SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 29, 1997. Commission file number 1-10730
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Haemonetics Corporation
(Exact name of registrant as specified in its charter)
Massachusetts 04-2882273
(State of Incorporation) (I.R.S. Employer Identification No.)
400 Wood Road,
Braintree, Massachusetts 02184-9114
(617) 848-7100
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Common stock, $.01 par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing sale price of May 22, 1997, was
approximately $392,000,000.
The number of shares of the registrant's common stock, $ .01 par value,
outstanding as of May 22, 1997 was 26,798,219.
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DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive Proxy
Statement for the Registrant's Annual Meeting to be held July 18, 1997.
TABLE OF CONTENTS
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Page Number
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Item 1. Business.............................................................................. 3
(a) New Developments in the Business.................................................. 3
(b) General Development of the Business............................................... 4
(c) Financial Information about Industry Segments..................................... 4
(d) Narrative Description of Business................................................. 4
(e) Financial Information about Foreign and Domestic Operations and Export Sales...... 11
Item 2. Properties............................................................................ 11
Item 3. Legal Proceedings..................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................................... 12
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............. 12
Item 6. Selected Consolidated Financial Data.................................................. 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 14
Item 8. Financial Statements and Supplementary Data........................................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure........................................................................... 33
Item 10. Directors and Executive Officers of the Registrant.................................... 33
(a) Identification of Directors....................................................... 33
(b) Identification of Executive Officers.............................................. 33
Item 11. Executive Compensation................................................................ 34
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 34
Item 13. Certain Relationships and Related Transactions........................................ 34
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................... 34
(a) Financial Statements.............................................................. 34
(b) Reports on Form 8-K............................................................... 34
(c) Exhibits.......................................................................... 34
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ITEM 1. BUSINESS
(a) New Developments in the Business.
FDA Developments
In April 1997, Haemonetics ("the Company") received marketing clearance
from the FDA to market its proprietary two-unit red blood cell collection
protocol for homologous (typically volunteer) donors. This follows the
clearance given in April 1996 to market the two-unit red cell collection
protocol for patients donating blood for their own surgical use and the
clearance given in October 1995 to market the one-unit red cell and two-unit
plasma protocol for the entire donor population. These protocols allow blood
centers to replace labor-intensive manual collection methods for red blood
cells with highly efficient automated apheresis systems while producing a more
consistent red blood cell transfusion unit. In addition, Haemonetics is the
first to provide its customers with the ability to collect two transfusable
units of red blood cells from a single donor. Two unit red cell collection
saves blood banks precious dollars and labor in testing, labeling, handling and
distribution requirements.
In June 1996, Haemonetics received marketing clearance from the FDA to
market its MCS(R) and MCS(R)+ apheresis systems for use in Therapeutic Plasma
Exchange. Therapeutic Plasma Exchange is the replacement of a patient's plasma
with either fresh frozen plasma or albumin. This medical procedure is
prescribed for an increasing number of indications, including autoimmune
diseases such as Thromobotic Thrombocytopenic Purpura (TTP), Myasthenia Gravis
and Guillian-Barre. The typical patient receives multiple treatments over weeks
or months and, in some cases, years.
New Business Developments
In April 1997, Haemonetics announced the acquisition of the assets of the
Tri-Counties Blood Bank, headquartered in Santa Barbara, California. The
acquisition is subject to review and approval by the attorney general of the
state of California. If approved, Tri-Counties will be operated as a wholly
owned subsidiary of Haemonetics. All regulatory licensees owned by Tri-Counties
will be included among the assets transferred, so through Tri-Counties Blood
Bank, Haemonetics will be fully licensed to collect and distribute blood
components. This acquisition is another significant step in the expansion of
Haemonetics' blood products and service business in the U.S.
In October 1996, Haemonetics announced the formation of three key
relationships with blood bank customers as part of the Company's blood bank
service strategy. Two relationships took the form of management service
agreements. The agreements were between the Company and the Oklahoma Blood
Institute, a leading blood center in Oklahoma City, Oklahoma and between the
Company and the New England Medical Center, a major tertiary care hospital in
Boston, Massachusetts. Under these management service agreements, the Company
is responsible to provide donor recruitment, component collection and
distribution services to blood bank customers. For these services, the Company
receives a fee for each blood component collected. The Company records this fee
as revenue. The cost of the disposable kit and all other costs, direct and
indirect, of producing the product are deducted from the fee revenue to arrive
at the operating margin of the blood component. The centers operate under the
responsible head and license of the partner. The third relationship took the
form of a 50/50 joint venture between the Company and the San Diego Blood Bank
to form Pacific Blood Services in Orange County, California.
The vertical integration of the Company into blood component collection
through the development of the service business allows the Company to provide
its partner with the Company's state of the art apheresis technology and
financial and management resources. This in turn will allow these partners the
ability to provide their communities, higher quality blood products at lower
cost. This is critical given the pressures inflicted by managed care. Further,
Haemonetics' involvement will help drive acceptance of its revolutionary red
cell technology which is critical to the success of total apheresis, the
automated collection of transfusable units of any of the blood's components;
red cells, platelets or plasma.
In October 1996, Haemonetics announced a distribution agreement for its
CollectFirst(R) system. Under this agreement, DePuy Orthopedics will be the
exclusive distributor of the CollectFirst(R) system in the U.S. and Canadian
orthopedics market. Haemonetics will continue to manufacture these products and
distribute them outside of the U.S. into the orthopedics market. The
CollectFirst(R) autologous blood collection system allows continual collection,
filtration and reinfusion of salvaged blood. This system offers versatility to
the physician through its ability to be used either for direct reinfusion or
with the Cell Saver(R) system for washing of the collected red blood cells.
(b) General Development of the Business.
Haemonetics Corporation was incorporated in Massachusetts in 1985. The
terms "Haemonetics" and the "Company" as used herein include its subsidiaries
and its predecessor where the context so requires.
Haemonetics was founded in 1971 and became a publicly owned company for
the first time in 1979. In August 1983, Haemonetics was acquired by American
Hospital Supply Corporation ("AHS"). In connection with the acquisition of AHS
by Baxter Travenol Laboratories, Inc. in 1985, Baxter Travenol divested
Haemonetics to address antitrust concerns related to the acquisition.
Haemonetics was purchased in December 1985 by investors that included two of
the Company's present executive officers (John F. White and James L. Peterson),
E. I. du Pont de Nemours and Company ("Du Pont"), and other present and former
employees of the Company. In May 1991, the Company completed an Initial Public
Offering, at which time Du Pont divested its entire interest in the Company.
Haemonetics is engaged in the manufacture of both automated systems for
the collection, processing and surgical salvage of blood and in the manufacture
of blood components through its service business. Since the development of its
first proprietary cell washing system in 1971, the Company has pioneered a
family of innovative systems and technologies for blood processing. The
Company's business is focused on surgical blood salvage, blood component
therapy, automated red cell and plasma collection. Haemonetics' blood
processing systems consist of proprietary disposable sets driven by specialized
equipment. The Company's equipment employs over 100 different sterile,
single-use disposable products. The Company markets its products to hospitals,
independent blood banks, commercial plasma fractionators and national health
organizations in over 50 countries.
(c) Financial Information about Industry Segments.
The Company reports the results of its operations for only one industry
segment.
(d) Narrative Description of Business.
Background
All of the Company's products involve the extracorporeal processing of
human blood. Each person has approximately 10 units of blood (1 unit = one
pint), which consists of both cellular and liquid portions. The cellular
portion, which constitutes approximately 45% of the body's blood by volume, is
composed of red blood cells, white blood cells and platelets. All of these are
derived from stem cells which originate in the bone marrow. The liquid portion,
which constitutes the remaining 55% of blood volume, is composed of plasma and
soluble blood proteins.
The practice of modern medicine relies on the availability of a safe and
adequate blood supply and the ability to treat a deficiency in one or more of
the above components. These deficiencies can be related to hereditary disorders
(e.g., hemophilia), serious injury or major surgery (e.g., open heart surgery).
Traditionally, a deficiency in any one of the components of blood has
been addressed by the transfusion of whole blood or blood components from one
or more third-party donors ("homologous blood transfusion"). These transfusions
have major drawbacks. First, homologous blood transfusions carry the risk of
transfusion reactions ranging from mild allergic responses to life-threatening
red cell incompatibility. Second, while the vast majority of units of blood in
the United States and other developed countries are tested for
transfusion-related diseases such as AIDS, hepatitis and cytomegalovirus, such
screening tests are not completely comprehensive and the evidence of disease
contamination in the blood supply is well documented. This risk is multiplied
when using blood collected from multiple donors.
As a result of the above risks and limitations of traditional transfusion
treatment, three important trends have emerged in blood transfusion therapy and
practice: increasing acceptance of autologous blood transfusion which involves
the reinfusion of a patient's own blood; increasing use of techniques and
systems that reduce the number of donors to which patients are exposed in the
course of therapies involving donor blood or blood components; and increasing
prevalence of blood component therapy which involves the administration of only
those blood components needed by the patient.
Markets and Products
Haemonetics' products address four important therapeutic markets for
blood and blood components: surgical blood salvage, blood component therapy,
automated red cell and plasma collection.
Surgical Blood Salvage
Surgical blood salvage, also known as autologous blood transfusion,
involves the rapid and safe collection of a patient's own blood before, during
and after surgery for reinfusion to the same patient. This process normally
includes an additional washing procedure whereby unwanted substances are
removed from the blood prior to reinfusion.
Autologous blood transfusion reduces or eliminates a patient's dependence
on blood donated from others, which carries the risk of transmission of
diseases, such as AIDS and hepatitis, as well as potentially severe transfusion
reactions. The decision to transfuse a unit of homologous blood involves
weighing the potential therapeutic benefits of such transfusion against the
risks of the transfusion itself. The Company believes there is increasing
recognition within the medical community that blood transfusions should be
autologous wherever possible to avoid the risks associated with homologous
blood transfusion. Moreover, patients are becoming increasingly aware of the
availability and advantages of autologous blood transfusions. Ongoing shortages
of blood and blood components reinforce the benefits of this approach.
The need for a blood transfusion during surgery is common with open
heart, trauma, transplant, vascular and orthopedic operations.
Haemonetics, which pioneered the first autologous blood transfusion
system, has developed a full line of products to address the needs of the
surgical blood salvage market. The core product line, the Cell Saver(R)
autologous blood recovery system, reduces the patient's dependence on
homologous red cell transfusions and leads to more rapid delivery of higher
quality, compatible blood to the surgical patient intra- and post-operatively.
An extension of this product line is the HaemoLite(R) autologous blood recovery
system, an automated portable system which requires limited operator monitoring
and is designed for lower blood loss procedures. The CollectFirst(R) autologous
blood collection system allows continual collection, filtration and reinfusion
of salvaged blood. This system offers versatility to the physician through its
ability to be used either for direct reinfusion or with the Cell Saver(R)
system for washing of the collected red blood cells.
The Company markets its surgical blood salvage products to hospital-based
medical specialists, primarily cardiovascular, orthopedic and trauma surgeons.
Blood Component Therapy
Blood component therapy involves the treatment of patients using specific
blood components, such as platelets, red blood cells, peripheral blood stem
cells or white blood cells, as opposed to whole blood. Blood component therapy
applications are increasing and have become integral to the treatment of a wide
variety of cancers, blood disorders and conditions involving hemorrhaging.
Platelet therapy is most often used to alleviate the side effects of bone
marrow suppression, a condition in which bone marrow is unable to produce a
sufficient quantity of platelets. Bone marrow suppression arises from a number
of causes, including infection, but most typically as a side effect of
chemotherapy. The demand for platelets is growing in conjunction with
increasingly aggressive cancer therapies.
Traditionally, platelets for therapeutic use have been derived from the
manual separation of platelets from blood obtained through whole blood
donations. However, platelets constitute a very small portion of an
individual's total blood volume. Hence, a single unit of whole blood contains
only one-sixth to one-eighth the quantity of platelets required for a
therapeutically useful dosage. As a result, the medical community has had to
rely on platelet pooling (the merging of platelets from multiple donors) to
obtain a volume of platelets sufficient for therapeutic treatment, thus
amplifying the risk of transmission of blood-borne disease or adverse reaction.
The Company addresses these drawbacks of platelet therapy with its
apheresis systems such as the Haemonetics MCS(R)+ mobile collection system. The
apheresis process permits the collection of therapeutically useful quantities
of components such as platelets from a single donor. The end product of
platelet apheresis is referred to as single donor platelets (as opposed to
pooled or random donor platelets traditionally available from blood banks or
hospital centers). Apheresis technology conserves the donor pool since donors
can donate non-red cell blood components more often than whole blood. Whole
blood donors are restricted in their ability to donate by regulatory agencies
to eight week intervals, whereas apheresis donors may donate as often as twice
a week. In addition, apheresis systems offer a purer and safer product to the
recipient because of the significant reduction in the number of donors to which
the recipient is exposed.
The Company markets its automated apheresis systems to hematologists,
oncologists and blood bankers.
Plasma Collection
Many important therapeutic and diagnostic products are derived from the
collection and subsequent processing of plasma. Therapeutic products derived
from plasma include albumin and plasma protein fractions, which are used
primarily as volume expanders for burn and shock victims; gamma globulins,
which are used for the prevention of diseases such as tetanus, rabies, measles,
etc.; coagulation specific concentrate products such as Factor VIII and other
derivatives such as hepatitis vaccine. Several companies have developed and
applied for U.S. Food and Drug Administration ("FDA") approval to market
non-plasma derived recombinant Factor VIII products. While such products may
reduce demand for plasma derived Factor VIII, the Company believes they should
have minimal effect on the demand for other plasma products such as albumin and
gamma globulin. Diagnostic products derived from source plasma include blood
grouping sera, test kit controls and quality control reagents.
Traditionally, plasma has been collected by manual techniques as part of
whole blood collection. As in the case of manual blood component collection,
manual techniques for collection of plasma have had poor product yields and are
very time consuming.
In the United States, commercial operators account for approximately 95%
of plasma collection, with the remainder collected from volunteer donors of
other blood bank organizations. Outside of the United States, plasma is
collected primarily from volunteer donors.
Commercial plasma collection firms in the United States pay donors for
their plasma and then fractionate the collected plasma themselves and sell the
resultant protein products or sell the collected plasma worldwide for
fractionation purposes. Outside the United States, virtually every
industrialized nation has expressed the desire to increase their access to the
plasma market worldwide due to the ever growing need for the plasma-based
therapeutic products and their desire to improve the quality of their country's
blood products. The increased appeal of more efficient, user-friendly automated
systems are leading to conversion from manual to automated plasma collection
techniques.
The Haemonetics automated plasma collection systems, PCS(R) and PCS(R)2,
shorten the collection procedure to approximately forty minutes from ninety
minutes required for manual collection. Donor safety is also increased as the
donor is never separated from his or her own blood, eliminating the risk that
exists in manual collection of having the wrong red cells returned to the
donor. The PCS(R) and PCS(R)2 systems also yield a higher quality plasma than
manual methods, since a smaller amount of anticoagulant is needed and the donor
is not given any intravenous fluids to dilute his or her native plasma.
Haemonetics has aggressively pursued the conversion of commercial plasma
collection firms from manual methods to the Company's automated PCS(R) systems.
Under contracts with Alpha Therapeutics, Bayer and Centeon, the Company has
agreed to install and service its PCS(R) and PCS(R)2 systems free of charge to
certain plasma collection centers operated by these parties. These
fractionators, in turn, have agreed to purchase certain minimum numbers of
processing chambers from Haemonetics.
Plasma collection from volunteer donors is undergoing dramatic changes
due to greater focus on the quality, safety and cost of plasma-based
therapeutic products. The Company has been the primary supplier of automated
plasma collection systems to the national blood collection programs of Japan,
France, Sweden, Canada and the United Kingdom. During fiscal year ended March
29, 1997, the Company began shipping plasma collection machines to China.
Automated Red Cell Collection
Red blood cell transfusions are performed to restore the oxygen-carrying
capacity of the blood, in situations involving hemorrhaging, such as surgery
and trauma and other blood disorders.
Traditionally, red blood cells have been derived from the manual
separation of red blood cells obtained through whole blood donations. However,
this process involves time consuming secondary handling and processing. It also
produces a red cell transfusion product of variable therapeutic content due to
variations found in donor characteristics and the whole blood donation process.
Haemonetics has extended its MCS(R)+ system product line to offer systems
for the apheresis collection of red blood cells. The Company's red blood cell
apheresis systems automate the manual red blood cell collection process,
producing a more consistent red cell transfusion unit and eliminating the
lengthy secondary handling and processing steps. In addition, by collecting red
blood cells in multiple units or together with other apheresis products such as
plasma, the blood center can meet its collection requirements more efficiently
and make better use of a shrinking donor base.
Revenue Detail
In the year ended March 29, 1997, sales of disposable products accounted
for approximately 87% of net revenues. Sales of disposable products by the
Company were 10% higher in 1997 than in 1996 and grew at a compound average
annual growth rate of 8% for the three years ended March 29, 1997. There can be
no assurance that sales of disposable products will continue to grow at this
rate. Growth in sales of disposables is related to increases in installed
equipment in use, as well as increased utilization rates of the Company's
equipment. Service revenues, which are included as part of disposables
revenues, accounted for approximately 2.7% of the Company's net revenues during
the year ended March 29, 1997. Approximately 75% of service revenues for the
year ended March 29, 1997 were generated from fees earned for the collection of
blood products through the Company's service business. The remaining 25% of
service revenues for the year ended March 29, 1997 were generated from
equipment repairs performed under preventive maintenance contracts or emergency
service billings.
Sales of equipment accounted for approximately 13% of net revenues in
fiscal 1997 and approximately 12% in fiscal 1996. Variations in the level of
the Company's sales of equipment are likely to occur from year to year and
quarter to quarter. These variations reflect the buying cycles of the Company's
customers and, in particular, the level of equipment purchases by the national
blood organizations in Europe, Japan and other countries that are implementing
programs for national self-sufficiency in blood products with the use of the
Company's products.
Marketing/Sales/Distribution
Haemonetics markets and sells its products to hospitals, independent
blood banks, commercial plasma collection centers and national health
organizations through its own direct sales force in North America, Western
Europe and Japan. This sales force is composed of full-time sales
representatives and clinical specialists based in the United States, United
Kingdom, Germany, France, Sweden, The Netherlands, Denmark, Italy, Australia,
Austria, Hong Kong, Canada, Japan, Switzerland and Belgium. These sales
representatives and clinical specialists interact with physicians, surgeons and
nurses to promote and sell Haemonetics' products and services, approximately
40% focusing on the surgical blood salvage market and the remainder on the
combination of the Company's other markets. The clinical specialists assist the
Company's sales force and customers through demonstrations and training.
Haemonetics distributes its disposable Cell Saver(R) products in North
American cardiovascular hospitals primarily through the Bentley Laboratories
division of Baxter International, Inc. ("Bentley"). In addition, Haemonetics
distributes its CollectFirst(R) autologous blood collection system in the
United States and Canada through DePuy Orthopedics. These relationships give
Haemonetics valuable additional exposure to the important North American
cardiovascular and orthopedic markets. In addition, Haemonetics uses numerous
distributors to market its products in South America, Eastern Europe, the
Middle East and the Far East.
Haemonetics' field service engineers support its equipment sales through
ongoing professional equipment service worldwide. The functional and safety
features of the equipment are checked to ensure correct and reliable operation.
All new equipment is covered by a 12-month warranty, during which all service
needs are covered at no charge and all equipment receives a preventive
maintenance check. After the initial warranty period, the Company provides
service compensated under preventive maintenance contracts or through emergency
service fees.
The field service engineer group is supported by a headquarters-based
technical support engineering staff which also provides 24-hour phone support
365 days a year. Many hospital customers have their own staffs of biomedical
engineers who rely on the Company's technical training and spare parts logistic
systems.
The Company endeavors to minimize the time between the receipt of
purchase orders and the date of delivery of products. Accordingly, the
Company's backlog as of the end of any period represents only a portion of
actual sales for the succeeding period.
Research and Development
The development of extracorporeal blood processing systems has required
that Haemonetics develop technical expertise in mechanical engineering,
electrical engineering, software engineering and materials engineering. The
Company's mechanical engineers design pumps, valves, equipment packaging,
centrifuge rotors and disposable plastic components (i.e., harness sets and
processing chambers). The Company's electrical engineers design sensors
(optical, ultrasonic, pressure, weight, speed), motors, control circuits,
driver circuits, computers and display systems. The Company's software
electrical engineers create programs that use input data from sensors to
control the actuation of mechanical components used to collect or manipulate
the blood components. The materials engineers monitor products'
biocompatibility and clinical performance and work with major raw materials and
tooling vendors. Innovations resulting from these efforts will allow the
Company to develop systems that are faster, smaller and more user-friendly or
that incorporate additional features important to its customer base.
Haemonetics operates research and development centers in Switzerland,
Japan and the United States, so that protocol variations are incorporated that
closely match local customer requirements. For the past three fiscal years, the
Company's expenditures for research and development were $19.0 million, $18.5
million and $16.7 million, respectively. All research and development costs are
expensed as incurred. The Company expects to continue to invest substantial
resources in research and development.
Customer collaboration is an important part of Haemonetics' technical
strength and competitive advantage. Since its inception, Haemonetics has built
close working relationships with a significant number of blood processing
professionals around the world. This network of experts provides Haemonetics
with ideas for new products, ways to improve existing products, new
applications and enhanced protocols. They also provide Haemonetics with test
sites, objective evaluations and expert opinions regarding technical and
performance issues.
Manufacturing
Disposables
Each individual blood collection procedure requires a disposable plastic
set, which contains a medical-grade tubing harness, bags, filters and a
processing chamber. Haemonetics molds many of its own components which it then
assembles with manufactured and purchased tubing and sheeting to form the final
products. The Company tests the materials for purity to determine that they are
biocompatible and free of contamination. Assembly is accomplished in a clean
room environment.
Production begins with injection, molding or extrusion of plastic parts.
Molding tools qualified to ensure specified tolerances and reproducibility.
Each step of the subsequent manufacturing and assembly processes is qualified
and validated. Critical process steps and materials are documented to ensure
that every unit produced consistently meets performance requirements.
All processing chamber and most set assembly is done in the Company's
Braintree, Pittsburgh, or Scotland facilities. All disposable blood processing
products are sterilized for patient and donor protection and are tested in
laboratories to confirm sterility. Some manufacturing of less proprietary
components is performed for the Company by outside contractors. The Company
also maintains two important relationships with Japanese manufacturers who
provide finished sets in Singapore and Thailand. These sets are primarily used
by our customers in Japan.
Equipment
Each Haemonetics blood processing machine is designed in-house and
assembled from components that are either manufactured by the Company or
manufactured by others to Company specifications. Many critical mechanical
assemblies are machined and fabricated utilizing the Company's own process
control procedures. The completed instruments are programmed, calibrated and
tested to ensure compliance with the Company's engineering and quality
assurance specifications. Throughout the manufacturing process, inspection
checks are made to verify proper assembly and functionality. When mechanical
and electronic components are sourced from outside vendors, detailed vendor
qualification requirements are met and verified through focused incoming
inspection programs. Approximately 99% of the Company's equipment, including
all new systems, is manufactured by Haemonetics. The remainder, consisting
entirely of established products, is manufactured for the Company by an outside
contractor.
Certain parts and components used in the Company's equipment and
disposables are purchased from various single sources. If it became necessary
to do so, the Company believes that, in most cases, alternative sources of
supply could be developed over a relatively short period of time. Nevertheless,
an interruption in supply could temporarily interfere with production schedules
and affect the Company's results of operations.
All of the Company's equipment and disposable manufacturing sites are
certified to the ISO 9000 standard and to the medical device directive allowing
placement of the CE mark of conformity.
Competition
The markets for the Company's products are developing and are highly
competitive. Although the Company competes directly with others, no one company
competes with the Company across its full line of products. Haemonetics has
established a record of innovation and leadership in each of the areas in which
it competes.
Competition in the surgical blood salvage market, where the underlying
technology among the major competitors is similar, is based upon reliability,
ease of use, service, support and price. Haemonetics competes with Medtronics,
Inc.; COBE Laboratories, Inc. ("COBE"), a subsidiary of Gambro AB; and Sorin
Biomedica.
In the blood component therapy market, competition is based upon the
ability of systems to achieve higher levels of performance as measured by the
time and efficiency of component collection and the quality of the components
collected. The Company's major competitors in this market are COBE and Baxter
International, Inc. Each of these companies has taken a different technological
approach than the Company in the design of systems for the component therapy
market.
In the red cell market, the Company has pioneered automated collection.
Currently the sole provider of automated systems for red cell collection, the
Company competes with traditional methods of collecting and separating whole
blood on the basis of total cost, process control, product quality, and
inventory management.
In the area of plasma collection, the Company competes with Baxter
International, Inc. on the basis of overall cost-effectiveness of equipment and
disposables over the long term and on the quality, ease of use and technical
features of their systems. The Company's automated systems also compete with
manual collection systems, which are less expensive, but also slower, less
efficient and clinically riskier.
The Company believes its technical staff is highly skilled, but many of
its competitors have substantially greater financial resources and larger
technical staffs at their disposal. There can be no assurance that such
competitors will not direct substantial efforts and resources toward the
development and marketing of products competitive with those of the Company.
The Company believes its ability to maintain its competitive advantage
will continue to depend on a combination of market leadership, its reputation,
its patents, its unpatented proprietary know-how in several technological
areas, the quality, safety and cost effectiveness of its products and the need
to rigorously document clinical performance.
Seasonality
Net revenues have historically been higher in the Company's third and
fourth quarters, reflecting principally the seasonal buying patterns of the
Company's customers.
Patents
Haemonetics holds patents in the United States and abroad on certain of
its machines and disposables. These patents cover certain elements of its
systems, including protocols employed in its equipment and certain aspects of
its processing chambers and other disposables. The Company considers its
patents to be important but not indispensable to its business. To maintain its
competitive position, the Company relies to a greater degree on the technical
expertise and know-how of its personnel than on its patents. The Company
pursues an active and formal program of invention disclosure and patent
application both in the United States and abroad. The Company also owns various
trademarks which have been registered in the United States and certain other
countries.
Regulation
The products manufactured and marketed by the Company are subject to
regulation by the Center for Biologics ("CBER") and the Center of Devices
("CDRH") of the U.S. Food and Drug Administration ("FDA") and in many
instances, by state and non-U.S. government agencies.
All medical devices introduced to the market since 1976 are required by
the FDA, as a condition of marketing, to secure either a 510(k) premarket
notification clearance or an approved Premarket Approval Application ("PMA"). A
510(k) premarket notification clearance indicates FDA agreement with an
applicant's determination that the product for which clearance has been sought
is substantially equivalent to another legally marketed medical device. An
approved PMA application indicates that the FDA has determined that the device
has been proven, through the submission of clinical data and manufacturing
information, to be safe and effective for its labeled indications. The process
of obtaining a 510(k) clearance typically takes six to nine months and involves
the submission of limited clinical data and supporting information, while the
PMA process typically will last more than a year and requires the submission of
significant quantities of clinical data and supporting information.
The Company maintains customer complaint files, records all lot numbers
of disposable products and conducts periodic audits to assure compliance with
FDA regulations. The Company places special emphasis on customer training and
advises all customers that blood processing procedures should be undertaken
only by qualified personnel.
The Company is also subject to regulation in the countries in which it
markets its products. Many of the regulations applicable to the Company's
products in such countries are similar to those of the FDA. However, the
national health or social security organizations of certain countries require
the Company's products to be qualified before they can be marketed in those
countries. Haemonetics has complied with these regulations and has obtained
such qualifications.
Federal, state and foreign regulations regarding the manufacture and sale
of products such as the Company's systems are subject to change. The Company
cannot predict what impact, if any, such changes might have on its business.
Environmental Matters
The Company does not anticipate that compliance with federal, state and
local environmental protection laws presently in effect will have a material
adverse impact upon the Company or require any material capital expenditures.
Employees
As of March 29, 1997, Haemonetics employed 1,526 persons assigned to the
following functional areas: manufacturing, 819; sales and marketing, 235;
general and administrative, 135; research and development, 86; quality control
and field service, 121; and blood bank services, 130. The Company considers its
employee relations to be satisfactory.
(e) Financial Information about Foreign and Domestic Operations and Export
Sales.
The information required by this item is included in Part II of this
report in footnote 10 of the financial statements, page 31.
ITEM 2. PROPERTIES
The Company owns its main facility, which is located on 14 acres in
Braintree, Massachusetts. This facility is located in a light industrial park
and was constructed in the 1970s. The building is approximately 180,000 square
feet, of which 72,000 square feet are devoted to manufacturing and quality
control operations, 35,000 square feet to warehousing, 63,000 square feet for
administrative and research and development activities and 10,000 square feet
available for expansion.
The Company leases an 81,850 square foot facility in Pittsburgh,
Pennsylvania. This facility is used for warehousing, distribution of the
products and, as of November of 1991, manufacturing operations. Annual lease
expense is $280,056 for this facility.
In April 1994, the Company purchased a facility in Bothwell, Scotland.
The facility manufactures disposable components for its automated plasma
collection and surgical blood salvage systems for its European customers. The
facility and related property were acquired at a cost of approximately
$1,600,000. The facility is approximately 22,200 square feet. Manufacturing
operations began in August, 1994.
In August 1995, the Company purchased a facility in Union, South
Carolina. This facility will be used for the manufacture of solutions to
support the Company's component therapy and plasma businesses once approval to
do so is received from the FDA. The Company is presently engaged in the lengthy
process of seeking such approval. The Company expects approval to take
approximately two years. The facility and land were acquired for a cost of
$2,423,000. The facility is approximately 57,700 square feet.
The Company also leases sales, service and distribution facilities in the
United Kingdom, France, Sweden, Switzerland, The Netherlands, Germany, Japan,
Hong Kong, Italy, Belgium and Austria.
ITEM 3. LEGAL PROCEEDINGS
The Company is presently engaged in various legal actions, and although
ultimate liability cannot be determined at the present time, the Company
believes that any such liability will not materially affect the consolidated
financial position of the Company or its results of operations.
The Company's products are relied upon by medical personnel in connection
with the treatment of patients and the collection of blood from donors. In the
event that patients or donors sustain injury or death in connection with their
condition or treatment, the Company, along with others, may be sued, and
whether or not the Company is ultimately determined to be liable, it may incur
significant legal expenses. In addition, such litigation could damage the
Company's reputation and, therefore, impair its ability to market its products
and impair its ability to obtain product liability insurance or cause the
premiums for such insurance to increase. The Company carries product liability
coverage. While management of the Company believes that the aggregate current
coverage is sufficient, there can be no assurance that such coverage will be
adequate to cover liabilities which may be incurred. Moreover, the Company may
in the future be unable to obtain product liability coverage in amounts and on
terms that it finds acceptable, if at all.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Executive Officers of the Registrant
The information concerning the Company's Executive Officers required by
this item is incorporated by reference to the section in Part III hereof
entitled "Directors and Executive Officers of the Registrant."
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Summary of Quarterly Data
(unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
1997 Quarter Ended 1996 Quarter Ended
------------------------------------------- ---------------------------------------------
June 29, Sept. 28, Dec. 28, March 29, July 1, Sept. 30, Dec. 30, March 30,
1996 1996 1996 1997 1995 1995 1995 1996
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues.............. $ 75,506 $ 74,426 $ 76,550 $ 83,335 $ 68,775 $ 69,133 $ 69,858 $ 70,450
Gross profit.............. 42,316 39,910 38,082 39,453 37,317 38,565 39,120 39,611
Operating income.......... 14,147 12,898 10,341 11,065 13,560 13,724 13,760 13,327
Net income................ 9,422 8,649 7,020 7,879 8,740 9,200 8,886 9,099
Net income per share...... $ 0.34 $ 0.31 $ 0.26 $ 0.29 $ 0.32 $ 0.33 $ 0.32 $ 0.33
</TABLE>
Haemonetics' common stock is listed on the New York Stock Exchange. The
following table sets forth for the periods indicated the high and low of the
daily sales prices, which represent actual transactions as reported by the New
York Stock Exchange.
<TABLE>
<CAPTION>
1997 Quarter Ended 1996 Quarter Ended
------------------------------------------- ------------------------------------------
June 29, Sept. 28, Dec. 28, March 29, July 1, Sept. 30, Dec. 30, March 30,
1996 1996 1996 1997 1995 1995 1995 1996
-------- --------- -------- --------- ------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market price of
Common Stock
High.................... 21-3/4 21-3/8 21-1/4 19-1/2 19-3/8 23-1/8 23 18
Low..................... 16-5/8 17-1/4 16-5/8 16 12-7/8 18-3/8 16-5/8 16-1/4
</TABLE>
There were approximately 639 holders of record of the Company's common
stock as of May 22, 1997.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
HAEMONETICS CORPORATION AND SUBSIDIARIES
TEN-YEAR REVIEW
(in thousands, except share data)
<TABLE>
<CAPTION>
Summary of
Operations 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ---------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues................... $309,817 $278,216 $262,416 $248,449 $216,286 $176,419 $157,332 $124,363 $115,244 $ 91,409
Cost of goods sold............. 150,056 123,603 117,561 104,879 97,296 85,524 82,656 62,322 54,611 42,840
--------------------------------------------------------------------------------------------------
Gross profit................... 159,761 154,613 144,855 143,570 118,990 90,895 74,676 62,041 60,633 48,569
--------------------------------------------------------------------------------------------------
Operating expenses:
Research and development..... 18,974 18,467 16,729 15,786 13,589 10,478 8,386 5,776 5,226 4,799
Selling, general and
administrative.............. 92,336 81,775 75,748 75,940 63,576 50,517 42,452 34,940 34,783 26,724
--------------------------------------------------------------------------------------------------
Total Operating Expenses....... 111,310 100,242 92,477 91,726 77,165 60,995 50,838 40,716 40,009 31,523
--------------------------------------------------------------------------------------------------
Operating income............... 48,451 54,371 52,378 51,844 41,825 29,900 23,838 21,325 20,624 17,046
Other income/(expense), net.... 2,257 883 192 (1,050) (1,839) (2,222) (2,927) (4,491) (2,822) (263)
--------------------------------------------------------------------------------------------------
Income before provision for
income taxes.................. 50,708 55,254 52,570 50,794 39,986 27,678 20,911 16,834 17,802 16,783
Provision for income taxes..... 17,738 19,329 18,925 19,305 15,231 9,687 7,110 5,455 6,272 6,782
--------------------------------------------------------------------------------------------------
Net income..................... $ 32,970 $ 35,925 $ 33,645 $ 31,489 $ 24,755 $ 17,991 $ 13,801 $ 11,379 $ 11,530 $ 10,001
==================================================================================================
Earnings per share:
Net income................... $ 1.20 $ 1.30 $ 1.18 $ 1.09 $ 0.87 $ 0.63 $ 0.50 $ 0.41 $ 0.42 $ 0.36
Weighted average number of
common and common
equivalent shares............. 27,451 27,722 28,443 28,802 28,612 28,342 27,554 27,554 27,554 27,554
==================================================================================================
<CAPTION>
Financial and
Statistical Data: 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Working capital................ $ 94,045 $112,440 $108,459 $ 81,504 $ 63,431 $ 40,919 $ 29,471 $ 27,233 $ 30,369 $ 19,668
--------------------------------------------------------------------------------------------------
Current ratio.................. 2.3 3.4 3.2 2.7 2.6 2.1 1.8 1.8 2.4 1.7
Property, plant and equipment,
net........................... $103,610 $ 86,416 $ 82,059 $ 68,342 $ 56,015 $ 46,751 $ 42,300 $ 36,214 $ 23,267 $ 20,403
--------------------------------------------------------------------------------------------------
Capital expenditures........... $ 32,048 $ 19,710 $ 24,907 $ 22,891 $ 17,595 $ 11,373 $ 12,975 $ 17,538 $ 7,314 $ 7,616
Depreciation and amortization.. $ 12,269 $ 13,143 $ 13,711 $ 10,720 $ 8,517 $ 6,954 $ 6,996 $ 4,561 $ 3,494 $ 4,569
--------------------------------------------------------------------------------------------------
Total assets................... $323,546 $287,818 $280,509 $230,684 $187,755 $144,846 $117,754 $110,630 $ 87,752 $ 68,399
Total debt..................... $ 29,526 $ 18,534 $ 33,392 $ 14,278 $ 13,562 $ 24,098 $ 24,805 $ 33,903 $ 28,588 $ 14,792
--------------------------------------------------------------------------------------------------
Stockholders' equity........... $225,274 $216,970 $193,177 $160,776 $126,650 $ 90,581 $ 67,543 $ 54,083 $ 42,415 $ 31,627
Return on average equity....... 14.9% 17.5% 19.0% 21.9% 22.8% 22.8% 22.7% 23.6% 31.1% 37.8%
Debt as a % of stockholders'
equity........................ 13.1% 8.5% 17.3% 8.9% 10.7% 26.6% 36.7% 62.7% 67.4% 46.8%
--------------------------------------------------------------------------------------------------
Number of employees............ 1,526 1,251 1,282 1,109 1,002 965 923 810 742 780
Net revenues per employee...... $ 203 $ 222 $ 205 $ 224 $ 216 $ 183 $ 170 $ 154 $ 155 $ 117
--------------------------------------------------------------------------------------------------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The table outlines the components of the consolidated statements of
income as a percentage of net revenues:
<TABLE>
<CAPTION>
Percentage of Net Revenues Percentage Increase
----------------------------------------------- -------------------
Year Ended Year Ended Year Ended
March 29, 1997 March 30, 1996 April 1, 1995 1997/96 1996/95
-------------- -------------- ------------- ------- -------
<S> <C> <C> <C> <C> <C>
Net revenues.................................. 100.0% 100.0% 100.0% 11.4% 6.0%
Cost of goods sold............................ 48.4 44.4 44.8 21.4 5.1
---------------------------------------------------------------
Gross profit.................................. 51.6 55.6 55.2 3.3 6.7
Operating expenses:
Research and development.................... 6.2 6.6 6.4 2.7 10.4
Selling, general and administrative......... 29.8 29.5 28.8 12.9 8.0
---------------------------------------------------------------
Total operating expenses................ 36.0 36.1 35.2 11.0 8.4
---------------------------------------------------------------
Operating income.............................. 15.6 19.5 20.0 (10.9) 3.8
---------------------------------------------------------------
Interest expense.............................. (0.6) (0.8) (0.7) (24.6) 26.4
Interest income............................... 1.0 0.8 0.9 40.0 (17.6)
Other income (expense), net................... 0.4 0.4 (0.2) (3.9) 321.9
---------------------------------------------------------------
Income before provision for income taxes...... 16.4 19.9 20.0 (8.2) 5.1
Provision for income taxes.................... 5.8 7.0 7.2 (8.2) 2.1
---------------------------------------------------------------
Net income.................................... 10.6% 12.9% 12.8% (8.2%) 6.8%
===============================================================
</TABLE>
1997 compared to 1996
Net revenues in 1997 increased 11.4% to $309.8 million from $278.2
million in 1996. Worldwide disposable sales increased approximately 10.2% due
to growth in both the domestic and international markets. Sales of disposables
products accounted for approximately 87% and 88% of net revenues for 1997 and
1996, respectively. Service revenues, which are included as part of disposables
revenues, accounted for approximately 2.7% and 1.7% of the Company's net
revenues for 1997 and 1996, respectively. Service revenues generated from fees
earned for the collection of blood products through the Company's service
business represented approximately 2.0% and .6% for 1997 and 1996 respectively.
The balance of the service revenues in both years was generated from equipment
repairs performed under preventive maintenance contracts or emergency service
billings . Equipment sales increased approximately 19.5% due to growth in the
domestic surgical market. International sales accounted for approximately 62%
and 61% of net revenues for 1997 and 1996, respectively.
Gross profit in 1997 increased to $159.8 million from $154.6 million in
1996. As a percentage of net revenues, gross profit percent decreased by 4.0%
to 51.6% in 1997 from 55.6% in 1996. Approximately twenty-five percent of the
decrease was due to the start up of the Company's service business. The
majority of the decrease, over fifty percent, was due to the Company's higher
manufacturing costs for more complex products and the pressure on product
prices inflicted by managed care. The remaining decrease, under twenty percent,
was due to the shift in sales from the higher margin surgical disposable
products to the lower margin plasma disposable products. The Company does not
see any change in these trends in the near term.
The Company expended $19.0 million in 1997 on research and development
(6.2% of net revenues) and $18.5 million in 1996 (6.6% of net revenues).
Selling, general and administrative expenses increased to $92.3 million
in 1997 from $81.8 million in 1996 and increased as a percentage of net
revenues to 29.8% from 29.5%. The increase resulted primarily from start up
costs associated with the Company's entry into the service business and
worldwide regulatory costs incurred for red cell apheresis.
Operating income, as a percentage of net revenues, decreased 3.9% to
15.6% in 1997 from 19.5% in 1996. Approximately twenty-five percent of the
decrease was due to the start up of the Company's service business. The
remainder of the decrease was primarily due to the Company's higher
manufacturing costs for more complex products and the pressure on product
prices inflicted by managed care. The Company does not see any change in these
trends in the near term.
Interest expense decreased in 1997 to $1.8 million from $2.3 million in
1996 due to a decrease in both the average borrowings and borrowing rates.
Interest income increased in 1997 to $2.9 million from $2.1 million in 1996
resulting from an increase in the Company's investment in sales-type leases and
higher average cash balances during the year.
The provision for income taxes remained at approximately 35% as a
percentage of pretax income for 1997 and 1996.
1996 compared to 1995
Net revenues in 1996 increased 6.0% to $278.2 million from $262.4 million
in 1995. Worldwide disposable sales increased 7.7% while increased equipment
sales in the domestic markets were offset by decreases in the international
markets. Sales of disposables products accounted for approximately 88% and 87%,
respectively, of net revenues for the twelve months ended March 30, 1996 and
April 1, 1995. During the first half of 1995, the Company discontinued
distribution of the SCD system (Sterile Connection Device) and its disposables
wafers. Without the effects of such sales, net revenues increased 7.4% in 1996
from 1995, and worldwide disposables sales increased 9.3% and worldwide
equipment sales decreased 4.3%.
Gross profit in 1996 increased to $154.6 million from $144.9 million in
1995. As a percentage of net revenues, gross profit increased 0.4% to 55.6% in
1996 from 55.2% in 1995. The favorable manufacturing variance during the year
accounts for 0.7% of the increase in gross profit. This was offset by a 0.3%
decrease attributable to lower margins on domestic sales.
The Company expended $18.5 million in 1996 on research and development
(6.6% of net revenues) and $16.7 million in 1995 (6.4% of net revenues).
Selling, general and administrative expenses were $81.8 million in 1996
and $75.7 million in 1995 due to increased staffing and related personnel costs
in both the domestic and international markets.
Interest expense increased in 1996 to $2.3 million from $1.8 million in
1995 due to increases in both the average level of borrowing during the year
and in interest rates. Interest income decreased in 1996 to $2.1 million from
$2.5 million in 1995 resulting from a decrease in the Company's average
investment in sales-type leases of its equipment during the year. In 1996,
other income, net, was $1.1 million compared to other expenses, net, of $0.5
million in 1995 due to the lower net costs of foreign exchange contracts.
The provision for income taxes decreased as a percentage of pretax income
to approximately 35.0% in 1996 from 36.0% in 1995, due to favorable tax
treatment of certain international operations.
