What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-02-07 · 95 added, 155 removed, 177 unchanged (59% of the section changed)

10 unchanged sentences

“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, Cell Salvage and Transfusion Management products, inclu des devices and methodologies for measuring coagulation characteristics of blood, vascular closure devices, specialized blood cell processing systems and disposables, surgical blood salvage systems and blood transfusion management software.

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 opport unities to exit unfavorable customer contracts.

Recent Developments

Share Repurchase Program

In August 2022, our Board of Directors authorized the repurchase of up to $300 million of Haemonetics common stock from time to time, based on market conditions, over the next three years.

In November 2022, the Company completed a $75.0 million repurchase of its common stock pursuant to an accelerated share repurchase agreement (“ASR”) entered into with Citibank N.A.

(“Citibank”) in August 2022.

The total number of shares repurchased under the ASR was 1.0 million at an average price per share upon final settlement of $75.20.

As of December 31, 2022, the total remaining authorization for repurchase of the Company’s common stock was $225 million.

Debt Issuance and Repayment

On July 26, 2022, we entered into an amended and restated credit agreement with certain lenders to refinance the credit facilities under our 2018 credit agreement (as amended from time to time) and extend the applicable maturity date through June 2025.

The amended and restated credit agreement provides for a $280.0 million senior unsecured term loan, the proceeds of which have been used to retire the balance of the term loan under our 2018 credit agreement, and a $420.0 million senior unsecured revolving credit facility.

In September 2022, we amended two prior interest rate swap agreements and entered into certain supplemental interest rate swap agreements to effectively convert between 70% to 80% of borrowings under our Revised Credit Facilities from a variable Term Secured Overnight Financing Rate (“SOFR”) rate to a fixed rate of interest through June 2025.

In September 2022, we amended two prior interest rate swap agreements and entered into certain supplemental interest rate swap agreements to effectively convert between 70% to 80% of borrowings under our Revised Credit Facilities from a variable Term SOFR rate to a fixed rate of interest through June 2025.

Operational Excellence Program

During fiscal 2022, our Board of Directors approved the revised Operational Excellence Program (the “2020 Program”).

The revised program is designed to improve product and service quality, reduce cost principally in our manufacturing and supply chain operations and ensure sustainability while helping to offset impacts from a previously announced customer loss, rising inflationary pressures and effects of the COVID-19 pandemic.

We now expect to incur aggregate charges between $95 million and $105 million by the end of fiscal 2025 and to achieve total gross savings of $115 million to $125 million on an annualized basis once the program is completed.

The majority of charges will result in cash outlays, including severance and other employee costs, and will be incurred as the specific actions required to execute these initiatives are identified and approved.

During the three and nine months ended December 31, 2022, the Company incurred $4.1 million and $10.7 million, respectively, of restructuring and restructuring related costs under this program.

Total cumulative charges under this program are $66.4 million as of December 31, 2022.

Financial Summary

Three Months Ended Nine Months Ended

(In thousands, except per share data) December 31,

2022 January 1,

2022 % Increase/ (Decrease) December 31,

2022 January 1,

Three Months Ended

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

2022 % Increase/ (Decrease)

13 unchanged sentences

Net income per share - diluted $ 0.80 $ 0.38 110.5 %

Net revenues increased 17.5% and 18.7% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

Without the effect of foreign exchange, net revenues increased 20.8% and 21.5% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

Revenue increases in our Plasma and Hospital businesses, primarily related to volume and price, drove the overall increase in revenue during the three and nine months ended December 31, 2022.

Operating income increased during the three and nine months ended December 31, 2022 as compared with the same period of fiscal 2022, primarily due to increased revenues in Plasma and Hospital, savings from the 2020 Program and decreased spending on acquisitions in the current year periods, partially offset by lower revenues in Blood Center, increased freight costs in our global supply chain, increased sales and marketing expense and higher performance-based compensation.

Net revenue s increased 19.1% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

Without the effects of foreign exchange, net revenues increased 20.5% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

Revenue increases in our Plasma and Hospital businesses, primarily related to volume and price benefits, drove the overall increase in revenue during the three months ended July 1, 2023.

Operating income increased 74.4% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023, primarily due to increased revenues in Plasma and Hospital, partially offset by continuous growth investments, the impact of foreign exchange, digital transformation costs related to the upgrade of our enterprise resource planning system and increased depreciation expense.

