PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including the statements of income, balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, recent accounting pronouncements, restructuring activities, income taxes, earnings per share, revenue recognition, inventories, strategic investments, leases, debt, financial instruments, commitments, segment information, and accumulated other comprehensive loss Unaudited Condensed Consolidated Statements of Income and Comprehensive Income Three Months Ended December 31, 2022 vs. January 1, 2022 (in thousands, except per share data) | Metric | Dec 31, 2022 | Jan 1, 2022 | Change (%) | | :-------------------------------- | :----------- | :---------- | :--------- | | Net revenues | $305,301 | $259,769 | 17.5% | | Gross profit | $158,707 | $138,565 | 14.5% | | Operating income | $43,279 | $35,651 | 21.4% | | Net income | $32,944 | $23,232 | 41.8% | | Net income per share - basic | $0.65 | $0.45 | 44.4% | | Net income per share - diluted | $0.64 | $0.45 | 42.2% | Nine Months Ended December 31, 2022 vs. January 1, 2022 (in thousands, except per share data) | Metric | Dec 31, 2022 | Jan 1, 2022 | Change (%) | | :-------------------------------- | :----------- | :---------- | :--------- | | Net revenues | $864,244 | $728,194 | 18.7% | | Gross profit | $458,848 | $369,191 | 24.3% | | Operating income | $120,778 | $61,551 | 96.2% | | Net income | $86,018 | $33,634 | 155.7% | | Net income per share - basic | $1.69 | $0.66 | 156.1% | | Net income per share - diluted | $1.67 | $0.65 | 156.9% | Unaudited Condensed Consolidated Balance Sheet As of December 31, 2022 vs. April 2, 2022 (in thousands) | Metric | Dec 31, 2022 | Apr 2, 2022 | | :-------------------------------- | :----------- | :---------- | | ASSETS | | | | Cash and cash equivalents | $224,002 | $259,496 | | Total current assets | $706,309 | $756,031 | | Property, plant and equipment, net | $313,138 | $258,482 | | Intangible assets, net | $284,383 | $310,261 | | Goodwill | $466,112 | $467,287 | | Total assets | $1,878,066 | $1,859,734 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $226,889 | $442,266 | | Long-term debt, net | $756,826 | $559,441 | | Total stockholders' equity | $775,979 | $749,424 | | Total liabilities and stockholders' equity | $1,878,066 | $1,859,734 | Unaudited Condensed Consolidated Statements of Stockholders' Equity Changes in Stockholders' Equity (in thousands) | Item | April 2, 2022 Balance | July 2, 2022 Balance | October 1, 2022 Balance | December 31, 2022 Balance | | :-------------------------------- | :-------------------- | :------------------- | :-------------------- | :---------------------- | | Total Stockholders' Equity | $749,424 | $770,423 | $729,009 | $775,979 | | Net income (Q2 FY23) | - | $19,877 | - | - | | Net income (Q3 FY23) | - | - | $33,197 | - | | Net income (Q4 FY23) | - | - | - | $32,944 | | Shares repurchased | - | - | $(75,000) | - | | Other comprehensive loss/income | $(6,763) (Q2 FY23) | $(7,538) (Q3 FY23) | $4,456 (Q4 FY23) | - | Unaudited Condensed Consolidated Statements of Cash Flows Nine Months Ended December 31, 2022 vs. January 1, 2022 (in thousands) | Cash Flow Activity | Dec 31, 2022 | Jan 1, 2022 | | :-------------------------------- | :----------- | :---------- | | Net cash provided by operating activities | $193,447 | $104,213 | | Net cash used in investing activities | $(125,782) | $(51,833) | | Net cash used in financing activities | $(98,761) | $(6,984) | | Effect of exchange rates on cash and cash equivalents | $(4,398) | $(824) | | Net Change in Cash and Cash Equivalents | $(35,494) | $44,572 | | Cash and Cash Equivalents at End of Period | $224,002 | $236,877 | Notes to Unaudited Condensed Consolidated Financial Statements 1. BASIS OF PRESENTATION The financial statements are unaudited, prepared in accordance with U.S. GAAP for interim information, and include normal recurring adjustments; operating results for the nine months ended December 31, 2022, are not indicative of the full fiscal year, and no material recognized or unrecognized subsequent events occurred - Financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information19 - No material recognized or unrecognized subsequent events occurred as of or for the nine months ended December 31, 202220 2. RECENT ACCOUNTING PRONOUNCEMENTS The Company adopted several ASC Updates, including ASC Update No. 2019-12 (Income Taxes) and ASC Update No. 2021-05 (Leases) with no material impact, while early adoption of ASC Update No. 2020-06 (Debt with Conversion and Other Options) decreased additional paid-in capital by $61.2 million and increased non-current convertible notes by $80.3 million - Adopted ASC Update No. 2019-12 (Income Taxes) effective April 4, 2021, with no material impact21 - Early adopted ASC Update No. 2020-06 (Debt with Conversion and Other Options) effective April 4, 2021, resulting in a $61.2 million decrease to additional paid-in capital and an $80.3 million increase to non-current convertible notes, net22 - Prospectively adopted ASC Update No. 2021-05 (Leases) effective in Q2 FY22, with no material impact23 3. RESTRUCTURING The Company's Operational Excellence Program (2020 Program) aims to improve product quality, reduce costs, and ensure sustainability, with cumulative charges of $66.4 million as of December 31, 2022, and expected aggregate charges between $95 million and $105 million by fiscal 2025 - The Operational Excellence Program (2020 Program) aims to improve product and service quality, reduce costs in manufacturing and supply chain, and ensure sustainability25 - Expected aggregate charges for the 2020 Program are between $95 million and $105 million by the end of fiscal 202525 Restructuring and Restructuring Related Costs (in thousands) | Period | Dec 31, 2022 | Jan 1, 2022 | | :-------------------------------- | :----------- | :---------- | | Three Months Ended | $4,125 | $5,682 | | Nine Months Ended | $10,797 | $20,250 | Cumulative Charges under 2020 Program | As of Dec 31, 2022 | $66.4 million | | :-------------------------------- | :------------ | 4. INCOME TAXES The Company's effective tax rates for the three and nine months ended December 31, 2022, were 22.0% and 20.9%, respectively, reflecting discrete tax expenses and benefits related to stock compensation shortfalls and tax rate changes Income Tax Expense and Effective Tax Rates (in thousands) | Period | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | | :-------------------------------- | :---------------------- | :--------------------- | :---------------------- | :--------------------- | | Income tax expense | $9,280 | $8,156 | $22,759 | $14,668 | | Effective tax rate | 22.0% | 26.0% | 20.9% | 30.4% | - The effective tax rate for the nine months ended December 31, 2022, includes a discrete tax benefit of $0.5 million related to tax rate changes and $0.4 million of discrete tax expense relating to stock compensation shortfalls30 5. EARNINGS PER SHARE Basic and diluted EPS significantly increased for both periods ended December 31, 2022, following the authorization of a $300 million share repurchase program and completion of a $75 million accelerated share repurchase Net Income Per Share (in thousands, except per share amounts) | Period | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | | :-------------------------------- | :---------------------- | :--------------------- | :---------------------- | :--------------------- | | Basic income per share | $0.65 | $0.45 | $1.69 | $0.66 | | Diluted income per share | $0.64 | $0.45 | $1.67 | $0.65 | | Basic weighted average shares | 50,509 | 51,094 | 50,896 | 51,024 | | Diluted weighted average shares | 51,219 | 51,344 | 51,487 | 51,356 | - In August 2022, the Board authorized a $300 million share repurchase program over three years34 - Completed a $75.0 million accelerated share repurchase (ASR) in November 2022, repurchasing 1.0 million shares at an average price of $75.2035 6. REVENUE Revenue is recognized upon satisfaction of performance obligations, with $23.3 million allocated to remaining obligations as of December 31, 2022, of which 77% is expected to be recognized within the next twelve months - Revenue is recognized when performance obligations are satisfied, with transaction prices allocated based on estimated standalone selling prices36 - As of December 31, 2022, $23.3 million of transaction price was allocated to remaining performance obligations, with approximately 77% expected to be recognized as revenue within the next twelve months37 Contract Assets and Liabilities (in thousands) | Metric | Dec 31, 2022 | Apr 2, 2022 | | :-------------------------------- | :----------- | :---------- | | Contract assets | $6,600 | $5,500 | | Contract liabilities | $26,600 | $26,800 | 7. INVENTORIES Inventories are valued at the lower of cost or net realizable value using FIFO, decreasing from $293.0 million at April 2, 2022, to $255.8 million at December 31, 2022 - Inventories are stated at the lower of cost or net realizable value, with cost determined by the first-in, first-out method41 Inventories, Net (in thousands) | Category | Dec 31, 2022 | Apr 2, 2022 | | :-------------------------------- | :----------- | :---------- | | Raw materials | $118,836 | $88,886 | | Work-in-process | $14,484 | $17,187 | | Finished goods | $122,436 | $186,954 | | Total inventories | $255,756 | $293,027 | 8. STRATEGIC INVESTMENTS During fiscal year 2023, the Company invested €30 million in Vivasure Medical LTD, acquiring both preferred stock and a special share for potential acquisition - Invested €30 million in Vivasure Medical LTD during fiscal year 2023, including preferred stock and a special share for potential acquisition43 9. LEASES The Company leases medical devices to customers primarily under operating lease arrangements, with a substantial majority of variable revenue linked to disposable product sales, representing approximately 3% of total net sales - Haemonetics equipment, primarily medical devices, are leased to customers under contractual arrangements, mostly operating leases45 - A substantial majority of operating lease revenue is variable and subject to subsequent non-lease component (disposable products) sales45 - Operating lease revenue represents approximately 3% of the Company's total net sales45 10. NOTES PAYABLE AND LONG-TERM DEBT The Company holds $500 million in 0% convertible senior notes due 2026 and refinanced credit facilities in July 2022, establishing a $280 million term loan and $420 million revolving credit facility, with $276.5 million outstanding on the term loan at a 6.0% effective interest rate as of December 31, 2022 - Issued $500.0 million aggregate principal amount of 0% convertible senior notes due 2026, classified as long-term debt4647 - Refinanced credit facilities in July 2022, establishing a $280.0 million senior unsecured term loan and a $420.0 million senior unsecured revolving credit facility, maturing June 202551 - As of December 31, 2022, $276.5 million was outstanding under the term loan with an effective interest rate of 6.0%, and no borrowings were outstanding under the revolving credit facility53 11. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS The Company uses derivative financial instruments, including foreign currency forward contracts and interest rate swaps, primarily designated as cash flow hedges, to mitigate foreign currency and interest rate fluctuations, with most derivatives classified as Level 2 in the fair value hierarchy - Utilizes foreign currency forward contracts to hedge anticipated cash flows from foreign currency transactions, primarily Japanese Yen and Euro56 - Uses interest rate swaps to mitigate exposure to changes in variable interest rates, with an average blended fixed interest rate on 70-80% of the term loan5961 Fair Value of Derivative Instruments (in thousands) as of December 31, 2022 | Category | Assets | Liabilities | | :-------------------------------- | :------- | :---------- | | Designated foreign currency hedge contracts | $1,055 | $45 | | Non-designated foreign currency hedge contracts | $49 | $246 | | Designated interest rate swaps | $1,687 | $1,108 | | Total | $2,791 | $1,399 | Fair Value Measured on a Recurring Basis (in thousands) as of December 31, 2022 | Category | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :------ | :------ | :------ | | Money market funds | $89,114 | — | — | $89,114 | | Designated foreign currency hedge contracts | — | $1,055 | — | $1,055 | | Non-designated foreign currency hedge contracts | — | $49 | — | $49 | | Designated interest rate swaps | — | $1,687 | — | $1,687 | | Contingent consideration (Liabilities) | — | — | $848 | $848 | 12. COMMITMENTS AND CONTINGENCIES The Company is involved in various legal proceedings, including a subpoena from the U.S. Attorney's Office regarding apheresis and autotransfusion devices (DOJ decided not to intervene) and a putative class action lawsuit under the Illinois Biometric Information Privacy Act (BIPA), which the Company intends to vigorously defend - Received a subpoena from the U.S. Attorney's Office regarding apheresis and autotransfusion devices; the DOJ decided not to intervene in the related qui tam action80 - Facing a putative class action lawsuit under the Illinois Biometric Information Privacy Act (BIPA) regarding fingerprint scanning, which the Company believes is without merit and will defend vigorously81 13. SEGMENT AND ENTERPRISE-WIDE INFORMATION The Company operates in Plasma, Blood Center, and Hospital segments, with net revenues increasing in Plasma and Hospital, decreasing in Blood Center, and U.S. revenues rising while international revenues declined due to foreign exchange - Reportable segments are Plasma, Blood Center, and Hospital, with management evaluating performance based on operating income, excluding certain corporate and non-recurring expenses838486 Net Revenues by Business Unit (in thousands) | Segment | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | | :-------------------------------- | :---------------------- | :--------------------- | :---------------------- | :--------------------- | | Plasma | $136,574 | $96,692 | $368,504 | $250,499 | | Blood Center | $76,827 | $74,527 | $219,052 | $221,522 | | Hospital | $93,889 | $82,100 | $275,635 | $235,609 | Net Revenues by Principal Operating Regions (in thousands) | Region | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | | :-------------------------------- | :---------------------- | :--------------------- | :---------------------- | :--------------------- | | United States | $224,104 | $167,270 | $617,824 | $460,404 | | Japan | $15,552 | $19,916 | $44,559 | $55,949 | | Europe | $39,105 | $41,540 | $121,412 | $126,055 | | Asia | $25,454 | $30,434 | $77,739 | $83,157 | 14. ACCUMULATED OTHER COMPREHENSIVE LOSS Accumulated Other Comprehensive Loss (AOCL) increased from $(25.954) million at April 2, 2022, to $(35.799) million at December 31, 2022, primarily due to foreign currency translation adjustments Components of Accumulated Other Comprehensive Loss (in thousands) | Component | April 2, 2022 Balance | December 31, 2022 Balance | | :-------------------------------- | :-------------------- | :------------------------ | | Foreign Currency | $(27,919) | $(37,958) | | Defined Benefit Plans | $1,619 | $1,619 | | Net Unrealized Gain/(Loss) on Derivatives | $346 | $540 | | Total | $(25,954) | $(35,799) | - Other comprehensive loss before reclassifications was $(5,977) million for the period, with $(10,039) million from foreign currency and $4,062 million from derivatives89 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, highlighting recent developments, revenue performance by geography and business unit, gross profit and operating expense analysis, and discussions on liquidity, cash flows, credit risk, inflation, and foreign exchange impacts Introduction - Haemonetics Corporation is a global healthcare company providing medical products and solutions for blood and plasma component collection, surgical suites, and hospital transfusion services91 - Operations are managed in three principal reporting segments: Plasma (growth potential), Blood Center (challenging markets requiring cost reduction and scope shrinking), and Hospital (growth potential)9293 Recent Developments - Board authorized a $300 million share repurchase program in August 2022; completed a $75.0 million accelerated share repurchase (ASR) in November 2022, repurchasing 1.0 million shares94 - Refinanced credit facilities in July 2022, extending maturity to June 2025, with a $280.0 million term loan and a $420.0 million revolving credit facility; amended interest rate swaps to convert 70-80% of borrowings to a fixed rate97 - Revised Operational Excellence Program (2020 Program) expects $95 million to $105 million in aggregate charges by fiscal 2025, aiming for $115 million to $125 million in annualized gross savings98 Financial Summary Financial Performance Summary (in thousands, except per share data) | Metric | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | % Change | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | % Change | | :-------------------------------- | :---------------------- | :--------------------- | :------- | :---------------------- | :--------------------- | :------- | | Net revenues | $305,301 | $259,769 | 17.5% | $864,244 | $728,194 | 18.7% | | Gross profit | $158,707 | $138,565 | 14.5% | $458,848 | $369,191 | 24.3% | | Operating income | $43,279 | $35,651 | 21.4% | $120,778 | $61,551 | 96.2% | | Net income | $32,944 | $23,232 | 41.8% | $86,018 | $33,634 | 155.7% | | Diluted EPS | $0.64 | $0.45 | 42.2% | $1.67 | $0.65 | 156.9% | - Net revenues increased 17.5% (20.8% constant currency) for the three months and 18.7% (21.5% constant currency) for the nine months, driven by Plasma and Hospital volume and price99 - Operating income increased due to higher revenues in Plasma and Hospital, savings from the 2020 Program, and decreased acquisition spending, partially offset by lower Blood Center revenues, increased freight costs, and higher sales and marketing/performance-based compensation100 Management's Use of Non-GAAP Measures - Management uses non-GAAP financial measures, such as constant currency growth, to monitor financial performance and make business decisions, considering them supplemental to U.S. GAAP results101 RESULTS OF OPERATIONS Net Revenues by Geography Net Revenues by Geography (in thousands) | Region | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | Reported Growth | Currency Impact | Constant Currency Growth | | :-------------------------------- | :---------------------- | :--------------------- | :-------------- | :-------------- | :----------------------- | | United States | $224,104 | $167,270 | 34.0% | —% | 34.0% | | International | $81,197 | $92,499 | (12.2)% | (9.0)% | (3.2)% | | Total Net Revenues | $305,301 | $259,769 | 17.5% | (3.3)% | 20.8% | | Region | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | Reported Growth | Currency Impact | Constant Currency Growth | | :-------------------------------- | :---------------------- | :--------------------- | :-------------- | :-------------- | :----------------------- | | United States | $617,824 | $460,404 | 34.2% | —% | 34.2% | | International | $246,420 | $267,790 | (8.0)% | (7.4)% | (0.6)% | | Total Net Revenues | $864,244 | $728,194 | 18.7% | (2.8)% | 21.5% | - International sales accounted for 26.6% and 28.5% of total net revenues for the three and nine months ended December 31, 2022, respectively, down from 35.6% and 36.8% in the prior year102 Net Revenues by Business Unit Net Revenues by Business Unit (in thousands) | Business Unit | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | Reported Growth | Currency Impact | Constant Currency Growth | | :-------------------------------- | :---------------------- | :--------------------- | :-------------- | :-------------- | :----------------------- | | Plasma | $135,461 | $96,460 | 40.4% | (0.8)% | 41.2% | | Blood Center | $73,362 | $75,692 | (3.1)% | (6.2)% | 3.1% | | Hospital | $91,560 | $82,273 | 11.3% | (3.1)% | 14.4% | | Service | $4,918 | $5,344 | (8.0)% | (6.8)% | (1.2)% | | Total Net Revenues | $305,301 | $259,769 | 17.5% | (3.3)% | 20.8% | | Business Unit | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | Reported Growth | Currency Impact | Constant Currency Growth | | :-------------------------------- | :---------------------- | :--------------------- | :-------------- | :-------------- | :----------------------- | | Plasma | $365,735 | $250,244 | 46.2% | (0.9)% | 47.1% | | Blood Center | $212,739 | $225,379 | (5.6)% | (4.5)% | (1.1)% | | Hospital | $270,909 | $237,074 | 14.3% | (2.7)% | 17.0% | | Service | $14,861 | $15,497 | (4.1)% | (5.8)% | 1.7% | | Total Net Revenues | $864,244 | $728,194 | 18.7% | (2.8)% | 21.5% | Plasma - Plasma revenue increased 40.4% (41.2% constant currency) for the three months and 46.2% (47.1% constant currency) for the nine months, driven by volume and price106 - Amended supply agreement with CSL Plasma Inc. to extend the term through December 2025, allowing continued use of PCS2 plasma collection system devices107 Blood Center - Blood Center revenue decreased 3.1% (increased 3.1% constant currency) for the three months, primarily due to an increase in the whole blood business107 - Blood Center revenue decreased 5.6% (decreased 1.1% constant currency) for the nine months, primarily driven by a decline in apheresis disposables volume107 Hospital - Hospital revenue increased 11.3% (14.4% constant currency) for the three months and 14.3% (17.0% constant currency) for the nine months108 - Growth was primarily attributable to Vascular Closure revenue (up 32.6% for 3 months, 36.6% for 9 months) and increases in Hemostasis Management disposables and Transfusion Management revenue105108 Gross Profit Gross Profit (in thousands) | Period | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | % Increase | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | % Increase | | :-------------------------------- | :---------------------- | :--------------------- | :--------- | :---------------------- | :--------------------- | :--------- | | Gross profit | $158,707 | $138,565 | 14.5% | $458,848 | $369,191 | 24.3% | | % of net revenues | 52.0% | 53.3% | | 53.1% | 50.7% | | - Gross profit increase was driven by volume, price, and productivity savings from the 2020 Program, partially offset by inflationary pressures and increased depreciation expense109 Operating Expenses Operating Expenses (in thousands) | Expense Category | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | % Change | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | % Change | | :-------------------------------- | :---------------------- | :--------------------- | :------- | :---------------------- | :--------------------- | :------- | | Research and development | $12,689 | $10,037 | 26.4% | $34,487 | $33,591 | 2.7% | | Selling, general and administrative | $94,661 | $80,726 | 17.3% | $279,299 | $247,722 | 12.7% | | Amortization of intangible assets | $8,078 | $12,151 | (33.5)% | $24,666 | $35,930 | (31.3)% | | Gains on divestiture | — | — | —% | $(382) | $(9,603) | (96.0)% | | Total operating expenses | $115,428 | $102,914 | 12.2% | $338,070 | $307,640 | 9.9% | - R&D expenses increased due to increased investments in product innovation111 - SG&A expenses increased due to inflationary pressures, higher freight costs, increased sales and marketing investments, and higher performance-based compensation, partially offset by 2020 Program savings and decreased acquisition-related costs113 - Amortization of intangible assets decreased due to intangible assets becoming fully amortized during fiscal 2022114 Interest and Other Expense, Net - Interest and other expenses, net, decreased 75.3% for the three months and 9.4% for the nine months, primarily driven by foreign currency impact due to market and rate volatility, partially offset by higher interest rates on the term loan116 Income Taxes Income Tax Expense and Effective Tax Rates (in thousands) | Period | Dec 31, 2022 (3 Months) | Jan 1, 2022 (3 Months) | Dec 31, 2022 (9 Months) | Jan 1, 2022 (9 Months) | | :-------------------------------- | :---------------------- | :--------------------- | :---------------------- | :--------------------- | | Income tax expense | $9,280 | $8,156 | $22,759 | $14,668 | | Effective tax rate | 22.0% | 26.0% | 20.9% | 30.4% | - Effective tax rates are impacted by the jurisdictional mix of earnings and include discrete tax expenses/benefits related to stock compensation shortfalls and tax rate changes117118 Liquidity and Capital Resources Key Liquidity and Cash Flow Indicators (in thousands) | Metric | Dec 31, 2022 | Apr 2, 2022 | | :-------------------------------- | :----------- | :---------- | | Cash & cash equivalents | $224,002 | $259,496 | | Working capital | $479,420 | $313,765 | | Current ratio | 3.1 | 1.7 | | Net debt | $(542,773) | $(514,093) | | Days sales outstanding (DSO) | 53 | 54 | | Inventory turnover | 1.8 | 1.4 | - Primary liquidity sources are cash and cash equivalents, internally generated cash flow, and the revolving credit facility, deemed sufficient for the next twelve months121 - As of December 31, 2022, $276.5 million was outstanding under the term loan (6.0% effective interest rate), with no borrowings on the $420 million revolving credit facility123 - Expected cash outlays include acquisitions, investments, capital expenditures, share repurchases, and cash payments for the revised credit agreement and the 2020 Program121125 Cash Flows Net Cash Provided by (Used in) Activities (in thousands) for Nine Months Ended | Activity | Dec 31, 2022 | Jan 1, 2022 | | :-------------------------------- | :----------- | :---------- | | Operating activities | $193,447 | $104,213 | | Investing activities | $(125,782) | $(51,833) | | Financing activities | $(98,761) | $(6,984) | | Net change in cash and cash equivalents | $(35,494) | $44,572 | - Net cash from operating activities increased by $89.2 million, driven by higher net income, decreased inventories (due to NexSys PCS device placements), and higher other net working capital127 - Net cash used in investing activities increased by $73.9 million, primarily due to increased capital expenditures (NexSys PCS device placements) and other investments, partially offset by lower divestiture proceeds128 - Net cash used in financing activities increased by $91.8 million, mainly due to share repurchases and acquisition-related contingent consideration payments129 Concentration of Credit Risk - Credit risk is generally limited due to a large, diverse customer base, but concentrations exist in the Plasma business (several large biopharmaceutical customers) and sales to government-owned healthcare systems internationally130 - The Company has not incurred significant losses on receivables and continually evaluates collection risks131 Inflation - Experienced rising inflationary pressures in the global supply chain impacting results, with expectations for these pressures to continue through fiscal 2023132 - Mitigation strategies include improving manufacturing/purchasing efficiencies, increasing employee productivity, and adjusting selling prices, though full mitigation may not always be possible132 Foreign Exchange - Significant foreign currency exposures primarily relate to sales denominated in Euro, Japanese Yen, Chinese Yuan, and Australian Dollars, and operational costs in Swiss Francs, Canadian Dollars, Mexican Pesos, and Malaysian Ringgit133 - A strengthening U.S. Dollar adversely affects results for sales-heavy currencies (Yen, Euro, Yuan, AUD) but positively affects results for cost-heavy currencies (CHF, CAD, MXN, MYR)134 - A hedging program using forward foreign currency contracts, generally one year out, is in place to mitigate exposure and facilitate financial planning135 Recent Accounting Pronouncements - No recent accounting pronouncements are expected to have a material impact on the Company's financial position and results of operations136 Cautionary Statement Regarding Forward-Looking Information - The report contains forward-looking statements subject to uncertainties, risks, and changes that are difficult to predict and outside the Company's control137138 - Investors are cautioned not to rely on these statements, and key factors that could cause actual results to differ are referenced in Item 1A. Risk Factors of the Annual Report on Form 10-K138139 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk This section details the Company's exposure to market risks, specifically foreign exchange risk and interest rate risk, and the strategies employed to mitigate them, including the use of derivative financial instruments Foreign Exchange Risk - The Company uses forward contracts to hedge anticipated cash flows from foreign currency denominated sales and costs, not for speculative purposes143 - A 10% strengthening of the U.S. Dollar would result in a $2.0 million increase in the fair value of forward contracts, while a 10% weakening would result in a $2.1 million decrease, as of December 31, 2022144 Interest Rate Risk - Exposure to interest rate changes is associated with variable rate debt under credit facilities, totaling $276.5 million at a 6.0% interest rate as of December 31, 2022145 - A 100 basis point increase in Term SOFR rates would result in an additional annual interest expense of $0.8 million145 - Interest rate swaps are used to convert $194.8 million of borrowings from variable to fixed rates, mitigating interest rate fluctuations and qualifying for hedge accounting145 ITEM 4. Controls and Procedures This section addresses the effectiveness of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of December 31, 2022146 Changes in Internal Control Over Financial Reporting - There were no changes in internal control over financial reporting during the three months ended December 31, 2022, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting147 PART II. OTHER INFORMATION Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 12 to the Unaudited Condensed Consolidated Financial Statements - Legal proceedings information is incorporated by reference from Note 12, Commitments and Contingencies148 Item 1A. Risk Factors There are no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended April 2, 2022 - No material changes from the Risk Factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended April 2, 2022149 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's share repurchase activities during the third quarter of fiscal 2023, including the completion of an accelerated share repurchase agreement Issuer Purchases of Equity Securities (Third Quarter Fiscal 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) | | :-------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | October 2, 2022 – October 29, 2022 | — | — | — | — | | October 30, 2022 – November 26, 2022 | 211,242 | (Not provided) | 211,242 | — | | November 27, 2022 – December 31, 2022 | — | — | — | — | | Total | 211,242 | (Not provided) | (Not provided) | $225.0 | - In November 2022, the Company completed a $75.0 million accelerated share repurchase (ASR) with Citibank, repurchasing 1.0 million shares at an average price of $75.20150 Item 3. Defaults upon Senior Securities This item is not applicable to the Company for the reporting period - Not applicable151 Item 4. Mine Safety Disclosures This item is not applicable to the Company for the reporting period - Not applicable152 Item 5. Other Information This item is not applicable to the Company for the reporting period - Not applicable153 Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, certifications, and XBRL data - Includes Restated Articles of Organization, By-Laws, Certifications pursuant to Sections 302 and 906 of Sarbanes-Oxley Act, and XBRL financial data156 SIGNATURES The report is duly signed on behalf of Haemonetics Corporation by its President and Chief Executive Officer and its Executive Vice President, Chief Financial Officer - The report is signed by Christopher A. Simon, President and Chief Executive Officer, and James C. D'Arecca, Executive Vice President, Chief Financial Officer160
Haemonetics(HAE) - 2023 Q3 - Quarterly Report