HAEMONETICS CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with both our interim condensed consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q and our annual consolidated financial statements, notes thereto and the MD&A contained in our Annual Report on Form 10-K for the fiscal year ended March 30, 2024. The following discussion may contain forward-looking statements and should be read in conjunction with the “Cautionary Statement Regarding Forward-Looking Information” in this discussion. Introduction Haemonetics 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: blood and plasma component collection, the surgical suite and hospital transfusion services. We view our operations and manage our business in three principal reporting segments: Plasma, Blood Center and Hospital. For that purpose, “Plasma” includes plasma collection devices and disposables, 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” is comprised of Interventional Technologies, which includes Vascular Closure, Sensor Guided Technologies and Esophageal Protection 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 Accelerated Share Repurchase In August 2024, in accordance with our previously-announced three-year share repurchase program, we entered into an accelerated share repurchase agreement (“ASR”) with Citibank N.A. (“Citibank”) to repurchase $75.0 million of our common stock. Pursuant to the terms of the ASR, in August 2024, we paid Citibank $75.0 million in cash and received an initial delivery of 0.8 million shares of our common stock based on a closing market price on the New York Stock Exchange on August 28, 2024 of $75.08. This initial delivery of shares represented approximately 80% of the notional amount of the ASR. The ASR was completed in October 2024, subsequent to the end of the second quarter of fiscal 2025, and 0.2 million additional shares were delivered upon settlement. As of September 28, 2024, the total remaining authorization for repurchases of our common stock under the share repurchase program was $150.0 million. Issuance of Convertible Senior Notes On May 28, 2024, we issued $700.0 million aggregate principal amount of 2.5% convertible senior notes due 2029 (the “2029 Notes”). The 2029 Notes are governed by the terms of the Indenture between the Company and U.S. Bank National Association, as trustee. The total net proceeds from the sale of the 2029 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were $682.8 million, of which $230.0 million was used to repay the entirety of the balance on the revolving credit facility under the Company’s current credit agreement, $185.5 million was used to repurchase a portion of our existing 0% convertible senior notes due 2026 and $88.2 million was used to complete capped call transactions, with the remaining proceeds available for future cash requirements. The 2029 Notes will mature on June 1, 2029, unless earlier converted, redeemed or repurchased. Debt Issuance and Repayment On April 30, 2024, we entered into a second amended and restated credit agreement with certain lenders to refinance our prior 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 our prior credit facilities, and a $750.0 million senior unsecured revolving credit facility. 29 Table of Contents Acquisition of Attune Medical On April 1, 2024, we completed our acquisition of Advanced Cooling Therapy, Inc., d/b/a Attune Medical (“Attune Medical”) for total consideration of $187.7 million, which included an upfront cash payment of $162.0 million, or $150.5 million net of cash acquired, the fair value of contingent consideration of $25.3 million, and $0.4 million of working capital adjustments. The contingent consideration is based on sales growth over the next three years, which is uncapped, and the achievement of certain other milestones. We financed the acquisition through a combination of cash on hand and borrowings under its senior unsecured revolving credit facility. Attune Medical's ensoETM technology is designed for use across a range of medical conditions involving patient cooling or warming, including treatment in electrophysiology, critical care, neurocritical care, trauma, burn surgery, spine surgery, and cancer surgery, among others. The addition of our Esophageal Protection product line through this acquisition expands our Hospital business unit’s presence in electrophysiology and complements its Vascular Closure product line within Interventional Technologies, which is included in the Hospital reportable segment. Acquisition of OpSens Inc. On December 12, 2023, we completed our acquisition of OpSens Inc. (“OpSens”) for total consideration of approximately $254.5 million, or $243.9 million, net of cash acquired. We 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 our Hospital business unit portfolio in the interventional cardiology market and is included in the Hospital reportable segment. Financial Summary Three Months Ended Six Months Ended (In thousands, except per share data) September 28, 2024 September 30, 2023 % Increase/ (Decrease) September 28, 2024 September 30, 2023 % Increase/ (Decrease) Net revenues $ 345,511 $ 318,183 8.6 % $ 681,683 $ 629,515 8.3 % Gross profit $ 187,437 $ 170,510 9.9 % $ 362,361 $ 337,775 7.3 % % of net revenues 54.2 % 53.6 % 53.2 % 53.7 % Operating expenses $ 135,740 $ 135,207 0.4 % $ 270,908 $ 248,813 8.9 % Operating income $ 51,697 $ 35,303 46.4 % $ 91,453 $ 88,962 2.8 % % of net revenues 15.0 % 11.1 % 13.4 % 14.1 % Interest and other expense, net $ (6,993) $ (2,471) 183.0 % $ (36) $ (4,540) (99.2) % Income before provision for income taxes $ 44,704 $ 32,832 36.2 % $ 91,417 $ 84,422 8.3 % Provision for income taxes $ 10,873 $ 7,924 37.2 % $ 19,213 $ 18,472 4.0 % % of pre-tax income 24.3 % 24.1 % 21.0 % 21.9 % Net income $ 33,831 $ 24,908 35.8 % $ 72,204 $ 65,950 9.5 % % of net revenues 9.8 % 7.8 % 10.6 % 10.5 % Net income per share - basic $ 0.66 $ 0.49 34.7 % $ 1.42 $ 1.30 9.2 % Net income per share - diluted $ 0.66 $ 0.48 37.5 % $ 1.40 $ 1.28 9.4 % Net revenues increased 8.6% and 8.3% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. Without the effects of foreign exchange, net revenues increased 8.7% during both the three and six months ended September 28, 2024, as compared with the same periods of fiscal 2024. Revenue increases in our Hospital businesses, primarily related to recent acquisitions as well as volume and price benefits, drove the overall increases in revenue during the three and six months ended September 28, 2024. 30 Table of Contents Operating income in creased 46.4% and 2.8% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. The increase during the three months ended September 28, 2024 was primarily due to operating leverage, partially offset by operating costs related to recent acquisitions and increased amortization of acquired intangible assets. The increase for the six months ended September 28, 2024 was primarily due to operating leverage and the gains realized on the sale of a manufacturing facility in the first quarter of fiscal 2025, partially offset by operating, transaction and integration costs related to recent acquisitions and increased amortization of acquired intangible assets. Management’s Use of Non-GAAP Measures Management uses non-GAAP financial measures, in addition to financial measures in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), to monitor the financial performance of the business, make informed business decisions, establish budgets and forecast future results. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with U.S. GAAP. Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency conversion rate. We have provided this non-GAAP financial measure because we believe it provides meaningful information regarding our results on a consistent and comparable basis for the periods presented. RESULTS OF OPERATIONS Net Revenues by Geography Three Months Ended (In thousands) September 28, 2024 September 30, 2023 Reported growth Currency impact Constant currency growth (1) United States $ 256,061 $ 236,345 8.3 % — % 8.3 % International 89,450 81,838 9.3 % (0.5) % 9.8 % Net revenues $ 345,511 $ 318,183 8.6 % (0.1) % 8.7 % Six Months Ended (In thousands) September 28, 2024 September 30, 2023 Reported growth Currency impact Constant currency growth (1) United States $ 504,963 $ 473,418 6.7 % — % 6.7 % International 176,720 156,097 13.2 % (1.8) % 15.0 % Net revenues $ 681,683 $ 629,515 8.3 % (0.4) % 8.7 % (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. ” 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 both the three and six months ended September 28, 2024, our revenue generated outside the U.S. was 25.9% of total net revenues, as compared with 25.7% and 24.8%, respectively, during the three and six months ended September 30, 2023. 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. Dollar. 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. 31 Table of Contents Net Revenues by Business Unit Three Months Ended (In thousands) September 28, 2024 September 30, 2023 Reported growth Currency impact Constant currency growth (1) Plasma $ 138,561 $ 142,794 (3.0) % — % (3.0) % Apheresis 54,332 54,973 (1.2) % (1.0) % (0.2) % Whole Blood 14,196 14,683 (3.3) % — % (3.3) % Blood Center 68,528 69,656 (1.6) % (0.7) % (0.9) % Interventional Technologies (2) 61,923 38,541 60.7 % (0.2) % 60.9 % Blood Management Technologies (3) 76,499 67,192 13.9 % 0.3 % 13.6 % Hospital 138,422 105,733 30.9 % 0.1 % 30.8 % Net revenues (4) $ 345,511 $ 318,183 8.6 % (0.1) % 8.7 % Six Months Ended (In thousands) September 28, 2024 September 30, 2023 Reported growth Currency impact Constant currency growth (1) Plasma $ 274,471 $ 282,415 (2.8) % — % (2.8) % Apheresis 103,426 104,139 (0.7) % (2.0) % 1.3 % Whole Blood 31,347 34,723 (9.7) % (0.1) % (9.6) % Blood Center 134,773 138,862 (2.9) % (1.4) % (1.5) % Interventional Technologies (2) 124,967 76,161 64.1 % (0.3) % 64.4 % Blood Management Technologies (3) 147,472 132,077 11.7 % (0.2) % 11.9 % Hospital 272,439 208,238 30.8 % (0.3) % 31.1 % Net revenues (4) $ 681,683 $ 629,515 8.3 % (0.4) % 8.7 % (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) Interventional Technologies includes Vascular Closure, Sensor Guided Technologies and Esophageal Protection product lines of the Hospital business unit. (3) Blood Management Technologies includes Hemostasis Management, Cell Salvage and Transfusion Management product lines of the Hospital business unit. (4) Beginning in fiscal 2025, the Company integrated service revenue within its three business units. Prior periods were conformed to current presentation. Plasma Pla sma revenue decreased 3.0% and 2.8% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. Without the effects of foreign exchange, Plasma revenue decreased 3.0% and 2.8% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. The decreases during the three and six months ended September 28, 2024 were primarily driven by lower sales volumes in North America, primarily relating to the previously announced customer transition of CSL Plasma, whose non-exclusive supply agreement with the Company is scheduled to expire in December 2025. We anticipate sales of approximately $100.0 million to CSL in fiscal 2025. The decrease for the six months ended September 28, 2024 was also due to a temporary plasma center outage at one of our customers. Blood Center Blood Center revenue decreased 1.6% and 2.9% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. Without the effects of foreign exchange, Blood Center revenue decreased 0.9% and 1.5% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. The decreases during the three and six months ended September 28, 2024 were primarily driven by declines in our Whole Blood business. 32 Table of Contents Hospital Hospital revenue increased 30.9% and 30.8% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. Without the effects of foreign exchange, Hospital revenue increased 30.8% and 31.1% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. The increases during the three and six months ended September 28, 2024 were primarily attributable to the product lines within the Interventional Technologies franchise with benefits from Sensor Guided Technologies and Esophageal Protection that were recently acquired, as well as growth in Vascular Closure as well as Blood Management Technologies. Gross Profit Three Months Ended Six Months Ended (In thousands) September 28, 2024 September 30, 2023 % Increase September 28, 2024 September 30, 2023 % Increase Gross profit $ 187,437 $ 170,510 9.9 % $ 362,361 $ 337,775 7.3 % % of net revenues 54.2 % 53.6 % 53.2 % 53.7 % Gross profit increased 9.9% and 7.3% for the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. Without the effects of foreign exchange, gross profit increased 13.2% and 9.5% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. The increases during the three and six months ended September 28, 2024 were driven by increased revenues in the Hospital business and volume, mix and price, partially offset by restructuring costs related to portfolio rationalization initiatives, foreign exchange, amortization of fair value inventory step-up related to the Attune Medical acquisition. Operating Expenses Three Months Ended Six Months Ended (In thousands) September 28, 2024 September 30, 2023 % Increase/ (Decrease) September 28, 2024 September 30, 2023 % Increase Research and development $ 16,530 $ 12,665 30.5 % $ 30,979 $ 25,313 22.4 % % of net revenues 4.8 % 4.0 % 4.5 % 4.0 % Selling, general and administrative $ 106,946 $ 115,320 (7.3) % $ 215,194 $ 208,805 3.1 % % of net revenues 31.0 % 36.2 % 31.6 % 33.2 % Amortization of acquired intangible assets $ 12,264 $ 7,222 69.8 % $ 24,735 $ 14,695 68.3 % % of net revenues 3.5 % 2.3 % 3.6 % 2.3 % Total operating expenses $ 135,740 $ 135,207 0.4 % $ 270,908 $ 248,813 8.9 % % of net revenues 39.3 % 42.5 % 39.7 % 39.5 % Research and Development Research and development expenses increased 30.5% and 22.4% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. Without the effects of foreign exchange, research and development expenses increased 30.7% and 22.5% during the three and six months ended September 28, 2024, respectively, as compared with the same periods of fiscal 2024. The increases during the three and six months ended September 28, 2024 were primarily due to increased headcount as a result of recent acquisitions. Selling, General and Administrative Selling, general and administrativ e expenses decreased 7.3% during the three months ended September 28, 2024 and increased 3.1% during the six months ended September 28, 2024, as compared with the same periods of fiscal 2024. Without the effects of foreign exchange, selling, general, and administrative expenses decreased 6.6% during the three months ended September 28, 2024 and increased 3.2% during th e six months ended September 28, 2024, as compared with the same periods of fiscal 2024 . The decrease during the three months ended September 28, 2024 was driven by decreased performance-based compensation as well as decreases in impairment of intangible assets and litigation-related charges compared to the prior year period, partially offset by operating costs related to recent acquisitions and increased headcount. The increase during the six months ended September 28, 2024 was primarily driven by transaction, integration and operating costs related to recent acquisitions, increased headcount and restructuring costs related to portfolio rationalization initiatives, partially offset by gains 33 Table of Contents realized on the sale of a manufacturing facility in the first quarter of fiscal 2025 and the decreases in impairment of intangible assets compared to the prior year period. Amortization of Acquired Intangible Assets We recognized amortization expense related to our acquired intangible assets of $12.3 million and $24.7 million during the three and six months ended September 28, 2024, respectively, and $7.2 million and $14.7 million during the three and six months ended September 30, 2023, respectively . The increases were primarily related to the amortization of the intangible assets acquired in conjunction with the recent acquisitions of OpSens and Attune Medical. Interest and Other Expense, Net Interest and other expense in creased by $4.5 million during the three months ended September 28, 2024 and decreased $4.5 million during the six months ended September 28, 2024 , as compared with the same periods of fiscal 2024. The increase during the three months ended September 28, 2024, as compared with the prior year period, was primarily driven by interest expense and amortization of deferred financing costs on the 2029 Notes issued in fiscal 2025, partially offset by foreign exchange. The decrease during the six months ended September 28, 2024 was primarily driven by the net gain on the repurchase of convertible notes during the first quarter of fiscal 2025, partially offset by i nterest expense on the 2029 Notes issued in fiscal 2025 as well as higher interest incurred on our revolving credit facilities, as compared with the same period of fiscal 2024. Income Taxes We conduct business globally and report our results of operations in a number of foreign jurisdictions in addition to the United States. Our reported tax rate differs from the statutory tax rate due to the jurisdictional mix of earnings in any given period as the foreign jurisdictions in which we operate have tax rates that differ from the U.S. statutory tax rate. Our effective tax rate is adversely impacted by non-deductible expenses including executive compensation and transaction costs. For the three and six months ended September 28, 2024, the Company reported income tax expense of $10.9 million and $19.2 million, representing effective tax rates of 24.3% and 21.0%. The effective tax rate for the three months ended September 28, 2024, which includes an immaterial discrete tax benefit. The effective tax rate for the six months ended September 28, 2024 includes $3.6 million of discrete tax benefit, primarily related to stock compensation windfalls. The discrete benefit also includes other items such as provision to return differences. For the three and six months ended September 30, 2023, the Company reported income tax expense of $7.9 million and $18.5 million, respectively, representing effective tax rates of 24.1% and 21.9%, respectively. The effective tax rate for the three months ended September 30, 2023 includes $0.1 million of discrete tax benefit primarily related to stock compensation windfalls. The effective tax rate for the six months ended September 30, 2023 includes $1.3 million of discrete tax benefit primarily related to stock compensation windfalls. The increase in the reported tax rate for the three months ended September 28, 2024, compared to the same period in fiscal 2024, relates primarily to the unfavorable impact of the jurisdictional mix of earnings and non-deductible acquisition-related expenses. The decrease in the reported tax rate for the six months ended September 28, 2024, compared to the same period in fiscal 2024, relates primarily to increased discrete tax benefits year-over-year, partially offset by the unfavorable impact of jurisdictional mix of earnings and non-deductible acquisition-related expenses. 34 Table of Contents Liquidity and Capital Resources The following table contains certain key performance indicators we believe depict our liquidity and cash flow position: (Dollars in thousands) September 28, 2024 March 30, 2024 Cash and cash equivalents $ 299,283 $ 178,800 Working capital $ 681,956 $ 468,520 Current ratio 3.5 2.6 Net debt position (1) $ (925,674) $ (628,993) Days sales outstanding (DSO) 56 54 Inventory turnover 1.4 1.7 (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 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 e xpected 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. As of September 28, 2024, we had $299.3 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. In the first quarter of fiscal 2025, the Company used a portion of its proceeds from the 2029 Notes to repurchase, for $185.5 million, $200.0 million of the $500.0 million aggregate principal amount of its 0% convertible senior notes due 2026 (the “2026 Notes”), resulting in a gain of $14.5 million related to the discount on repurchase. As the repurchase of the 2026 Notes met the criteria for extinguishment accounting, $1.9 million of unamortized debt issuance costs were allocated to the repurchase, resulting in a net gain of $12.6 million. As of September 28, 2024, the $300.0 million remaining principal balance on the 2026 Notes was netted down by $2.3 million of remaining debt issuance costs, resulting in a net convertible note payable of $297.7 million. Interest expense related to the 2026 Notes was $0.4 million and $1.0 million for the three and six months ended September 28, 2024, respectively, which is entirely attributable to the amortization of the debt issuance costs. The remaining debt issuance costs are amortized at an effective interest rate of 0.5%. As of September 28, 2024, the $700.0 million principal balance of the 2029 Notes was netted down by $16.2 million of remaining debt issuance costs, resulting in a net convertible note payable of $683.8 million. Interest expense related to the 2029 Notes was $5.2 million and $6.9 million for the three and six months ended September 28, 2024, respectively, which includes nominal interest expense and the amortization of the debt issuance costs. On July 26, 2022, the Company entered into an amended and restated credit agreement to refinance its credit facilities initially entered into in 2018 and extend their maturity date through June 2025. The amended and restated credit agreement provided for a $280.0 million senior unsecured term loan and a $420.0 million senior unsecured revolving credit facility (together, the “2022 Revised Credit Facilities”) with applicable interest rates during the period established using an annual rate equal to the Adjusted Term SOFR Rate plus an applicable rate ranging from 1.125% to 1.750% based on the Company’s consolidated net leverage ratio, as specified in the agreement. On April 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, were 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”). 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. 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. 35 Table of Contents At September 28, 2024, $248.4 million was outstanding under the term loan with an effective interest rate of 6.7%. There were no outstanding borrowings under the revolving credit facilities at September 28, 2024. The Company also had $19.8 million of uncommitted operating lines of credit to fund its global operations under which there were no outstanding borrowings as of September 28, 2024. The Company has scheduled principal payments of $3.1 million required during the remainder of fiscal 2025 related to its term loan. During fiscal 2022, our Board of Directors approved a revised Operational Excellence Program. We estimate that we will incur aggregate charges between $85.0 million and $90.0 million by the end of fiscal 2025 under the program 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 six months ended September 28, 2024, the Company incurred $1.7 million and $4.1 million , respectively, of restructuring and restructuring related costs under this program. Cash Flows Six Months Ended (In thousands) September 28, 2024 September 30, 2023 Net cash provided by (used in): Operating activities $ 21,402 $ 118,210 Investing activities (162,564) (40,396) Financing activities 258,888 (7,770) Effect of exchange rate changes on cash and cash equivalents (1) 2,757 (3,505) Net change in cash and cash equivalents $ 120,483 $ 66,539 (1) The balance sheet is affected by spot exchange rates used to translate local currency amounts into U.S. Dollars. In accordance with U.S. GAAP, we have 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 decreased by $96.8 million during the six months ended September 28, 2024, as compared with the six months ended September 30, 2023. The decrease in cash provided by operating activities was primarily due to the timing of accounts payable payments, increased inventory balances and a payment in connection with a previously disclosed legal settlement. Net cash used in investing activities increased by $122.2 million during the six months ended September 28, 2024, as compared with the six months ended September 30, 2023. The increase in cash used in investing activities was primarily the result of the acquisition of Attune Medical, partially offset by the proceeds from the sales of property, plant and equipment. Net cash provided by financing activities increased by $266.7 million during the six months ended September 28, 2024, as compared with the six months ended September 30, 2023, primarily due to the issuance the 2029 Notes, partially offset by the repurchase of a portion of the 2026 Notes, capped call transactions, share repurchases, payments on the revolving credit facility and debt issuance costs. Concentration of Credit Risk Concentrations of credit risk with respect to trade accounts receivable are generally limited due to our large number of customers and their diversity across many geographic areas. Certain markets and industries, however, can expose us to concentrations of credit risk. For example, in the Plasma business unit, sales are concentrated with several large customers. As a result, accounts receivable extended to any one of these biopharmaceutical customers can be significant at any point in time. In addition, a portion of our trade accounts receivable outside the U.S. include sales to government-owned or supported healthcare systems in several countries, which are subject to payment delays and local economic conditions. Payment is dependent upon the financial stability and creditworthiness of those countries’ national economies. We have not incurred significant losses on 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. 36 Table of Contents Foreign Exchange During both the three and six months ended September 28, 2024, 25.9% of our sales were generated outside the U.S., generally in foreign currencies, yet our reporting currency is the U.S. Dollar. We also incur certain manufacturing, marketing and selling costs in international markets in local currency. Our primary foreign currency exposures relate to sales denominated in 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 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. Whenever the U.S. Dollar strengthens relative to these foreign currencies, there is a positive effect on our results of operations. Conversely, whenever the U.S. Dollar weakens relative to these currencies, there is an adverse effect on our results of operations. We have a program in place that is designed to mitigate our exposure to changes in foreign currency exchange rates. That program includes the use of derivative financial instruments to minimize, for a period of time, the unforeseen impact on our financial results from changes in foreign exchange rates. We utilize forward foreign currency contracts to hedge the anticipated cash flows from transactions denominated in foreign currencies, primarily Japanese Yen and Euro, and to a lesser extent Swiss 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. These contracts are designated as cash flow hedges. The final impact of currency fluctuations on the results of operations is dependent on the local currency amounts hedged and the actual local currency results. Recent Accounting Pronouncements Refer to Note 2, Recent Accounting Pronouncements , to the Condensed Consolidated Financial Statements for a discussion of recently issued accounting pronouncements. Cautionary Statement Regarding Forward-Looking Information Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q and incorporated by reference into this report, constitute “forward looking-statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements do not relate strictly to historical or current facts and reflect management’s assumptions, views, plans, objectives and projections about the future. Forward-looking statements may be identified by the use of words such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “foresees,” “potential” and other words of similar meaning in conjunction with, among other things: discussions of future operations; expected operating results and financial performance; the Company’s strategy for growth; product development, commercialization and anticipated performance and benefits; regulatory approvals; impacts of acquisitions or dispositions; 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. Investors should realize that if underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, the Company’s actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements. Investors are therefore cautioned not to rely on these forward-looking statements. The following are some important factors that could cause our actual results to differ from our expectations in any forward-looking statements. For further discussion of these and other factors, see Item 1A. “Risk Factors” in our most recent Annual Report on Form 10-K (as supplemented by Part II, Item 1A. “Risks Factors” of our Quarterly Report on Form 10-Q for the first quarter ended June 29, 2024). • Our ability to achieve our long-term strategic and financial-improvement goals; 37 Table of Contents • Demand for and market acceptance risks for new and existing products, including material reductions in purchasing from or loss of a significant customer; • Our ability to develop, manufacture and market new products and technologies successfully and in a timely manner and the ability of our competitors and other third parties to develop products or technologies that render our products or technologies noncompetitive or obsolete; • Product quality or safety concerns, leading to product recalls, withdrawals, regulatory action by the FDA (or similar non-U.S. regulatory agencies), reputational damage, declining sales or litigation; • Security breaches of our information technology systems or our products, which could impair our ability to conduct business or compromise sensitive information of the Company or its customers, suppliers and other business partners, or of customers’ patients; • The potential that the expected strategic benefits and opportunities from completed or planned acquisitions, including the Company’s acquisitions of OpSens Inc. and Attune Medical, divestitures or other strategic investments by the Company may not be realized or may take longer to realize than expected; • Pricing pressures resulting from trends toward healthcare cost containment, including the continued consolidation among healthcare providers and other market participants; • Disruptions to the continuity, availability and pricing of plastic and other raw materials, finished goods and components used in the manufacturing of our products (including those purchased from sole-source suppliers) and the related continuity of our manufacturing, sterilization, supply chain and distribution operations, including disruptions caused by natural disasters, extreme weather and other conditions caused by or related to climate change, labor strikes, terrorism acts, cyber incidents or other adverse events; • Our ability to obtain the anticipated benefits of restructuring programs that we have or may undertake, including the Operational Excellence Program and portfolio rationalization initiatives; • The impact of enhanced requirements to obtain regulatory approval in the U.S. and around the world and the associated timing and cost of product approval; • Our ability to comply with established and developing U.S. and foreign legal and regulatory requirements, including 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; • The impact of changes in U.S. and international tax laws; • Our ability to meet our debt obligations and raise additional capital when desired on terms reasonably acceptable to us; • The potential impact of our convertible senior notes and related capped call transactions; • Geopolitical and economic conditions in China, Taiwan, Russia, Ukraine, the Middle East and other foreign jurisdictions where we do business; • Our ability to execute and realize anticipated benefits from our investments in emerging economies; • The potential effect of foreign currency fluctuations and interest rate fluctuations on our net sales, expenses and resulting margins; • Our ability to protect intellectual property and the outcome of patent litigation; • Costs and risks associated with product liability and other litigation claims we may be subject to now or in the future; • 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; 38 Table of Contents • Our ability to achieve against our corporate responsibility initiatives and meet evolving stakeholder expectations concerning corporate responsibility matters; and • The impact of actual or threatened public health crises. Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above and in Item 1A. “Risk Factors” in our Annual Report on Form 10-K (as supplemented by Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the first quarter ended June 29, 2024) to be a complete statement of all potential risks and uncertainties. The Company does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments.