FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the quarter ended: July 4, 1998 Commission File Number: 1-10730
-------------- ---------
HAEMONETICS CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2882273
- ----------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
400 Wood Road, Braintree, MA 02184
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (781) 848-7100
----------------
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) (2.) has been subject to the
filing requirements for at least the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
26,584,679 shares of Common Stock, $.01 par value, as of
--------------------------------------------------------
July 4, 1998
HAEMONETICS CORPORATION
INDEX
PAGE
----
PART I. Financial Information
Consolidated Balance Sheets - July 4, 1998 2
and March 28, 1998
Consolidated Statements of Operations - 3
Three Months Ended July 4, 1998
and June 28, 1997
Consolidated Statements of Stockholders' Equity - 4
Three Months Ended July 4, 1998
Consolidated Statements of Cash Flows - 5
Three Months Ended July 4, 1998 and June 28, 1997
Notes to Consolidated Financial Statements 6-9
Management's Discussion and Analysis of Financial Condition 10-12
and Results of Operations
PART II. Other Information 13
Signatures 14
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share data)
<TABLE>
<CAPTION>
July 4, March 28,
ASSETS 1998 1998
------- ---------
<S> <C> <C>
Current assets:
Cash and short term investments................................................... $ 24,255 $ 21,766
Accounts receivable, less allowance of $840 at July 4, 1998
and $818 at March 28, 1998....................................................... 57,126 58,886
Inventories....................................................................... 64,474 61,664
Current investment in sales-type leases, net...................................... 11,849 11,887
Deferred tax asset................................................................ 20,852 21,777
Other prepaid and current assets.................................................. 9,532 15,170
--------------------
Total current assets.......................................................... 188,088 191,150
--------------------
Property, plant and equipment....................................................... 170,180 170,261
Less accumulated depreciation..................................................... 87,346 86,042
--------------------
Net property, plant and equipment................................................... 82,834 84,219
Other assets:
Investment in sales-type leases, net (long term).................................. 34,252 38,596
Distribution rights, net.......................................................... 9,956 10,718
Other assets, net................................................................. 10,074 5,204
Property, plant and equipment and other assets net of long-term liabilities of
discontinued operations.......................................................... 6,164 6,806
--------------------
Total other assets............................................................ 60,446 61,324
--------------------
Total assets.................................................................. $331,368 $336,693
====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt............................ $ 12,466 $ 17,468
Accounts payable.................................................................. 15,109 21,689
Accrued payroll and related costs................................................. 6,365 7,726
Accrued income taxes.............................................................. 8,213 5,750
Accrued value added tax........................................................... 0 0
Other accrued liabilities......................................................... 17,159 15,132
Current liabilities and accrued losses net of current assets of discontinued
operations....................................................................... 7,518 10,593
--------------------
Total current liabilities..................................................... 66,830 78,358
--------------------
Deferred income taxes............................................................... 13,755 9,944
Long-term debt, net of current maturities........................................... 51,462 53,586
Other long-term liabilities......................................................... 150 150
Stockholders' equity:
Common stock, $.01 par value; Authorized - 80,000,000 shares;
Issued 29,341,648 shares at July 4, 1998;
29,341,648 shares at March 28, 1998.............................................. 293 293
Additional paid-in capital........................................................ 59,166 59,142
Retained earnings................................................................. 195,657 190,757
Cumulative translation adjustments................................................ (9,996) (9,588)
--------------------
Stockholders' equity before treasury stock........................................ 245,120 240,604
Less: treasury stock 2,756,969 shares at cost at July 4, 1998
and 2,756,969 shares at cost at March 28, 1998............................... 45,949 45,949
--------------------
Total stockholders' equity.................................................... 199,171 194,655
--------------------
Total liabilities and stockholders' equity.................................... $331,368 $336,693
====================
Supplemental disclosure of balance sheet information:
Net debt........................................................................ $ 39,673 $ 49,288
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
July 4, June 28,
1998 1997
------- --------
<S> <C> <C>
Net revenues........................................ $71,996 $79,485
