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Haemonetics(HAE) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for Q2 FY24 detail income, balance sheet, equity, and cash flow performance Condensed Consolidated Statements of Income (Six Months Ended) | Metric | Six Months Ended Sep 30, 2023 (in thousands) | Six Months Ended Oct 1, 2022 (in thousands) | | :--- | :--- | :--- | | Net revenues | $629,515 | $558,943 | | Gross profit | $337,775 | $300,141 | | Operating income | $88,962 | $77,499 | | Net income | $65,950 | $53,074 | | Diluted EPS | $1.28 | $1.03 | Condensed Consolidated Balance Sheet Highlights | Metric | Sep 30, 2023 (in thousands) | Apr 1, 2023 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $351,005 | $284,466 | | Total current assets | $865,744 | $769,722 | | Total assets | $2,011,275 | $1,934,825 | | Long-term debt | $748,662 | $754,102 | | Total stockholders' equity | $893,660 | $817,997 | Condensed Consolidated Statements of Cash Flows (Six Months Ended) | Metric | Six Months Ended Sep 30, 2023 (in thousands) | Six Months Ended Oct 1, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $118,210 | $129,032 | | Net cash used in investing activities | ($40,396) | ($89,282) | | Net cash used in financing activities | ($7,770) | ($49,081) | | Net Change in Cash and Cash Equivalents | $66,539 | ($18,296) | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, OpSens acquisition, restructuring, impairment, debt, and legal contingency disclosures - On October 10, 2023, the company entered into a definitive agreement to acquire OpSens, Inc. for approximately USD $253.0 million in an all-cash transaction, expected to close by the end of January 202421 - Under the Operational Excellence Program (2020 Program), the company incurred $4.2 million in restructuring and related costs during the six months ended September 30, 2023. Total cumulative charges under the program are $71.4 million28 - In Q2 fiscal 2024, the company recorded an intangible asset impairment charge of $10.4 million related to the enicor GmbH acquisition within the Hospital business unit46 - In August 2023, a voluntary recall of certain Whole Blood products resulted in cumulative charges of $6.5 million for inventory, returns, and customer claims as of September 30, 202383 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial results, highlighting revenue growth, operating income changes, and strategic focus on Plasma and Hospital Financial Summary (Three Months Ended Sep 30, 2023) | Metric | Q2 FY24 (in thousands) | Q2 FY23 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Net revenues | $318,183 | $297,485 | 7.0% | | Gross profit | $170,510 | $157,878 | 8.0% | | Operating income | $35,303 | $46,732 | (24.5)% | | Net income | $24,908 | $33,197 | (25.0)% | - The company's strategy focuses on growth in the Plasma and Hospital segments, while managing the challenging Blood Center market through cost reduction and portfolio evaluation92 - The company announced plans to end-of-life the ClotPro system (Hospital) and whole blood inline collection products (Blood Center), which are not expected to materially impact fiscal 2024 results95 Results of Operations This section details Q2 FY24 revenue by business unit, gross profit, and operating expense drivers, including impairment Net Revenues by Business Unit (Three Months Ended Sep 30, 2023) | Business Unit | Q2 FY24 Revenue (in thousands) | Q2 FY23 Revenue (in thousands) | Reported Growth | | :--- | :--- | :--- | :--- | | Plasma | $141,900 | $127,893 | 11.0% | | Blood Center | $68,098 | $73,683 | (7.6)% | | Hospital | $103,143 | $90,856 | 13.5% | - The increase in operating expenses for Q2 FY24 was driven by a $10.4 million impairment of intangible assets related to the enicor GmbH acquisition111115 - SG&A expenses increased 14.0% in Q2 FY24 due to higher investments in sales and marketing, costs for an ERP system upgrade, and litigation-related charges113 Liquidity and Capital Resources The company's liquidity relies on cash, operations, and credit facilities, sufficient for the OpSens acquisition and future needs Key Liquidity Indicators | Metric | Sep 30, 2023 (in thousands) | Apr 1, 2023 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $351,005 | $284,466 | | Working capital | $601,529 | $517,906 | | Net debt position | ($411,223) | ($481,420) | - Net cash from operating activities decreased to $118.2 million for the six months ended Sep 30, 2023, from $129.0 million in the prior year, primarily due to an increase in inventory126 Quantitative and Qualitative Disclosures about Market Risk The company is exposed to foreign exchange and interest rate market risks, mitigated by derivative instruments and swaps - The company utilizes forward foreign currency contracts to hedge anticipated cash flows, primarily in Japanese Yen and Euro134143 - As of September 30, 2023, the company had $269.5 million in variable-rate debt, with interest rate swaps on a notional amount of $217 million to effectively convert borrowings to a fixed rate146 Controls and Procedures Management concluded disclosure controls were effective, with a new ERP system potentially impacting future internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2023147 - The company is implementing a new global ERP system in phases, which may materially affect internal control over financial reporting in the future149 PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 14 for legal matters, including a qui tam action and a BIPA class action lawsuit - The company is cooperating with a subpoena from the U.S. Attorney's Office regarding its apheresis and autotransfusion devices. The Department of Justice has declined to intervene in the related qui tam action81 - The company has recorded a total accrual of approximately $8.7 million related to a putative class action complaint alleging violations of the Illinois Biometric Information Privacy Act (BIPA)82 Risk Factors There are no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K - There are no material changes from the Risk Factors previously disclosed in the company's Annual Report on Form 10-K151 Other Information This section discloses an executive officer adopted a Rule 10b5-1 trading plan for common stock sales - On August 31, 2023, Josep Llorens, EVP of Global Manufacturing and Supply Chain, adopted a Rule 10b5-1 trading plan to sell 8,857 shares of common stock, expiring August 16, 2024155