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Item 7. Management’s Discussion and Analysis

2024-05-20 compared with 2023-05-22 · 121 added, 92 removed, 298 unchanged (42% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Haemonetics is a global healthcare company dedicated to providing a suite of innovative medical products and solutions for customers, to help them improve patient care and reduce the cost of healthcare.

Haemonetics is a global healthcare company dedicated to providing a suite of innovative medical technology solutions that improve the quality, effectiveness and efficiency of care.

We challenge ourselves to think big and make new possibilities a reality, so that our customers can make it matter for patients, every single day.

Our technology addresses important medical markets:

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Plasma, Blood Center and Hospital.

For that purpose, “Plasma” includes plasma collection devices and disposables, plasma donor management software and anticoagulant and saline sold to plasma customers.

For that purpose, “Plasma” includes plasma collection devices and disposables, donor management software and supporting software solutions sold to plasma customers.

“Blood Center” includes blood collection and processing devices and disposables for red cells, platelets and whole blood.

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

“Hospital” is comprised of Interventional Technologies, which includes Vascular Closure and Sensor Guided Technologies products, and Blood Management Technologies, which includes Hemostasis Management, Cell Salvage and Transfusion Management products.

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

Share Repurchase Program

In August 2022, we announced that our Board of Directors had approved a new three-year share repurchase program authorizing the repurchase of up to $300.0 million of Haemonetics common stock from time to time, based on market conditions, through August 2025.

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.

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 April 1, 2023, the total remaining authorization for repurchase of the Company’s common stock was $225.0 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.

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 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.

Attune Medical

On March 5, 2024, the Company entered into a definitive agreement to acquire Advanced Cooling Therapy, Inc., d/b/a Attune Medical (“Attune Medical”), the manufacturer of the ensoETM® proactive esophageal cooling device, based in Chicago, Illinois.

The acquisition closed on April 1, 2024, subsequent to our fiscal year end.

The Company acquired Attune Medical for total upfront consideration of $160.0 million.

The agreement also provides for additional contingent consideration based on sales growth over the next three years and the achievement of certain other milestones.

The Company financed the acquisition through a combination of cash on hand and borrowings under its senior unsecured revolving credit facility.

The addition of Attune Medical expands the Hospital business unit’s presence in electrophysiology and complements its Vascular Closure product line.

On October 10, 2023, the Company entered into an Arrangement Agreement with OpSens Inc.

(“OpSens”), a medical device cardiology-focused company delivering solutions based on its proprietary optical technology, pursuant to which, among other things, the Company agreed to acquire all of the issued and outstanding common shares of OpSens.

On December 12, 2023, the Company completed its acquisition of OpSens for total consideration of approximately $254.5 million, or $243.9 million, net of cash acquired.

The Company financed the acquisition through a combination of cash on hand and borrowings under its senior unsecured revolving credit facility.

OpSens offers commercially and clinically validated optical technology for use primarily in interventional cardiology.

OpSens’ core products include the SavvyWire ® , a sensor-guided 3-in-1 guidewire for TAVR procedures, advancing the workflow of the procedure and enabling potentially shorter hospital stays for patients;

and the OptoWire ® , a pressure guidewire that aims to improve clinical outcomes by accurately and consistently measuring Fractional Flow Reserve (FFR) and diastolic pressure ratio (dPR) to aid clinicians in the diagnosis and treatment of patients with coronary artery disease.

OpSens also manufactures a range of fiber optic sensor solutions used in medical devices and other critical industrial applications.

The addition of OpSens expands the Hospital business unit portfolio in the interventional cardiology market and is included in the Hospital reportable segment.

Portfolio Rationalization Initiatives

In November 2023, the Company announced its plans to end of life the ClotPro analyzer system within the Hospital business unit and certain products within the Blood Center business unit, primarily in Whole Blood, including the associated

manufacturing operations and closure of certain other facilities.

The Company incurred charges of $13.9 million in fiscal 2024 related to these initiatives.

Market Trends

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

where approximately 70% of the world’s source plasma is collected and only a few customers provide the majority of our Plasma re venue.

where approximately two-thirds of the world’s source plasma is collected and only a few customers provide the majority of our Plasma re venue.

However, certain jurisdictions such as Egypt and the United Kingdom have begun to collect or are considering collection of plasma for fractionation for their local needs, which could expand the Plasma market.

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Hospital Markets

Interventional Technologies:

Vascular Closure Market - The target markets for our Vascular Closure products used in coronary, structural heart, peripheral 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.

Our products also address many of the vascular closure needs for the structural heart (contralateral access sites) and electrophysiology procedures.

Our Vascular Closure market continues to grow with the VASCADE MVP launch in Japan in September 2023.

In addition, our VASCADE and VASCADE MVP

vascular closure systems received CE mark clearance in fiscal 2023, providing a pathway for country-specific introduction of these products in the EU.

Sensor Guided Technologies Market - The market for sensor-guided technologies reflects varying dynamics across different interventional cardiology procedures.

In the transcatheter aortic valve replacement (TAVR) market, characterized by high growth, the demand for innovative solutions like SavvyWire is driven by an aging population and increasing prevalence of aortic valve diseases globally.

Conversely, in the more mature percutaneous coronary intervention (PCI) market, the steady demand for sensor-guided technologies such as OptoWire remains driven by persistent prevalence of coronary artery disease, emphasizing the need for advanced diagnostic and therapeutic interventions.

Our strategic investment in sensor-guided technologies positions us to capitalize on these trends, leveraging innovation to address evolving needs in both high-growth and mature markets while expanding our global market presence through initiatives like obtaining CE mark clearance for our vascular closure systems.

Blood Management Technologies:

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.

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In addition, advanced hemostasis testing supports hospital efforts to reduce the risks, complications and costs associated with unnecessary blood component transfusions.

Haemonetics’ TEG, ClotPro and HAS hemostasis analyzer systems are advanced diagnostic tools that provide a comprehensive assessment of a patient’s overall hemostasis.

Haemonetics’ TEG and HAS hemostasis analyzer systems are advanced diagnostic tools that provide a comprehensive assessment of a patient’s overall hemostasis.

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

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Geographically, TEG systems have achieved the highest market penetration in North America, Europe and China.

However, there are considerable growth opportunities in these as well as other markets, as TEG systems become more established as the standard of care around the world.

Our ClotPro system is currently available in select European and Asian markets and is not available for use or sale in the U.S.

The HAS-100 is currently commercialized in China.

Vascular Closure Market - The target markets for our Vascular Closure products, 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.

Additionally, our VASCADE and VASCADE MVP vascular closure systems received CE mark clearance in fiscal 2023, providing a pathway for country-specific introduction of these products in the EU.

However, there are considerable growth opportunities in these as well as other markets, as TEG systems become more established as the standard of care around the wor ld.

The HAS-100 and HAS-300 are 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.

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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.

We believe there are growth opportunities in Asia Pacific as the use of autotransfusion is becoming accepted as a standard of care.

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

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Without the effects of foreign exchange, net revenues increased 12.7% compared with fiscal 2023.

Revenue increases in our Plasma and Hospital businesses, primarily related to volume and price, drove the overall increase in revenue during the fiscal year ended April 1, 2023.

Operating income increased 93.2% during fiscal 2023 as compared with fiscal 2022, primarily due to increased revenues in Plasma and Hospital, savings from the Operational Excellence Program (“2020 Program”), decreased spending on acquisitions in fiscal 2023 and decreased amortization of acquired intangible assets, partially offset by higher performance-based compensation, lower revenues in Blood Center, increased freight costs in our global supply chain and increased sales and marketing expense.

Revenue increases in our Plasma and Hospital businesses, primarily related to volume and price, drove the overall increase in revenue during the fiscal year ended March 30, 2024.

Operating income increased 5.7% during fiscal 2024 as compared with fiscal 2023, primarily due to increased revenues in Plasma and Hospital and savings from the Operational Excellence Program (“2020 Program”), partially offset by spend on portfolio rationalization initiatives, continuous growth investments, digital transformation costs incurred as part of the upgrade of our enterprise resource planning system and transaction and integration costs related to the acquisition of OpSens.

Management’s Use of Non-GAAP Measures

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Europe 12.2 % 13.4 %

Asia 8.9 % 11.2 %

Rest of Asia 8.2 % 8.9 %

Other 1.0 % 0.4 %

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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 to mitigate our exposure to foreign currency fluctuations.

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.

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(In thousands) 2024 2023 Reported growth Currency impact Constant currency growth (1)

Revenues by business unit

Plasma 565,944 496,923 13.9 % 0.1 % 13.8 %

Apheresis 204,086 200,546 1.8 % (3.1) % 4.9 %

Whole Blood 72,058 79,416 (9.3) % (0.6) % (8.7) %

Blood Center 276,144 279,962 (1.4) % (2.4) % 1.0 %

Interventional Technologies (2)

174,285 126,717 37.5 % (0.2) % 37.7 %

Hemostasis Management 159,139 138,854 14.6 % (0.6) % 15.2 %

111,938 106,160 5.4 % (0.7) % 6.1 %

Hospital 445,362 371,731 19.8 % (0.5) % 20.3 %

Net business unit revenues 1,287,450 1,148,616 12.1 % (0.7) % 12.8 %

Service 21,605 20,044 7.8 % 0.5 % 7.3 %

Net revenues $ 1,168,660 $ 993,196 17.7% (2.6)% 20.3%

Total net revenues $ 1,309,055 $ 1,168,660 12.0 % (0.7) % 12.7 %

(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 $138.9 million and $127.4 million for fiscal years 2023 and 2022, respectively.

Hemostasis Management revenue increased 9.0% during fiscal 2023 as compared with fiscal 2022.

Without the effect of foreign exchange, Hemostasis Management revenue increased 11.3% as compared with fiscal 2022.

Vascular Closure revenue increased 35.1% during fiscal 2023 as compared with fiscal 2022.

(2) Interventional Technologies includes Vascular Closure and Sensor Guided Technologies product lines of the Hospital business unit.

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

Plasma revenue increased 13.9% during fiscal 2024 as compared with fiscal 2023.

Without the effect of foreign exchange, Plasma revenue increased 42.2% during fiscal 2023 as compared with fiscal 2022.

Without the effect of foreign exchange, Plas ma revenue increased 13.8% during fiscal 2024 as compared with fiscal 2023.

This revenue increase was primarily driven by volume and price.

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During the third quarter of fiscal 2023, we further amended our supply agreement with CSL 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.

CSL has a minimum purchase commitment under the non-exclusive supply agreement of approximately $85 million in fiscal 2025.

Blood Center revenue decreased 1.4% during fiscal 2024 as compared with fiscal 2023.

Without the effect of foreign exchange, Blood Center revenue decreased 1.8% during fiscal 2023.

The decrease was primarily driven by declines in the volume of apheresis disposables, partially offset by an increase in whole blood disposables.

Without the effect of foreign exchange, Blood Center revenue increased 1.0% during fiscal 2024.

The decrease in Blood Center’s reported revenue was primarily driven by declines in whole blood disposables and the impact of foreign exchange, partially offset by an increase in apheresis disposables.

Hospital revenue increased 19.8% during fiscal 2024 as compared with fiscal 2023.

Without the effect of foreign exchange, Hospital revenue increased 20.3% during fiscal 2024.

The increase was primarily attributable to Vascular Closure revenue, as well as increases in Hemostasis Management disposables revenue and Transfusion Management revenue.

(In thousands) 2023 2022 % Increase/(Decrease)

The increase was primarily attributable to Vascular Closure revenue and Hemostasis Management disposables revenue, as well as increases in Transfusion Management revenue.

(In thousands) 2024 2023 % Increase

Gross profit $ 691,548 $ 615,097 12.4 %

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Without the effects of foreign exchange, gross profit increased 16.5% during fiscal 2024.

The increase was primarily driven by volume, price, decreased spend on both restructuring and restructuring related costs and integration and transaction costs, as well as productivity savings from the 2020 Program.

These drivers were partially offset by inflationary pressures in our global manufacturing and supply chain and increased depreciation expense.

The increase was primarily driven by volume, product mix and productivity savings from the 2020 Program, partially offset by spend on portfolio rationalization initiatives and amortization of inventory fair value step-up related to the OpSens acquisition.

Operating Expenses

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% of net revenues 2.4 % 2.8 %

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

Gains on divestiture and sale of assets $ (2,000) $ (382) n/m

% of net revenues (0.2) % — %

Impairment of intangible assets $ 10,419 $ — n/m

% of net revenues 0.8 % — %

Total operating expenses $ 526,665 $ 459,064 14.7 %

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Without the effects of foreign exchange, research and development expenses increased 8.1% during fiscal 2024.

The increase in fiscal 2023 was primarily due to increased investments into product innovation, partially offset by decreased spend on MDR and IVDR.

The increase in fiscal 2024 was primarily due to increased investments into product innovation as well as increased costs associated with the acquisition of OpSens.

Selling, General and Administrative

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Without the effects of foreign exchange, selling, general and administrative expenses increased 14.5% during fiscal 2024.

The increase in fiscal 2023 was primarily driven by higher performance-based compensation, inflationary pressures and higher freight costs in our global supply chain and increased investments in sales and marketing, partially offset by cost savings related to the 2020 Program and decreased acquisition costs and restructuring and restructuring related costs in fiscal 2023.

The increase in fiscal 2024 was primarily driven by spend on portfolio rationalization initiatives, continuous growth investments, digital transformation costs incurred as part of the upgrade of our enterprise resource planning system and transaction and integration costs related to the acquisition of OpSens, partially offset by operating leverage.

Amortization of Acquired Intangible Assets

We recognized amortization expense related to our acquired intangible assets of $32.0 million and $32.6 million during fiscal 2024 and fiscal 2023, respectively.

The decrease in fiscal 2023 is primarily the result of intangible assets that became fully amortized during fiscal 2022.

Gains on Divestitures

We recognized gains on divestitures of $0.4 million and $9.6 million during fiscal 2023 and fiscal 2022, respectively.

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

The decrease in fiscal 2024 is primarily the result of intangible assets that became fully amortized during fiscal 2023, partially offset by amortization of intangibles acquired as part of the OpSens acquisition during fiscal 2024.

Gains on Divestiture and sale of assets

We recognized gains on divestiture and sale of assets of $2.0 million and $0.4 million during fiscal 2024 and fiscal 2023, respectively.

During fiscal 2024, we recognized a gain on the sale of certain licenses and during fiscal 2023, we recognized a gain for contingent consideration earned on the sale of U.S.

blood donor management software.

Impairment of Intangible Assets

We recognized a $10.4 million impairment of intangible assets in fiscal 2024 related to the enicor GmbH acquisition completed in fiscal 2021 within our Hospital business unit.

Interest and Other Expense, Net

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Without the effects of foreign exchange, interest and other expenses de creased 10.1% during fiscal 2024.

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

The decrease was primarily driven by increased

interest income on investments due to higher interest rates, lower interest paid on interest rate swaps due to market and rate volatility, partially offset by higher interest incurred on our credit facility.

2024 2023 % Increase/(Decrease)

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We have assessed, on a jurisdictional basis, the available means of recovering deferred tax assets, including the ability to carry-back net operating losses, the existence of reversing temporary differences, the availability of tax planning strategies and available sources of future taxable income.

As of April 1, 2023, we maintain a valuation allowance against certain U.S.

As of March 30, 2024, we maintain a valuation allowance against certain U.S.

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

For the year ended April 1, 2023, we recorded income tax expense of $26.0 million on our worldwide pre-tax income of $141.4 million, resulting in a reported tax rate of 18.4%.

Our effective tax rate for the year ended April 1, 2023 is lower than our effective tax rate of 31.8% for fiscal 2022, primarily due to the release of valuation allowance related to U.S.

state deferred tax assets, the absence of provisions related to contingent consideration and decreased disallowed stock compensation expense, partially offset by jurisdictional mix of earnings.

Effective beginning in 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.

There was not a material impact on our effective tax rate in fiscal 2023 as a result of this requirement.

For the year ended March 30, 2024, we recorded income tax expense of $34.3 million on our worldwide pre-tax income of $151.9 million, resulting in a reported tax rate of 22.6%.

Our effective tax rate for the year ended March 30, 2024 is higher than our effective tax rate of 18.4% for fiscal 2023, primarily due to the release of valuation allowance related to U.S.

state deferred tax assets in fiscal 2023 that did not recur in fiscal 2024, partially offset by a tax benefit recorded in fiscal 2024 related to the impact of foreign tax law changes, an increase in stock compensation tax benefit and an unfavorable impact of the jurisdictional mix of earnings.

Liquidity and Capital Resources

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

(In thousands) April 1,

(Dollars in thousands) March 30,

2024 April 1,

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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 and our revolving credit facility.

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 principal and interest 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.

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations and our senior unsecured revolving credit facility.

We believe these sources are sufficient to fund our cash requirements over at least the next twelve months and to meet our known long-term cash requirements, including our convertible senior notes due March 1, 2026.

Our expected cash outlays relate primarily to acquisitions, investments, capital expenditures, including enhancements to our North American manufacturing facilities, share repurchases, portfolio rationalization initiatives and cash principal and interest payments under our revised credit agreements.

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.

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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 April 1, 2023.

As of April 1, 2023, we had $284.5 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 March 30, 2024.

As of March 30, 2024, we had $178.8 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.

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.

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 credit facility (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 includes 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 (together, the “2022 Revised Credit Facilities”).

Loans under the 2022 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.

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Under the 2022 Revised Credit Facilities, the Company is required to maintain certain leverage and interest coverage ratios specified in the amended and restated credit agreement as well as other customary non-financial affirmative and negative covenants.

The Revised Credit Facilities mature on June 15, 2025.

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 April 1, 2023, $274.7 million was outstanding under the term loan with an effective interest rate of 6.3%.

Th ere were no borrowings outstanding on the revolving loan.

We also had $21.3 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of April 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 April 1, 2023.

The Company has scheduled principal payments of $12.3 million required during 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.

As of March 30, 2024, $262.5 million was outstanding under the term loan with an effective interest rate of 6.9% and $50.0 million in outstanding borrowings under the revolving credit facility with an effective interest rate of 6.8% .

We also had $18.7 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings a s of March 30, 2024.

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 March 30, 2024.

In April 2024, subsequent to the fiscal year ended March 30, 2024, the Company entered into a second amended and restated credit agreement with certain lenders to refinance the 2022 Revised Credit Facilities and extend their maturity date through April 2029.

The second amended and restated credit agreement provides for a $250.0 million senior unsecured term loan, the proceeds of which, along with $12.5 million of cash on hand, have been used to retire the balance of the term loan under the 2022 Revised Credit Facilities, and a $750.0 million senior unsecured revolving credit facility (together, the “2024 Revised Credit Facilities”), which constitutes a $330.0 million increase from the revolving credit facility under the 2022 Revised Credit Facilities.

Loans under the 2024 Revised Credit Facilities will initially bear interest at an annual rate equal to the Adjusted Term SOFR Rate (as specified in the second amended and restated credit agreement), which is subject to a floor of 0.0%, plus an applicable rate ranging from 1.125% to 1.750% based on the Company’s consolidated net leverage ratio (as specified in the second amended and restated credit agreement) at the applicable measurement date.

Adjusted Term SOFR Rate loans are also subject to a credit spread adjustment of 0% per annum.

The revolving credit facility carries an unused fee that ranges from 0.125% to 0.250% annually based on the Company’s consolidated net leverage ratio at the applicable measurement date.

The 2024 Revised Credit Facilities mature on April 30, 2029.

The principal amount of the term loan under the 2024 Revised Credit Facilities amortizes quarterly through the maturity date at a rate of 2.5% for the first three years following the closing date, 5.0% for the fourth year following the closing date and 7.5% for the fifth year following the closing date, with the unpaid balance due at maturity.

As of April 30, 2024, the outstanding balance under the revolving credit facility was $230.0 million, which increased from the end of fiscal 2024, primarily due to borrowings associated with the acquisition of Attune Medical on April 1, 2024.

The Company has scheduled principal payments, adjusted for the impact of the debt refinancing in April 2024, of $17.3 million required during fiscal 2025.

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

We estimate that we will incur aggregate charges between $85 million and $95 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 fiscal years ended April 1, 2023 and April 2, 2022, the Company incurr ed $11.5 million and $28.7 million, respectively, of restructuring and restructuring related costs under this program.

During the fiscal years ended March 30, 2024 and April 1, 2023, the Company incurr ed $9.8 million and $11.5 million, respectively, of restructuring and restructuring related costs under this program.

(In thousands) 2024 2023

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Operating Activities

Net ca sh provided by operating activities was $273.1 million during fiscal 2023, an increase o f $100.8 million as compared with fiscal 2022.

The increase in cash provided by operating activities was primarily the result of higher net income, decreased inventory driven by NexSys PCS device placements and increased accrued performance-based compensation, partially offset by increases in accounts receivable during fiscal 2023.

Net ca sh provided by operating activities was $181.8 million during fiscal 2024, a de crease o f $91.3 million as compared with fiscal 2023.

The decrease in cash provided by operating activities was primarily the result of replenishment of NexSys PCS devices during fiscal 2024.

Investing Activities

Net cash used in investing activities was $322.4 million during fiscal 2024, an increase of $178.6 million as compared with fiscal 2023.

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 fiscal 2023, partially offset by lower proceeds received from divestitures in fiscal 2023.

The increase in cash used in investing activities was primarily the result of the acquisition of OpSens in fiscal 2024, partially offset by lower capital expenditures driven by NexSys PCS device placements that occurred during fiscal 2023 and decreased cash outflows for other investments compared to fiscal 2023.

Financing Activities

Net cas h used in financing activities was $100.4 million during fiscal 2023, an increase of $84.6 million as compared with fiscal 2022 .

The increase in cash used in financing activities during fiscal 2023 was primarily due to share repurchases and acquisition-related contingent consideration payments made in fiscal 2023.

Net cas h provided by financing activities was $38.2 million during fiscal 2024, an increase of $138.5 million as compared with fiscal 2023, primarily due to the borrowings under the revolving credit facility in fiscal 2024 in connection with the OpSens acquisition as well as cash outflows in fiscal 2023 for share repurchases and higher contingent consideration payments.

Contractual Obligations

A summary of our contractual and commercial commitments as of April 1, 2023 is as follows:

A summary of our contractual and commercial commitments as of March 30, 2024, which includes the impact of the April 2024 refinancing of the term loan under our 2024 Revised Credit Facilities, is as follows:

Payments Due by Period

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Total contractual obligations $ 1,512,024 $ 381,638 $ 571,902 $ 82,919 $ 475,565

(1) Interest payments reflect the contractual interest payments on our outstanding debt and exclude the impact of interest rate swap agreements.

Interest payments are projected using interest rates in effect as of April 1, 2023.

(1) Interest payments reflect the contractual interest payments on outstanding debt related to the term loan under our 2024 Revised Credit Facilities and exclude the impact of interest rate swap agreements.

Interest payments are projected using interest rates in effect as of April 30, 2024, the date the term loan was refinanced.

Certain of these projected interest payments may differ in the future based on changes in market interest rates.

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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.

Subsequent to our fiscal year ended March 30, 2024, we entered into a definitive agreement to acquire Attune Medical that includes additional contingent consideration we may be required to pay in the future based on sales growth over the next three years and the achievement of certain other milestones.

Concentration of Credit Risk

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For a discussion of our material legal proceedings refer to Note 15, Commitments & Contingencies, to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

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

We continue to monitor inflationary pressures generally and raw materials indices that may affect our procurement and produ ction costs.

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.

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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 Franc and Mexican Peso.

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 and 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

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

Refer to Note 2, Summary of Significant Accounting Policies , to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements.

Critical Accounting Policies and Estimates

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We consider an estimate to be a “critical accounting estimate” when (i) the nature of the estimate is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change;

and (ii) the impact of the estimate on

financial condition or operating performance is material.

and (ii) the impact of the estimate on financial condition or operating performance is material.

The accounting policies and estimates identified as critical are as follows:

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With respect to the specific legal proceedings and claims described below, unless otherwise noted, the amount or range of possible losses is not reasonably estimable.

There can be no assurance that the settlement, resolution, or other outcome of one or more matters, including the matters set forth below, during any subsequent reporting period will not have a material adverse effect on the Company’s results of operations or cash flows for that period or on the Company’s financial condition.

There can be no assurance that the settlement, resolution, or other outcome of one or more matters, including the matters set forth below, during any subsequent reporting period will not

have a material adverse effect on the Company’s results of operations or cash flows for that period or on the Company’s financial condition.

Business Combinations

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Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the dates of acquisition.

The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions including forecasted cash flows, revenues attributable to existing technology and existing customer attrition.

When estimating the significant assumptions to be used in the valuation we included a consideration of current industry information, market and economic trends, historical results of the acquired business and other relevant factors.

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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