Cost of goods sold.................................. 36,026 42,397
------------------
Gross profit........................................ 35,970 37,088
Operating expenses:
Research and development.......................... 3,803 4,928
Selling, general and administrative............... 24,864 20,712
------------------
Total operating expenses...................... 28,667 25,640
------------------
Operating income.................................... 7,303 11,448
Interest expense.................................... (979) (557)
Interest income..................................... 1,083 950
Other income, net................................... 220 32
------------------
Income from continuing operations
before provision for income taxes.................. 7,627 11,873
Provision for income taxes.......................... 2,670 4,156
------------------
Earnings from continuing operations................. $ 4,957 $ 7,717
==================
Discontinued operations:
Loss from operations, net of income tax
benefit of ($31) in 1998 and ($666) in 1997...... (57) (1,236)
------------------
Net Income.......................................... $ 4,900 $ 6,481
==================
Basic income(loss) per common share
Continuing operations $ 0.186 $ 0.290
Discontinued operations (0.002) (0.046)
Net income (loss) 0.184 0.244
Income(loss) per common share assuming dilution
Continuing operations $ 0.186 $ 0.290
Discontinued operations (0.002) (0.047)
Net income (loss) 0.184 0.243
Weighted average shares outstanding
Basic 26,585 26,569
Diluted 26,627 26,645
</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>
Accumulated
Common Stock Additional Cumulative Total
-------------- Paid-in Treasury Retained Translation Stockholders' Comprehensive
Shares $'s Capital Stock Earnings Adjustment Equity Income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 28, 1998 29,342 $293 $59,142 ($45,949) $190,757 ($9,588) $194,655
=============================================================================
Employee stock purchase plan --- --- --- --- --- --- 0
Exercise of stock options
and related tax benefit --- --- 24 --- --- --- 24
Purchase of treasury stock --- --- --- --- --- --- 0
Net Income --- --- --- --- 4,900 --- 4,900 4,900
Foreign currency translation
adjustment --- --- --- --- --- (408) (408) (408)
--------------------------------------------------------------------------------------------
Balance, July 4, 1998 29,342 $293 $59,166 ($45,949) $195,657 ($9,996) $199,171 $4,492
============================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited- in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
July 4, June 28,
1998 1997
------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 4,900 $ 6,481
Less net loss from discontinued operations (57) (1,236)
-------------------
Net income from continuing operations 4,957 7,717
Adjustments to reconcile net income to net cash provided by operating activities:
Non cash items:
Depreciation, amortization and other 6,793 6,604
Deferred tax benefit (provision) (261) 2
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable - net 1,574 (5,045)
(Increase) in inventories (2,881) (3,680)
(Increase) in sales-type leases (current) (876) (1,081)
(Increase) decrease in prepaid income taxes 7,725 (41)
(Increase) in other assets (1,464) (5,068)
Decrease in accounts payable, accrued
expenses and other current liabilities (2,371) (5,048)
-------------------
Net cash provided by (used in) operating activities, continuing operations 13,196 (5,640)
-------------------
Net cash (used in) operating activities, discontinued operations (2,306) (584)
-------------------
Net cash provided by (used in) operating activities 10,890 (6,224)
Cash Flows from Investing Activities:
Capital expenditures on property, plant and equipment, net of
retirements and disposals (3,834) (8,415)
Net (increase) decrease in sales-type leases (long-term) 2,750 (8,995)
-------------------
Net cash (used in) investing activities, continuing operations (1,084) (17,410)
-------------------
Net cash (used in) investing activities, discontinued operations (186) (695)
-------------------
Net cash (used in) investing activities (1,270) (18,105)
Cash Flows from Financing Activities:
Payments on long-term real estate mortgage (50) (226)
Net increase (decrease) in short-term revolving
credit agreements (5,038) 2,733
Net increase (decrease) in long-term credit agreements (2,083) 23,633
Exercise of stock options and related tax benefit 24 820
Purchase of treasury stock 0 (5,566)
-------------------
Net cash provided by (used in) financing activities (7,147) 21,394
Effect of exchange rates on cash and cash equivalents 16 94
-------------------
Net increase (decrease) in cash and cash equivalents 2,489 (2,841)
Cash and cash equivalents at beginning of period 21,766 8,272
-------------------
Cash and cash equivalents at end of period $24,255 $ 5,431
===================
Supplemental disclosures of cash flow information:
Net (decrease) in cash and cash equivalents, discontinued operations ($2,492) ($1,279)
Net increase (decrease) in cash and cash equivalents, continuing operations $ 4,981 ($1,562)
Increase (decrease) in net debt ($9,660) $ 28,981
Interest paid $ 444 $ 519
Income taxes paid (refunded) ($7,416) $ 6,210
===================
</TABLE>
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The results of operations for the interim periods shown in this report
are not necessarily indicative of results for any future interim period or
for the entire fiscal year. The Company believes that the quarterly
information presented includes all adjustments (consisting only of normal,
recurring adjustments) that the Company considers necessary for a fair
presentation in accordance with generally accepted accounting principles.
The accompanying consolidated financial statements and notes should be read
in conjunction with the Company's audited annual financial statements.
2. FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to the last day
of March. As a result, current fiscal year 1999 includes 53 weeks as
compared to the normal 52 weeks. The additional week was added to the first
quarter ended July 4, 1998 which, as a result, included 14 weeks. Fiscal
year 1998 included 52 weeks with the first quarter, ended June 28, 1998
including 13 weeks.
3. COMPREHENSIVE INCOME
In June 1998, the Company adopted Statement of Financial Accounting
Standard (SFAS) NO. 130, "Reporting Comprehensive Income." SFAS 130
requires the presentation, by major components and as a single total, the
change in the Company's net assets during a period from non-owner sources.
Currently, the Company's non-owner changes in equity are the foreign
currency translation adjustments, which totaled ($9.9) million and ($9.6)
million at July 4, 1998 and March 28, 1998, respectively.
4. NEW PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards board, (FASB) issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information". SFAS 131 requires companies to present segment information
using the management approach. The management approach is based upon the
way that management organizes the segments within a Company for making
operating decisions and assessing performance. SFAS 131 is effective for
the Company's 1999 annual financial statements. Adoption of this standard
will not impact the Company's consolidated financial position, results of
operations or cash flows, and any effect will be limited to the form and
content of its disclosures.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities. The Statement establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
its fair value. The Statement requires that changes in the derivatives fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item
in the income statement, and requires that a company must formally document,
designate, and asses the effectiveness of transactions that receive hedge
accounting. Statement 133 is effective for fiscal years beginning after
June 15, 1999. A company may also implement the Statement as of the
beginning of any fiscal quarter after issuance (that is fiscal quarters
beginning June 16, 1998 and thereafter). Statement 133 cannot be applied
retroactively. The impacts of adopting Statement 133 on the Company's
financial statements or the timing of adoption of Statement 133 have not
been determined. However, it is expected that the derivative financial
instruments acquired in connection with the Company's hedging program will
continue to qualify for hedge accounting.
5. FOREIGN CURRENCY
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 hedging activities is to
reduce uncertainty associated with currency movement in future periods.
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 July 4, 1998 the Company had forward exchange contracts, all having
maturities of less than one year, to exchange foreign currencies (major
European currencies and Japanese yen) for US dollars totaling $94.5 million.
Of that balance, $30.9 million represented contracts for terms of 30 days or
less. Gross unrealized gains from hedging firm sales commitments, based on
current spot rates, were $5.2 million at July 4, 1998. Deferred gains and
losses are recognized in earnings when the transactions being hedged are
recognized. Management anticipates that the deferred amounts will be offset
by the foreign exchange effect on sales of product in future periods.
6. 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 method.
Inventories consist of the following:
<TABLE>
<CAPTION>
July 4, March 28,
1998 1998
------- ---------
(in thousands)
<S> <C> <C>
Raw materials $15,331 $11,532
Work-in-process 5,817 5,878
Finished goods 43,326 44,254
------- -------
$64,474 $61,664
======= =======
</TABLE>
7. NET INCOME (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards board issued SFAS
NO. 128, "Earnings per Share," which is effective for financial statements
issued for periods ending after December 15, 1997. SFAS 128 supersedes
Accounting Principles Board Opinion No. 15 (APB 15) and establishes new
standards for the presentation of earnings per share. Under SFAS 128,
"Basic Earnings Per Share" excludes dilution and is computed by dividing
income available to common stockholders by weighted average shares
outstanding. "Diluted Earnings Per Share" reflects the effect of all
dilutive outstanding common stock equivalents. The following table provides
a reconciliation of the numerators and denominators of the basic and diluted
earnings per share computations, as required by SFAS 128:
<TABLE>
<CAPTION>
For the three months ended
-----------------------------
July 4, 1998 June 28, 1997
------------ -------------
<S> <C> <C>
Basic EPS
Net Income(loss) $ 4,900 $ 6,481
Weighted Average Shares 26,585 26,569
------------------------
Basic income(loss) per share $ .184 $ .244
========================
Diluted EPS
Net Income(loss) $ 4,900 $ 6,481
Basic Weighted Average shares 26,585 26,569
Effect of Stock options 42 76
------------------------
Diluted Weighted Average shares 26,627 26,645
------------------------
Diluted income(loss) per share $ .184 $ .243
========================
</TABLE>
8. DISCONTINUED OPERATIONS
On May 1, 1998, the Board of Directors announced a plan to discontinue
the Company's Blood Bank Management Services Business, ("BBMS").
Accordingly, the operating results for BBMS have been segregated from the
results for the continuing operations and reported as a separate line on the
consolidated statements of operations for all periods presented. For the
three months ended July 4, 1998, the operating loss for BBMS of $2,674 was
charged to the discontinued operations provision established in the fourth
quarter of fiscal year 1998.
The Operating losses for BBMS are detailed as follows:
<TABLE>
<CAPTION>
July 4, June 28,
1998 1997
------- --------
(in thousands)
<S> <C> <C>
Net Revenues $ 6,091 $ 2,843
Gross Profit 260 (26)
Operating expenses:
Research and Development 0 76
Selling, general and administrative 2,934 1,761
------------------
Total operating expenses 2,934 1,837
Operating loss (2,674) (1,863)
Other expense (88) (39)
Taxes (967) (666)
------------------
Net loss (1,795) (1,236)
Charged to Reserve:
Operating loss (net of taxes) 1,738 --
------------------
Reflected on Statement of Operations $ (57) $(1,236)
==================
</TABLE>
Other income(expense) includes an allocation of corporate interest
expense of approximately $88,000 and $39,000 for the three months ended
July 4, 1998 and June 28, 1997, respectively. The allocation of corporate
interest was calculated based upon the percentage of net assets of BBMS to
total domestic assets.
The remaining net assets of BBMS included in the consolidated balance
sheet for July 4, 1998 and March 28, 1998 are as follows:
<TABLE>
<CAPTION>
July 4, March 28,
1998 1998
------- ---------
(in thousands)
<S> <C> <C>
Current Assets $ 5,497 $ 5,167
Net property, plant and equipment 7,559 8,217
Other assets 55 39
-------------------
Total assets $13,111 $13,423
Current liabilities and accrued losses $13,015 $15,760
Other long-term liabilities 1,450 1,450
-------------------
Total liabilities $14,465 $17,210
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF CONTINUING OPERATIONS
The table outlines the components of the consolidated statements of
income for continuing operations as a percentage of net revenues:
<TABLE>
<CAPTION>
Percentage of Net Revenues Percentage Increase
Three Months Ended Three Months Ended
July 4, 1998 June 28, 1997 1998/97
----------------------------------------------------
<S> <C> <C> <C>
Net revenues 100.0% 100.0% (9.4)%
Cost of goods sold 50.0 53.3 (15.0)
Gross Profit 50.0 46.7 (3.0)
Operating Expenses:
Research and development 5.3 6.2 (22.8)
Selling, general and administrative 34.5 26.1 20.0
-----------------------------------------
Total operating expenses 39.8 32.3 11.8
Operating income 10.1 14.4 (36.2)
Interest expense (1.4) (0.7) 75.8
Interest income 1.5 1.2 14.0
Other income 0.3 ---- 587.5
-----------------------------------------
Income before provision for income
taxes 10.6 14.9 (35.8)
Provision for income taxes 3.7 5.2 (35.8)
-----------------------------------------
Earnings from continuing operations 6.9% 9.7% (35.8)%
=========================================
</TABLE>
Three Months Ended July 4, 1998 Compared to Three Months Ended June 28, 1997
Net revenues in 1998 decreased 9.4% to $72.0 million from $79.5
million in 1997. Without the effects of foreign exchange fluctuations and a
non-recurring $7.4 million order in the prior year, net revenues increased
6.0%. Worldwide disposable sales increased approximately .8%. Without the
effects of currency, disposable sales increased 7.8%. Sales of disposables
products accounted for approximately 95% and 85% of net revenues for 1998
and 1997, respectively. Service revenues generated from equipment repairs
performed under preventive maintenance contracts or emergency service
billings are included as part of disposables revenues and accounted for
approximately .8% and .5% of the Company's net revenues for 1998 and 1997,
respectively. Equipment revenues decreased approximately 69.1%. The
majority of this decrease was attributable to the $6.0 million in plasma
equipment shipped to China during the first quarter of 1997. This revenue
was non-recurring in 1998. International sales accounted for approximately
67% of net revenues for both 1998 and 1997.
Gross profit in 1998 decreased $1.1 million from $37.1 million in
1997. As a percentage of net revenues, gross profit percent increased by
3.3% to 50.0% in 1998 from 46.7% in 1997. This increase was the net result
of a 6.1 percentage point increase in gross profit percent due to lower
product costs in 1998, offset by a 2.8 percentage point decrease in gross
profit percent in 1998 due to the unfavorable effects of currency.
The Company expended $3.8 million in 1998 on research and development
(5.3% of net revenues) and $4.9 million in 1997 (6.2% of net revenues).
Selling, general and administrative expenses increased to $24.9
million in 1998 from $20.7 million in 1997 and increased as a percentage of
net revenues to 34.5% from 26.1%. Approximately $2.6 million of the 1998
expense was related to a provision for certain sales contract receivables
from the American Red Cross upon the Company's decision to resolve a dispute
with the American Red Cross.
Operating income, as a percentage of net revenues, decreased 4.3 % to
10.1% in 1998 from 14.4% in 1997. The decrease in operating income as a
percentage of sales was due to the increase in selling, general and
administrative expenses, partially offset by the improvement in gross profit
as a percentage of sales.
Interest expense increased in 1998 to $1.0 million from $.6 million in
1997 due to an increase domestically in the average level of borrowings and
in interest rates charged as a result of the $40.0 million in fixed rate
notes with a coupon rate of 7.05% issued by the Company during the third
quarter of last year. Interest income increased only slightly in 1998 to
$1.0 million as a result of interest earned on increased domestic cash
balances.
Other income increased $.2 million from 1997 to 1998 due to increases
in income earned from points on hedging transactions.
The provision for income taxes, as a percentage of pretax income,
remained at 35.0% for both 1998 and 1997. The annualized rate for the full
12 months of fiscal 1999 is expected to be approximately 35%.
RESULTS OF DISCONTINUED OPERATIONS
Three Months Ended July 4, 1998 Compared to Three Months Ended June 28, 1997
Net revenues increased 114.3% in 1998 to $6.1 million in 1997. Gross
profit in 1998 increased to $.2 million in 1998 from slightly less than zero
in 1997 and operating losses increased 43.5% to $(2.7) million in 1998 from
$(1.9) million in 1997. The increase in operating losses was the result of
operating costs increasing at rates in excess of sales growth.
LIQUIDITY AND CAPITAL RESOURCES
The Company has satisfied its cash requirements principally from
internally generated cash flow and borrowings. The Company's need for funds
is derived primarily from capital expenditures, acquisitions, new business
development and working capital.
During the three months ended July 4, 1998, the Company increased its
cash balances by $2.5 million from operating, investing and financing
activities which represents an increase of $5.3 million from the $2.8
million utilized by the Company's operating, investing and financing
activities during the three months ended June 28, 1997. The increase was
largely a result of $33.9 million net cash provided by the Company's
operating and investing activities offset by $28.6 million of additional
cash utilized by the Company's financing activities.
Operating Activities:
The Company generated $13.2 million in cash from operating activities
of continuing operations in 1998 as compared to $5.6 million utilized during
1997. The $18.8 million increase in operating cash flow from continuing
operations was a result of $6.6 million in account receivable collections; a
$1.1 million decrease in inventory investment and short-term sales-type
leases; a $7.7 million decrease in prepaid income taxes as a result of a
refund received related to last year's losses; a $3.6 million decrease in
other assets; and a $2.6 million swing in accounts payable, accrued expenses
and other current liabilities. These increased sources of cash were offset
by a decrease in net income adjusted for non-cash items of $2.8 million.
During 1998, the Company's discontinued operations utilized $2.3
million in operating cash flows, an increase of $1.7 million over the $0.6
million of uses in 1997.
Investing Activities
The Company utilized $1.1 million in cash for investing activities
from continuing operations in 1998, a decrease of $16.3 million from 1997.