Management’s Use of Non-GAAP Measures

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Three Months Ended

(In thousands) December 31,

2022 January 1,

2022 Reported growth Currency impact Constant currency growth (1)

United States $ 224,104 $ 167,270 34.0 % — % 34.0 %

International 81,197 92,499 (12.2) % (9.0) % (3.2) %

Net revenues $ 305,301 $ 259,769 17.5 % (3.3) % 20.8 %

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

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

Nine Months Ended

(In thousands) December 31,

2022 January 1,

(In thousands) July 1,

2022 Reported growth Currency impact Constant currency growth (1)

4 unchanged sentences

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

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

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

During the three and nine months ended December 31, 2022 our revenue generated outside the U.S.

was 26.6% and 28.5% of total net revenues, respectively, as compared with 35.6% and 36.8% during the three and nine months ended January 1, 2022, respectively.

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

Our results of operations are impacted by changes in foreign exchange rates, particularly in the value of the Yen, Euro and Australian Dollar relative to the U.S.

We have placed foreign currency hedges to mitigate our exposure to foreign currency fluctuations.

Our principal operations are in the United States, Europe, Japan and other parts of Asia.

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

During the three months ended July 1, 2023 our revenue generated outside the U.S.

was 23.9% of total net revenues as compared with 30.4% during the three months ended July 2, 2022.

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

Our results of operations are impacted by changes in foreign exchange rates, particularly in the value of the Yen and Euro relative to the U.S.

We have placed foreign currency hedges on certain foreign currencies to mitigate our exposure to foreign currency fluctuations.

Please see the section entitled “Foreign Exchange” in this discussion for a more complete explanation of how foreign currency affects our business and our strategy for managing this exposure.

1 unchanged sentence

Three Months Ended

(In thousands) December 31,

2022 January 1,

2022 Reported growth Currency impact Constant currency growth (1)

Plasma $ 135,461 $ 96,460 40.4 % (0.8) % 41.2 %

Blood Center 73,362 75,692 (3.1) % (6.2) % 3.1 %

91,560 82,273 11.3 % (3.1) % 14.4 %

Service 4,918 5,344 (8.0) % (6.8) % (1.2) %

Net revenues $ 305,301 $ 259,769 17.5 % (3.3) % 20.8 %

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

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

(2) Hospital revenue includes Hemostasis Management revenue of $34.9 million and $33.5 million during the three months ended December 31, 2022 and January 1, 2022, respectively.

Hemostasis Management revenue increased 4.2% in the third quarter of fiscal 2023, as compared with the same period of fiscal 2022.

Without the effect of foreign exchange, Hemostasis Management revenue increased 7.3% in the third quarter of fiscal 2023, as compared with the same period of fiscal 2022.

Vascular Closure revenue increased 32.6% in the third quarter of fiscal 2023 as compared with the same period of fiscal 2022.

Nine Months Ended

(In thousands) December 31,

2022 January 1,

(In thousands) July 1,

2022 Reported growth Currency impact Constant currency growth (1)

Plasma $ 138,610 $ 102,381 35.4 % (0.1) % 35.5 %

Whole Blood 20,040 19,595 2.3 % (1.6) % 3.9 %

Apheresis 47,300 46,099 2.6 % (4.1) % 6.7 %

Blood Center 67,340 65,694 2.5 % (3.3) % 5.8 %

Hemostasis Management 37,820 33,497 12.9 % (1.6) % 14.5 %

Vascular Closure 37,620 29,568 27.2 % — % 27.2 %

24,168 25,429 (5.0) % (2.0) % (3.0) %

Hospital 99,608 88,494 12.6 % (1.2) % 13.8 %

Net business unit revenues 305,558 256,569 19.1 % (1.5) % 20.6 %

Service 5,774 4,889 18.1 % (1.2) % 19.3 %

2 unchanged sentences

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

(2) Hospital revenue includes Hemostasis Management revenue of $102.7 million and $97.2 million during the nine months ended December 31, 2022 and January 1, 2022, respectively.

Hemostasis Management revenue increased 5.7% in the first nine months of fiscal 2023, as compared with the same period of fiscal 2022.

Without the effect of foreign exchange, Hemostasis Management revenue increased 8.1% in the first nine months of fiscal 2023, as compared with the same period of fiscal 2022.

Vascular Closure revenue increased 36.6% in the first nine months of fiscal 2023 as compared with the same period of fiscal 2022.

Plasma revenue increased 40.4% and 46.2% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

Without the effect of foreign exchange, Plasma revenue increased 41.2% and 47.1% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

The increases during the three and nine months ended December 31, 2022, as compared with the same period of fiscal 2022 were driven by volume and price.