Liquidity and Capital Resources
The Company historically has satisfied its cash requirements principally
from internally generated cash flow and bank borrowings. During the twelve
months ended March 29, 1997, the Company generated $26.7 million in cash flow
from operating activities compared to $54.8 million in cash flow from operating
activities for the twelve months ended March 30, 1996. The Company's need for
funds is derived primarily from capital expenditures, acquisitions, treasury
stock purchases and working capital. During the twelve months ended March 29,
1997, net cash used for capital expenditures was $32.0 million related to
equipment utilized in the U.S. commercial plasma business and manufacturing
operations and investments in the Company's service businesses. The change in
accounts receivable utilized net cash of $17.1 million and the increase in
accounts payable, accrued expenses and deferred revenue provided $14.4 million
in 1997. The increase in sales type leases utilized cash of $13.2 million
attributable to growth in the plasma business worldwide. In 1997 the need for
funds not satisfied by the internally generated cash flow was satisfied by an
increase to the committed bank lines of $14.1 million. Conversely, in 1996, the
Company paid down its revolving credit agreements by $12.8 million. At the
April 1997 board meeting, the board approved the increase in the Company's
committed bank lines to $40.0 million from $20.0 million. The Company intends
to secure the additional financing by the end of the first quarter of 1998.
The Company used $15.8 million to repurchase 902,100 shares of treasury
stock during the twelve months ended March 29, 1997. On January 19, 1996, the
Company's Board of Directors approved an additional 1,000,000 share repurchase
program to be implemented upon the completion of the existing 1,000,000 share
program. Combined under both programs there remains approximately 589,800
shares available to repurchase by the Company at prevailing prices as market
conditions warrant.
At March 29, 1997, the Company had working capital of $94.0 million. This
reflects a decrease of $18.4 million in working capital for the twelve months
ended March 29, 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPLLEMENTARY DATA
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
March 29, March 30,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 8,302 $ 13,434
Accounts receivable, less allowance of $961 in 1997 and $984 in 1996.... 72,199 60,326
Inventories............................................................. 55,090 56,729
Current investment in sales-type leases, net............................ 13,559 11,020
Deferred tax asset...................................................... 14,290 10,911
Other prepaid and current assets........................................ 4,229 6,459
----------------------
Total current assets................................................ 167,669 158,879
Property, plant and equipment:
Land, building, and building improvements............................... 25,676 23,156
Machinery and equipment................................................. 63,484 59,519
Furniture and fixtures.................................................. 6,461 6,599
Commercial plasma and rental equipment.................................. 95,137 71,550
----------------------
Total property, plant and equipment................................. 190,758 160,824
Less: accumulated depreciation.......................................... 87,148 74,408
----------------------
Net property, plant and equipment................................... 103,610 86,416
Other assets:
Investment in sales-type leases, net.................................... 30,954 21,428
Distribution rights, net................................................ 10,266 12,418
Other assets, net....................................................... 11,047 8,677
----------------------
Total other assets.................................................. 52,267 42,523
----------------------
Total assets........................................................ $ 323,546 $ 287,818
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt.................. $ 19,511 $ 3,378
Accounts payable........................................................ 27,885 16,909
Accrued payroll and related costs....................................... 6,814 8,305
Accrued income taxes.................................................... 10,478 8,345
Other accrued liabilities............................................... 8,936 9,502
----------------------
Total current liabilities........................................... 73,624 46,439
Deferred income taxes ................................................... 12,770 9,253
Long-term debt, net of current maturities ................................ 10,015 15,156
Other long-term liabilities .............................................. 1,863 --
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $.01 par value; Authorized--80,000,000 shares;
Issued--29,238,350 shares in 1997; 28,770,346 shares in 1996........... 292 288
Additional paid-in capital.............................................. 56,547 52,355
Retained earnings....................................................... 215,657 182,707
Cumulative translation adjustment....................................... (6,162) 7,387
----------------------
Stockholders' equity before treasury stock.............................. 266,334 242,737
Less: treasury stock at cost--2,478,888 shares in 1997; 1,607,354 shares
in 1996................................................................ 41,060 25,767
----------------------
Total stockholders' equity........................................... 225,274 216,970
----------------------
Total liabilities and stockholders' equity.......................... $ 323,546 $ 287,818
======================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended
-----------------------------------
March 29, March 30, April 1,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net revenues....................................................... $ 309,817 $ 278,216 $ 262,416
Cost of goods sold................................................. 150,056 123,603 117,561
-----------------------------------
Gross profit....................................................... 159,761 154,613 144,855
-----------------------------------
Operating expenses:
Research and development........................................ 18,974 18,467 16,729
Selling, general and administrative............................. 92,336 81,775 75,748
-----------------------------------
Total operating expenses.................................. 111,310 100,242 92,477
-----------------------------------
Operating income................................................... 48,451 54,371 52,378
Interest expense................................................... (1,762) (2,338) (1,849)
Interest income.................................................... 2,940 2,098 2,547
Other income (expense), net........................................ 1,079 1,123 (506)
-----------------------------------
Income before provision for income taxes........................... 50,708 55,254 52,570
Provision for income taxes......................................... 17,738 19,329 18,925
-----------------------------------
Net income......................................................... $ 32,970 $ 35,925 $ 33,645
===================================
Net income per share .............................................. $ 1.20 $ 1.30 $ 1.18
===================================
Weighted average common and common equivalent shares outstanding... 27,451 27,722 28,443
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Cumulative Total
-------------- Paid-in Retained Treasury Translation Stockholders'
Shares $'s Capital Earnings Stock Adjustment Equity
------ ----- ---------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 2, 1994............ 28,215 $ 282 $ 48,674 $ 113,197 $ (2,176) $ 799 $ 160,776
Employee stock purchase plan.... 25 -- 384 (18) 381 -- 747
Exercise of stock options and
related tax benefit............ 163 2 1,028 -- -- -- 1,030
Purchase of treasury stock...... -- -- -- -- (15,724) -- (15,724)
Net income...................... -- -- -- 33,645 -- -- 33,645
Translation adjustment.......... -- -- -- -- -- 12,703 12,703
------------------------------------------------------------------------------
Balance, April 1, 1995............ 28,403 284 50,086 146,824 (17,519) 13,502 193,177
Employee stock purchase plan.... -- -- -- (42) 633 -- 591
Exercise of stock options and
related tax benefit............ 367 4 2,269 -- -- -- 2,273
Purchase of treasury stock...... -- -- -- -- (8,881) -- (8,881)
Net income...................... -- -- -- 35,925 -- -- 35,925
Translation adjustment.......... -- -- -- -- -- (6,115) (6,115)
------------------------------------------------------------------------------
Balance, March 30, 1996........... 28,770 288 52,355 182,707 (25,767) 7,387 216,970
Employee stock purchase plan.... -- -- -- (20) 537 -- 517
Exercise of stock options and
related tax benefit............ 468 4 4,192 -- -- -- 4,196
Purchase of treasury stock...... -- -- -- -- (15,830) -- (15,830)
Net income...................... -- -- -- 32,970 -- -- 32,970
Translation adjustment.......... -- -- -- -- -- (13,549) (13,549)
------------------------------------------------------------------------------
Balance, March 29, 1997........... 29,238 $ 292 $ 56,547 $ 215,657 $ (41,060) $ (6,162) $ 225,274
==============================================================================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
----------------------------------
March 29, March 30, April 1,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income............................................................ $ 32,970 $ 35,925 $ 33,645
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 12,269 13,143 13,711
Increase (decrease) in deferred income taxes........................ 3,588 (3,178) 892
Increase in accounts receivable--net................................ (17,116) (1,931) (9,880)
Increase in inventories............................................. (876) (188) (13,474)
Increase in sales-type leases....................................... (13,150) (3,259) (48)
(Increase) decrease in other assets................................. (5,322) 7,968 (3,166)
Increase (decrease) in accounts payable, accrued expenses and
deferred revenue................................................... 14,382 6,330 (6,052)
----------------------------------
Total adjustments................................................. (6,225) 18,885 (18,017)
----------------------------------
Net cash provided by operating activities......................... 26,745 54,810 15,628
Cash Flows from Investing Activities:
Capital expenditures on property, plant and equipment, net............ (32,048) (19,710) (24,907)
Increase in distribution rights....................................... -- -- (5,195)
DHL asset acquisition................................................. -- (6,189) --
----------------------------------
Net cash used in investing activities............................. (32,048) (25,899) (30,102)
Cash Flows from Financing Activities:
Payments on long-term real estate mortgage............................ (186) (152) (152)
Net increase (decrease) in short-term revolving credit agreements..... 17,545 (4,022) 2,175
Net increase (decrease) in long-term revolving credit agreements...... (3,450) (8,798) 14,132
Employee stock purchase plan.......................................... 517 591 747
Exercise of stock options and related tax benefit..................... 4,161 2,273 1,030
Purchase of treasury stock............................................ (15,830) (8,881) (15,724)
----------------------------------
Net cash provided by (used in) financing activities............... 2,757 (18,989) 2,208
Effect of exchange rates on cash and cash equivalents................... (2,586) (718) 339
----------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents.................... (5,132) 9,204 (11,927)
Cash and Cash Equivalents at Beginning of Year.......................... 13,434 4,230 16,157
----------------------------------
Cash and Cash Equivalents at End of Year................................ $ 8,302 $ 13,434 $ 4,230
==================================
Supplemental disclosures of cash flow information:
Interest paid......................................................... $ 2,834 $ 1,791 $ 1,441
Income taxes paid, net of refunds..................................... $ 15,228 $ 22,058 $ 22,583
==================================
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS
Haemonetics Corporation and subsidiaries (the "Company") designs,
manufactures and markets automated systems for the collection, processing and
surgical salvage of blood. Haemonetics also collects blood products for several
of its blood bank customers under various forms of management service
agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year ends on the Saturday closest to the last day of
March. Fiscal 1997, Fiscal 1996 and Fiscal 1995 each included 52 weeks.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents include money market funds with a maturity of less than
one week. Cash and cash equivalents are recorded at cost, which approximates
market value.
Net Income per Share
Net income per share data are computed using the weighted average number
of shares of common stock outstanding and common equivalent shares from stock
options (using the treasury stock method). Fully diluted net income per share
data have not been presented as the amounts do not differ significantly from
primary net income per share. In March 1997 the FASB issued SFAS No. 128,
"Earnings Per Share." It is effective for the Company in fiscal 1998. The more
significant changes are the replacement of primary earnings per share (EPS)
with basic EPS. Basic EPS is computed by dividing reported earnings available
to common stockholders by weighted average shares outstanding. No dilution for
any potentially dilutive securities is included. If basic EPS were reported for
the year ended March 29, 1997 and March 30, 1996, the Company's basic EPS would
have been $1.21 and $1.32, respectively. Fully diluted EPS, now called diluted
EPS, which reflects common stock equivalents, is still required.
Foreign Currency
Foreign currency transactions and financial statements are translated
into U.S. dollars following the provisions of Statement of Financial Accounting
Standard (SFAS) No. 52, "Foreign Currency Translation." Accordingly, assets and
liabilities of foreign subsidiaries are translated into U.S. dollars at
exchange rates in effect at year-end. Net revenues and costs and expenses are
translated at average rates in effect during the year. Included in other
income/expense in 1997, 1996 and 1995 are $288,000, $710,000 and $583,000,
respectively, in foreign currency transaction gains.
The Company enters into forward exchange contracts to hedge certain firm
sales commitments to customers, which are denominated in foreign currencies.
The purpose of the Company's foreign currency hedging activities is to protect
the Company from the risk that the eventual dollar cash flows resulting from
the sale of products to international customers will be adversely affected by
changes in exchange rates. Gains and losses realized on these contracts are
recorded in operations, offsetting the related foreign currency transactions.
The cash flows related to the gains and losses on these foreign currency hedges
are classified in the statements of cash flows as part of cash flows from
operating activities.
At March 29, 1997 and March 30, 1996, the Company had forward exchange
contracts, all having maturities of less than one year, to exchange foreign
currencies (major European currencies and Japanese yen) primarily for U.S.
dollars totaling $98,200,000 and $144,234,000, respectively. Gross unrealized
gains and losses from hedging firm sales commitments, based on current spot
rates, were a $7,132,000 gain and a $4,000 loss at March 29, 1997 and a
$6,964,000 gain and a $333,000 loss at March 30, 1996. Deferred gains and
losses are recognized in earnings when the future sales are recognized.
Management anticipates that these deferred amounts at March 29, 1997 will be
offset by the foreign exchange effect on sales of products to international
customers in fiscal 1998.
The Company is exposed to credit loss in the event of nonperformance by
counter-parties on these foreign exchange contracts. The Company does not
anticipate nonperformance by any of these parties.
Financial Instruments
SFAS No. 107 "Disclosures About Fair Value of Financial Instruments,"
requires disclosure of an estimate of the fair value of certain financial
instruments. The fair value of certain of the Company's financial instruments,
including cash and cash equivalents, notes payable and long-term debt, pursuant
to SFAS No. 107 approximated their carrying values at March 29, 1997 and March
30, 1996. Fair values have been determined through information obtained from
market sources and management estimates.
Property, Plant and Equipment
The Company provides for depreciation and amortization by charges to
operations using the straight-line method in amounts estimated to recover the
cost of the building and improvements, equipment, and furniture and fixtures
over their estimated useful lives as follows:
<TABLE>
<CAPTION>
Estimated
Asset Classification Useful Lives
-------------------- ------------
<S> <C>
Building........................................ 30 Years
Building and leasehold improvements............. 5-25 Years
Machinery and equipment......................... 3-10 Years
Furniture and fixtures.......................... 5-8 Years
Commercial plasma and rental equipment.......... 6-8 Years
</TABLE>
Leasehold improvements are amortized over the lesser of their useful
lives or the term of the lease. Maintenance and repairs are charged to
operations as incurred. When equipment and improvements are sold or otherwise
disposed of, the asset cost and accumulated depreciation are removed from the
accounts, and the resulting gain or loss, if any, is included in the results of
operations. Fully depreciated assets are removed from the accounts when they
are no longer in use.
Inventories
Inventories are stated at the lower of cost or market and include the
cost of material, labor and manufacturing overhead. Cost is determined on the
first-in, first-out basis.
Inventories consist of the following:
<TABLE>
<CAPTION>
March 29, March 30,
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Raw materials....................... $ 12,501 $ 6,727
Work-in-process..................... 5,628 6,699
Finished goods...................... 36,961 43,303
--------------------
$ 55,090 $ 56,729
====================
</TABLE>
Revenue Recognition
Revenues from equipment and disposable product sales and sales-type
leases are recognized upon shipment. Service revenues are recognized ratably
over the contractual periods or as the services are provided. The Company
provides for the cost of warranty based on product shipments.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
the temporary differences between the tax and financial reporting bases of
assets and liabilities.
Distribution Rights
Distribution rights represent the cost to acquire the right to directly
distribute certain of the Company's products in foreign markets. These rights
were acquired in several different acquisitions. The historical cost of these
acquisitions was approximately $13,900,000 as of both March 29, 1997 and March
30, 1996. The distribution rights are amortized on the straight-line basis over
20 years. The accumulated amortization was approximately $3,253,000 and
$2,531,000 for the years ended March 29, 1997 and March 30, 1996. The Company
assesses the future useful life of these rights whenever events or changes in
circumstances indicate that the current useful life has diminished. The Company
considers the future undiscounted cash flows of the rights in assessing the
recoverability of the asset. If impairment has occurred, any excess of carrying
value over fair value is recorded as a loss. In the opinion of management, no
impairment in the Company's long-lived assets has occurred.
Accounting for Stock-Based Compensation
In December 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which is to become effective for the Company in
fiscal 1998. SFAS No. 123 requires that employee stock-based compensation be
recorded or disclosed at its fair value. The Company has elected to adopt the
disclosure provision for stock-based compensation in SFAS No. 123 but to
continue to account for stock-based compensation under APB No. 25. No
accounting recognition is given to options granted at fair market value until
they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform with the 1997 presentation.
3. INVESTMENT IN SALES-TYPE LEASES
The Company leases equipment to customers under sales-type leases. The
components of the Company's net investment in sales-type leases are as follows:
<TABLE>
<CAPTION>
March 29, March 30,
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Total minimum lease payments receivable............ $ 55,236 $ 39,537
Less-- Unearned interest........................ 10,723 7,089
---------------------
Net investment in sales-type leases................ 44,513 32,448
Less-- Current portion.......................... 13,559 11,020
---------------------
$ 30,954 $ 21,428
=====================
</TABLE>
Future minimum lease payments receivable under noncancelable leases as of
March 29, 1997 are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending (in thousands)
------------------
<S> <C>
1998...................................... $ 17,276
1999...................................... 14,084
2000...................................... 10,692
2001...................................... 6,732
2002 and thereafter....................... 6,452
--------
$ 55,236
========
</TABLE>
4. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
March 29, March 30,
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Real estate mortgage...................... $ 8,754 $ 8,923
U.S. borrowings........................... -- 1,080
Non-U.S. borrowings....................... 20,772 8,531
--------------------
29,526 18,534
Less--Current portion..................... 19,511 3,378
--------------------
$ 10,015 $ 15,156
====================
</TABLE>
Credit Facilities
U.S. borrowings are evidenced by a $20,000,000 committed, unsecured
revolving credit facility and a $10,000,000 uncommitted, unsecured credit line.
The committed facility is under a joint financing agreement dated October 1,
1996 (the "Agreement"). This facility is available through September 30, 1999,
on which date all borrowings become due. The uncommitted line is under a
financing agreement dated July 29, 1996. As of March 29, 1997 neither the
credit facility nor the uncommitted line had funds drawn against it.
Interest on all facilities bear interest, at the Company's option, at (a)
the higher of the bank's base rate, the bank's prime rate or the Federal Funds
effective rate plus 1%, (b) the Euro-Rate plus a margin of .35%-1% or (c) the
money market rate. The Agreement provides for a commitment fee of 0.20% on the
unused portion of the revolving credit facility. The Agreement contains several
restrictive covenants principally related to the maintenance of minimum
tangible net worth, debt to net worth ratio, and a minimum debt service
interest ratio.
Non-U.S. borrowings represent the financing arranged by the Company's
subsidiaries with local banks which may be guaranteed by the Company.
The weighted average short-term rates for U.S. and non-U.S. borrowings
were 1.69%, 5.47% and 5.69% as of March 29, 1997, March 30, 1996 and April 1,
1995, respectively.
Real Estate Mortgage Agreement
The Company has a $10,000,000 real estate mortgage agreement (the
"Mortgage Agreement") with an insurance company. The Mortgage Agreement
requires principal and interest payments of $91,500 per month for a period of
120 months, commencing October 1, 1990, with the remaining unpaid principal
balance and interest thereon due and payable on September 1, 2000. The entire
balance of the loan may be repaid, subject to a prepayment premium equal to the
greater of either 1% of the principal balance at prepayment, or an amount
calculated based on the interest rate differential, the principal balance due
and the remaining loan term. The Mortgage Agreement provides for interest to
accrue on the unpaid principal balance at a rate of 10.5% per annum. Borrowings
under the Mortgage Agreement are secured by the land, building and improvements
at the Company's headquarters and manufacturing facility. The Mortgage
Agreement also includes minimum tangible net worth and current ratio
requirements. The terms and conditions of this agreement remain unchanged for
future periods.
As of March 29, 1997, notes payable and long-term debt mature as follows:
<TABLE>
<CAPTION>
Fiscal Years Ending (in thousands)
-------------------
<S> <C>
1998......................................... $ 19,511
1999......................................... 1,638
2000......................................... 230
2001......................................... 8,147
2002 and thereafter.......................... --
--------
$ 29,526
========
</TABLE>
5. INCOME TAXES
The components of domestic and foreign income before the provision for
income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended
--------------------------------
March 29, March 30, April 1,
1997 1996 1995
--------- --------- --------
(in thousands)
<S> <C> <C> <C>
Domestic.................................... $ 39,408 $ 43,020 $ 42,910
Foreign..................................... 11,300 12,234 9,660
--------------------------------
$ 50,708 $ 55,254 $ 52,570
================================
</TABLE>
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
Years Ended
--------------------------------
March 29, March 30, April 1,
1997 1996 1995
--------- --------- --------
(in thousands)
<S> <C> <C> <C>
Current
Federal......................... $ 13,423 $ 15,543 $ 16,229
State........................... 2,286 2,390 2,447
Foreign......................... 2,329 2,303 2,351
--------------------------------
18,038 20,236 21,027
================================
Deferred
Federal......................... (1,998) (980) (1,414)
State........................... (137) (154) (258)
Foreign......................... 1,835 227 (430)
--------------------------------
(300) (907) (2,102)
--------------------------------
$ 17,738 $ 19,329 $ 18,925
================================
</TABLE>
Included in the federal and state income tax provisions for fiscal years
1997, 1996 and 1995 are approximately $2,247,000, $3,209,000, and $3,321,000,
respectively, provided on foreign source income of approximately $6,419,000 in
1997, $9,169,000 in 1996 and $9,224,000 in 1995, taxes on which are payable in
the United States.
The tax effect of significant temporary differences composing the net
deferred tax asset (liability) is as follows:
<TABLE>
<CAPTION>
Years Ended
---------------------
March 29, March 30,
1997 1996
--------- ---------
(in thousands)
<S> <C> <C>
Depreciation................................. $ (9,691) $ (6,345)
Amortization................................. (3,535) (2,908)
Inventory.................................... 12,221 10,148
Accruals and reserves........................ 2,138 753
Other........................................ 387 10
--------------------
Total net deferred taxes.................. $ 1,520 $ 1,658
====================
</TABLE>
The provision for income taxes differs from the amount computed by
applying the statutory U.S. federal income tax rate of 35% in 1997, 1996 and
1995 due to the following:
<TABLE>
<CAPTION>
Years Ended
--------------------------------
March 29, March 30, April 1,
1997 1996 1995
--------- --------- --------
(in thousands)
<S> <C> <C> <C>
Tax at federal statutory rate............................... $ 17,748 $ 19,340 $ 18,399
Difference due to:
Foreign sales corporation................................. (1,605) (1,268) (1,462)
Difference between U.S. tax rate and tax rates
used in other tax jurisdictions.......................... 167 147 833
State taxes, net of federal income tax benefit.............. 1,403 1,355 1,422
Research and development credits............................ -- -- (400)
Other, net.................................................. 25 (245) 133
--------------------------------
$ 17,738 $ 19,329 $ 18,925
================================
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company leases facilities and certain equipment under operating
leases expiring at various dates through fiscal year 2004. Facility leases
require the Company to pay certain insurance expenses, maintenance costs and
real estate taxes.