During the three months ended July 4, 1998, the Company incurred $3.8
million in capital expenditures net of retirements and disposals. Included
in this amount is a $.2 million net increase in long-term demonstration
assets. During the three months ended June 28, 1998, the Company utilized
$8.4 million for capital expenditures net of retirements and disposals,
including $.4 million for net expenditures for long-term demonstration
assets. The $4.6 million decrease in expenditures on property, plant and
equipment, commercial plasma machines and other revenue generating assets
from 1997 to 1998 is due primarily to lower commercial plasma machine
placements. Finally, the Company reduced its investment in long-term sales-
type leases by $2.8 million in the first quarter of fiscal 1999, compared
with an increased investment of $9.0 million in the first quarter of fiscal
1998.
During the three months ended July 4, 1998, the Company invested $0.2
million in discontinued operations related to capital expenditures. This
reflects a decrease in capital investing of $0.5 million over the $0.7
million invested during the three months ended June 28, 1997.
Financing Activities:
During the three months ended July 4, 1998, the Company's continuing
operations generated cash from operating activities and, as a result paid
down a portion of debt.
Net debt decreased $9.6 million to $39.6 million in 1998, including
$2.5 million which was utilized by the discontinued operations.
The Company does not expect to repurchase any shares during the
current fiscal year. During the quarter ended June 28, 1997, the Company
used $5.6 million to repurchase shares of treasury stock.
At July 4, 1998, the Company had working capital of $121.2 million.
This reflects an increase of $8.5 million in working capital for the three
months ended July 4, 1998. The Company believes its sources of cash are
adequate to meet its projected needs.
Year 2000 Compliance
Haemonetics is aware of the potential for industry wide business
disruption which could occur due to problems related the "Year 2000 issue."
It is the belief of Haemonetics Management that we have a prudent plan in
place to address these issues within our company and our supply chain. The
components of our plan include: an assessment of internal systems for
modification and/or replacement; communication with external vendors to
determine their state of readiness to maintain an uninterrupted supply of
goods and services to Haemonetics; an evaluation of equipment sold by
Haemonetics to customers as to the ability of the equipment to work properly
after the turn of the century; an evaluation of our production equipment as
to its ability to function properly after the turn of the century; an
evaluation of facility related issues; the retention of technical and
advisory expertise to ensure that we are taking prudent action steps; and
the development of a contingency plan.
At this time Haemonetics is not aware of any specific internal systems
or external vendors issues related to the Year 2000 which would prevent, or
seriously impact the Company from continuing operations before, during, or
after the turn of the century. Furthermore, we are not aware of any issues
related to equipment sold by Haemonetics which would prevent our customers
from continuing their operations or which would impact the safety of
patients or donors in any way. Haemonetics does not believe that the total
cost of Year 2000 compliance for the company will be material to the
financial results of the Company.
Although we believe that we are taking prudent action related to the
identification and resolution of issues related to the Year 2000 our
assessment is still in progress. We may never be able to know with
certainty whether certain key vendors are compliant, especially those
outside the United States. There are also technical vagaries to logic
imbedded within microchips which may prove not feasible or impossible to
test.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Not applicable.
Item 2. Changes in Securities
---------------------
Not applicable.
Item 3. Defaults upon Senior Securities
-------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
In accordance with the provisions of Rule 14a-4(c) promulgated
under the Securities Exchange Act of 1934, if the Company does not
receive notice of a shareholder proposal to be raised at its 1999
Annual Meeting on or before May 8, 1999, then in such event, the
management proxies shall be allowed to use their discretionary
voting authority when the proposal is raised at the 1999Annual
Meeting of Stockholders.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a). Exhibits
The following exhibits will be filed as part of this form 10-Q:
Exhibit 27 Financial Data Schedule
(b). Reports on Form 8-K.
On April 17, 1998, the Company filed a current report on Form 8-K,
dated April 16, 1998 to report under Item 5 the declaration of a
dividend distribution of Rights in connection with the adoption of
a Shareholder Rights Plan.
SIGNATURES
----------
Pursuant to the requirements 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
Date: August 10, 1998 By: /s/ JAMES L. PETERSON
------------------------------------
James L. Peterson, President and
Chief Executive Officer
Date: August 10, 1998 By: /s/ RONALD J. RYAN
------------------------------------
Ronald J. Ryan, Sr. Vice President of
Finance and Chief Financial Officer,
(Principal Accounting Officer)
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