During the third quarter of fiscal 2022, we amended our supply agreement with CSL Plasma Inc.

(“CSL”), which CSL had previously notified us of its intent not to renew and was initially set to expire in June 2022, to allow CSL to continue to use our PCS2 plasma collection system devices and purchase disposable plasmapheresis kits on a non-exclusive basis through December 2023.

During the third quarter of fiscal 2023, we further amended our supply agreement with CSL to extend the term through December 2025.

Blood Center revenue decreased 3.1% and 5.6% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

Without the effect of foreign exchange, Blood Center revenue increased 3.1% and decreased 1.1% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

The increase during the three months ended December 31, 2022, as compared to the same period of fiscal 2022 was primarily due to an increase in our whole blood business.

The decrease during the nine months ended December 31, 2022, as compared with the same period of fiscal 2022 was primarily driven by a decline in the volume of apheresis disposables.

Hospital revenue increased 11.3% and 14.3% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

Without the effect of foreign exchange, Hospital revenue increased 14.4% and 17.0% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

The increase during the three and nine months ended December 31, 2022 was primarily attributable to Vascular Closure revenue, as well as increases in Hemostasis Management disposables revenue and Transfusion Management revenue.

Three Months Ended Nine Months Ended

(In thousands) December 31,

2022 January 1,

2022 % Increase December 31,

2022 January 1,

(2) Other includes the Cell Salvage and Transfusion Management product lines of the Hospital business unit.

Plasma revenue increased 35.4% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

Without the effects of foreign exchange, Plasma revenue increased 35.5% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

The increase during the three months ended July 1, 2023 was primarily driven by volume and price.

During the third quarter of fiscal 2023, we amended our supply agreement with CSL, which was scheduled to expire in December 2023, to extend the term through December 2025.

CSL has a minimum purchase commitment under the non-exclusive supply agreement that slightly exceeds $100.0 million in fiscal 2024, and we expect that CSL will continue to provide a meaningful contribution to our Plasma business revenue in fiscal 2025.

Blood Center revenu e increased 2.5% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

Without the effects of foreign exchange, Blood Center revenue increased 5.8% during the three months ended July 1, 2023 as compared with the same periods of fiscal 2023.

Th e increase was primarily due to an increase in our apheresis business.

Hospital revenue increased 12.6% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

Without the effects of foreign exchange, Hospital revenue increased 13.8% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

The increase during the three months ended July 1, 2023 was primarily attributable to increased Vascular Closure and Hemostasis Management revenue.

Three Months Ended

(In thousands) July 1,

2022 % Increase

1 unchanged sentence

% of net revenues 53.7 % 54.4 %

Gross profit increased 14.5% and 24.3% for the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

Without the effect of foreign exchange, gross profit increased 18.4% and 28.5% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

The increase during the three and nine months ended December 31, 2022 was primarily driven by volume, price and productivity savings from the 2020 Program, partially offset by inflationary pressures in our global manufacturing and supply chain and increased depreciation expense.

Gross profit increased 17.6% for the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

Without the effects of foreign exchange, gross profit increased 21.8% during the three months ended July 1, 2023 as compared with the

same period of fiscal 2023.

The increase during the three months ended July 1, 2023 was primarily driven by geographic and product mix, volume and price, partially offset by inventory reserves, investments in operations and increased depreciation expense.

Operating Expenses

Three Months Ended Nine Months Ended

(In thousands) December 31,

2022 January 1,

2022 % Increase/

(Decrease) December 31,

2022 January 1,

Three Months Ended

(In thousands) July 1,

2022 % Increase/

3 unchanged sentences

% of net revenues 30.0 % 35.3 %

Amortization of intangible assets $ 8,078 $ 12,151 (33.5) % $ 24,666 $ 35,930 (31.3) %

% of net revenues 2.6 % 4.7 % 2.9 % 4.9 %

Gains on divestiture $ — $ — — % $ (382) $ (9,603) (96.0) %

Amortization of acquired intangible assets $ 7,473 $ 8,367 (10.7) %

% of net revenues 2.4 % 3.2 %

2 unchanged sentences

Research and Development

Research and development expenses increased 26.4% and 2.7% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

Without the effect of foreign exchange, research and development expenses increased 26.9% and 3.2% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

This increase was due to increased investments into product innovation.

Research and development expenses increased 16.0% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

Without the effects of foreign exchange, research and development expenses increased 15.7% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

This increase was due to increased investments into product innovation across our product portfolio.