Approximate future basic rental commitments under operating leases as of
March 29, 1997 are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending (in thousands)
------------------
<S> <C>
1998...................................... $ 3,465
1999...................................... 2,461
2000...................................... 1,954
2001...................................... 1,498
2002 and thereafter....................... 3,689
--------
$ 13,067
========
</TABLE>
Rent expense in 1997, 1996 and 1995 was $2,613,000, $4,219,000 and
$3,713,000, respectively.
The Company is presently engaged in various legal actions, and although
ultimate liability cannot be determined at the present time, the Company
believes, based on consultation with counsel, that any such liability will not
materially affect the consolidated financial position of the Company or its
results of operations.
7. CAPITAL STOCK
Treasury Stock
During 1997 and 1996, the Company repurchased 902,100 shares and 514,141
shares, respectively, of its outstanding common stock at average prevailing
prices of $17.46 and $17.24, respectively. The Company expects any repurchased
shares to be made available for issuance pursuant to its employee benefit and
incentive plans and for other corporate purposes.
Stock Plans
The Company has a long-term incentive stock option plan under which a
maximum of 2,853,464 shares of the Company's common stock may be issued
pursuant to incentive and or non-qualified stock options and stock awards
granted to key employees, consultants and advisers (the "Long-Term Incentive
Plan"). The Long-Term Incentive Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee") consisting of two or more
disinterested members of the Company's Board of Directors. The exercise price
for non-qualified options granted under the Long-Term Incentive Plan is
determined by the Committee, but in no event shall such option price be less
than 50% of the fair market value of the common stock at the time the option is
granted. Incentive options may be granted at a price not less than fair market
value on the date of grant. Options become exercisable in a manner determined
by the Committee, generally over 4 years, and incentive options expire not more
than ten years from the date of the grant. There were 828,378 shares available
for future grant at March 29, 1997.
The Company also has a non-qualified stock option plan for non-employee
directors for the purchase of common stock (the "Non-employee Plan"). Under the
Non-employee Plan, a maximum of 6,000 shares can be granted to each director,
not to exceed 24,000 shares per calendar year, and a maximum of 86,000 shares
in aggregate. Options are granted at not less than fair market value on the
date of grant, vest over 4 years and expire not more than ten years from the
date of grant. There were no shares available for future grant at March 29,
1997 under this plan.
The Company also has a stock option plan which grants options to key
employees and consultants for the purchase of common stock (the "Option Plan").
The Option Plan is administered by the Committee, which is empowered to grant
either non-qualified or incentive stock options. Under the Option Plan, options
to purchase up to 1,468,800 shares may be granted at a price, in the case of
incentive options, not less than fair market value on the date of grant.
Options become exercisable in a manner determined by the Committee, generally
over 4 or 5 years, and incentive options expire not more than ten years from
the date of grant. At the year ended March 29, 1997 there were 70,300 shares
available for future grant.
The Company has an Employee Stock Purchase Plan (the "Purchase Plan")
under which a maximum of 289,200 shares (subject to adjustment for stock splits
and similar changes) of common stock may be purchased by eligible employees.
Substantially all full-time employees of the Company are eligible to
participate in the Purchase Plan.
The Purchase Plan provides for two "purchase periods" within each of the
Company's fiscal years, the first commencing on January 1 of each calendar year
and continuing through June 30 of such calendar year, and the second commencing
on July 1 of each year and continuing through December 31 of such calendar
year. Eligible employees may elect to become participants in the Purchase Plan
for a purchase period by completing a stock purchase agreement prior to the
first day of the purchase period for which the election is made. Shares are
purchased through accumulation of payroll deductions (of not less than 2% nor
more than 8% of compensation, as defined) for the number of whole shares
determined by dividing the balance in the employee's account on the last day of
the purchase period by the purchase price per share for the stock determined
under the Purchase Plan. The purchase price for shares will be the lower of 85%
of the fair market value of the common stock at the beginning of the purchase
period, or 85% of such value at the end of the purchase period.
During 1997, there were 33,181 shares purchased at a range of $15.09 to
$15.51 per share under the Purchase Plan. During 1996, there were 39,835 shares
purchased at a range of $14.66 to $15.09 per share under the Purchase Plan.
The Company accounts for these plans under APB Opinion No. 25, under
which no compensation cost has been recognized for options granted at fair
market value. Had the compensation cost for these plans been determined
consistent with the SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company's net income and earnings per share would have been the following
pro forma amounts:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C> <C>
Net Income: As Reported $32,970,000 $35,925,000
Pro Forma $31,526,000 $35,197,000
Primary EPS: As Reported 1.20 1.30
Pro Forma 1.15 1.27
</TABLE>
For purposes of the pro forma disclosure, the fair value of each option
is estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Volatility.......................................... 28.3% 28.3%
Risk-Free Interest Rate............................. 6.5% 6.8%
Expected Life of Options............................ 7 yrs. 7 yrs.
</TABLE>
The weighted average grant date fair value of options granted during 1997
and 1996 was approximately $8.223 and $7.892, respectively.
The fair values of shares purchased under the Employee Stock Purchase
Plan is estimated using the Black-Scholes option pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Volatility.......................................... 28.3% 28.3%
Risk-Free Interest Rate............................. 5.3% 5.9%
Expected Life of Options............................ 6 mos. 6 mos.
</TABLE>
The weighted average grant-date fair value of options granted under the
Purchase Plan was $4.34 in 1997 and $4.20 in 1996.
The effects of applying SFAS No. 123 for the purposes of providing pro
forma disclosures may not be indicative of the effects on reported net income
per share for future years, as the pro forma disclosures include the effects of
only those awards granted after April 2, 1995.
A summary of stock option activity for the combined plans for the three
years ended March 29, 1997 is as follows:
<TABLE>
<CAPTION>
Weighted-
Average
Number of Exercise
Shares Price per Share
--------- ---------------
<S> <C> <C>
Outstanding at April 2, 1994................... 2,111,865 $ 13.582
Granted........................................ 466,613 $ 16.270
Exercised...................................... (163,300) $ 6.189
Terminated..................................... (212,566) $ 16.023
------------------------
Outstanding at April 1, 1995................... 2,202,612 $ 14.464
Granted........................................ 652,079 $ 16.989
Exercised...................................... (367,488) $ 6.218
Terminated..................................... (142,992) $ 16.528
------------------------
Outstanding at March 30, 1996.................. 2,344,211 $ 16.333
Granted........................................ 595,425 $ 18.018
Exercised...................................... (468,004) $ 8.775
Terminated..................................... (208,601) $ 17.239
------------------------
Outstanding at March 29, 1997.................. 2,263,031 $ 18.231
</TABLE>
The following table summarizes information about stock options
outstanding at March 29, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 3/29/97 Life Price at 3/29/97 Price
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$12.500 to $16.500................. 809,518 7.0 years $ 15.518 312,517 $ 15.675
$17.563 to $18.375................. 691,482 8.6 years $ 18.071 87,247 $ 18.356
$18.813 to $23.125................. 566,700 6.4 years $ 20.138 433,950 $ 19.672
$23.875 to $24.563................. 195,331 6.2 years $ 24.500 148,190 $ 24.497
-------------------------------------------------------------
Total........................... 2,263,031 7.3 years $ 18.231 981,904 $ 19.011
=============================================================
</TABLE>
8. SAVINGS PLUS PLAN
The Company's Savings Plus Plan (the "Savings Plan") allows employees to
accumulate savings on a pretax basis. In addition, the Company makes matching
contributions to the Savings Plan based on preestablished rates. The Company
can also make additional discretionary contributions if approved by the Board
of Directors. The Company's matching contributions amounted to approximately
$660,000, $616,000 and $565,000 in 1997, 1996 and 1995, respectively. The Board
of Directors declared a discretionary contribution of approximately $1,100,000
for the Savings Plan year ended March 30, 1996. No discretionary contributions
were made for the Savings Plan years ended March 29, 1997 and April 1, 1995.
The Company has no material obligation for postretirement or
postemployment benefits.
9. TRANSACTIONS WITH RELATED PARTIES
The Company advances money to various employees for relocation costs and
incentive purposes. Loans to employees, which are included in other assets,
amounted to approximately $593,000 as of March 29, 1997 and $916,000 as of
March 30, 1996 and are payable within five years. Certain loans are
interest-bearing, and the Company records interest income on these loans when
collected. Certain loans have forgiveness provisions based upon continued
service or compliance with various guidelines. The Company amortizes the
outstanding loan balance as a charge to operating expense as such amounts are
forgiven.
10. GEOGRAPHIC AND CUSTOMER INFORMATION
The Company operates in one industry segment consisting of the design,
manufacture, marketing and service of blood processing systems and related
disposable items for use in the collection and processing of blood components,
collection of plasma and salvage of shed blood that would otherwise be lost
during surgical procedures. Geographic area information for 1997, 1996 and 1995
is as follows:
<TABLE>
<CAPTION>
Geographic Area
------------------------------------------------
Europe & Far East &
Domestic All Other Japan Consolidated
-------- --------- ---------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Year ended March 29, 1997:
Net revenues................................... $116,831 $97,026 $ 95,960 $309,817
----------------------------------------------
Income before provision for income taxes....... $ 27,065 $15,206 $ 8,437 $ 50,708
----------------------------------------------
Identifiable assets............................ $215,410 $71,791 $ 36,345 $323,546
----------------------------------------------
Year ended March 30, 1996:
Net revenues................................... $108,152 $78,423 $ 91,641 $278,216
----------------------------------------------
Income before provision for income taxes....... $ 36,258 $11,063 $ 7,933 $ 55,254
----------------------------------------------
Identifiable assets............................ $166,771 $82,598 $ 38,449 $287,818
----------------------------------------------
Year ended April 1, 1995:
Net revenues................................... $106,101 $76,760 $ 79,555 $262,416
----------------------------------------------
Income before provision for income taxes....... $ 48,523 $ 2,102 $ 1,945 $ 52,570
----------------------------------------------
Identifiable assets............................ $155,322 $76,337 $ 48,850 $280,509
----------------------------------------------
</TABLE>
Intercompany transfers to foreign subsidiaries are transacted at prices
intended to allow the subsidiaries comparable earnings to those of unaffiliated
distributors. Sales to unaffiliated distributors and customers outside the
United States, including U.S. export sales, were approximately $194,849,000 in
1997, which represented 63% of net revenues; $171,410,000 in 1996, which
represented 62% of net revenues and $158,609,000 in 1995, which represented 60%
of net revenues.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Haemonetics Corporation:
We have audited the accompanying consolidated balance sheets of
Haemonetics Corporation (a Massachusetts corporation) and subsidiaries as of
March 29, 1997 and March 30, 1996, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in the
period ended March 29, 1997. These consolidated financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Haemonetics
Corporation and subsidiaries as of March 29, 1997 and March 30, 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended March 29, 1997, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in item
14 (a) is the responsibility of the Company's management and is presented for
the purpose of complying with the Securities and Exchange Commission's rules
and is not a required part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic consolidated financial statements and, in our opinion, fairly states,
in all material respects, the financial data required to be set forth therein
in relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 11, 1997
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information concerning the Company's directors and concerning
compliance with Section 16(a) of the Securities Exchange Act of 1934 required
by this Item is incorporated by reference to the Company's Proxy Statement for
the Annual Meeting to be held July 18, 1997.
(b) The information concerning the Executive Officers of the Company, who are
elected by and serve at the discretion of the Board of Directors, is as
follows:
JOHN F. WHITE joined Haemonetics in 1976 as Marketing and Sales Manager
and was promoted to Vice President of Marketing and Sales in 1978. In 1982, he
was elected Senior Vice President of Operations and has served as President
since 1983. Prior to joining Haemonetics, Mr. White worked for the Minnesota
Mining & Manufacturing Co. where he held various managerial positions. Mr.
White has been Chairman of Haemonetics' Board of Directors since 1985.
JAMES L. PETERSON joined Haemonetics in 1980 as Director of European
Operations. In 1982, he was promoted to Vice President with responsibility for
all international activities. He was promoted to Executive Vice President in
1988. In May 1994, he assumed the role of President, International Operations.
Prior to joining Haemonetics, he was employed by Hewlett-Packard Company in
Europe and was responsible for its medical sales and service operation. Mr.
Peterson has been a member of Haemonetics' Board of Directors since 1985 and
was elected to the position of Vice Chairman of Haemonetics' Board of Directors
in April 1994.
BRIGID A. MAKES joined Haemonetics in 1992 as Assistant Treasurer. In
August 1992, Ms. Makes was promoted to Treasurer, responsible for all areas of
corporate treasury. In June 1993, Ms. Makes was promoted to Treasurer, Director
of Human Resources and in September 1995, was promoted to Vice President and
Treasurer responsible for treasury, human resources and tax. In November 1995,
Ms. Makes was named acting Chief Financial Officer, increasing her
responsibilities to include financial planning, operational and financial
accounting, investor relations and facility management. In May 1996, Ms. Makes
was promoted to Chief Financial Officer. Prior to joining Haemonetics, Ms.
Makes was employed as Manager of Treasury Services and Controller of Sales and
Service for Lotus Development Corporation. Prior to joining Lotus, Ms. Makes
held various financial positions with increasing levels of responsibility at
General Electric.
JOHN R. BARR joined Haemonetics in 1990 as Director of Customer Service
responsible for domestic and international customer services, as well as
finished goods warehousing and shipping. In September 1991, Mr. Barr was
promoted to Vice President, Operations, responsible for all manufacturing
operations: purchasing; planning raw material warehousing; and offshore
manufacturing. In April 1992, Mr. Barr was promoted to Senior Vice President
with additional responsibility for the U.S. Commercial Plasma Business. In May
1994, Mr. Barr was promoted to Executive Vice President and in October 1995 was
promoted to President, North American Operations, responsible for all
manufacturing operations, North American sales and service and core research
and development. In 1996, Mr. Barr was elected to serve on the Board of
Directors. Prior to joining Haemonetics, Mr. Barr was employed as a Vice
President of Baxter Systems Division where his responsibilities included
management of R&D, customer support staffs and general operations.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for the Annual Meeting to be held July 18, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for the Annual Meeting to be held July 18, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a) Financial Statements are included in Part II of this report
Financial Statements required by Item 8 of this Form
Consolidated Balance Sheets............................ 17
Consolidated Statements of Income...................... 18
Consolidated Statements of Stockholders' Equity........ 19
Consolidated Statements of Cash Flows.................. 20
Notes to Consolidated Financial Statements............. 21
Report of Independent Public Accountants............... 32
Schedules required by Article 12 of Regulation S-X
II Valuation and Qualifying Accounts................... 39
All other schedules have been omitted because they are not applicable or
not required.
(b) Reports on Form 8-K
None.
(c) Exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index at page 36, which is incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HAEMONETICS CORPORATION
By: /s/ JOHN F. WHITE
-----------------------------------
John F. White, Chairman, President
and Chief Executive Officer
May 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JOHN F. WHITE Chairman, President and Chief Executive May 27, 1997
- ------------------------------- Officer
John F. White
/s/ JAMES L. PETERSON Vice Chairman and President, International May 27, 1997
- ------------------------------- Operations
James L. Peterson
/s/ BRIGID A. MAKES Vice President of Finance and Chief Financial May 27, 1997
- ------------------------------- Officer, (Principal Financial and Accounting
Brigid A. Makes Officer)
/s/ JOHN R. BARR President, North American Operations, Director May 27, 1997
- -------------------------------
John R. Barr
/s/ SIR STUART BURGESS Director May 27, 1997
- -------------------------------
Sir Stuart Burgess
/s/ YUTAKA SAKURADA Sr. Vice President Haemonetics Corp. and May 27, 1997
- ------------------------------- President, Haemonetics Japan Director
Yutaka Sakurada
/s/ JERRY E. ROBERTSON Director May 27, 1997
- -------------------------------
Jerry E. Robertson
/s/ DONNA C. E. WILLIAMSON Director May 27, 1997
- -------------------------------
Donna C. E. Williamson
</TABLE>
EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION
Number and Description of Exhibit
---------------------------------
3. Articles of Organization
3A* Articles of Organization of the Company effective August 29, 1985,
as amended December 12, 1985 and May 21, 1987 (filed as Exhibit 3A
to the Company's Form S-1 No. 33-39490 and incorporated herein by
reference).
3B* Form of Restated Articles of Organization of the Company (filed as
Exhibit 3B to the Company's Form S-1 No. 33-39490 and incorporated
herein by reference).
3C* By-Laws of the Company presently in effect (filed as Exhibit 3C to
the Company's Form 10-K No. 1-10730 for the year ended April 3,
1993 and incorporated herein by reference).
3D* Articles of Amendment to the Articles of Organization of the
Company filed May 8, 1991 with the Secretary of the Commonwealth of
Massachusetts (filed as Exhibit 3E to the Company's Amendment No. 1
to Form S-1 No. 33-39490 and incorporated herein by reference).
4. Instruments defining the rights of security holders
4A* Specimen certificate for shares of common stock (filed as Exhibit
4B to the Company's Amendment No. 1 to Form S-1 No. 33-39490 and
incorporated herein by reference).
10. Material Contracts
10A* The 1990 Stock Option Plan, as amended (filed as Exhibit 4A to the
Company's Form S-8 No. 33-42006 and incorporated herein by
reference).
10B* Form of Option Agreements for Incentive and Non-qualified Options
(filed as Exhibit 10B to the Company's Form S-1 No. 33-39490 and
incorporated herein by reference).
10C* Distribution Agreement dated April 11, 1990 between Baxter
Healthcare Corporation, acting through its Bentley Laboratories
Division, and the Company (filed as Exhibit 10C to the Company's
Form S-1 No. 33-39490 and incorporated herein by reference).
10D* Agreement dated December 8, 1987 between the Company and Miles,
Inc., Cutter Biological (filed as Exhibit 10D to the Company's Form
S-1 No. 33-39490 and incorporated herein by reference).
10E* Supply Agreement between the Company and Alpha Therapeutic
Corporation dated December, 1988 (filed as Exhibit 10E to the
Company's Form S-1 No. 33-39490 and incorporated herein by
reference).
10F* Sublease dated October 29, 1992 between Clean Harbors of Kingston,
Inc. and the Company (filed as Exhibit 10F to the Company's Form
10-K No. 1-10730 for the year ended April 3, 1993 and incorporated
herein by reference).
10G* Third Amended and Restated Financing Agreement dated as of August
22, 1990 among the Company, Fleet Credit Corporation and Fleet
National Bank (filed as Exhibit 10G to the Company's Form S-1 No.
33-39490 and incorporated herein by reference).
10H* First Supplement to the Third Amended and Restated Financing
Agreement dated as of February 3, 1992, and the related Revolving
Credit Note, among the Company, Fleet Credit Corporation and Fleet
National Bank (filed as Exhibit 10H to the Company's Form 10-K No.
1-10730 for the year ended March 28, 1992 and incorporated herein
by reference).
10I* Second Supplement to the Third Amended and Restated Financing
Agreement dated as of March 27, 1992 among the Company, Fleet
Credit Corporation and Fleet National Bank (filed as Exhibit 10I to
the Company's form 10-K No. 1-10730 for the year ended March 28,
1992 and incorporated herein by reference).
10J* Note and Mortgage dated August 7, 1990 between the Company and John
Hancock Mutual Life Insurance Company relating to the Braintree
facility (filed as Exhibit 10H to the Company's Form S-1 No.
33-39490 and incorporated herein by reference).
10K* Credit Facility with Swiss Bank Corporation (filed as Exhibit 10J
to the Company's Amendment No. 1 to Form S-1 No. 33-39490 and
incorporated herein by reference).
10L* Lease dated July 17, 1990 between the Buncher Company and the
Company of property in Pittsburgh, Pennsylvania (filed as Exhibit
10K to the Company's Form S-1 No. 33-39490 and incorporated herein
by reference).
10M* Lease dated July 3, 1991 between Wood Road Associates II Limited
Partnership and the Company for the property adjacent to the main
facility in Braintree, Massachusetts (filed as Exhibit 10M to the
Company's Form 10-K No. 1-10730 for the year ended March 28, 1992
and incorporated herein by reference).
10N* Amendment No. 1 to Lease dated July 3, 1991 between Wood Road
Associates II Limited Partnership and the Company for the child
care facility (filed as Exhibit 10N to the Company's Form 10-K No.
1-10730 for the year ended March 28, 1992 and incorporated herein
by reference).
10O* Bank Overdraft Facility between The Sumitomo Bank and the Company
with an annual renewal beginning February 28, 1993 (filed as
Exhibit 10O to the Company's Form 10-K No. 1-10730 for the year
ended March 28, 1992 and incorporated herein by reference).
10P* Bank Overdraft Facility between The Mitsubishi Bank and the Company
with an annual renewal beginning June 30, 1993 (filed as Exhibit
10P to the Company's Form 10-K, No. 1-10730 for the year ended
March 28, 1992 and incorporated herein by reference).
10Q* Short-term Loan Agreement between The Mitsubishi Bank and the
Company renewable every three months (filed as Exhibit 10Q to the
Company's Form 10-K No. 1-10730 for the year ended March 28, 1992
and incorporated herein by reference).
10R* 1991 Employee Stock Purchase Plan as amended (filed as Exhibit 10R
to the Company's Form 10-K No. 1-10730 for the year ended April 3,
1993 and incorporated herein by reference).
10S* Amendment No. 2 to Lease dated July 3, 1991 between Wood Road
Associates II Limited Partnership and the Company (filed as Exhibit
10S to the Company's Form 10-K No. 1-10730 for the year ended April
3, 1993 and incorporated herein by reference).
10T* 1992 Stock Option Plan for Non-Employee Directors (filed as Exhibit
10U to the Company's Form 10-K No. 1-10730 for the year ended April
3, 1993 and incorporated herein by reference).
10U* 1992 Long-Term Incentive Plan (filed as Exhibit 10V to the
Company's Form 10-K No. 1-10730 for the year ended April 3, 1993
and incorporated herein by reference).
10V* Agreement dated April 3, 1993 between Cellco, Inc. and Haemonetics
Ventures Corporation for the purchase of Cellco, Inc. Preferred
Shares and Warrants (filed as Exhibit 10W to the Company's Form
10-K No. 1-10730 for the year ended April 2, 1994 and incorporated
herein by reference).
10W* Bridge loan and convertible promissory notes dated April 15 and
June 10, 1994 between Cellco, Inc. and the Company (filed as
Exhibit 10Z to the Company's Form 10-K No. 1-10730 for the year
ended April 1, 1995 and incorporated herein by reference).
10X* Real Estate purchase agreement dated May 1, 1994 between 3M UK
Holding PLC and the Company (filed as Exhibit 10AA to the Company's
Form 10-K No. 1-10730 for the year ended April 1, 1995 and
incorporated herein by reference).
10Y* Real Estate purchase agreement dated September 30, 1994 between The
Midland Mutual Life Insurance Company and the Company (filed as
Exhibit 10AB to the Company's Form 10-K No. 1-10730 for the year
ended April 1, 1995 and incorporated herein by reference).
10Z* Purchase agreement dated October 1, 1994 between Kuraray Co. and
the Company (filed as Exhibit 10AC to the Company's Form 10-K No.
1-10730 for the year ended April 1, 1995 and incorporated herein by
reference).
10AA* Asset Purchase Agreement dated as of July 18, 1995 between DHL
Laboratories and the Company (filed as Exhibit 10AF to the
Company's Form 10-K No. 1-10730 for the year ended March 30, 1996
and incorporated herein by reference).
10AB* Lease dated May 10, 1996 between Charlotte E. Flatley and John P.
Garrahan, trustees of the 1970 Flatley Family Trust and the Company
for the property located at Forbes Business Center, Braintree,
Massachusetts (filed as Exhibit 10AG to the Company's Form 10-Q No.
1-10730 for the quarter ended September 28, 1996 and incorporated
herein by reference).
10AC* Supplement to the lease dated May 10, 1996 between Charlotte E.
Flatley and John P. Garrahan, trustees of the 1970 Flatley Family
Trust and the Company for the property located at Forbes Business
Center, Braintree, Massachusetts (filed as Exhibit 10AH to the
Company's Form 10-Q No. 1-10730 for the quarter ended September 28,
1996 and incorporated herein by reference).
10AD* First Amendment to lease dated July 17,1990 between Buncher Company
and the Company of property in Pittsburg, Pennsylvania (filed as
Exhibit 10AI to the Company's Form 10-Q No. 1-10730 for the quarter
ended December 28, 1996 and incorporated herein by reference).
10AE Revolving Credit Agreement among Mellon Bank, N.A., the First
National Bank of Boston and Haemonetics Corporation dated as of
October 1, 1996
10AF Amendment, dated April 18, 1997 to the 1992 Long-Term Incentive
Plan (filed as Exhibit 10V to the Company's Form 10-K No. 1-10730
for the year ended April 3, 1993 and incorporated herein by
reference).
11. Statement re: computation of per share earnings
21. Subsidiaries of the Company
23. Consent of the Independent Public Accountants
27. Financial Data Schedule
- --------------------
* Incorporated by reference.
(All other exhibits are inapplicable.)
SCHEDULE II
HAEMONETICS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Write-Offs Balance at
Beginning Costs and (Net of End
Allowance for Doubtful Accounts of Period Expenses Recoveries) of Period
- ------------------------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
For the Year Ended March 29, 1997............... $ 984 $ 431 $ (454) 961
For the Year Ended March 30, 1996............... 681 321 (18) 984
For the Year Ended April 1, 1995................ 464 222 (5) 681
</TABLE>
EXHIBIT 10AE
REVOLVING CREDIT AGREEMENT
AMONG
MELLON BANK, N.A.,
THE FIRST NATIONAL BANK OF BOSTON
AND
HAEMONETICS CORPORATION
DATED AS OF OCTOBER 1, 1996
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT, dated and effective as of October 1, 1996,
by and among HAEMONETICS CORPORATION, (the "Borrower") a Massachusetts
corporation, and MELLON BANK, N.A., a national banking association
(hereinafter called "Mellon"), and THE FIRST NATIONAL BANK OF BOSTON, a
national banking association (hereinafter called "Bank of Boston," and
either Mellon or Bank of Boston, the "Bank," or collectively the "Banks");
PRELIMINARY STATEMENT:
WHEREAS the Banks each have agreed to make available to the Borrower a
Revolving Credit Facility upon all of the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of their mutual agreements
hereinafter set forth and intending to be legally bound hereby, the Borrower
and the Banks agree as follows:
ARTICLE I
DEFINITIONS: Construction
--------------------------
1.01. Certain Definitions. In addition to other words and terms
defined elsewhere in this Agreement, as used herein the following words and
terms shall have the following meanings, respectively, unless the context
hereof otherwise clearly requires:
"AB Rate" and "AB Rate Option" shall have the meaning assigned those
terms in Section 2.05(a)(i) hereof.
"AB Rate Loan" shall mean any loan bearing interest under the AB Rate
Option.
"Additional Interest Event" shall mean the occurrence of the following
event or condition measured in accordance with Section 2.05(a) hereof:
Consolidated Total Indebtedness shall be greater than 30% of Consolidated
Tangible Net Worth.
"Affiliate" shall mean an entity which is directly or indirectly
controlled by the Borrower or which controls the Borrower or which is under
common control with the Borrower.
"Agreement" shall mean this Agreement as amended, modified or
supplemented from time to time.
"Assets" at any time shall mean the assets of the Borrower at such
time, determined in accordance with GAAP.
"Business Day" shall mean any day other than a Saturday, Sunday,
public holiday under the laws of the Commonwealth of Pennsylvania or other
day on which banking institutions are authorized or obligated to close in
Pittsburgh Pennsylvania.
"Capitalized Lease Obligation" shall mean any lease obligation which
is required to be capitalized in accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and any successor statute of
similar import, and regulations thereunder, in each case as in effect from
time to time.
"Change in Control" shall mean any Person or group of Persons (as used
in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended,
(the "Exchange Act"), and the rules and regulations thereunder) shall have
become the beneficial owner (as defined in rules promulgated by the
Securities & Exchange Commission) of more than 35% of the voting securities
of the Borrower.
"Closing Date" shall mean October 1, 1996.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
"Commitment" shall have the meaning assigned to such term in Section
2.01 hereof, and with respect to each Bank the Commitment of each Bank
hereunder as set forth below its signature on the last page of this
Agreement hereto, as such Commitment may be terminated or reduced pursuant
to this Agreement. The Commitment shall automatically and permanently
terminate on the Expiration Date.
"Consolidated Net Income" for any period shall mean the net earnings
(or loss) after taxes of the Borrower and its Consolidated Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Consolidated Subsidiaries" at any particular time shall mean those
Subsidiaries whose accounts are or should be consolidated with those of the
Borrower in accordance with GAAP.
"Consolidated Tangible Net Worth" at any time shall mean the
stockholders' equity of the Borrower and its Consolidated Subsidiaries,
determined and consolidated in accordance with GAAP, except that there shall
be deducted all intangible assets of the Borrower and its Consolidated
Subsidiaries (including but not limited to goodwill, organization costs,
patents, copyrights, trademarks, trade names, franchises, licenses) at such
time in accordance with GAAP.
"Consolidated Total Indebtedness" at any time shall mean all
Indebtedness of the Borrower and its Consolidated Subsidiaries at such time.
"Contingent Liabilities" of the Borrower and its Consolidated
Subsidiaries at any particular time shall mean the obligations of the
Borrower and its Consolidated Subsidiaries at such time in respect of any
guarantee or suretyship of the obligations of any other Person (except such
other Person whose accounts are consolidated with the Borrower or its
Consolidated Subsidiaries, as the case may be) the liability for which is
not otherwise reflected as a consolidated liability or any other agreement
to purchase, sell or lease (as lessee or lessor) property or assets
(excluding operating leases) or to purchase or sell services (i) primarily
for the purpose of enabling such Person to satisfy such obligation or (ii)
regardless of the non-delivery of such property or assets or the failure to
furnish such services.
"Controlled Group Member" shall mean each trade or business (whether
or not incorporated) which together with the Borrower is treated as a single
employer under Section 4001(b)(1) of ERISA.
"Corresponding Source of Funds" shall mean in the case of any Euro-
Rate Loan, the proceeds of hypothetical receipts by a Notional Euro-Rate
Funding Office of one or more Dollar deposits in the interbank Eurodollar
market at the beginning of the Euro-Rate Maturity Period applicable to such
Loan, having maturities approximately equal to such Maturity Period and in
an aggregate amount approximately equal to such Loan.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
"Environmental Affiliate" shall mean any Person whose Environmental
Claim the Borrower or any Subsidiary has retained, assumed or is otherwise
liable for (by Law, agreement or otherwise).
"Environmental Approvals" shall mean any governmental or Official Body
action pursuant to or required under any Environmental Law.
"Environmental Claim" shall mean, with respect to any Person, any
action, suit, proceeding, investigation, notice, claim, complaint, demand,
request for information or other communication (written or oral) by any
other Person (including but not limited to any governmental authority,
citizens' group or present or former employee of such Person) alleging,
asserting or claiming any (a) violation of any Environmental Law, (b)
liability for cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries, fines or penalties arising out
of, based on or resulting from the release into the environment, of any
Environmental Concern Materials at any location, whether or not owned by
such Person.
"Environmental Concern Materials" shall mean any flammable substance,
explosive, radioactive material, hazardous material, hazardous waste, toxic
substance, solid waste, pollutant or contaminant specified in or regulated
or otherwise affected by any Environmental Law (including but not limited to
any "hazardous substance" as defined in CERCLA or any similar state law and
including without limitation any asbestos, gasoline, diesel fuel, motor oil,
waste and used oil, heating oil and other petroleum products or compounds,
polychlorinated biphenyls, radon and urea formaldehyde).
"Environmental Law" shall mean any Law, whether now existing or
subsequently enacted or amended, relating to (a) pollution or protection of
the environment, including natural resources, (b) exposure of Persons,
including but not limited to employees, to Environmental Concern Materials,
(c) protection of the public health or welfare from the effects of products,
by-products, wastes, emissions, discharges or releases of Environmental
Concern Materials or (d) regulation of the manufacture, use or introduction
into commerce of Environmental Concern Materials including their
manufacture, formulation, packaging, labeling, distribution, transportation,
handling, storage or disposal. Without limitation, "Environmental Law" shall
also include any Environmental Approval and the terms and conditions thereof
and shall also include all laws relating to public health, safety and
welfare (including rules and regulations of the Federal Food and Drug
Administration), health care and the provision of health care and related
products, services and equipment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA shall be construed to also refer to any successor
sections.
"Euro-Rate" and "Euro-Rate Option" shall have the meanings assigned to
those terms in Section 2.05(a)(ii) hereof.
"Euro-Rate Loan" shall mean any Loan bearing interest under the Euro-
Rate Option.
"Event of Default" shall mean any of the Events of Default described
in Article VII hereof.
"Expiration Date" shall mean September 30, 1999.
"GAAP" shall have the meaning set forth in Section 1.03 hereof.
"Guaranty Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of any
other Person in any manner, whether direct or indirect, and including
without limitation any obligation, whether or not contingent, (i) to
purchase any such Indebtedness or any property constituting security
therefor for the purpose of assuring the holder of such Indebtedness, (ii)
to advance or provide funds or other support for the payment or purchase of
any such Indebtedness or to maintain working capital, solvency or other
balance sheet condition of such other Person (including without limitation
keep well agreements, maintenance agreements, comfort letters or similar
agreements or arrangements) for the benefit of any holder of Indebtedness of
such other Person, (iii) to lease or purchase property, securities or
services primarily for the purpose of assuring the holder of such
Indebtedness, or (iv) to otherwise assure or hold harmless the holder of
such Indebtedness against loss in respect thereof. The amount of any
Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount
(or maximum principal amount, if larger) of the Indebtedness in respect of
which such Guaranty Obligation is made.
"Indebtedness" of a Person shall mean:
(i) all indebtedness or liability for or on account of money
borrowed by, or for or on account of deposits with or advances to (but
not including accrued pension costs, deferred income taxes or accounts
payable of) such Person;
(ii) all obligations (including Contingent Liabilities) of such
Person evidenced by bonds, debentures, notes, banker's acceptances or
similar instruments;
(iii) all indebtedness or liability for or on account of
property or services purchased or acquired by such Person;
(iv) any amount secured by a Lien on property owned by such
Person (whether or not assumed) and Capitalized Lease Obligations of
such Person (without regard to any limitation of the rights and
remedies of the holder of such Lien or the lessor under such
Capitalized Lease to repossession or sale of such property);
(v) the maximum available amount of all standby letters of
credit issued for the account of such Person and, without duplication,
all drafts drawn thereunder (to the extent unreimbursed); and
(vi) all Guaranty Obligations of such Person.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ,
decree or award of any Official Body.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
"Loan" or "Loans" shall mean a loan or loans made by a Bank or Banks
to the Borrower under this Agreement.
"London Business Day" shall mean a Business Day (as herein defined)
which is also a day for dealing in deposits in Dollars by and among banks in
the London interbank market.
"Margin" shall mean with respect to any Loan bearing interest at the
Euro-Rate Option the margin expressed as a percentage rate per annum to be
added to the Euro-Rate in order to determine the interest rate payable by
the Borrower pursuant to Section 2.05 (a)(ii) hereof.
"Material Adverse Effect" shall mean any event or circumstance which
has been, will be, or should be disclosed by the Borrower in any required
filing with the Securities and Exchange Commission.
"Maturity Period" and "Maturity Date" shall have the meanings assigned
to those terms in Section 2.05 hereof.
"Money Market Rate" and "Money Market Rate Option" shall have the
meaning assigned such terms in Section 2.05(a)(iii) hereof.
"Money Market Rate Loan" shall mean any Loan bearing interest at the
Money Market Rate Option.
"Month," with respect to a Euro-Rate Maturity Period, has the
following meaning unless a calendar month is specified or the context
otherwise clearly requires:
(i) if the first day of such Euro-Rate Maturity Period is the
last day of a calendar month, a "month" is the interval between the
last days of consecutive calendar months;
(ii) otherwise, a "month" is the interval between the days in
consecutive calendar months numerically corresponding to the first day
of such Euro-Rate Maturity Period or, if there is no such numerically
corresponding day in a particular calendar month, then the last day of
such calendar month.
"Multiemployer Plan" shall mean any multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which Section 4021(a) of ERISA applies, and
to which a Borrower or any Controlled Group Member made, or was required to
make, contributions at any time during the preceding five years.
"Note" or "Notes" shall mean the promissory note or notes of the
Borrower executed and delivered under this Agreement, or any note executed
and delivered pursuant hereto, together with all extensions, renewals,
refinancings or refundings in whole or part.
"Notional Euro-Rate Funding Office" shall have the meaning given to
that term in Section 2.10(a) hereof.
"Office", when used in connection with either Bank, shall mean its
office address that is stated below its signature on the last page of this
Agreement hereto, or at such other office or offices of each Bank or branch,
subsidiary or affiliate thereof as may be designated in writing from time to
time by such Bank to the Borrower.
"Official Body" shall mean any government or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator,
in each case whether foreign or domestic.
"Operating Cash Flow" shall mean earnings of the Borrower and its
Consolidated Subsidiaries, determined and consolidated in accordance with
GAAP, before interest and taxes, plus depreciation and amortization, minus
cash taxes, minus capital expenditures that are not financed by term debt.
"Option" shall mean the AB Rate Option or the Euro-Rate Option or the
Money Market Rate Option, as the case may be.
"PBGC" means the Pension Benefit Guaranty Corporation established
under Title IV of ERISA or any other governmental agency, department or
instrumentality succeeding to the functions of said corporation.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, government
(including political subdivisions), governmental authority or agency, or any
other entity.
"Plan" means any employee pension benefit plan to which Section
4021(a) of ERISA applies (other than any Multiemployer Plan) and (i) which
is maintained for employees of a Borrower or any Controlled Group Member; or
(ii) to which a Borrower or any Controlled Group Member made, or was
required to make, contributions at any time within the preceding five years.
"Potential Default" shall mean any event or condition referenced in
Section 7 hereof which with notice, passage of time or any combination of
the foregoing, would constitute an Event of Default.
"Reportable Event" means (i) a reportable event described in Section
4043 of ERISA and regulations thereunder, (ii) a withdrawal by a substantial
employer from a Plan to which more than one employer contributes, as
referred to in Section 4063(b) of ERISA, or (iii) a cessation of operations
at a facility causing more than twenty percent (20%) of Plan participants to
be separated from employment, as referred to in Section 4062(e) of ERISA.
"Standard Notice" shall mean an irrevocable notice for Loan pursuant
to Section 2.03 provided to either or both Banks on a Business Day which is
(i) the same Business Day in the case of any AB Rate Loan or
Money Market Rate Loan; and
(ii) at least two London Business Days in advance in the case of
any Euro-Rate Loan.
Standard Notice must be provided no later than: (A) 12:00 o'clock Noon,
Pittsburgh time in the case of Euro-Rate Loans; and (B) by 2:30 p.m.,
Pittsburgh time in the case of AB Rate Loans or Money Market Rate Loans, on
the last day permitted for such notice. Standard Notice shall be in writing
(including telex, facsimile or cable communication) or by telephone (to be
subsequently confirmed in writing) in any such case, effective upon receipt
by Bank.
"Subsidiary" of the Borrower at any time shall mean any corporation of
which a majority (by number of shares or number of votes) of any class of
outstanding capital stock normally entitled to vote for the election of one
or more directors (regardless of any contingency which does or may suspend
or dilute the voting rights of such class) is at such time owned directly or
indirectly by the Borrower or one or more Subsidiaries.
"Total Debt Service" shall mean interest expense plus required
principal payments for Indebtedness.
1.02. Construction. Unless the context of this Agreement otherwise
clearly requires, "or" has the inclusive meaning represented by the phrase
"and/or". References in this Agreement to "determination" by either Bank or
the Banks include good faith estimates by either Bank or the Banks (in the
case of quantitative determinations) and good faith belief of the Banks (in
the case of qualitative determinations). The words "hereof", "herein",
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. The section and
other headings contained in this Agreement are for reference purposes only
and shall not control or affect the construction of this Agreement or the
interpretation hereof in any respect. Section, subsection and exhibit
references are to this Agreement unless otherwise specified.
1.03. Accounting Principles. (a) As used herein, "GAAP" shall mean
generally accepted accounting principles as such principles shall be in
effect at the Relevant Date, subject to the provisions of this Section 1.03.
As used herein, "Relevant Date" shall mean the date a relevant computation
or determination is to be made or the date of relevant financial statements,
as the case may be.
(b) Except as otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters shall be made, and
all financial statements to be delivered pursuant to this Agreement shall be
prepared, in accordance with GAAP (including principles of consolidation
where appropriate), and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP.
(c) If any change in GAAP after the date of this Agreement is or shall
be required to be applied to transactions then or thereafter in existence,
and a violation of one or more provisions of this Agreement shall have
occurred (or in the opinion of both Banks would be likely to occur) which
would not have occurred or be likely to occur if no change in accounting
principles had taken place, the parties agree in such event to negotiate in
good faith an amendment of this Agreement which shall approximate to the
extent possible the economic effect of the original financial covenants
after taking into account such change in GAAP.
(d) Without in any manner limiting the provisions of this Section
1.03, if any change in GAAP occurs after the date of this Agreement and such
change in GAAP could or would materially change the Borrower's financial
results or position from that reflected in the Borrower's financial
statements prior to such change, the Borrower shall notify both Banks as
soon as practicable.
ARTICLE II
THE CREDITS
-----------
2.01. Revolving Credit Loans; Money Market Loans. Subject to the
terms and conditions and relying upon the representations and warranties
herein set forth, each Bank agrees, severally and not jointly, to (such
agreement being herein called the Bank's "Commitment") make Loans to the
Borrower at any time or from time to time on or after the date hereof and to
but not including the Expiration Date in an aggregate principal amount not
exceeding $10,000,000, at any time outstanding (for each Bank, the
"Commitment Amount"). Within such limits of time and amount and subject to
the provisions of this Agreement, the Borrower may, subject to all of the
terms and conditions hereof, borrow, repay and reborrow hereunder.
2.02. The Notes. The obligations of the Borrower to repay the
aggregate unpaid principal amount of the Loan or Loans made by the Banks to
the Borrower hereunder and to pay interest thereon shall be evidenced in
part by two promissory notes of the Borrower dated on or prior to the
Closing Date in substantially the form attached hereto as Exhibit A, with
the blanks appropriately filled and payable to the order of each respective
Bank in the amount of the lesser of the applicable Bank's Commitment Amount
or the unpaid principal amount of all Loans made to the Borrower by the
Bank. The outstanding principal amount of each Loan, the unpaid interest
accrued thereon, the interest rate or rates applicable and the duration of
such applicability shall be determined from each Bank's records, which shall
be conclusive absent manifest error. The executed Notes shall be delivered
by the Borrower to each Bank on or prior to the Closing Date.
2.03. Making of Loans. (a) Whenever the Borrower desires to request a
Loan hereunder it shall give Standard Notice thereof to the Bank or Banks
setting forth the following information:
(i) The date, which shall be a Business Day and, in the case of
Euro-Rate Loans, a London Business Day, on which such Loan is to be
made;
(ii) The interest rate Option applicable to such Loan, selected
in accordance with Section 2.05(a) hereof;
(iii) The Maturity Period to apply to such Loan, selected in
accordance with Section 2.05(b) hereof;
(iv) The total principal amount of such Loan, selected in
accordance with Section 2.05(c) hereof.
Standard Notice having been so given, on the date specified in such Notice
and by the close of the applicable Bank's business on such date, such Bank
shall make the proceeds of its Loan available to the Borrower at the Bank's
Office, in funds immediately available at such office. The proceeds of each
Loan may be applied by the Bank or Banks in whole or in part against amounts
then due and payable by the Borrower hereunder.
(b) Absent contrary notice from the Borrower by 12:00 o'clock Noon,
Pittsburgh time, one Business Day prior to any Maturity Date the Borrower
shall, at the applicable Bank's option (and without in any manner limiting
the Borrower's ability to repay the Loan on its Maturity Date without
premium or penalty), be deemed to have given such Bank or Banks notice at
such time pursuant to Section 2.03(a) hereof to the effect that the Borrower
requests that such Bank or Banks make a Loan to the Borrower on such
Maturity Date at the AB Rate Option in an aggregate principal amount equal
to the aggregate principal amount of the Loans becoming due and payable to
such Bank on such Maturity Date.
2.04. Commitment Fees, etc. The Borrower agrees in consideration of
the Commitment of each Bank hereunder, to pay to each Bank a fee
("Commitment Fees") for the period from the Closing Date to and including
the Expiration Date calculated (based on a year of 365 or 366 days as the
case may be) at a rate of .20 of 1% per annum of the aggregate unutilized
Commitment Amount of each respective Bank in effect from time to time;
provided, however, that if an Additional Interest Event shall occur, the
Commitment Fees shall be calculated at the rate of .35 of 1% per annum. Such
fee shall be payable quarterly on the last day of each March, June,
September and December after the Closing Date, and on the Expiration Date,
for the preceding period for which such fee has not been paid. The Borrower
may at any time upon at least ten (10) Business Days' notice to either or
both Banks terminate in whole or reduce in part a Commitment of such Bank
hereunder to an amount not less than the aggregate principal amount of all
Loans then outstanding plus the principal amount of all Loans not yet made
as to which notice has been given pursuant to Section 2.03 hereof; provided,
however, that each partial reduction shall be in a minimum amount of
$1,000,000 or an integral multiple thereof.
2.05. Interest Rates: Maturity Periods; Transactional Amounts.
(a) Optional Basis of Borrowing. Each Loan, if offered, shall bear
interest for each day until due on a single basis selected by the Borrower
from among the interest rate Options set forth below; but the Borrower may
select different Options to apply simultaneously to different Loans:
(i) AB Rate Option: A rate per annum (computed on the basis of
a year of 365 or 366 days, as the case may be) for each day equal to
the higher of: (A) the Base Rate or Prime Rate for such day or (B) the
Federal Funds Effective Rate for such day plus 1% per annum. "Base
Rate" and Prime Rate as used herein shall mean the interest rate per
annum announced from time to time by Mellon or Bank of Boston
respectively as its prime rate or base rate, as applicable. "Federal
Funds Effective Rate" for any day shall mean the rate per annum
(rounded upward to the nearest 1/100 of 1%) determined by each Bank
respectively (which determination shall be conclusive) to be the rate
per annum announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on
overnight Federal funds transactions arranged by Federal funds brokers
on the previous trading day, as computed and announced by such Federal
Reserve Bank (or any successor) in substantially the same manner as
such Federal Reserve Bank computes and announces the weighted average
it refers to as the "Federal Funds Effective Rate" as of the date of
this Agreement; provided, that if such Federal Reserve Bank (or its
successor) does not announce such rate on any day, the "Federal Funds
Effective Rate" for such day shall be the Federal Funds Effective Rate
for the last day on which such rate was announced. Changes in the AB
Rate shall take effect on the date the applicable Bank announces a
change in the Base Rate or the Federal Reserve Bank announces a change
in the Federal Funds Effective Rate, as the case may be.
(ii) Euro-Rate Option: A rate per annum (based on a year of 360
days and actual days elapsed) for each day equal to the Euro-Rate for
such day plus a Margin of .35% of 1% per annum. "Euro-Rate" for any
day, as used herein, shall mean for each Euro-Rate Loan corresponding
to a proposed or existing Euro-Rate Maturity Period the rate per annum
determined by each Bank respectively by dividing (the resulting
quotient to be rounded upward to the nearest 1/100 of 1%) (x) the rate
of interest (which shall be the same for each day in such Euro-Rate
Maturity Period) determined in good faith by the applicable Bank
(which determination shall be conclusive absent manifest error) to be
the average of the rates per annum for deposits in Dollars offered to
banks in the London interbank market at approximately 11:00 o'clock
a.m., London time, two London Business Days prior to the first day of
such Euro-Rate Maturity Period for delivery on the first day of such
Euro-Rate Maturity Period in amounts comparable to such Euro-Rate
Maturity Period by (y) a number equal to 1.00 minus the Euro-Rate
Reserve Percentage.
The "Euro-Rate" described in this Section 2.05(a)(ii) may also
be expressed by the following formula:
[average of the rates offered to ]
[banks in the London interbank market ]
[determined by the Bank per subsection (ii) ]
Euro-Rate = [of this Section 2.05(a) ]
----------------------------------------------------
[1.00-Euro-Rate Reserve Percentage ]
The "Euro-Rate Reserve Percentage" for any day is the maximum
effective percentage (expressed as a decimal fraction, rounded upward
to the nearest 1/100 of 1%), as determined in good faith by the
applicable Bank (which determination shall be conclusive absent
manifest error), which is in effect on such day as prescribed by the
Board of Governors of the Federal Reserve System (or any successor)
for determining the reserve requirements (including, without
limitation, supplemental, marginal and emergency reserve requirements)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities") of a member bank in such System but only
to the extent actually incurred by the applicable Bank, such Bank's
determination thereof to be conclusive in the absence of manifest
error. The Euro-Rate shall be adjusted automatically as of the
effective date of each change in the Euro-Rate Reserve Percentage.
The applicable Bank shall give prompt notice to the Borrower of
the Euro-Rate so offered or adjusted from time to time and such Bank's
determination thereof shall be conclusive in the absence of manifest
error. Notwithstanding any other provision of this Agreement, upon the
occurrence of an Additional Interest Event, the Margin applicable to
the Euro-Rate Option shall increase to .60 of 1% per annum; likewise,
at such time as an Additional Interest Event shall cease to exist, the
Margin applicable to the Euro-Rate Option shall decrease to .35 of 1%
per annum; provided, however, that for purposes of the foregoing
sentence, the Borrower shall be entitled to calculate the existence or
non-existence of an Additional Interest Event on a monthly basis (for
such month taken as a whole), and shall notify the applicable Bank
thereof within ten (10) Business Days of the end of each fiscal month,
such notice, if the Bank so requests, to state in reasonable detail
the information and calculations necessary to determine the existence
or non-existence thereof. Changes in Margin required by the foregoing
shall take effect as of the first day of the month following the
reported month.
(iii) Money Market Rate Option. A rate per annum computed on
the basis of 360 days, as the case may be, equal to the Money Market
Rate for such day. "Money Market Rate" shall mean that rate of
interest offered by Mellon or the Bank of Boston respectively to the
Borrower from time to time in the Bank's sole discretion as its Money
Market Rate which rate may be fixed or floating above a stated market
index rate.
(b) Maturity Periods. At any time when a Borrower shall request a
Bank to make a Loan, the Borrower shall specify the term of such Loan (the
"Maturity Period" of each such Loan) within the limitations set forth in the
chart below:
<TABLE>
<CAPTION>
Type of Loan Available Maturity Periods
------------ --------------------------
<S> <C>
AB Rate Loan Any number of days
as applicable Bank
may agree ("AB Rate
Maturity Period")
Euro-Rate Loan One, two, three, or six
months ("Euro-Rate Maturity
Period")
Money Market Rate Loan Any number of days not
exceeding 90 ("Money Market
Rate Maturity Period")
</TABLE>
(i) Each AB Rate Maturity Period, Euro-Rate Maturity Period or
Money Market Rate Maturity Period which would otherwise end after the
Expiration Date shall instead end on the Expiration Date;
(ii) Each AB Rate Maturity Period or Money Market Rate Maturity
Period or Euro-Rate Maturity Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day is after the Expiration Date in
which event, such Maturity Period shall end on the immediately
preceding Business Day;
(iii) Each Euro-Rate Maturity Period shall begin on a London
Business Day, and the duration of each Euro-Rate Maturity Period shall
be determined in accordance with the definition of the term "month"
herein;
(iv) Notwithstanding any other provision of this Agreement, the
Borrower may not fix a Maturity Period that would end after the
Expiration Date.
The principal amount of each Loan shall be due and payable on the last day
of the Maturity Period corresponding thereto (the "Maturity Date" therefor).
(c) Transactional Amounts. Every request for a Loan and every
prepayment of a Loan shall be in a principal amount such that, after giving
effect thereto, the principal amount of such Loan shall be as set forth in
the table below:
<TABLE>
<CAPTION>
Type of Loan Allowable Principal Amounts
------------ ---------------------------
<S> <C>
AB Rate Loan $500,000 plus an integral
multiple of $1,000
Money Market Rate Loan $500,000 plus an integral
multiple of $1,000
Euro-Rate Loan $1,000,000 plus an integral
multiple of $1,000
</TABLE>
(d) Interest After Maturity. After the principal amount of any Loan
shall have become due (by acceleration or otherwise), such Loan shall bear
interest for each day until paid (before and after judgment) at a rate per
annum (based on a year of 365 or 366 days, as the case may be) which shall
be 2% above the then-current Base Rate or Prime Rate of the applicable Bank,
such interest rate to change automatically from time to time effective as of
the effective date of each change in such Base Rate or Prime Rate.
(e) Euro-Rate Unascertainable; Impracticability. If
(i) on any date on which a Euro-Rate would otherwise be set the
applicable Bank shall have in good faith determined (which
determination shall be conclusive) that:
(A) adequate and reasonable means do not exist for
ascertaining such Euro-Rate; or
(B) a contingency has occurred which materially and
adversely affects the interbank eurodollar market; or
(C) the effective cost to such Bank of funding a proposed
Euro-Rate Loan from a Corresponding Source of Funds shall exceed
the Euro-Rate applicable to such Loan; or
(ii) at any time the applicable Bank shall have determined in
good faith (which determination shall be conclusive) that the making,
maintenance or funding of any Euro-Rate Loan has been made
impracticable or unlawful by compliance by such Bank or a Notional
Euro-Rate Funding Office of such Bank in good faith with any Law or
guideline or interpretation or administration thereof by any Official
Body charged with the interpretation or administration thereof or with
any request or directive of any such Official Body (whether or not
having the force of law);
then, and in any such event, such Bank shall notify the Borrower of the
Bank's determination. Upon such date as shall be specified in such notice
(which shall not be earlier than the date such notice is given to the
Borrower) the obligation of such Bank to allow the Borrower to select the
Euro-Rate Option shall be suspended until such Bank shall have later
notified the Borrower of its determination (which determination shall be
presumed correct) that the circumstances giving rise to such previous
determination no longer exist.
If a Bank notifies the Borrower of a determination under subsection
(ii) of this Section 2.05(e), any Euro-Rate Loans then outstanding shall be
due and payable on the date specified in such notice. Absent contrary notice
from the Borrower by 12:00 o'clock Noon, Pittsburgh time, on such specified
date, the Borrower shall be deemed to have given such Bank notice at such
time pursuant to Section 2.03(a) hereof to the effect that the Borrower
requests a Loan hereunder at the Money Market Rate, if available and if not,
at the AB Rate Option in principal amount equal to the principal amount
becoming due and payable pursuant to the preceding sentence.
If at the time a Bank makes a determination under this Section 2.05(e)
and the Borrower has previously notified such Bank that it wishes the Bank
to make a Euro-Rate Loan but such Loan has not yet been made, such
notification shall be deemed to request the making of an AB Rate Loan
instead of a Euro-Rate Loan.
2.06. Prepayments. Subject to Section 2.09(b) hereof, the Borrower
shall have the right at its option from time to time to prepay any Loan in
whole or in part upon at least: (i) one Business Day's prior written notice
to the applicable Bank in the case of any AB Rate Loan or Money Market Rate
Loan, provided, however that any prepayment of any AB Rate Loan or Money
Market Rate Loan shall be in a minimum principal amount of $500,000; and
(ii) five Business Days' prior written notice to the applicable Bank in the
case of any Euro-Rate Loan; provided, however that any prepayment of any
Loan referenced in this clause (ii) shall be in a minimum principal amount
of $1,000,000. Whenever the Borrower desires to prepay any part of any Loan,
it shall provide Standard Notice to the applicable Bank setting forth the
following information:
(a) The date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(b) The Maturity Date, principal amount of, and interest rate
Option applicable to, the Loan to be prepaid; and
(c) The principal amount to be prepaid.
Standard Notice having been so provided, and on the date specified in such
notice the principal amount of the Loan specified in such notice, together
with interest on such principal amount to such date, shall be due and
payable.
2.07. Interest Payment Dates. Interest on each AB Rate Loan and each
Money Market Rate Loan shall be due and payable on the Maturity Date
thereof. Interest on each Euro-Rate Loan shall be due and payable on the
Maturity Date thereof and, if the corresponding Euro-Rate Maturity Period is
longer than three months, also every third month during such Maturity
Period. After maturity of any Loan (by acceleration or otherwise), interest
on such Loan shall be due and payable on demand.
2.08. Payments. All payments and prepayments to be made in respect of
principal, interest, Commitment Fees or other amounts due from the Borrower
hereunder or under any Note shall be payable at 12:00 o'clock Noon,
Pittsburgh time, on the day when due without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and an action
therefore shall accrue on and as of the expiration of any grace period.
Unless otherwise agreed by the applicable Bank, such payments shall be made
to the Bank at its respective Office in Dollars in funds immediately
available at such Office. Such payments shall be made without setoff,
counterclaim or other deduction of any nature, except only that the
principal amount of any Loan then due from the Borrower to the Bank shall
automatically be set-off against the principal amount of any Loan then due
from the Bank to the Borrower hereunder. To the extent permitted by law,
after there shall have become due (by acceleration or otherwise) interest,
Commitment Fees or any other amounts due from the Borrower hereunder or
under any Note (excluding overdue principal, which shall bear interest as
described in Section 2.05(d) hereof, but including interest payable under
this Section 2.08), such amounts shall bear interest for each day until paid
(before and after judgment), payable on demand, at a rate per annum (based
on a year of 365 or 366 days, as the case may be) which shall be 2% above
the then-current Base Rate or Prime Rate, such interest rate to change
automatically from time to time effective as of the effective date of each
change in the Base Rate or Prime Rate.
2.09. Additional Compensation in Certain Circumstances.
(a) Increased Costs or Reduced Return Resulting From Taxes. Reserves;
Capital Adequacy Requirements; Expenses. etc. If any now existing or
hereafter adopted Law or guideline or interpretation or application thereof
by any Official Body charged with the interpretation or administration
thereof or compliance with any request or directive of any Official Body
(whether or not having the force of law) hereafter:
(i) subjects a Bank or any Notional Euro-Rate Funding Office of
either Bank to any tax or changes the basis of taxation with respect
to this Agreement, the Notes, the Loans or payments by the Borrower of
principal, interest, Commitment Fees or other amounts due from the
Borrower hereunder or under the Notes (except for taxes on the overall
net income of each Bank or such Notional Euro-Rate Funding Office
imposed by the jurisdiction in which each Bank's respective principal
office or Notional Euro-Rate Funding Office is located),
(ii) imposes, modifies or deems applicable any reserve, special
deposit or similar requirement against assets held by, credit extended
by, deposits with or for the account of, or other acquisition of funds
by, a Bank or its respective Notional Euro-Rate Funding Office (other
than requirements expressly included herein in the determination of
the Euro-Rate hereunder),
(iii) imposes, modifies or deems applicable any capital adequacy
or similar requirement (A) against assets (funded or contingent) of,
or credits or Commitments to extend credit by, a Bank or its
respective Notional Euro-Rate Funding Office or holding company, or
(B) otherwise applicable to the obligations of a Bank or its
respective Notional Euro-Rate Funding Office under this Agreement, or
(iv) imposes upon a Bank or its respective Notional Euro-Rate
Funding Office any other condition or expense with respect to this
Agreement, the Note held by each Bank or its making, maintenance or
funding of any Loans,
and the result of any of the foregoing is to increase the cost to, reduce
the income receivable by, or impose any expense (including loss of margin)
upon a Bank or its respective Notional Euro-Rate Funding Office with respect
to this Agreement, its Note or the making, maintenance or funding of any
part of any Loan or, in the case of any capital adequacy or similar
requirement, to have the effect of reducing the return on such Bank's or
holding company's capital, of such Bank or the Bank holding company which is
the parent of such Bank (taking into account the Bank's policies with
respect to capital adequacy) by an amount which such Bank deems to be
material (such Bank being deemed for this purpose to have made, maintained
or funded each Euro-Rate Loan from a Corresponding Source of Funds), such
Bank shall from time to time notify the Borrower of the amount determined
(using any averaging and attribution methods) by the Bank in good faith
(which determination shall be conclusive) to be necessary to compensate the
Bank or its Notional Euro-Rate Funding Office for such increase in cost,
reduction in income or additional expense reasonably allocable to the
making, maintenance or funding of Loans hereunder. Such amount shall be due
and payable by the Borrower to such Bank thirty (30) days after such notice
is given.
(b) Indemnity. In addition to the compensation required by subsection
(a) of this Section 2.09, the Borrower shall indemnify each Bank
respectively against any loss or expense (including loss of margin) which
the applicable Bank has sustained or incurred as a consequence of any
(i) payment or prepayment of any part of any Euro-Rate Loan or
Money Market Rate Loan on a day other than the last day of the
corresponding Maturity Period (whether or not such payment or
prepayment is mandatory and whether or not such payment or prepayment
is then due),
(ii) attempt by the Borrower to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any notice stated
herein to be irrevocable (such Bank having in its discretion the
options (A) to give effect to any such attempted revocation and obtain
indemnity under this Section 2.09(b) or (B) to treat such attempted
revocation as having no force or effect, as if never made), or
(iii) default by the Borrower in the performance or observance
of any covenant or condition contained in this Agreement or the Notes,
including without limitation any failure of the Borrower to pay when
due (by acceleration or otherwise) any principal, interest, Commitment
Fees or any other amount due hereunder or under the Notes, or
(iv) claims, demands, losses or expenses incurred by or asserted
against either Bank in connection with the Borrower's use of the
proceeds of any Loan and/or either Bank's role as a lender hereunder
except to the extent caused by such Bank's gross negligence or willful
misconduct.
If a Bank sustains or incurs any such loss or expense it shall from time to
time notify the Borrower of the amount determined by such Bank in good faith
(which determination shall be conclusive) to be necessary to indemnify such
Bank for such loss or expense (the Bank being deemed for this purpose to
have made, maintained or funded each Euro-Rate Loan from a Corresponding
Source of Funds). Such amount shall be due and payable by the Borrower to
such Bank ten Business Days after such notice is given. Notwithstanding the
provisions of this Section 2.09(b), the Borrower shall not be required to
indemnify such Bank as a consequence of any of the events specified in
clauses (i) through (iv) of this Section 2.09(b) if the sole cause of such
event is an act of God, civil commotion, governmental action, fire,
explosion, strike or other industrial disturbance, equipment malfunction or
any other cause that is beyond the Borrower's reasonable control.
2.10. Funding by Branch, Subsidiary or Affiliate.
(a) Notional Funding. Each Bank shall have the right from time to
time, prospectively or retrospectively, without notice to the Borrower, to
deem any branch, subsidiary or affiliate of such Bank to have made,
maintained or funded any of the Bank's Euro-Rate Loans at any time. Any
branch, subsidiary or affiliate so deemed shall be known as a "Notional
Euro-Rate Funding Office." Each Bank shall deem any of its Euro-Rate Loans
or the funding therefor to have been transferred to a different Notional
Euro-Rate Funding Office if such transfer would avoid or cure an event or
condition described in Section 2.05(e)(ii) hereof or would lessen
compensation payable by the Borrower under Section 2.09(a) hereof, and if
such Bank determines in its sole discretion that such transfer would be
practicable and would not have a Material Adverse Effect on such Loans, such
Bank or its Notional Euro-Rate Funding Office (it being assumed for purposes
of such determination that each such Euro-Rate Loan is actually made or
maintained by or funded through the corresponding Notional Euro-Rate Funding
Office). Notional Euro-Rate Funding Offices may be selected by each Bank
respectively without regard to each Bank's actual methods of making,
maintaining or funding Loans or any sources of funding actually used by or
available to such Bank.
(b) Actual Funding. Each Bank shall have the right from time to time
to make or maintain any Euro-Rate Loan by arranging for a branch, subsidiary
or affiliate of such Bank to make or maintain such Loan. Each Bank shall
have the right to hold any applicable Note payable to its order for the
benefit and account of such branch, subsidiary or affiliate. If a Bank
causes a branch, subsidiary or affiliate to make or maintain any Loan
hereunder, all terms and conditions of this Agreement shall, except where
the context clearly requires otherwise, be applicable to such Loan to the
same extent as if such Loan were made or maintained by such Bank.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants that:
3.01. Organization and Qualification. The Borrower and each of its
Subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of the their respective jurisdictions of
incorporation; each of the Borrower and its Subsidiaries has the power and
authority to own its properties as assets, and to carry on its business as
presently conducted and is qualified to do business in those jurisdictions
in which its ownership of property or the nature of its business activities
is such that failure to receive or retain such qualification would have a
Material Adverse Effect upon the business, operations or condition
(financial or otherwise) of the enterprise comprised of the Borrower and its
Consolidated Subsidiaries taken as a whole. A list of the Borrower's
Subsidiaries setting forth their respective jurisdictions of incorporation
is set forth in Schedule 1 hereto.
3.02. Corporate Power and Authorization. The Borrower has corporate
power and authority to make and carry out this Agreement, to make the
borrowings provided for herein, to execute and deliver the Notes and to
perform its obligations hereunder and under the Notes; all such action has
been duly authorized by all necessary corporate proceedings on its part.
3.03. Financial Statements. The Borrower has furnished to each Bank
copies of the audited consolidated financial statements of the Borrower and
its Consolidated Subsidiaries including a consolidated balance sheet and
related statements of income and retained earnings for the fiscal year
ending March 30, 1996. Such financial statements fairly present the
financial position of the Borrower and its Consolidated Subsidiaries as of
the date of such reports and the consolidated results of their operations
and cash flows for the fiscal periods then ended, in conformity with
generally accepted accounting principles applied on a consistent basis and
have been examined and reported upon by Arthur Andersen & Co., independent,
certified public accountants.
3.04. Litigation. Except as disclosed to each Bank in writing prior
to the Closing Date or otherwise disclosed in the financial statements
delivered to Bank pursuant to Section 3.03 hereof, there is no litigation or
governmental proceeding by or against the Borrower pending or, to its
knowledge, threatened, which in the reasonable judgment of the Borrower,
involves or could involve any Material Adverse Effect on the business,
operations, prospects or condition (financial or otherwise) of the
enterprise represented by the Borrower and its Consolidated Subsidiaries
taken as a whole.
3.05. No Adverse Changes. Since March 30, 1996 there has been no
material adverse change in the business, operations, prospects or condition
(financial or otherwise) of the enterprise represented by the Borrower and
its Consolidated Subsidiaries taken as a whole.
3.06. No Conflicting Laws or Agreements; Consents and Approvals. (a)
Neither the execution and delivery of this Agreement, the consummation of
the transactions herein contemplated nor compliance with the terms and
provisions hereof or of the Notes will conflict with or result in a breach
of any of the terms, conditions or provisions of the articles of
incorporation or by-laws of the Borrower or of any Law or of any agreement
or instrument to which the Borrower is a party or by which it is bound or to
which it is subject, or constitute a default thereunder or result in the
creation or imposition of any Lien of any nature whatsoever upon any of the
property of the Borrower pursuant to the terms of any such agreement or
instrument.
(b) No authorization, consent, approval, license, exemption or other
action by, and no registration, qualification, designation, declaration or
filing with, any Official Body is or will be necessary or advisable in
connection with execution and delivery of this Agreement, of the Notes,
consummation of the transactions herein or therein contemplated, performance
of or compliance with the terms and conditions hereof or thereof.
3.07. Execution and Binding Effect. This Agreement has been duly and
validly executed and delivered by the Borrower. This Agreement constitutes,
and the Notes when duly executed and delivered by the Borrower pursuant to
the provisions hereof will constitute, legal, valid and binding obligations
of the Borrower, enforceable in accordance with the terms thereof except, as
to the enforcement of remedies, for limitations imposed by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally including, without limitation,
Laws with respect to fraudulent conveyance, or by Laws limiting the right of
specific performance or by general principles of equity.
3.08. ERISA Matters. (i) Each Plan has been maintained, in all
material respects, in accordance with its terms and with all provisions of
ERISA applicable thereto, (ii) no Reportable Event has occurred and is
continuing with respect to any Plan and (iii) the Borrower has not incurred
any liability to PBGC.
3.09. Taxes. All tax returns required to be filed by the Borrower
have been properly prepared, executed and filed. All taxes, assessments,
fees and other governmental charges upon the Borrower or upon its
properties, income or sales which are due and payable have been paid. The
reserves and provisions for taxes on the books of the Borrower are adequate
for all open years and for its current fiscal period.
3.10. Regulation U. The Borrower will make no borrowing hereunder for
the purpose of buying or carrying any "margin stock" as such term is used in
Regulation U of the Board of Governors of the Federal Reserve System. The
Borrower is not engaged in the business of extending credit to others for
the purposes of buying or carrying any "margin stock."
3.11. Environmental Matters. The Borrower and each Subsidiary and
their respective Environmental Affiliates is now in material compliance with
all applicable Environmental Laws. There are, to the Borrower's knowledge
after due inquiry, no circumstances that may prevent or interfere with such
material compliance in the future. The Borrower and each Subsidiary and
their respective Environmental Affiliates have all material Environmental
Approvals necessary or desirable for the ownership and operation of their
respective properties, facilities and businesses as presently owned and
operated and as presently proposed to be owned and operated and for the
manufacture, use, production and distribution of their respective products
and equipment as presently done and as presently proposed to be done. Except
as disclosed in Schedule 2 hereto, there is no Environmental Claim pending
or threatened, and, to the Borrower's knowledge, there are no past or
present acts, omissions, events or circumstances that could form the basis
of any Environmental Claim, against the Borrower or any Subsidiary. To the
best of the Borrower's knowledge, no facility or property now or previously
owned, operated or leased by the Borrower or any Subsidiary or any of its
respective Environmental Affiliates is an Environmental Cleanup Site. To the
best of the Borrower's knowledge, except as set forth on Schedule 2, neither
the Borrower nor any Subsidiary nor any of its respective Environmental
Affiliates has directly transported or directly arranged for the
transportation of any Environmental Concern Materials to any Environmental
Cleanup Site. No Lien exists, and, to the best of the Borrower's knowledge,
except as set forth on Schedule 2, no condition exists which could result in
the filing of a Lien, against any property of the Borrower or any Subsidiary
or any of its respective Environmental Affiliates, under any Environmental
Law.
3.12. Patents. Licenses Franchises. The Borrower and each Subsidiary
own or possess all the patents, trademarks, service marks, trade names,
copyrights, licenses, franchises, permits and rights with respect to the
foregoing necessary to own and operate their respective properties and to
carry on their respective businesses as presently conducted and presently
planned to be conducted without conflict with the rights of others.
3.13. Investment Company: Public Utility Holding Company. The
Borrower: (a) is not an investment company within the meaning of the
Investment Company Act of 1940; and (b) is exempt from registration under
the Public Utility Holding Company Act of 1935.
3.14. Accurate and Complete Disclosure. To the best of the Borrower's
knowledge, the Borrower has disclosed to each Bank in writing every fact
which materially and adversely affects, or which so far as the Borrower can
reasonably foresee would materially and adversely affect, the business,
operations, prospects or condition (financial or otherwise) of the Borrower
or the ability of the Borrower to perform its obligations under this
Agreement and the Notes.
3.15. Absence of Violations. The Borrower is not in violation of any
charter document, corporate minute or resolution, any instrument or
agreement, in each case binding on it or affecting its property, or any
requirement of law, in a manner which could have a materially adverse
effect, including without limitation all applicable federal and state tax
laws, ERISA and environmental laws. For purposes hereof materially adverse
effect shall mean any "materially adverse effect" on the financial condition
or business operations of the Borrower or material impairment of the ability
of the Borrower in perform its obligations hereunder or under any of the
loan documents.
ARTICLE IV
CONDITIONS OF LENDING
---------------------
The obligations of each Bank to make any Loan hereunder are subject to the
accuracy as of the date hereof of the representations and warranties herein
contained, to the performance by the Borrower of its obligations to be
performed hereunder on or before the date of such Loans and to the
satisfaction of the following further conditions:
4.01. Representations and Warranties: Events of Default and Potential
Defaults. The representations and warranties contained in Article III
hereof shall be true on and as of the date of each Loan hereunder with the
same effect as though made on and as of each such date, and on the date of
each Loan hereunder no Event of Default and no Potential Default shall have
occurred and be continuing or exist or shall occur or exist after giving
effect to the Loans to be made on such date. Failure of a Bank to receive
notice from the Borrower to the contrary before any Loan is made or deemed
made hereunder shall constitute a representation and warranty by the
Borrower that (i) the representations and warranties contained in Article
III hereof are true and correct on and as of the date of such Loan with the
same effect as though made on and as of such date and (ii) on the date of
such Loan no Event of Default or Potential Default has occurred and is
continuing or exists or will occur or exist after giving effect to such
Loan.
4.02. Proceedings and Incumbency. There shall have been delivered to
each Bank a certificate in form and substance satisfactory to each Bank
dated the Closing Date and signed on behalf of the Borrower by the Secretary
or an Assistant Secretary of the Borrower, certifying as to (a) true copies
of all corporate action taken by the Borrower relative to this Agreement and
the Notes, including but not limited to that described in Section 3.02
hereof and (b) the names, true signatures and incumbency of the officer or
officers of the Borrower authorized to execute and deliver this Agreement
and the Notes. Each Bank may conclusively rely on such certificates unless
and until a later certificate revising the prior certificates have been
furnished to the Banks.
4.03. Opinion of Counsel. There shall have been delivered to each
Bank a written opinion addressed to both Banks, dated the Closing Date, of
Lisa Lopez, General Counsel of the Borrower, in form and substance
satisfactory to both Banks, as to the matters referred to in Sections 3.01,
3.02, 3.04, 3.06 and 3.07 hereof (except that as to the matters referred to
in Sections 3.04 and 3.06 such opinion may be limited to the knowledge of
such counsel).
4.04. Details. Proceedings and Documents. All legal details and
proceedings in connection with the transactions contemplated by this
Agreement shall be satisfactory to both Banks, and each Bank shall have
received all such counterpart originals or certified or other copies of such
documents and proceedings in connection with such transactions, in form and
substance satisfactory to it, as each Bank may from time to time reasonably
request.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
The Borrower hereby covenants to each Bank as follows:
5.01. Reporting and Information Requirements. The Borrower shall
deliver to each Bank:
(a) Annual Reports. As soon as practicable and in any event within
100 days after the close of each fiscal year of the Borrower, the Borrower
shall furnish to each Bank, audited consolidated statements of income,
retained earnings and cash flows of the Borrower and its Consolidated
Subsidiaries for such fiscal year and a consolidated audited balance sheet
of the Borrower and its Consolidated Subsidiaries as of the close of such
fiscal year, and notes to each, all in reasonable detail and in accordance
with GAAP, setting forth in comparative form the corresponding figures for
the preceding fiscal year, with such statements and balance sheets to be
certified by independent public accountants of recognized national standing
selected by the Borrower and acceptable to each Bank, the certificate or
report of such accountants shall be free of exceptions or qualifications not
reasonably acceptable to each Bank.
(b) Quarterly Statements. Within 60 days after the end of the first,
second and third quarterly accounting periods in each fiscal year of the
Borrower, copies of the unaudited consolidated balance sheets of the
Borrower and its Consolidated Subsidiaries as of the end of such accounting
period and of the consolidated income statements of the Borrower and its
Consolidated Subsidiaries for the elapsed portion of the fiscal year ended
with the last day of such accounting period, all in reasonable detail
subject to year-end audit adjustments and certified by the principal
financial officer of the Borrower to have been prepared in accordance with
generally accepted accounting principles consistently applied by the
Borrower except as explained in such certificate.
(c) Compliance Certificates. Within 100 days after the end of each
fiscal year of the Borrower and within 60 days after the end of each of the
first three quarters of each fiscal year, the Borrower shall deliver to each
Bank, a certificate dated as of the end of such fiscal year or quarter,
signed on behalf of the Borrower by a principal financial officer, (i)
stating that as of the date thereof no Event of Default or Potential Default
has occurred and is continuing or exists, or if an Event of Default or
Potential Default has occurred and is continuing or exists, specifying in
detail the nature and period of existence thereof and any action with
respect thereto taken or contemplated to be taken by the Borrower, (ii)
stating in reasonable detail the information and calculations necessary to
establish compliance with the provisions of Article VI hereof, and (iii)
stating that the signer has reviewed this Agreement and that such
certificate is based on an examination made by or under the supervision of
the sinner sufficient to assure that such certificate is accurate.
(d) Further Information. The Borrower will promptly furnish to each
Bank such other information and in such form as each Bank may reasonably
request, with a copy furnished thereof to the other Bank.
(e) Notice of Event of Default. Immediately upon becoming aware of
any Event of Default or Potential Default the Borrower shall give each Bank
notice thereof, together with a written statement of the president or a
principal financial officer of the Borrower setting forth the details
thereof and any action with respect thereto taken or contemplated to be
taken by the Borrower.
(f) Notice of Material Adverse Change. Promptly upon becoming aware
thereof, the Borrower shall give each Bank notice of any material adverse
change in the business, operations or condition (financial or otherwise) of
the Borrower or of the enterprise represented by the Borrower and its
Subsidiaries taken as a whole.
(g) Notice of Material Proceedings. Promptly upon becoming aware
thereof the Borrower shall give each Bank notice of the commencement,
existence or threat of any proceeding or a material change in any existing
material proceeding by or before any Official Body against or affecting the
Borrower which, if adversely decided, would have a Material Adverse Effect
on the business, operations, prospects or condition (financial or otherwise)
of the Borrower or on the ability of the Borrower to perform its obligations
under this Agreement or the Notes.
(h) Notice of Pension-Related Events. Promptly after the Borrower,
any Controlled Group Member or any administrator of a Plan:
(i) has knowledge of the occurrence of a Reportable Event with
respect to a Plan or that action has been or will be taken by any
Person to terminate any Plan in accordance with Section 4041 of ERISA
or otherwise, or
(ii) files a notice of intent to terminate a Plan with the
Internal Revenue Service or the PBGC; or files with the Internal
Revenue Service a request pursuant to Section 412(d) of the Code for a
variance from the minimum funding standard for a Plan; or files a
return with the Internal Revenue Service with respect to the tax
imposed under Section 4971(a) of the Code for failure to meet the
minimum funding standards established under Section 412 of the Code
for a Plan,
the Borrower will furnish to each Bank a copy of any notice, return or other
written materials applicable or required to be filed by the Borrower in
respect thereof; the most recent Annual Report (Form 5500 Series) and
attachments thereto for the Plan; the most recent actuarial report for the
Plan; and a written statement of the President or chief financial officer of
the Borrower describing the event or the action taken and the reasons
therefor.
(i) Visitation. The Borrower shall permit such Persons as each
Bank may designate to visit and inspect any of the properties of the
Borrower, to discuss its affairs with its financial management and
accountants, and provide such other information relating to the
business and financial condition of the Borrower at such times as each
Bank may reasonably request and the Borrower may reasonably agree. The
Borrower hereby authorizes its financial management to discuss with
each Bank the affairs of the Borrower.
5.02. Preservation of Existence and Franchises. The Borrower shall
and shall cause each of its Subsidiaries to maintain its corporate
existence, rights and franchises in full force and effect in its
jurisdiction of incorporation. The Borrower shall and shall cause each of
its Subsidiaries to qualify and remain qualified as a foreign corporation in
each jurisdiction in which failure to receive or retain such qualification
would have a Material Adverse Effect on the business, operations or
financial condition of the Borrower or such Subsidiary.
5.03. Insurance. The Borrower shall maintain with financially sound
and reputable insurers insurance with respect to its properties and business
and against such liabilities, casualties and contingencies and of such types
and in such amounts as is customary in the case of corporations engaged in
the same or a similar business or having similar properties similarly
situated.
5.04. Maintenance of Properties. The Borrower shall maintain or cause
to be maintained in good repair, working order and condition the properties
now or hereafter owned, leased or otherwise possessed by and used or useful
in its business and shall make or cause to be made all needful and proper
repairs, renewals, replacements and improvements thereto so that the
business carried on in connection therewith may be properly conducted at all
times, provided, however, that the foregoing shall not impose on the
Borrower any obligation in respect of any property leased by the Borrower in
addition to the Borrower's obligations under the applicable document
creating the Borrower's lease or tenancy.
5.05. Payment of Taxes and Other Potential Charges and Priority
Claims: Payment of Other Current Liabilities. The Borrower shall and shall
cause each of its Subsidiaries to pay or discharge:
(a) on or prior to the date on which penalties attach thereto, all
taxes, assessments and other governmental charges or levies imposed upon it
or any of its properties or income (including such as may arise under
Section 4062, Section 4063 or Section 4064 of ERISA, or any similar
provision of law);
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like
Persons which, if unpaid, might result in the creation of a Lien upon any
such property; and
(c) on or prior to the date when due, all other lawful claims which,
if unpaid, might result in the creation of a Lien upon any such property
(other than Liens not forbidden by Section 6.06 hereof) or which, if unpaid,
might give rise to a claim entitled to priority over general creditors of
the Borrower in a case under Title 11 (Bankruptcy) of the United States
Code, as amended, or in any insolvency proceeding or dissolution or
winding-up involving the Borrower or such Subsidiary;
provided that, unless and until foreclosure, distraint, levy, sale or
similar proceedings shall have been commenced, the Borrower need not pay or
discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof is contested in good faith and by appropriate proceedings
diligently conducted and so long as such reserves or other appropriate
provisions as may be required by GAAP shall have been made therefor and so
long as such failure to pay or discharge does not have a Material Adverse
Effect on the business, operations or financial condition of the Borrower
and its Subsidiaries, taken as a whole.
5.06. Financial Accounting Practices. The Borrower shall and shall
cause each of its Subsidiaries to make and keep books, records and accounts
which, in reasonable detail, accurately and fairly reflect its transactions
and dispositions of its assets and maintain a system of internal accounting
controls sufficient to provide reasonable assurances that transactions are
recorded as necessary to permit preparation of financial statements required
under Section 5.01 hereof in conformity with GAAP and to maintain
accountability for assets.
5.07. Compliance with Laws. The Borrower shall and shall cause each
of its Subsidiaries to comply with all applicable Laws (including but not
limited to ERISA, the Code and any applicable product safety or
Environmental Law) in all respects; provided that the Borrower or any
Subsidiary shall not be deemed to be in violation of this Section 5.07 as a
result of any failures to comply which would not result in fines, penalties,
injunctive relief or other civil or criminal liabilities which, in the
aggregate, would materially adversely affect the business, operations,
prospects or condition (financial or otherwise) of the enterprise
represented by the Borrower and its Consolidated Subsidiaries taken as a
whole or the ability of the Borrower to perform its obligations under this
Agreement or the Notes.
5.08. Use of Proceeds. The Borrower shall use the proceeds of all
Loans hereunder for its general corporate purposes.
5.09. Continuation Of and Change In Business. The Borrower and its
Subsidiaries shall continue to engage in the business and activities
substantially as currently engaged in and the Borrower shall not engage in
any other unrelated businesses or activities to any substantial degree.
ARTICLE VI
NEGATIVE COVENANTS
------------------
The Borrower covenants to each Bank as follows:
6.01. Financial Maintenance Covenants.
(a) Tangible Net Worth. The Borrower shall maintain Consolidated
Tangible Net Worth which is at all times equal to $160,000,000 increased
yearly on a cumulative basis by an amount equal to fifty percent (50%) of
the Consolidated Net Income for the preceding fiscal year beginning with the
fiscal year ending 1997 provided, however, that if in any year Consolidated
Net Income constitutes a loss, there shall be no deduction or adjustment to
the foregoing reflecting such loss.
(b) Debt/Worth. The ratio of Consolidated Total Indebtedness to
Consolidated Tangible Net Worth shall at no time exceed .5 to 1.
(c) Operating Cash Flow/Total Debt Service. The ratio of Operating
Cash Flow to Total Debt Service shall at no time be less than 2 to 1,
provided, however, that for the purposes of this section 6.01 (c): (i).
Operating Cash Flow shall mean Operating Cash Flow of the Borrower and its
Consolidated Subsidiaries for the most recent and three prior fiscal
quarters; and (ii) Total Debt Service shall mean Total Debt Service of the
Borrower and its Consolidated Subsidiaries for the most recent and three
prior fiscal quarters.
6.02. Merger. The Borrower shall not, and shall not permit any
Subsidiary to, merge with or into or consolidate with any other Person, or
agree to do any of the foregoing, except that if no Event of Default or
Potential Event of Default shall occur and be continuing or shall exist at
the time of such merger or consolidation or immediately thereafter and after
giving effect thereto:
(a) a Subsidiary may merge with or into or consolidate with any other
Subsidiary;
(b) the Borrower may merge with any other corporation, including a
Subsidiary, if the Borrower shall be the surviving corporation;
(c) if the Bank's consent is obtained, the Borrower may merge into or
consolidate with any other corporation if the corporation into which the
Borrower is merged or which is formed by such consolidation shall expressly
assume all obligations of the Borrower under this Agreement.
6.03. Dispositions of Assets. The Borrower shall not, and shall not
permit any Subsidiary to sell, convey, assign, lease, abandon or otherwise
transfer or dispose of, voluntarily or involuntarily (any of the foregoing
being referred to in this Section 6.03 as a "transaction" and any series of
related transactions constituting but a single transaction), any of its
properties or Assets, tangible or intangible (including but not limited to
sale, assignment, discount or other disposition of accounts, contract
rights, chattel paper or general intangibles with or without recourse),
except:
(a) transactions in the ordinary course of business involving current
assets or leases of warehouse space;
(b) sales, conveyances, assignments or other transfers or dispositions
in immediate exchange for cash or tangible assets, provided that any such
sales, conveyances or transfers shall not individually, or in the aggregate,
exceed $15,000,000 in any fiscal Year; or
(c) dispositions of equipment or other property which is obsolete or
no longer used or useful in the conduct of the business of the Borrower.
6.04 Liens. The Borrower shall not, and shall not permit any
Subsidiary to at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or
hereafter acquired or agree or become liable to do so, except:
(a) Liens existing on the date hereof (and extension/s, renewal and
replacement Liens upon the same property, provided the amount secured by
each Lien constituting such an extension, renewal or replacement Lien shall
not exceed the amount secured by the Lien theretofore existing);
(b) Liens arising from taxes, assessments, charges, levies or claims
described in Section 5.05 hereof that are not yet due or that remain payable
without penalty or to the extent permitted to remain unpaid under the
provision of such Section 5.05;
(c) Liens on property securing all or part of the purchase price
thereof to the Borrower and Liens (whether or not assumed) existing in
property at the time of purchase thereof by the Borrower (and extension,
renewal and replacement Liens upon the same property), provided -
(i) each such Lien is confined solely to the property so
purchased, improvements thereto and proceeds thereof, and
(ii) the aggregate amount of the obligations secured by all such
Liens on any particular property at any time purchased by the
Borrower, as applicable, shall not exceed 100% (if such obligations
are not subject when created to United States income taxes) or 90% (in
all other cases) of the lesser of the fair market value of such
property at such time or the actual purchase price of such property.
(d) Zoning restrictions, easements, minor restrictions on the use of
real property, minor irregularities in title thereto and other minor Liens
that do not in the aggregate materially detract from the value of a property
or Asset to, or materially impair its use in the business of, the Borrower.
6.05. Transactions With Affiliates. The Borrower shall not, and shall
not permit any Subsidiary to, enter into or carry out any transaction with
(including, without limitation, purchase or lease property or services to,
loan or advance to or enter into, suffer to remain in existence or amend any
contract, agreement or arrangement with) any Affiliate of the Borrower, or
directly or indirectly to do any of the foregoing, except transactions with
Affiliates in good faith and on terms no less favorable to the Borrower or
any Subsidiary than those that could have been obtained in a comparable
transaction on an arm's length basis from an unrelated Person.
6.06. Limitation or Other Restrictions on Dividends by Subsidiaries
etc. The Borrower shall not permit any Subsidiary to be or become subject
to any restriction of any nature (whether arising by operation of Law, by
agreement, by its articles of incorporation, by-laws or other constituent
documents of such Subsidiary, or otherwise) on the right of such Subsidiary
from time to time to: (i) declare and pay dividends or other distributions
with respect to capital stock owned by the Borrower or any Subsidiary, (ii)
pay any indebtedness, obligations or liabilities from time to time owed to
the Borrower or any Subsidiary except legal restrictions of general
applicability under the corporation law under which such Subsidiary is
incorporated, and fraudulent conveyance or similar laws or general
applicability for the benefit of creditors of such Subsidiary generally.
6.07. Loans and Investments. The Borrower shall not and shall not
permit any Subsidiary to, at any time make or suffer to remain outstanding
any loan or advance to, or purchase, acquire or own any stock, bonds, notes
or securities of, or any partnership interest (whether general or limited)
in, or any other interest in, or make any capital contribution to, any other
Person, or agree, become or remain liable to do any of the foregoing,
except:
(a) trade credit extended, and loans and advances extended to
subcontractors or suppliers, under usual and customary terms in the ordinary
course of business;
(b) advances to employees to meet expenses incurred by such employees
in the ordinary course of business, advances to employees against
commissions or bonuses paid in accordance with the terms of any formal
commission/bonus plan, or to meet expenses incurred by such employees in the
ordinary course of such business, or to meet education and relocation
related expenses incurred in the Borrower's interest;
(c) loans from a Subsidiary to the Borrower or to another Subsidiary
or loans from the Borrower to a Subsidiary:
(d) investments in the capital stock of a Subsidiary owned on the date
hereof;
(e) investments permitted by the Borrower's Investment Management
Policy for cash investments, as such is presently in effect and disclosed to
the Banks;
(f) money market or mutual fund investments from time acquired or
maintained by the Borrower if acquired for investment in the ordinary course
of business;
(g) investments in an amount at any time outstanding not to exceed
$10,000,000 with respect to any one transaction and $25,000,000 in the
aggregate, provided that no Potential Default or Event of Default has
occurred and is continuing or would occur after giving effect thereto and,
provided such investments are in Persons whose activities are within the
scope of the Borrower's activities at the time of the particular investment.
6.08. Sale-Leasebacks. The Borrower shall not, and shall not permit
any Subsidiary to, at any time enter into or suffer to remain in effect any
transaction to which the Borrower or such Subsidiary is a party involving
the sale, transfer or other disposition by the Borrower or any Subsidiary of
any property (now owned or hereafter acquired), with a view directly or
indirectly to the leasing back of any part of the same property or any other
property used for the same or a similar purpose or purposes in an aggregate
amount in excess of $20,000,000 at any time outstanding.
6.09. Business. The Borrower will not and will not permit any
Subsidiary to engage (directly or indirectly) in any businesses other than
the businesses in which the Borrower and its Subsidiaries are engaged on the
Closing Date and any businesses reasonably related thereto, including any
investment in blood centers.
6.10. Disposition of Stock In and Indebtedness of Subsidiaries. The
Borrower will not directly or indirectly sell or otherwise dispose of, or
part with control of, any shares of capital stock of a Subsidiary (or any
Indebtedness of a Subsidiary) and the Borrower will not permit any
Subsidiary directly or indirectly to issue, sell or otherwise dispose of, or
part with control of, any shares of capital stock of itself or another
Subsidiary (or any Indebtedness of itself or another Subsidiary) (an
"indirect" disposition or issuance of shares of capital stock shall include
but not be limited to disposition or issuance of warrants, rights or options
for, or securities convertible into, such shares), except:
(i) a Subsidiary may issue and dispose of shares of its own
capital stock pursuant to a stock dividend or recapitalization not
forbidden by Section 6.02 hereof; and
(ii) the Borrower may sell or otherwise dispose of the capital
stock and Indebtedness of a Subsidiary in a single transaction if the
capital stock or Indebtedness to be sold or disposed of does not
represent more than 20% of the Consolidated Net Worth of the Borrower
and its Consolidated Subsidiaries and as long as no Event of Default
or Potential Default exists at the time or after the occurrence of the
transaction.
ARTICLE VII
EVENTS OF DEFAULT
-----------------
7.01. Events of Default. If one or more of the following described
Events of Default shall occur, that is to say:
(a) The Borrower shall default in the payment when due of the
principal of any Loan;
(b) The Borrower shall default in the payment when due of any
interest, Commitment Fees, or any other fee or amount payable hereunder
which default shall continue for a period of five (5) days from the due date
thereof;
(c) The Borrower shall default in the observance, performance or
fulfillment of any covenant contained in Article VI hereof;
(d) The Borrower shall default (i) in any payment of principal of or
interest on any other obligation for borrowed money in principal amount of
$200,000 or more beyond any period of grace provided with respect thereto,
or (ii) in the performance of any other agreement, term or condition
contained in any such agreement under which any such obligation in principal
amount of $100,000 or more is created, if the effect of such default is to
cause or permit the holder or holders of such obligation (or trustee on
behalf of such holder or holders) to cause such obligation to become due
prior to its stated maturity;
(e) One or more judgments for the payment of money shall have been
entered against the Borrower which judgment/s exceed $100,000 in the
aggregate and such judgment/s shall remain undischarged or uncontested or
appealed in good faith for a period of thirty (30) consecutive days;
(f) Any representation or warranty herein made by the Borrower, or any
certificate or financial statement furnished pursuant to the provisions
hereof, shall prove to have been false or misleading in any material respect
as of the time made or furnished;
(g) The Borrower shall default in the observance, performance or
fulfillment of any other covenant, condition or provision hereof and such
default shall not be remedied for a period of twenty (20) days after written
notice thereof to the Borrower from a Bank or the holder of any Note issued
hereunder;
(h) Any Controlled Group Member shall fail to pay when due any amount
which it shall have become liable to pay under Title IV of ERISA; or notice
of intent to terminate any Plan shall be filed under Title IV of ERISA by
any Controlled Group Member, any plan administrator or any combination of
the foregoing; or the PBGC shall institute proceedings under Title IV of
ERISA to terminate, to impose liability in respect of, or to cause a trustee
to be appointed to administer any Plan; or a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating that any
Plan must be terminated; or there shall occur a complete or partial
withdrawal from, followed by a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans by one
or more Controlled Group Members;
(i) A Change in Control shall occur;
(j) A decree or order by a court having jurisdiction in the premises
shall have been entered adjudging the Borrower a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the
Borrower under the Federal bankruptcy laws, or any other similar applicable
Federal or State law, and such decree or order shall have continued
undischarged or unstayed for a period of sixty (60) days; or a decree or
order of a court having jurisdiction in the premises for the appointment of
a receiver or liquidator or trustee or assignee in bankruptcy or insolvency
of the Borrower or a substantial part of its property, or for the winding up
or liquidation of its affairs, shall have been entered, and such decree or
order shall have remained in force undischarged and unstayed for a period of
sixty (60) days;
(k) The Borrower shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking
reorganization under the Federal bankruptcy laws, or any other similar
applicable Federal or State law, or shall consent to the filing of any such
petition, or shall consent to the appointment of a receiver or liquidator or
trustee or assignee in bankruptcy or insolvency of it or of a substantial
part of its property, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or corporate action shall be taken by the
Borrower in furtherance of any of the aforesaid purposes;
then, (i) as to any Event of Default specified under subsections (a) through
(i) of this Article VII, both Banks shall be under no further obligation to
make Loans hereunder and may, by separate written notice to the Borrower,
each Bank may declare the unpaid balance of all of its Loans then
outstanding and interest accrued thereon and all other liabilities of the
Borrower hereunder and thereunder to be forthwith due and payable, and the
same shall thereupon become and be immediately due and payable, without
presentment, demand, protest or notice or any kind, all of which are hereby
expressly waived; and (ii) as to any Event of Default specified under
subsections (j) or (k) of this Article VII, both Banks shall be under no
further obligation to make Loans hereunder and the unpaid balance of all
Loans from both Banks outstanding hereunder and interest accrued thereon and
all other liabilities of the Borrower hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived. Each Bank has the
right to act independently from the other Bank in declaring a default and
exercising its remedies under this Agreement.
ARTICLE VIII
MISCELLANEOUS
-------------
8.01. No Implied Waiver etc. No delay or failure of a Bank, or the
holder of any Note in exercising any right, power or privilege hereunder
shall affect such right, power or privilege; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce
such a right, power or privilege preclude any further exercise thereof or of
any other right, power or privilege. The rights and remedies hereunder of a
Bank and any holder of the Note are cumulative and not exclusive of any
rights or remedies which, it or they would otherwise have. Any amendment,
waiver, permit, consent or approval of any kind or character on the part of
each Bank of any breach or default under this Agreement or any such waiver
of any provision or condition of this Agreement must be in writing and shall
be effective only to the extent in such writing specifically set forth.
8.02. Set-Off. In case any one or more of the Events of Default
described in Article VII hereof shall occur, or upon the happening of any
Potential Default, the holder of any Note shall have the right, in addition
to all other rights and remedies available to it, to set-off against the
unpaid balance of the Note held by it any debt owing by such holder to the
Borrower, including without limitation any funds in any deposit account
maintained by the Borrower with such holder, and such holder shall have and
there is hereby created in favor of such holder a security interest in all
deposit accounts maintained by the Borrower with such holder. Any sums
obtained by the holder of any Note issued hereunder by way of counterclaim,
set-off, banker's lien or other lien for application upon any Note held by
it shall be shared pro rata with the holders of the other Notes. Nothing in
this Agreement shall be deemed any waiver or prohibition of any right of
banker's lien or set-off under applicable Law.
8.03. Survival of Provisions. All representations, warranties,
covenants and agreements of the Borrower contained herein or made in writing
in connection herewith shall survive the execution and delivery of this
Agreement, the making of Loans hereunder and the issuance of the Notes.
8.04. Expenses and Fees: Indemnity. The Borrower agrees to pay and
save each Bank harmless against liability for the payment of, all expenses
of the Bank (including the reasonable fees and expenses of counsel for such
Bank which for all purposes hereof shall include counsel employed by such
Bank) arising in connection with the preparation and negotiation of this
Agreement and the Notes, enforcement or collection thereof and relating to
consents, amendments and waivers hereof. Unless caused by each Bank's gross
negligence or willful misconduct, the Borrower further agrees to indemnify,
defend and hold each Bank, its officers, directors and employees harmless
from and against all claims, losses, causes of action, damages, liabilities,
expenses and costs of any kind which are in any way sustained by each Bank
and which arise out of or are incident to the breach by the Borrower of any
of its representations hereunder or the failure of the Borrower or any
Subsidiary to comply with any Environmental Law.
8.05. Each Bank acknowledges that it has, independently and without
reliance upon the other Bank and based on such documents and information as
it has deemed appropriate, made its own credit analysis and decision to
enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the other Bank and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or
based upon this Agreement or any other loan document, any related agreement
or any document furnished hereunder or thereunder.
Neither Bank nor any of its respective directors, officers, employees
or agents shall be liable as such for any action taken or omitted by any of
them except for its or his own gross negligence or willful misconduct or be
responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by
the Borrower of any of the terms, conditions, covenants or agreements
contained in any related loan document. Neither Bank shall be responsible
to the other Bank for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement, or any other loan
documents or other instruments or agreements. Each Bank shall in all cases
be fully protected in acting, or refraining from acting, in accordance with
its own credit analysis and decision-making for its respective Loans,
including any remedies exercised relating thereto. Neither Bank nor any of
its respective directors, officers, employees or agents shall have any
responsibility to the Borrower on account of the failure of or delay in
performance or breach by the other Bank of any of its obligations hereunder
or to the other Bank on account of the failure of or delay in performance or
breach by the Borrower of any of its respective obligations hereunder or
under any other Loan document or in connection herewith or therewith. With
respect to the Loans made by it hereunder, each Bank acknowledges that it is
acting in its individual capacity and not as an agent or jointly with the
other Bank and each shall have the same rights and powers as the other Bank
as provided herein.
8.06. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other loan document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
8.07. Holidays. Unless otherwise specified herein, whenever any
payment or action to be made or taken hereunder or under the Notes shall be
stated to be due on a Saturday, Sunday or public holiday under the laws of
the Commonwealth of Pennsylvania, such payment or action shall be made or
taken on the next succeeding Business Day and such extension of time shall
in such case be included in computing interest, if any, in connection with
such payment or action.
8.08. Notices, etc. Any notice or other communication in connection
with this Agreement shall be deemed to have been given or made when received
by the party to whom directed. All such notices and other communications
shall be in writing unless otherwise provided herein and shall be directed,
if to Mellon, to One Mellon Bank Center, Pittsburgh, Pennsylvania 15258
Attention: Loan Administration; if to Bank of Boston, to 100 Federal Street,
Boston, Massachusetts 02110, Mail Stop No. 01-07-07, Attention: Debbie
Phinney; and if to the Borrower, Haemonetics Corporation, 400 Wood Road,
Braintree, MA 02184, Attention: Brigid A. Makes, Chief Financial Officer, in
accordance with the latest unrevoked written direction from any party to the
other parties hereto.
8.09. Governing Law: Waiver of Jury Trial. This Agreement and the
Notes issued hereunder shall be deemed to be contracts under the laws of the
Commonwealth of Massachusetts and for all purposes shall be construed in
accordance with the laws of said Commonwealth without regard to conflicts of
law principles. All parties hereby waive their respective rights to a jury
trial with respect to any action arising in connection with this Agreement,
the Notes or any other loan document.
8.10. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute one and the same instrument.
8.11. Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign
or otherwise transfer any of its rights or duties under this Agreement
without the prior written consent of each Bank. Each Bank may assign all or
part of its rights and duties under this Agreement to one or more financial
institutions or other entities with, if an Event of Default or a Potential
Default has not occurred and is continuing, the prior written consent of the
Borrower, which consent shall not be unreasonably withheld. Each Bank may
freely grant participations in its Commitment and its Loans without the
consent of or notice to the Borrower.
IN WITNESS WHEREOF, the parties hereto, by their respective officers
thereunto duly authorized, have executed this Agreement as of the day and
year first above written.
HAEMONETICS CORPORATION
By: Brigid A. Makes
-----------------------------
(Signature)
Name:
--------------------------
Title: Vice President
--------------------------
MELLON BANK, N.A.
By: Rita C. Long
-----------------------------
(Signature)
Name:
----------------------------
Title: Vice President
--------------------------
One Mellon Bank Center
Pittsburgh, PA 15258
Attention: Loan Administration
COMMITMENT AMOUNT: $10,000,000.00
THE FIRST NATIONAL BANK OF BOSTON
By: Ellen L. Korpi
-----------------------------
(Signature)
Name:
---------------------------
Title: Director
--------------------------
Address:
------------------------
COMMITMENT AMOUNT: $10,000,000.00
EXHIBIT A
HAEMONETICS CORPORATION
$10,000,000.00 Boston, Massachusetts
Dated: October 1, 1996
FOR VALUE RECEIVED, the undersigned, Haemonetics Corporation, a
Massachusetts corporation (the "Borrower"), hereby promises to pay to the
order of [Name of Bank]., (the "Bank") on the Maturity Date for each Loan
made by the Bank to the Borrower pursuant to the Agreement described below
the lesser of (i) the principal sum of Ten Million Dollars
($10,000,000.00) and (ii) the unpaid principal amount of all such Loans made
by the Bank maturing on such Maturity Date. The Borrower further promises to
pay to the order of the Bank interest on the unpaid principal amount hereof
from time to time outstanding at the rate or rates per annum determined
pursuant to Section 2.05 of, or as otherwise provided in, the Agreement,
payable on the dates set forth in the Agreement.
This Promissory Note is one of the Notes referred to in the Revolving Credit
Agreement dated as of October 1, 1996 among the Borrower, Mellon Bank, N.A.
and The First National Bank of Boston (as the same may have been or may
hereafter be amended or modified. the "Agreement"), which Agreement, among
other things, contains provisions for prepayments on account of principal
hereof prior to the maturity hereof and also for acceleration of the
maturity hereof upon the happening of certain stated events, upon the terms
and conditions therein specified. Terms defined in the Agreement shall have
the same meanings herein.
The Borrower hereby expressly waive presentment, demand, protest, and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Agreement, and an
action for amounts due hereunder or thereunder shall immediately accrue upon
the expiration of any grace period.
This Note shall be governed by, construed and enforced in accordance with
the laws of the Commonwealth of Massachusetts, without regard to conflicts
of law principles.
HAEMONETICS CORPORATION
By: Brigid A. Makes
-----------------------------
(Signature)
Name:
---------------------------
Title: Vice President
--------------------------
HAEMONETICS CORPORATION
FIRST AMENDMENT TO
1992 LONG-TERM INCENTIVE PLAN
The Haemonetics Corporation 1992 Long-Term Incentive Plan (the
"Plan") is hereby amended in accordance with the provisions of Section 12
of the Plan this 18th day of April, 1997, subject to shareholder approval
of such amendment, as follows:
1. Section 2 of the Plan is amended by adding a new subparagraph
(d) as follows:
2(d) The maximum number of shares of the Company's Common
Stock with respect to which an option or award may be
granted under the Plan to any employee in any one
taxable year of the Company shall not exceed 250,000
shares (in the aggregate for all such options or awards
taken together), taking into account shares subject to
options and awards granted and terminated, or repriced,
during such taxable year.
2. Except as herein amended, the Plan is hereby ratified and
confirmed in all respects.
Adopted by the Board of Directors: April 18, 1997.
EXHIBIT 11
HAEMONETICS CORPORATION
COMPUTATION OF NET INCOME PER SHARES
(in thousands except share data)
<TABLE>
<CAPTION>
March 29, March 30, April 1,
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Net Income............................................ $ 32,970 $ 35,925 $ 33,645
=================================
Weighted Average common shares outstanding............ 27,160 27,294 27,896
Net effect of dilutive stock options.................. 291 428 547
---------------------------------
Total weighted average common and common equivalent
shares outstanding................................ 27,451 27,722 28,443
=================================
Net income per common and common equivalent share..... $ 1.20 $ 1.30 $ 1.18
=================================
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF HAEMONETICS CORPORATION
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
Haemonetics S.A. International Switzerland
Haemonetics Scandinavia AB Sweden
Haemonetics GmbH Germany
Haemonetics France SARL France
Haemonetics U.K. Ltd. England
Haemonetics Japan Co., Ltd. Japan
Haemonetics Ventures Corp. Massachusetts
Haemonetics Foreign Sales Corp. Virgin Islands
Haemonetics Services, Inc. Delaware
Nyon Associates, Inc. Delaware
Haemonetics Blood Services and Training Institute, Inc. Delaware
Haemonetics Belgium S.A./N.V. Belgium
Haemonetics Italia S.R.L. Italy
Haemonetics Handelsgesellschaft.m.b.H. Austria
Haemonetics Asia Incorporated Delaware
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into the
Company's previously filed Registration Statement File Nos. 33-42005,
33-42006, 33-70932, 33-70934, and 33-80652.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 5, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000313143
<NAME> HAEMONETICS CORPORTION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-START> MAR-31-1996
<PERIOD-END> MAR-29-1997
<CASH> 8,302
<SECURITIES> 0
<RECEIVABLES> 73,160
<ALLOWANCES> 961
<INVENTORY> 55,090
<CURRENT-ASSETS> 167,669
<PP&E> 190,758
<DEPRECIATION> 87,148
<TOTAL-ASSETS> 323,546
<CURRENT-LIABILITIES> 73,624
<BONDS> 10,015
0
0
<COMMON> 292
<OTHER-SE> 224,982
<TOTAL-LIABILITY-AND-EQUITY> 323,546
<SALES> 309,817
<TOTAL-REVENUES> 309,817
<CGS> 150,056
<TOTAL-COSTS> 150,056
<OTHER-EXPENSES> 18,974
<LOSS-PROVISION> 431
<INTEREST-EXPENSE> 1,762
<INCOME-PRETAX> 50,708
<INCOME-TAX> 17,738
<INCOME-CONTINUING> 32,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,970
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
