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: December 27, 1997 Commission File Number: 1-10730
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HAEMONETICS CORPORATION
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(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
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(Address of principal executive offices)
Registrant's telephone number, including area code: (781) 848-7100
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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.
26,512,979 shares of Common Stock, $ .01 par value, as of
---------------------------------------------------------
December 27, 1997
HAEMONETICS CORPORATION
INDEX
PAGE
----
PART I. Financial Information
Consolidated Balance Sheets - December 27, 1997 2
and March 29, 1997
Consolidated Statements of Operations - 3
Three and Nine Months Ended December 27, 1997
and December 28, 1996
Consolidated Statement of Stockholders' Equity - 4
Nine Months Ended December 27, 1997
Consolidated Statements of Cash Flows - 5
Nine Months Ended December 27, 1997 and December 28, 1996
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial Condition 9-11
and Results of Operations
PART II. Other Information 12
Signatures 13
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 27, March 29,
ASSETS 1997 1997
------------ ---------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 7,330 $ 8,302
Accounts receivable, less allowance of $926 at December 27, 1997
and $961 at March 29, 1997...................................... 78,407 72,199
Inventories...................................................... 60,781 55,090
Current investment in sales-type leases, net..................... 14,311 13,559
Deferred tax asset............................................... 12,811 14,290
Other prepaid and current assets................................. 14,165 4,229
----------------------
Total current assets ........................................ 187,805 167,669
----------------------
Property, plant and equipment...................................... 200,408 190,758
Less accumulated depreciation.................................... 92,688 87,148
----------------------
Net property, plant and equipment.................................. 107,720 103,610
Other assets:
Investment in sales-type leases, net............................. 38,132 30,954
Distribution rights, net......................................... 10,925 10,266
Other assets, net................................................ 14,849 11,047
----------------------
Total other assets........................................... 63,906 52,267
----------------------
Total assets................................................. $359,431 $323,546
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt........... $ 22,576 $ 19,511
Accounts payable................................................. 21,658 27,885
Accrued payroll and related costs................................ 9,405 6,814
Accrued income taxes............................................. 0 10,478
Other accrued expenses........................................... 20,285 8,936
----------------------
Total current liabilities.................................... 73,924 73,624
----------------------
Deferred income taxes.............................................. 12,580 12,770
Long-term debt, net of current maturities.......................... 50,143 10,015
Other long-term liabilities........................................ 3,721 1,863
Stockholders' equity:
Common stock, $.01 par value; Authorized - 80,000,000 shares;
Issued - 29,294,736 at December 27, 1997; 29,238,350 shares at
March 29, 1997.................................................. 293 292
Additional paid-in capital....................................... 58,403 56,547
Retained earnings................................................ 214,479 215,657
Cumulative translation adjustments............................... (7,750) (6,162)
----------------------
Stockholders' equity before treasury stock....................... 265,425 266,334
Less: treasury stock - 2,781,757 shares at cost at December
27, 1997 and 2,478,888 shares at cost at March 29, 1997..... 46,362 41,060
----------------------
Total stockholders' equity................................... 219,063 225,274
----------------------
Total liabilities and stockholders' equity................... $359,431 $323,546
======================
</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 Nine Months Ended
---------------------------- ----------------------------
December 27, December 28, December 27, December 28,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues ............................................ $ 75,782 $76,550 $234,723 $226,482
Cost of goods sold ...................................... 40,285 38,468 127,628 106,174
--------------------------------------------------------
Gross profit ............................................ 35,497 38,082 107,095 120,308
Operating expenses:
Research and development .............................. 4,324 4,620 14,073 14,338
Selling, general and administrative ................... 23,831 23,121 69,964 68,584
--------------------------------------------------------
Total operating expenses .......................... 28,155 27,741 84,037 82,922
--------------------------------------------------------
Non-Recurring Restructuring Expense ..................... (25,200) 0 (25,200) 0
Operating income (loss) ................................. (17,858) 10,341 (2,142) 37,386
Interest expense ........................................ (1,088) (396) (2,556) (1,281)
Interest income ......................................... 933 678 2,958 2,099
Other income (expense), net ............................. 48 178 (53) 383
--------------------------------------------------------
Income (loss) before provision for income taxes ......... (17,965) 10,801 (1,793) 38,587
Provision (benefit) for income taxes .................... (6,288) 3,781 (628) 13,496
--------------------------------------------------------
Net income (loss) ....................................... $(11,677) $ 7,020 $ (1,165) $ 25,091
========================================================
NET INCOME (LOSS) PER SHARE ............................. $ (0.44) $ 0.26 $ (0.04) $ 0.91
========================================================
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING ............................................ 26,528 27,361 26,598 27,580
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited - 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 March 29, 1997.................... 29,238 $292 $56,547 $215,657 $(41,060) $(6,162) $225,274
Exercise of stock options and related
tax benefit.............................. 57 1 1,856 --- --- --- 1,857
Employee stock purchase plan.............. --- --- --- (13) 264 --- 251
Treasury stock ........................... --- --- --- --- (5,566) --- (5,566)
Net income (loss)........................ --- --- --- (1,165) --- --- (1,165)
Translation adjustment.................... --- --- --- --- --- (1,588) (1,588)
----------------------------------------------------------------------------------
Balance December 27, 1997................. 29,295 $293 $58,403 $214,479 $(46,362) $(7,750) $219,063
==================================================================================
</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>
Nine Months Ended
---------------------
Dec. 27, Dec. 28,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................................ $ (1,165) $ 25,091
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................. 4,676 10,340
(Increase) decrease in deferred income taxes .................................. (146) 140
Increase in accounts receivable, net .......................................... (7,216) (8,811)
(Increase) decrease in inventories ............................................ (5,926) 9,249
Increase in sales-type leases ................................................. (878) (2,292)
Increase in other assets ...................................................... (7,797) (2,622)
Decrease in accounts payable, accrued expenses and deferred revenues .......... (911) 502
---------------------
Total adjustments ........................................................... (18,198) 6,506
---------------------
Net cash (used in) provided by operating activities ........................... (19,363) 31,597
---------------------
Cash flows from investing activities:
Capital expenditures on property, plant and equipment, net ...................... (3,914) (26,688)
Increase in distribution rights ................................................. (659) ---
Acquisitions in Blood Bank Management Services Business ......................... (10,508) ---
Net increase in long-term sales contracts ....................................... (7,341) (5,888)
---------------------
Net cash used in investing activities ......................................... (22,422) (32,576)
---------------------
Cash flows from financing activities:
Payments on long-term real estate mortgage ...................................... (137) (142)
Net increase in short-term revolving credit agreements .......................... 4,318 9,462
Net increase (decrease) in long-term revolving credit agreements ................ (75) (741)
Borrowings under long term senior note purchases agreements ..................... 40,000
Exercise of stock options and related tax benefit ............................... 1,857 2,802
Employee stock purchase plan .................................................... 251 275
Purchase of treasury stock ...................................................... (5,566) (6,338)
---------------------
Net cash provided by financing activities ..................................... 40,648 5,318
---------------------
Effect of exchange rates on cash .................................................. 165 (1,202)
---------------------
Net decrease in cash .............................................................. (972) 3,137
Cash at beginning of period ....................................................... 8,302 13,434
---------------------
Cash at end of period ............................................................. $ 7,330 $ 16,571
=====================
Supplemental disclosures of cash flow information:
Interest paid ................................................................... $ 2,253 $ 1,841
=====================
Income taxes paid, net of refunds ............................................... $ 13,030 $ 4,395
=====================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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. 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 December 27, 1997 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 $75.7
million. Of that balance, $27.2 million represented contracts for terms of
30 days or less. Gross unrealized gains from hedging firm sales
commitments, based on current spot rates, were $4.2 million at December 27,
1997. 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.
3. 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>
December 27, March 29,
1997 1997
------------ ---------
(in thousands)
<S> <C> <C>
Raw materials $ 9,358 $12,501
Work-in-process 6,650 5,628
Finished goods 44,773 36,961
----------------------
$60,781 $55,090
======================
</TABLE>
4. 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 other diluted
outstanding common stock equivalents and is computed similarly to primary
earnings per share according to AFB 15. 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 December 27, 1997
---------------------------------------------
Income/(Loss) Shares
(in thousands) (in thousands) Per-Share
(Numerators) (Denominator) Amount
---------------------------------------------
<S> <C> <C> <C>
Basic EPS
- ---------
Income available to common stockholders $11,677 $26,513 $ (.44)
Effect of dilutive securities
- -----------------------------
Stock options - 15 -
----------------------------------------
Diluted EPS
- -----------
Income available to common stockholders,
including assumed conversions $11,677 $26,528 $ (.44)
========================================
<CAPTION>
For the nine months ended December 27, 1997
---------------------------------------------
Income/(Loss) Shares
(in thousands) (in thousands) Per-share
(Numerator) (Denominator) Amount
---------------------------------------------
<S> <C> <C> <C>
Basic EPS
- ---------
Income available to common stockholders $(1,165) $26,530 $(0.04)
Effect of dilutive securities
- -----------------------------
Stock options - 68 -
----------------------------------------
Diluted EPS
- -----------
Income available to common stockholders
including assumed conversions $(1,165) $26,598 $(0.04)
========================================
</TABLE>
5. ACQUISITION OF BLOOD CENTERS BY BLOOD BANK MANAGEMENT SERVICES
During the nine months ended December 27, 1997, the Company purchased
substantially all of the assets of three blood centers. Each of these
acquisitions was accounted for using the purchase method of accounting, and
accordingly, the results of operations for each acquisition have been
included in the consolidated results of the Company from the respective
acquisition dates. The purchase price for the 1997 acquisitions exceeded
the underlying fair value of the net assets acquired by $4.9 million which
has been assigned to goodwill. Goodwill is included in other assets in the
accompanying consolidated Balance Sheet. The purchase price allocation is
preliminary and subject to adjustment. To finance the 1997 acquisitions,
the Company paid approximately $10.5 million in cash which was provided
through the Company's long-term revolving credit agreements.
6. RESTRUCURING CHARGE
The Company recorded a restructuring charge of $25.2 million related
to the restructuring plans announced by the Company on November 12, 1997.
From a manufacturing perspective, the Company made a decision to terminate
their rework program and no longer manufacture certain products.
Additionally, certain products, which would have required additional
investments to continue their useful lives, will no longer be supported.
The Company has also identified certain operations, which they intend to
close or partially close, resulting in losses associated with the
abandonment of certain leases and fixed assets, and the termination of
certain employees.
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The $25.2 million charge consists of $8.6 million related to the
write-off of certain disposable and equipment inventories. These
inventories and equipment were scrapped or abandoned in conjunction with
decisions to discontinue a disposable rework program, and to exit certain
product lines. The Company also recorded charges of $3.8 million related to
the cost of exiting certain long term supply commitments for products which
the company no longer plans to resell or use in its operations. Other
assets totaling $2.9 million were written off. These included certain
strategic investments in non-core businesses which the Company no longer
intends to pursue. The Company charged $3.4 million which was related to
reserves for severance and other contractual obligations. These reserves
and other restructuring costs discussed above were provided in accordance
with Emerging Issues Task Force Issue 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". Finally, an
additional $6.5 million relates to the write down of certain property, plant
and equipment, principally older generation commercial plasma equipment,
which the Company no longer intends to support. This write down was
computed using management's estimate of future cash flows to be provided by
the equipment, and the costs to service the equipment, consistent with
Statement of Financial Accounting Standards No. 121, "Impairment of Long
Lived Assets".
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- -------------------------------------------------------------------------------
Three Months Ended December 27, 1997 Compared to Three Months Ended December
28, 1996
Net revenues in 1997 decreased 1 % to $75.8 million from $76.6 million
in 1996. Without the effects of currency, net revenues increased 5%.
Worldwide disposable sales increased 1%. Without the effects of currency,
the increase in disposable sales was approximately 7% driven by the
international markets. Disposable sales in the US were adversely effected
during the quarter due to discontinued plasma business with one customer and
lower surgical shipments due to continued inventory reduction initiatives by
our US distributor. Sales of disposables products accounted for
approximately 90% and 89% of net revenues for the three months ended
December 27, 1997 and December 28, 1996, respectively. Disposable revenue
includes $5.3 million and $2.3 million in service revenue earned for the
collection of blood products through the Company's Blood Bank Management
Services ("BBMS") for 1997 and 1996, respectively. Worldwide equipment sales
in 1997 decreased 14% to $7.5 million from $8.8 million in 1996. Without the
effects of currency, the decrease in equipment sales was approximately 10%
driven by a shortfall in the domestic market. International sales accounted
for approximately 64% and 61% of net revenues for 1997 and 1996,
respectively.
Gross profit for the three months ended December 27, 1997 decreased to
$35.5 million from $38.1 million for the three months ended December 28,
1996. As a percentage of net revenues, gross profit decreased 2.9% to 46.8%
from 49.7%. The decline in margin is due largely to higher manufacturing
costs incurred at BBMS. The negative effect of currency was fully offset by
improvements in the base margin of the Company as a result of favorable
improvements in the Company's core manufacturing.
The Company expended $4.3 million in 1997 on research and development
(5.7% of net revenues) and $4.6 million in 1996 (6.0% of net revenues in
1996.) The decrease is a result of management's targeted effort to control
spending as well as from staff reductions associated with discontinued
operations of Haemonentics Plasma Product Services under taken as part of
the restructuring.
Selling, general and administrative expenses increased to $23.8
million in 1997 from $23.1 million in 1996 and increased as a percentage of
net revenues to 31.4% from 30.2%. This increase is attributed to increased
costs of $1.5 million incurred by BBMS offset by lower expenses for the
core business.
During the quarter, the Company recorded a restructuring charge of
$25.2 million (or $16.4 million net of income taxes) related to the
restructuring plans announced by the Company on November 12, 1997. From a
manufacturing perspective, the Company made a decision to terminate their
rework program and no longer manufacture certain products. Additionally,
certain products, which would have required additional investments to
continue their useful lives, will no longer be supported The Company has
also identified certain operations, which they intend to close or partially
close, resulting in losses associated with the abandonment of certain leases
and fixed assets, and the termination of certain employees.
The $25.2 million charge consists of $8.6 million related to the
write-off of certain disposable and equipment inventories. These
inventories and equipment were scrapped or abandoned in conjunction with
decisions to discontinue a disposable rework program, and to exit certain
product lines. An additional $6.5 million relates to the write down of
certain property, plant and equipment, principally older generation
commercial plasma equipment, which the Company no longer intends to support.
The Company also recorded charges of $3.6 million related to the cost of
exiting certain long term supply commitments for products which the Company
no longer plans to sell. Other assets totaling $2.9 million were also
written off. These included certain strategic investments in non-core
businesses which the Company no longer intends to pursue. Finally, $3.4
million relates to reserves for severance and other contractual obligations
with respect to the employee terminations.
Operating income, as a percentage of net revenues, decreased in 1997
to (23.6)% from 13.5% during the same period in 1996. Without the
restructure charge of $25.2 million taken during the current quarter, the
operating income, as a percentage of net revenues, decreased 3.8% to 9.7%
from 13.5% in 1996. This 3.8% decrease was driven by the strengthening of
the dollar and start up costs from BBMS which accounted for a combined
reduction in operating margin, as a percentage of revenues of approximately
6.0%. This 6.0% decrease was partially offset by improvements in both base
business operating expenses and gross margin before the effects of currency.
Interest expense increased $0.7 million in 1997 to $1.1 million from
$0.4 million for the same period in 1996 due to an increased level of
borrowing.
Interest income increased $0.2 million in 1997 to $0.9 million from
$0.7 million for the same period in 1996. The increase was due to the
increase in the balance of sales-type leases.
The provision for income taxes remained at approximately 35% as a
percentage of pretax income. The annualized rate for the full 12 months of
fiscal 1998 is expected to be approximately 35%.
Nine Months Ended December 27, 1997 Compared to Nine Months Ended December
28, 1996
Net revenues in 1997 increased 4% to $234.7 million from $226.5
million in 1996. Without the effects of currency, the increase was 9%.
Worldwide disposable sales increased 5%. Without the effects of currency,
the increase in disposable sales was approximately 11% driven approximately
30% by the domestic market and 70% by the international market. Sales of
disposable products accounted for approximately 89% and 88% of revenues for
the nine months ended December 27, 1997 and December 28, 1996 respectively.
Disposable revenue includes $12.2 million and $4.0 million in service
revenue earned for the collection of blood products through BBMS for 1997
and 1996 respectively. Worldwide equipment sales were approximately $26.7
million in 1997 and $27.8 million in 1996. Without the effects of currency,
equipment revenue was unchanged. International sales accounted for
approximately 64% of net revenues for 1997 and 63% in 1996.
Gross profit for the nine months ended December 27, 1997 decreased to
$107.1 million from $120.3 million for the nine months ended December 28,
1996. As a percentage of net revenues, gross profit decreased to 45.6%
from 53.1%. Approximately 40% of the decrease was a result of the
unfavorable effects of the strengthening of the dollar and 10% was due to
the mix shift in product sales from the higher margin surgical disposable
products to the lower margin plasma disposable products. The remaining 50%
of the decrease is shared equally between the investment cost in BBMS and
higher manufacturing costs.
The Company expended $14.1 million in 1997 and $14.3 in 1996 on
research and development (6.0% of net revenues in 1997 and 6.3% of net
revenues in 1996.)
Selling, general and administrative expenses increased to $70.0
million in 1997 from $68.6 million in 1996 and decreased as a percentage of
net revenues to 29.8% from 30.3%. A majority of the dollar increase is
attributed to BBMS.
Operating income, as a percentage of net revenues, decreased in 1997
to (.9)% from 16.5% during the same period in 1996. Without the restructure
charge of $25.2 million taken during the third quarter, the operating
income, as a percentage of net revenues, decreased 6.7% to 9.8% from 16.5%
in 1996. The decrease was due to higher manufacturing costs, the stronger
dollar and the costs associated with BBMS. This decrease was partially
offset by the decrease in selling, general and administrative expenses as a
percentage of net revenues.
Interest expense increased $1.3 million in 1997 to $2.6 million from
$1.3 million for the same period in 1996 due to an increased level of
borrowing.
Interest income increased $0.9 million in 1997 to $3.0 million from
$2.1 million for the same period in 1996, due to the increase in the balance
of sales-type leases.
The provision for income taxes remained at approximately 35% as a
percentage of pretax income.
Liquidity and Capital Resources
The Company historically has satisfied its cash requirements
principally from internally generated cash flow and bank borrowings. During
the nine months ended December 27, 1997, the Company utilized $19.4
million in cash flow from operating activities compared to generating $31.6
million in cash flow from operating activities for the nine months ended
December 28, 1996. The Company's need for funds is derived primarily from
capital expenditures, long-term sales contracts, acquisitions, treasury
stock purchases and working capital. During the nine months ended December
27, 1997, net cash used for investing activities totaled $22.4 million
consisting of $3.9 million (net of $14.0 million in gross write-offs due to
the restructure) related primarily to equipment utilized in the
manufacturing operations and the worldwide plasma business, $10.5 million
for acquisitions in BBMS and $7.3 million from the increase in long-term
sales contracts attributable to growth in the plasma business worldwide.
During the nine months ended December 27, 1997, the need for funds not
satisfied by the internally generated cash flow was satisfied by an increase
in committed borrowings of $44.2 million. Effective October 28, 1997 the
Company completed a private placement of $40.0 million in unsecured senior
notes. The notes have a coupon rate of 7.05% and a ten year term. The
company also amended it's Revolving Credit Agreement to reduce it's
committed line of credit from $40.0 million to $20.0 million.
The Company used $5.6 million to repurchase 318,700 shares of treasury
stock during the nine months ended December 27, 1997. Under the stock
repurchase program approved by the Board at the July 19, 1996 Board of
Directors Meeting there remain approximately 271,000 shares available to
repurchase by the Company at prevailing prices as market conditions warrant.
No shares were purchased during the second quarter.
To date, approximately $300,000 of cash has been used in connection
with the restructuring charge. it is expected that approximately $3.8
million of cash will be utilized in connection with the total restructuring
charge.
At December 27, 1997 and March 29, 1997, the Company had working
capital of $113.8 million and $94.0 million respectively. The Company
believes its sources of cash are adequate to meet projected needs.
Year 2000 Compliance
Based upon information currently available, management does not
anticipate that the Company will incur material costs to update its computer
software programs and applications to be "Year 2000 compliant." The "Year
2000 problem" which is common to most corporations concerns the inability of
information systems, primarily computer software programs, to properly
recognize and process date sensitive information as the year 2000
approaches. The Company has completed an assessment of its internal
systems, has developed a workplan to address this issue and is in the
process of modifying and identifying actions to address affected systems in
time to minimize any detrimental effects on operations. The Company expects
that the costs to ensure its systems are Year 2000 compliant will not be
material to the Company's results of operations, liquidity, or consolidated
financial position.
In addition the Company relies on third party providers for some of
its systems support. To the extent that the Company will be relying on its
outside software vendors, Year 2000 compliance matters will not be entirely
within the Company's direct control. In addition, the Company has
relationships with vendors, customers and other third parties that rely on
computer software that may not be Year 2000 compliant. There can be no
assurance that Year 2000 compliance failures by such third parties will not
have a material adverse effect on the Company.
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
-----------------
Not applicable.
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 10A First Amendment, dated December 26, 1997, to
the Revolving credit Agreement, dated June 25,
1997, among Haemonetics Corporation and Mellon
Bank N.A.
Exhibit 27 Financial Data Schedule
(b). Reports on Form 8-K.
The Company filed Form 8-K on February 3, 1998 to report under Item
5 that Sir Stuart Burgess has become Chairman of the Board and
that James L. Peterson has been elected as President and Chief
Executive Office on January 30, 1998. John F. White stepped down
as Chairman, Director, President and Chief Executive Officer on
that date.
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: February 9, 1998 By: /s/ JAMES L. PETERSON
----------------------------
James L. Peterson, President and
Chief Executive Officer
Date: February 9, 1998 By: /s/ BRIGID A. MAKES
----------------------------
Brigid A. Makes, Chief Financial
Officer, (Principal Financial Officer)
Exhibit 10A
-----------
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
(HAEMONETICS CORPORATION)
This First Amendment to Revolving Credit Agreement (the or this "First
Amendment") is dated as of December 26, 1997 by and among HAEMONETICS
CORPORATION (the "Borrower"), a Massachusetts corporation, and banks from time
to time a party hereto (each a "Bank" and, collectively, the "Banks") and
MELLON BANK, N.A., a national banking association (hereinafter "Mellon"), and
as contract representative for the Banks (in such capacity, the "Agent").
NOW, THEREFORE, for the promises herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
I. Background
As of June 25, 1997, the Borrower and the Banks entered into a revolving
loan arrangement of up to Forty Million Dollars ($40,000,000) (the "Original
Loan"). The Original Loan was evidenced by three promissory notes: a
$20,000.000 note dated June 25, 1997 made by the Borrower to the order of
Mellon Bank, N.A., a $10,000,000 note dated June 25, 1997 made by the Borrower
to the order of BankBoston, N.A. and a $10,000,000 note dated June 25, 1997
made by the Borrower to the order of The Sanwa Bank, Limited (collectively, the
"Notes"). The Borrower and the Banks entered into a revolving credit agreement
dated as of June 25, 1997 (the "Original Credit Agreement").
The Borrower and the Banks have agreed to amend the Original Credit
Agreement to provide for certain revised pricing options and to exclude certain
non-cash charges from the covenant calculations.
The Borrower has agreed to pay an amendment fee upon the execution of
this Amendment in connection with the execution and delivery of this First
Amendment.
Capitalized terms used in this First Amendment and not defined herein
shall have the meaning given such terms in the original Loan Agreement. This
First Amendment, together with the Original Loan Agreement and such other
amendments, modifications, supplements or restatements, as may be made from
time to time, is referred to herein as the "Loan Agreement").
II. Amendment to Article I. Section 1.01 "Certain Definitions" is hereby
amended as follows:
A. The following definition is hereby added: "Federal Funds Effective
Rate" shall mean the rate per annum (based on a year of 360 days and actual
days elapsed and rounded upward to the nearest 1/100 of 1%) 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, 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 Prime Rate.
B. The definition of "Money Market Rate" and "Money Market Rate
Options" is hereby deleted.
C. In the term "Option" the term "the Money Market Rate Option" is
hereby deleted and the term "Federal Funds Rate Option" is hereby inserted in
lieu thereof.
D. The following definition is hereby added. The term "Applicable
Margin" shall mean:
(a) 0.45 of one percent (1%) per annum if Consolidated Total
Indebtedness shall be less than or equal to thirty percent
(30%) of Consolidated Tangible Net Worth;
(b) 0.55 of one percent (1%) per annum if Consolidated Total
Indebtedness shall be greater than thirty percent (30%) of
Consolidated Tangible Net Worth but less than or equal to
forty-two percent (42%) of consolidated Tangible Net Worth;
(c) 0.65 of one percent (1%) per annum if Consolidated Total
Indebtedness shall be greater than forty-two percent (42%) of
Consolidated Tangible Net Worth.
The Applicable Margin shall be determined based upon the Borrower's
Compliance Certificate and the covenant calculations for the fiscal quarter
immediately preceding the date for which the calculation of the Applicable
Margin shall apply. The Applicable Margin, once determined, shall apply for the
entire fiscal quarter.
E. The term "Additional Interest Event" is hereby deleted.
F. In the term "Standard Notice" the term "the Money Market Rate Loan"
is hereby deleted and the term "Federal Funds Rate Loan" is hereby inserted in
lieu thereof.
III. Amendment to Article II. The Credits
Article II is hereby deleted and the following is hereby inserted in lieu
thereof:
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 for each Bank not exceeding at
any time the amount designated as the "Commitment" set opposite such Bank's
signature to this Agreement, as such amount may have been reduced under Section
2.04 at such time (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 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 the
Agent's records, which shall be conclusive on the Borrower 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) 1. Whenever the Borrower desires to request a
Euro-Rate Loan or an AB Rate Loan hereunder it shall give Standard Notice
thereof to the Agent at the Agent's Office 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 the Agent shall promptly notify each Bank
of the information contained therein and of such Bank's proportionate share of
the proposed borrowing. On the date for such Loan specified in such notice from
the Agent and by the close of the applicable Bank's business on such date, each
Bank shall make the proceeds of its Loan available to the Borrower at the
Agent's Office, in funds immediately available at such office (ratably in
proportion to its Commitment). The proceeds of each Loan may be applied by the
Agent in whole or in part against amounts then due and payable by the Borrower
hereunder.
2. Whenever the Borrower desires to request a Federal Funds Effective
Rate Loan hereunder, it shall give Standard Notice thereof to the Agent at the
Agent's Office setting forth the total principal amount of such Loan, selected
in accordance with Section 2.05(c) hereof.
(b) Absent contrary notice from the Borrower by 12:00 o'clock Noon,
Pittsburgh time, one Business Day prior to any Maturity Date (other than the
Expiration Date) the Borrower shall, at the Agent'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 the Agent notice at such
time pursuant to Section 2.03(a) hereof to the effect that the Borrower
requests that the Banks make a Loan to the Borrower on such Maturity Date under
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 the Agent for the account of 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 Consolidated Total Indebtedness shall be greater
than or equal to thirty percent (30%) of Consolidated Tangible Net Worth, the
Commitment Fees shall be calculated at the rate of .35 of 1% per annum
likewise, at such time as Consolidated Total Indebtedness shall be less than
thirty percent (30%) of Consolidated Tangible Net Worth, commencing with the
next following fiscal quarter the Commitment Fee shall decrease to .20 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 Agent
terminate in whole or reduce in part the unused Commitments 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. The Agent shall promptly advise each Bank of the
date of any such termination of the Commitments and of the date and amount of
each such reduction of Commitments. Each such reduction shall be permanent and
may not be reinstated and commencing on the date thereof the Commitment Fees
shall be calculated upon the amount of the Commitments as so reduced.
2.05. Interest Rates: Maturity Periods; Transactional Amounts.
(a) Optional Basis of Borrowing. Each Loan and all Loans made by the
Banks on the same day as part of one borrowing, 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, as follows:
(i) AB Rate Option: The "AB Rate Option" shall mean the Borrower's
option to elect a rate per annum (computed on the basis of a year of 365
or 366 days, as the case may be) (the "AB Rate") for each day equal to
the Prime Rate for such day. "Prime Rate" as used in this Agreement shall
mean the interest rate per annum announced from time to time by Mellon as
its "prime rate". Changes in the AB Rate shall take effect on the date
Agent announces a change in the Base Rate.
(ii) Euro-Rate Option: The "Euro-Rate Option" shall mean the
Borrower's option to elect a rate per annum (based on a year of 360 days
and actual days elapsed) for each day equal to the EuroRate for such day
plus the Applicable Margin. "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 Agent
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 Agent
(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 Agent 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 Agent (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 Agent, the
Agent'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 Agent shall give prompt notice to the Borrower and the Banks of
the Euro-Rate so offered or adjusted from time to time and Agent's
determination thereof shall be conclusive in the absence of manifest
error.
(iii) Federal Funds Effective Rate Option. The "Federal Funds
Effective Rate Option" shall mean the Borrower's option to elect a rate
per annum computed on the basis of 360 days, as the case may be, equal to
the Federal Funds Effective Rate for such day plus the Applicable Margin.
(b) Maturity Periods. At any time when a Borrower shall request Agent
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 Agent may agree
("AB Rate Maturity Period")
Euro-Rate Loan One Week, One, two, three, or six months
("Euro-Rate Maturity Period")
Federal Funds Effective Rate Loan One day ("Federal Funds Rate Maturity
Period")
</TABLE>
(i) Each AB Rate Maturity Period or Euro-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 Federal Funds Effective Rate
Maturity Period or EuroRate 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
Euro-Rate Loan $1,000,000 plus an integral multiple of $1,000
Federal Funds Effective Rate Loan $200,000 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 Prime Rate, such interest rate to change
automatically from time to time effective as of the effective date of each
change in such Prime Rate.
(e) Euro-Rate Unascertainable; Impracticability. If
(i) on any date on which a Euro-Rate would otherwise be set the
Agent shall have in good faith determined (which determination shall be
conclusive) that adequate and reasonable means do not exist for
ascertaining such Euro-Rate; or
(ii) on any date on which a Euro-Rate would otherwise be set the
Required Banks shall have in good faith determined (which determination
shall be conclusive absent manifest error) that the effective cost to
each of such Required Banks of funding its Loan to which such rate would
apply, will exceed the interest rate payable by the Borrower in respect
thereof under this Agreement; or
(iii) at any time any Bank shall have determined in good faith
(which determination shall be conclusive absent manifest error) that the
making, maintenance or funding by such Bank of any Euro-Rate Loan has
been made impracticable or unlawful by (A) the occurrence of a
contingency which materially and adversely affects the interbank
eurodollar market, or (B) 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 or Banks shall forthwith so notify the
Agent, and the Agent shall forthwith advise the other Banks and the Borrower
thereof. A certificate as to the specific circumstances specified in such
notice shall be promptly submitted by such Bank or Banks to the Agent (which
shall promptly confirm the same to the Borrower and the other Banks).
Upon such date as shall be specified in such notice (which shall not be
earlier than the date such notice is given) the obligation of each of the Banks
(in the case of clauses (i) and (ii) above) or of the Bank giving such notice
(in the case of clause (iii) above) to allow the Borrower to select the
Euro-Rate Option, shall be suspended until the Bank furnishing such notice
shall have later notified the Agent of its determination in good faith (which
determination shall be presumed correct) that the circumstances giving rise to
such previous determination no longer exist.
If a Bank notifies the Agent of a determination under subsection (iii) of
this Section 2.05(e), any Euro Rate Loans covered by such notice which are then
outstanding shall be due and payable on the date specified in such notice.
Absent contrary notice from the Borrower to the Agent by 12:00 o'clock Noon,
Pittsburgh time, one Business Day prior to such date, the Borrower shall, at
the option of the Agent, be deemed to have notified the Agent at such time
pursuant to Section 2.05(a) to the effect that the Borrower requests the Banks
to make AB Rate Loans to the Borrower on such date in an aggregate principal
amount equal to the aggregate principal amount of the outstanding Loans covered
by such notice.
If, at the time the Agent or the Required Banks, as the case may be, make
a determination under subsection 2.05(e) in respect of the Euro-Rate Option,
the Borrower has previously notified the Agent that it wishes to select that
Option in respect of a proposed Loans, but such Option has not yet gone into
effect, such notification shall be deemed to provide for selection of the 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) in the case of any AB Rate Loan, one Business Day's
prior written notice to the Agent, and Borrower shall simultaneously with
making any such prepayment provide a notice of prepayment to Agent, provided,
however, that any prepayment of any AB Rate Loan shall be in a minimum
principal amount of $500,000; and (ii) five Business Days' prior written notice
to the Agent 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 notice in writing to the Agent, 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.
In the case of AB Rate Loans and Euro Rate Loans only, the Agent shall deliver
prepayment notices received from the Borrower to the other Banks. 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 and any amounts due under Section 2.09(b), shall be due and
payable.
2.07 Interest Payment Dates. Interest on each AB Rate Loan and each
Federal Funds Effective 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 Agent, such payments shall be made to the Agent 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, and
shall be distributed by the Agent to each Bank pro-rata based upon the
Commitments of each Bank, except as may be otherwise provided herein. The
Borrower shall, at the time of making each prepayment under this Agreement,
specify to the Agent the Loan or Loans or other amounts payable by the Borrower
hereunder to which such payment is to be applied and, if the Borrower fails to
so specify or if an Event of Default has occurred, the Agent may distribute
such payment to the Banks in such manner as it or the Required Banks may
determine to be appropriate. 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 any
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 any Bank or such Notional Euro-Rate Funding Office imposed by the
jurisdiction in which any 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 any 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
Agent, who will in turn notify the Borrower of the amount determined (using any
averaging and attribution methods) by such Bank in good faith (which
determination shall be conclusive) to be necessary to compensate such 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; provided that, if such Bank has withheld or delayed
its issuance of such notice, such Bank shall not be entitled to receive
additional amounts pursuant to this Section 2.09(a) for periods occurring prior
to the 90th day before the Bank gave such notice, and provided further that
each Bank agrees not to seek such compensation unless it seeks similar
compensation from other borrowers of such Bank from which it is entitled to
seek compensation. Such amount shall be due and payable by the Borrower to
Agent for distribution to such Bank no later than ten (10) business days after
such notice from Agent is given. A certificate by such Bank as to the amount
due under this 2.09(a) from time to time describing in reasonable detail the
determination of such amount shall be conclusive absent manifest error. Each
Bank agrees that it will use good faith efforts promptly to notify the Agent of
the occurrence of any event that would give rise to a payment under this
Section 2.09(a).
(b) Indemnity. In addition to the compensation required by subsection
(a) of this Section 2.09, the Borrower shall indemnify each Bank 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 on a
day other than the last day of the corresponding Maturity Period (whether
or not such payment or prepayment is mandatory including, without
limitation a prepayment required to be made under Section 2.03(c) hereof,
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 any Bank or the Agent in connection with the Borrower's use of
the proceeds of any Loan and/or any 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
(10) 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 an adverse effect on such
Bank or 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.
IV. Amendment Fee. The Borrower shall pay, upon the execution of this First
Amendment by the Borrower and the Banks, an amendment facility fee in the
amount of 1/8 of 1% of the Commitment. Such amount shall be deemed fully earned
upon the execution of this First Amendment by the Borrower and the Banks and
shall not be subject to rebate or return, in whole or in part.
V. Ratification and Consent
A. The loan documents shall otherwise remain unaltered, ratified,
confirmed and in full force and effect. The Borrower hereby also ratifies and
confirms the Notes.
B. The Borrower represents and warrants as follows: There are no
defenses, offsets or counterclaims against obligations to the Banks evidenced
by the Notes or the other loan documents, and to the extent there are any
defenses, offsets or counterclaims, the same are hereby waived. All the
representations and warranties contained in the Loan Agreement are true,
correct and accurate in all material respects as of the date hereof.
C. The Banks hereby agree that up to $21.2 million in non-cash charges
as outlined in the attached Schedule 1 to be taken by the Borrower in the
fiscal third quarter of 1997 ending December 27, 1997, shall be excluded from
the covenant calculations in Section 6.1 for which such quarter is used. In all
other respects each of the covenant terms remains unmodified and unchanged.
[End of Page]
[Signature Page for First Amendment to Revolving Credit Agreement
(Haemonetics Corporation)]
IN WITNESS WHEREOF, the parties hereto have set their hand and seal as of
the date first above written.
Dated as of December 26, 1997.
HAEMONETICS CORPORATION
By: John F. White
-----------------------------------
Its Chief Executive Officer
MELLON BANK
By: Rita C. Long
-----------------------------------
Its Vice President
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<TOTAL-LIABILITY-AND-EQUITY> 359,431
<SALES> 234,723
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<INCOME-PRETAX> (1,793)
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