Selling, General and Administrative

Selling, general and administrative expenses increased 17.3% and 12.7% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

Without the effect of foreign exchange, selling, general, and administrative expenses increased 19.7% and 14.7% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

The increase during the three and nine months ended December 31, 2022 was primarily driven by inflationary pressures and higher freight costs in our global supply chain, higher investments in sales and marketing and higher performance-based compensation, partially offset by cost savings related to the 2020 Program and decreased acquisition related costs in the current year.

Amortization of Intangible Assets

We recognized amortization expense of $8.1 million and $24.7 million during the three and nine months ended December 31, 2022, respectively, and $12.2 million and $35.9 million during the three and nine months ended January 1, 2022, respectively.

Selling, general and administrativ e expenses increased 1.4% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

Without the effects of foreign exchange, selling, general, and administrative expenses increased 1.8% during th e three months ended July 1, 2023 as compared with the same period of fiscal 2023.

T he increase during the three months ended July 1, 2023 was primarily driven by higher investments in sales and marketing and costs associated with the upgrade of our enterprise resource planning system.

Amortization of Acquired Intangible Assets

We recognized amortization expense related to our acquired intangible assets of $7.5 million and $8.4 million during the three months ended July 1, 2023 and July 2, 2022, respectively.

The decrease is primarily the result of intangible assets that became fully amortized during fiscal 2023.

Gains on Divestiture

We recognized gains on divestiture of $0.4 million during the nine months ended December 31, 2022 and $9.6 million during the nine months ended January 1, 2022.

Interest and Other Expense, Net

Interest and other expenses decreased 75.3% and 9.4% during the three and nine months ended December 31, 2022, respectively, as compared with the same period of fiscal 2022.

Without the effects of foreign exchange, interest and other expenses decreased 73.1% and 10.5% during the three and nine months ended December 31, 2022, respectively, as compared with the same periods of fiscal 2022.

The decrease was primarily driven by foreign currency impact due to market and rate volatility, partially offset by higher interest rates which impacted the interest incurred on our term loan.

Interest and other expenses decreased 60.8% during the three months ended July 1, 2023 as compared with the same period of fiscal 2023.

The decrease was primarily driven by increased interest income on investments due to higher interest rates and foreign currency impact due to market and rate volatility, partially offset by higher interest incurred on our term loan.

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

1 unchanged sentence

statutory tax rate.

For the three and nine months ended December 31, 2022, we reported income tax expense of $9.3 million and $22.8 million, respectively, representing effective tax rates of 22.0% and 20.9%, respectively.

The effective tax rate for the three months ended December 31, 2022 includes $0.1 million of discrete tax expense relating to stock compensation shortfalls.

The effective tax rate for the nine months ended December 31, 2022 includes a discrete tax benefit of $0.5 million related to tax rate changes enacted in the period and $0.4 million of discrete tax expense relating to stock compensation shortfalls.

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

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

For the three months ended July 1, 2023, we recorded income tax expense of $10.5 million, representing an effective tax rate of 20.4%.

The effective tax rate for the three months ended July 1, 2023 includes $1.2 million of discrete tax benefit primarily related to stock compensation windfalls.

For the three months ended July 2, 2022 , we recorded income tax expense of $5.6 million, representing an effective tax rate of 22.0%.

The effective tax rate for the three months ended July 2, 2022 includes $0.6 million discrete tax expense relating to stock compensation shortfalls.

Liquidity and Capital Resources

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

(Dollars in thousands) December 31,

(Dollars in thousands) July 1,

2023 April 1,

Cash & cash equivalents $ 224,002 $ 259,496

Cash and cash equivalents $ 285,719 $ 284,466

Working capital $ 564,668 $ 517,906

Current ratio 3.4 3.1

Net debt position (1)

$ (479,234) $ (481,420)

4 unchanged sentences

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

Our expected cash outlays relate primarily to acquisitions, investments, capital expenditures, including enhancements to our North American manufacturing facilities, share repurchases and cash payments under our revised credit agreement.

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

The Company has $500.0 million aggregate principal amount of 0% convertible senior notes due in 2026, or the 2026 Notes.

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

2 unchanged sentences

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

The 2026 Notes have an effective interest rate of 0.5% as of December 31, 2022.

As of December 31, 2022, we had $224.0 million in cash and cash equivalents, the majority of which is held in the U.S.

The 2026 Notes have an effective interest rate of 0.5% as of July 1, 2023.

