HAEMONETICS CORP 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposures relative to market risk are due to foreign exchange risk, interest rate risk, concentration of credit risk and investment risk. Foreign Exchange Risk O ur reporting currency is the U.S. Dollar, however, during the three months ended September 27, 2025 and September 28, 2024, 26.6% and 25.6%, respectively, of our sa les were generated outside the U.S., and d uring the six months ended September 27, 2025 and September 28, 2024, 25.9% and 25.9%, respectively, of our sa les were generated outside the U.S., generally in foreign currencies. We also incur certain manufacturing, marketi ng 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 sale s exposure is partially mitigated by costs and expenses for foreign operations and sourcing products denominated in foreign currencies. Since our foreign c urrency 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. Convers ely, 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 excha nge 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 Canadian Dollar, Swiss Franc and Mexican Peso. This does not eliminate the volatility of foreign exchange rates, but because we generally enter into forward contracts into the future, rates are fixed at the time of execution; thereby facilitating financial planning and resource allocation. Hedges are executed on a rolling ba sis over an 18-month horizon, informed by forecasted net income exposures. Both forecasted exposures and active hedges are reviewed periodically throughout the year to ensure effective and efficient mitigation of foreign currency exchange rate risk. 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. We do no t use forward foreign currency contracts for speculative or trading activities. We estimate the change in the fair value of all forward con tracts assuming both a 10% strengthening and weakening of the U.S. Dollar relative to all other major cu rrencies. As of September 27, 2025, in the event of a 10% strengthening of the U.S. Dollar, the change in fair value of all forward contracts wo uld result in a $9.8 million increase in the fair value of the forward contracts, whereas a 10% weakening of the U.S. Dollar would result in a $11.9 million decrease in the fair value of the forward contracts. Interest Rate Risk Our exposure to changes in int erest rates is associated with borrowings under our credit facilities, all of which is variable rate debt. Total outstanding debt under our senior unsecured term loan as of September 27, 2025 was $242.2 million with an effective interest rate of 6.4% based on prevailing Term SOFR rates. An increase of 100 basis points in Term SOFR rates would result in additional annual interest expense of $0.4 million. As of September 27, 2025, the notional amount on our two active interest rate swap agreements to effectively convert borrowings under our 2024 Revised Credit Facilities from a variable rate to a fixed rate were $201.9 million. These interest rate swaps are intended to mitigate the exposure to fluctuations in interest rates and qualify for hedge accounting treatment as cash flow hedges. 46 Table of Contents 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. Investment Risk As part of our business development activities, we have made private loans and hold strategic investments in privately held entities, including preferred stock and a special share. The special share allows us to acquire the related entity in accordance with an agreement between the parties. As these equity instruments do not have readily determinable fair values, they have been measured using the measurement alternative, at cost less impairment. The carrying amount for these instruments would be subsequently adjusted for observable price changes, or prices in orderly transactions for an identical investment or similar investment of the same issuer. In addition, these investments are periodically evaluated for impairment. There is also a risk that we could lose all or a substantial portion of our investment in these privately held entities depending on their solvency and ability to achieve their business objectives. As of September 27, 2025, our strategic investments in privately held entities total $88.6 million and they are classified as other long-term assets on our condensed consolidated balance sheets. We did not record any adjustments to the carrying value of strategic investments for the three months ended September 27, 2025.