Haemonetics(HAE) - 2024 Q1 - Quarterly Report

Part I. Financial Information This section presents the company's unaudited condensed consolidated financial statements, management's discussion, and market risk disclosures Financial Statements Unaudited Q1 FY2024 financial statements show significant revenue and net income growth, with increased assets and equity, despite reduced operating cash flow from inventory build-up Condensed Consolidated Statements of Income and Comprehensive Income This statement details the company's net revenues, gross profit, operating income, and net income for the quarter Income Statement Summary (Three Months Ended) | Metric | July 1, 2023 | July 2, 2022 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $311,332K | $261,458K | +19.1% | | Gross Profit | $167,265K | $142,263K | +17.6% | | Operating Income | $53,659K | $30,767K | +74.4% | | Net Income | $41,042K | $19,877K | +106.5% | | Diluted EPS | $0.80 | $0.38 | +110.5% | Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at quarter-end Balance Sheet Highlights | Metric | July 1, 2023 | April 1, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $285,719K | $284,466K | | Total current assets | $801,607K | $769,722K | | Total assets | $1,962,258K | $1,934,825K | | Total current liabilities | $236,939K | $251,816K | | Long-term debt, net | $751,381K | $754,102K | | Total stockholders' equity | $864,616K | $817,997K | Condensed Consolidated Statements of Cash Flows This statement outlines the company's cash inflows and outflows from operating, investing, and financing activities - Net cash from operating activities decreased to $19.1 million from $42.0 million year-over-year, mainly due to a significant increase in inventories ($29.4 million use of cash)[17] - Net cash used in investing activities decreased substantially to $15.3 million from $58.2 million in the prior-year period, driven by lower capital expenditures[17] - Net cash used in financing activities decreased to $0.6 million from $23.4 million, primarily due to lower contingent consideration payments compared to the prior year[17] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed disclosures on significant accounting policies, financial instruments, and other material events - The company made strategic investments of $6.0 million during the first quarter of fiscal 2024[22] - As of July 1, 2023, the company had $24.6 million of transaction price allocated to remaining performance obligations, with about 80% expected to be recognized as revenue within the next twelve months[24] - Under the Operational Excellence Program, the company incurred $2.2 million in restructuring and related costs during the quarter, with total cumulative charges reaching $69.4 million towards an expected total of $95-$105 million by fiscal 2025[28] - A voluntary recall of certain Whole Blood business products was issued in August 2023, resulting in a $3.4 million charge for inventory in Q1 fiscal 2024[40] - The company has $500.0 million in 0% convertible senior notes due 2026 and $273.0 million outstanding under a term loan with an effective interest rate of 6.6% as of July 1, 2023[43][49] - Additional loss contingencies were recorded in Q1 fiscal 2024 related to a DOJ subpoena and a BIPA class action lawsuit, neither of which had a material impact on the financial statements[73][74] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports strong Q1 FY2024 revenue growth, driven by Plasma and Hospital segments, with surging operating income and solid liquidity Financial Summary This section provides a concise overview of the company's key financial performance metrics for the quarter Q1 FY2024 Financial Highlights vs. Q1 FY2023 | Metric | Q1 FY2024 (ended Jul 1, 2023) | Q1 FY2023 (ended Jul 2, 2022) | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $311,332K | $261,458K | +19.1% | | Operating Income | $53,659K | $30,767K | +74.4% | | Net Income | $41,042K | $19,877K | +106.5% | | Diluted EPS | $0.80 | $0.38 | +110.5% | - Revenue growth was primarily driven by volume and price benefits in the Plasma and Hospital businesses[88] Results of Operations This section analyzes the drivers of revenue growth, gross profit, and operating expenses across business units Net Revenue Growth by Business Unit (Q1 FY2024 vs Q1 FY2023) | Business Unit | Reported Growth | Constant Currency Growth | Key Driver | | :--- | :--- | :--- | :--- | | Plasma | +35.4% | +35.5% | Volume and price | | Blood Center | +2.5% | +5.8% | Increase in apheresis business | | Hospital | +12.6% | +13.8% | Vascular Closure & Hemostasis Management | - Gross profit increased 17.6% to $167.3 million, though the gross margin slightly decreased from 54.4% to 53.7% due to inventory reserves, investments, and higher depreciation, which partially offset benefits from mix, volume, and price[97][98] - Total operating expenses increased by a modest 1.9%, with R&D expenses up 16.0% due to innovation investments, while SG&A expenses rose only 1.4%[99][100][101] Liquidity and Capital Resources This section discusses the company's cash position, working capital, debt, and sources of liquidity Key Liquidity Indicators | Metric | July 1, 2023 | April 1, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $285,719K | $284,466K | | Working capital | $564,668K | $517,906K | | Net debt position | $(479,234)K | $(481,420)K | - Primary liquidity sources are cash on hand, cash from operations, and a $420.0 million senior unsecured revolving credit facility, which had no outstanding borrowings as of July 1, 2023[107][109] - The company has $273.0 million outstanding under its term loan and $500.0 million in convertible senior notes due 2026[108][110] - Operating cash flow decreased by $22.9 million year-over-year, primarily due to an increase in inventory[113] Quantitative and Qualitative Disclosures about Market Risk The company mitigates market risks from foreign exchange and interest rate fluctuations through derivative instruments like forward contracts and interest rate swaps - The company uses forward contracts to hedge anticipated cash flows from transactions in foreign currencies, primarily the Japanese Yen and Euro[130] - A 10% strengthening of the U.S. Dollar would result in a $3.4 million increase in the fair value of forward contracts, while a 10% weakening would cause a $3.7 million decrease[131] - The company uses interest rate swaps to convert a portion of its variable-rate debt to a fixed rate. As of July 1, 2023, swaps covered a notional amount of $219.1 million of the $273.0 million outstanding term loan[132] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[133] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[134] Part II. Other Information This section provides disclosures on legal proceedings, risk factors, and other significant corporate information Legal Proceedings The company is involved in various legal proceedings, including a DOJ inquiry and a BIPA class action lawsuit, with related loss contingencies deemed immaterial - Information regarding legal proceedings is detailed in Note 13 to the financial statements[135] Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended April 1, 2023 - There are no material changes from the Risk Factors disclosed in the Annual Report on Form 10-K for the fiscal year ended April 1, 2023[136] Other Information Certain directors and officers adopted Rule 10b5-1 trading plans for future sales of company common stock during the quarter - Certain directors and officers adopted Rule 10b5-1 trading arrangements for the sale of company common stock during the quarter[140]