As of July 1, 2023, we had $285.7 million in cash and cash equivalents, the majority of which is held in the U.S.

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

On July 26, 2022, we entered into an amended and restated credit agreement with certain lenders to refinance our prior credit agreement entered into on June 15, 2018, which consisted of a $350.0 million term loan and a $350.0 million revolving loan (together, as amended from time to time, the “2018 Credit Facilities”), and extend the maturity date through June 2025.

The amended and restated credit agreement provides for a $280 million senior unsecured term loan, the proceeds of which have been used to retire the balance of the term loan under the 2018 Credit Facilities, and a $420 million senior unsecured revolving credit facility (together, the “Revised Credit Facilities”).

Our Revised Credit Facilities include a $280.0 million senior unsecured term loan, the proceeds of which have been used to retire the balance of the term loan under the 2018 Credit Facilities, and a $420.0 million senior unsecured revolving credit facility.

Loans under the Revised Credit Facilities bear interest at an annual rate equal to the Adjusted Term SOFR Rate (as specified in the amended and restated credit agreement), which is subject to a floor of 0%, plus an applicable rate ranging from 1.125% to 1.750% based on the Company’s consolidated net leverage ratio (as specified in the amended and restated credit agreement) at the applicable measurement date.

4 unchanged sentences

The principal amount of the term loan under the Revised Credit Facilities is repayable quarterly through the maturity date at a rate of 2.5% for the first year and 5% thereafter, with the unpaid balance due at maturity.

As of December 31, 2022, $276.5 million was outstanding under the term loan with an effective interest rate of 6.0%.

There were no borrowings outstanding under the revolving credit facility at December 31, 2022.

We also had $21.4 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of December 31, 2022.

Additionally, the Company was in compliance with the leverage and interest coverage ratios specified in the amended and restated credit agreement as well as all other bank covenants as of December 31, 2022.

As of July 1, 2023, $273.0 million was outstanding under the term loan with an effective interest rate of 6.6%.

There were no borrowings outstanding on the revolving loan.

We also had $19.6 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of July 1, 2023.

Additionally, 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 July 1, 2023.

The Company has scheduled principal payments of $10.5 million required during the remainder of fiscal 2024.

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.

During fiscal 2022, our Board of Directors approved a revised Operational Excellence Program.

We estimate that we will incur aggregate charges between $95 million and $105 million in connection with the Operational Excellence Program.

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

During the three and nine months ended December 31, 2022, we incurred $4.1 million and $10.7 million, respectively, of restructuring and restructuring related costs under this program.

Nine Months Ended

(In thousands) December 31,

2022 January 1,

During the three months ended July 1, 2023, we incurred $2.2 million of restructuring and restructuring related costs under this program.

Three Months Ended

(In thousands) July 1,

Net cash provided by (used in):

7 unchanged sentences

In accordance with U.S.

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

Net cash provided by operating activities increased by $89.2 million during the nine months ended December 31, 2022, as compared with the nine months ended January 1, 2022.

The increase in cash provided by operating activities was primarily the result of an increase in net income, a decrease in inventories driven by NexSys PCS device placements and higher other net working capital, including higher performance-based compensation.

Net cash used in investing activities increased by $73.9 million during the nine months ended December 31, 2022, as compared with the nine months ended January 1, 2022.

The increase in cash used in investing activities was primarily the result of an increase in capital expenditures, driven by NexSys PCS device placements, and other investments made in the current year period, which was partially offset by lower proceeds received from divestitures during fiscal 2023 compared to fiscal 2022 and increased sales of property, plant and equipment.

Net cash used in financing activities increased by $91.8 million during the nine months ended December 31, 2022, as compared with the nine months ended January 1, 2022, primarily due to share repurchases and acquisition-related contingent consideration payments made in the current year.

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

Net cash provided by operating activities de creased by $22.9 million during the three months ended July 1, 2023, as compared with the three months ended July 2, 2022.

The decrease in cash provided by operating activitie s was primarily the result of an increase in inventory, partially offset by an increase in net income.

Net cash used in investing activities d ecreased by $43.0 million during the three months ended July 1, 2023, as compared with the three months ended July 2, 2022.

The decrease in cash used in investing activities was primarily the result of lower capital expenditures driven by NexSys PCS device placements that occurred during fiscal 2023 and decreased other investments compared to the first quarter of fiscal 2023.

Net cash used in financing activities decreased by $22.8 million during the three months ended July 1, 2023, as compared with the three months ended July 2, 2022, primarily due to lower contingent consideration payments in the first quarter of fiscal 2024.

Concentration of Credit Risk

6 unchanged sentences

Payment is dependent upon the financial stability and creditworthiness of those countries’ national economies.

We have not incurred significant losses on receivables.

We have not incurred significant losses on trade accounts or other receivables.

We continually evaluate all receivables for potential collection risks associated with the availability of government funding and reimbursement practices.

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

We experienced rising inflationary pressures in our global supply chain that had an impact on our results of operations during the three and nine months ended December 31, 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

During the three and nine months ended December 31, 2022, 26.6% and 28.5%, respectively, of our sales were generated outside the U.S., generally in foreign currencies, yet our reporting currency is the U.S.

During the three months ended July 1, 2023, 23.9% of our sales were generated outside the U.S., generally in foreign currencies, yet our reporting currency is the U.S.

We also incur certain manufacturing, marketing and selling costs in international markets in local currency.

Our primary foreign currency exposures relate to sales denominated in Euro, Japanese Yen, Chinese Yuan and Australian Dollars.

Our primary foreign currency exposures relate to sales denominated in Japanese Yen, Euro and Chinese Yuan.

We also have foreign currency exposure related to manufacturing and other operational costs denominated in Swiss Francs, Canadian Dollars, Mexican Pesos and Malaysian Ringgit.

The Yen, Euro, Yuan and Australian Dollar sales exposure is partially mitigated by costs and expenses for foreign operations and sourcing products denominated in foreign currencies.

Since our foreign currency denominated Yen, Euro, Yuan and Australian Dollar sales exceed the foreign currency denominated costs, whenever the U.S.

Dollar strengthens relative to the Yen, Euro, Yuan or Australian Dollar, there is an adverse effect on our results of operations and, conversely, whenever the U.S.

Dollar weakens relative to the Yen, Euro, Yuan or Australian Dollar, there is a positive effect on our results of operations.

The Yen, Euro and Yuan sales exposure is partially mitigated by costs and expenses for foreign operations and sourcing products denominated in foreign currencies.

Since our foreign currency denominated Yen, Euro and Yuan sales exceed the foreign currency denominated costs, whenever the U.S.

Dollar strengthens relative to the Yen, Euro or Yuan, there is an adverse effect on our results of operations and, conversely, whenever the U.S.

Dollar weakens relative to the Yen, Euro or Yuan, there is a positive effect on our results of operations.

For Swiss Francs, Canadian Dollars Mexican Pesos and Malaysian Ringgit our primary cash flows relate to product costs or costs and expenses of local operations.

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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, Chinese Yuan and Mexican Pesos.

This does not eliminate the volatility of foreign exchange rates, but because we generally enter into forward contracts one year out, rates are fixed for a one-year period, thereby facilitating financial planning and resource allocation.

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expected operating results and financial performance;

impacts of the COVID-19 pandemic;

the Company’s strategy for growth;

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impacts of acquisitions or dispositions;

market position and expenditures.

and market position and expenditures.

Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of the Company ’ s control.

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

• The effect of the ongoing COVID-19 pandemic, or outbreaks of communicable diseases, on our business, financial conditions and results of operations, including the time it will take for vaccines to be broadly distributed and 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, including inflationary pressures and higher freight costs in our global supply chain;

• Failure to achieve our long-term strategic and financial-improvement goals;

• Our ability to achieve our long-term strategic and financial-improvement goals;

• Demand for and market acceptance risks for new and existing products, including material reductions in purchasing from or loss of a significant customer;

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regulatory agencies), reputational damage, declining sales or litigation;

• Our ability to retain and attract key personnel;

• Security breaches of our information technology systems or our products, which could impair our ability to conduct business or compromise sensitive information of the Company or its customers, suppliers and other business partners, or of customers’ patients;

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

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

and foreign legal and regulatory requirements, including the U.S.

Foreign Corrupt Practices Act, European Union Medical Device Regulation and In Vitro Diagnostic Regulation and similar laws in other jurisdictions, as well as U.S.

and foreign export and import restrictions and tariffs;

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• Costs and risks associated with product liability and other litigation claims we may be subject to now or in the future;

• The impact of actual or threatened public health emergencies;

• Our ability to retain and attract key personnel;

• Market conditions impacting our stock price and/or our share repurchase program, and the possibility that such share repurchase program may be delayed, suspended or discontinued;

• Our ability to achieve against our corporate responsibility initiatives and meet evolving stakeholder expectations concerning corporate responsibility matters.

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

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis