs, recent acquisitions and continued investments in our Plasma and Hospital Business units.

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

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

Without the effects of foreign exchange, research and development expenses decreased 13.4% during fiscal 2020.

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

Selling, General and Administrative

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

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

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

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

Selling, general and administrative expenses increased 23.8% during fiscal 2022 as compared with fiscal 2021.

Without the effects of foreign exchange, selling, general and administrative expenses increased 23.2% during fiscal 2022.

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

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

The increase in fiscal 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.

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

Without the effects of foreign exchange, selling, general and administrative expenses decre ased 3.5% durin g fiscal 2021.

The decrease was partially offset by higher transaction and integration costs and higher share-based and variable compensation expense.

Amortization of Intangible Assets

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Impairment of Assets

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

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

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

We recognized intangible asset impairment charges of $0.6 million and $1.0 million during fiscal 2022 and fiscal 2021, respectively.

Gains on Divestitures

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

We recognized gains on divestitures of $9.6 million and $32.8 million during fiscal 2022 and fiscal 2021, respectively.

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

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

Interest and Other Expense, Net

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Without the effects of foreign exchange, interest and other expenses increased 1.3% during fiscal 2022.

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

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

The increase was primarily driven by realized losses due to foreign currency, partially offset by a reduction in interest expense.

Interest and other expenses increased 3.9% during fiscal 2021 as compared with fiscal 2020.

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

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

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

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

2022 2021 2020 % Increase/(Decrease)

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

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

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

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

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

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

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

Income Tax Acts

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

Under the GILTI provisions, U.S.

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

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

In July 2020, the U.S.

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

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

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

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

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

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

For the year ended April 2, 2022, we recorded income tax expense of $20.3 million on our worldwide pre-tax income of $63.6 million, resulting in a reported tax rate of 31.8%.

Our effective tax rate for the year ended April 2, 2022 is higher than our effective tax rates of (9.0)% and 12.2% for the years ended April 3, 2021 and March 28, 2020, respectively.

The increase in our tax rate for fiscal 2022, as compared with fiscal 2021, is primarily the result of a deferred tax asset recorded in the prior year related to the U.S.

purchase of intellectual property, a non-recurring tax benefit in the prior year from the release of a portion of the valuation allowance due to taxable temporary differences acquired with the acquisition of Cardiva being available as a source of income to realize certain pre-existing deferred tax assets, greater tax benefits associated with windfall stock compensation deductions in the prior year, and jurisdictional mix of earnings.

Effective for fiscal 2023, the Tax Cuts and Jobs Act of 2017 requires the Company to capitalize, and subsequently amortize research and development expenses over five years for research activities conducted in the U.S.

and over fifteen years for research activities conducted outside of the U.S.

The Company is evaluating the impact on our effective tax rate.

Liquidity and Capital Resources

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(In thousands) April 2,

2021 March 28,

2022 April 3,

Cash and cash equivalents $ 259,496 $ 192,305

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

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations, our Revolving Credit Facility and proceeds from employee stock option exercises.

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

We believe these sources are sufficient to fund our cash requirements over at least the next twelve months.

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

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

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

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

The 2026 Notes are governed by the terms of the Indenture between the Company and U.S.

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As of April 2, 2022, we had $259.5 million in cash and cash equivalents, the majority of which is held in the U.S.

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

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

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

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.

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

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

As of April 2, 2022, $284.4 million was outstanding under the term loan with an effective interest rate of 2.3%.

Th ere were no borrow ings outstand ing on the revolving loan.

We also had $23.0 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of April 2, 2022.

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

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

We were in compliance with the leverage and interest coverage ratios specified in the credit agreement as well as all other bank covenants as of April 3, 2021.

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

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

The Company has scheduled principal payments of $214.4 million required during fiscal 2023.

The Company plans to refinance the Credit Facility prior to the maturity date of June 15, 2023.

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 April 2, 2022.

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

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

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

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

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

20 Increase/(Decrease)

(In thousands) 2022 2021 2020

Net cash provided by (used in):

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Operating Activities

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

The decrease in cash provided by operating activities was primarily the result of a reduction in net income, as adjusted for depreciation, amortization and other non-cash charges compared with the prior year period, partially offset by a decrease in working capital outflow as compared with the prior year period due to lower inventory growth, primarily related to NexSys PCS devices, a decline in the build of accounts receivable due to lower sales and improved collection timing and a payment for a compensation-related liability paid at the closing of the Cardiva acquisition.

Net cash provided by operating activities was $172.3 million during fiscal 2022, an increase of $63.5 million as compared with fiscal 2021.

The increase in cash provided by operating activities was primarily the result of higher net income, as adjusted for depreciation, amortization and other non-cash charges compared to the prior year period, decreased inventory driven by higher NexSys PCS device placements and the absence of a payment for a compensation-related liability paid at the closing of the Cardiva acquisition during fiscal 2021, partially offset by increases in accounts receivable during fiscal 2022.

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

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

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

The decrease in cash provided by operating activities was primarily the result of a reduction in net income, as adjusted for depreciation, amortization and other non-cash charges compared with the prior year period, partially offset by a decrease in working capital outflow as compared with the prior year period due to lower inventory growth, primarily related to NexSys PCS devices, a decline in the build of accounts receivable due to lower sales and improved collection timing, partially offset by a payment for a compensation-related liability paid at the closing of the Cardiva acquisition.

Investing Activities

Net cash used in investing activities was $86.3 million during fiscal 2022, a decrease of $339.1 million as compared with fiscal 2021.

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

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

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

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

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

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

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

Financing Activities

Net cash used in financing activities was $15.7 million during fiscal 2022, an increase of $383.2 million as compared with fiscal 2021.

The increase in cash used in financing activities during fiscal 2022 was primarily the result of cash received from issuance of convertible notes in fiscal 2021 and contingent consideration payments in fiscal 2022, partially offset by lower payments of short-term loans during fiscal 2022 as compared to fiscal 2021.

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

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

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

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

Contractual Obligations

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192,584 192,584 — — —

Contingent consideration 30,209 30,209 — — —

Expected retirement plan benefit payments 16,760 1,328 2,752 2,813 9,867

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The majority of our operating expense spending does not require any advance commitment.

The above table does not reflect our long-term liabilities associated with unrecognized tax benefits of $3.6 million recorded in accordance with ASC Topic 740, Income Taxes.

The above table does not reflect our long-term liabilities associated with unrecognized tax bene fits of $2.6 million re corded in accordance with ASC Topic 740, Income Taxes.

We cannot reasonably make a reliable estimate of the period in which we expect to settle these long-term liabilities due to factors outside of our control, such as tax examinations.

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For a discussion of our material legal proceedings refer to Note 16, Commitments & Contingencies, to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

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

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

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

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

We experienced rising inflationary pressures in our global supply chain that had an impact on our results of operations during fiscal 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 throughout fiscal 2023.

Historically, we have been able to limit the impact of the effects of inflation by improving our manufacturing and purchasing efficiencies, by increasing employee productivity and by adjusting the selling prices of products, but we may not be able to fully mitigate these increases in our operational costs in the future.

Foreign Exchange

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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.

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 Franc, Australian Dollar, Chinese Yuan and the Mexican Peso.

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.

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Recent Accounting Pronouncements

Standards to be Implemented

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

2019-12, Income Taxes (Topic 740).

The new guidance will improve consistent application of and simplify the accounting for income taxes by removing certain exceptions to the general principals in Topic 740.

ASC Update No.

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

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

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

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

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

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

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

We early adopted ASC Update No.

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

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

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

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

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

Critical Accounting Policies and Estimates

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

Convertible Senior Notes

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

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

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

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

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

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

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis