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 3, 1999 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.
26,441,838 shares of Common Stock, $ .01 par value, as of
---------------------------------------------------------
July 3, 1999
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HAEMONETICS CORPORATION
INDEX
PAGE
----
PART I. Financial Information
Consolidated Statements of Operations - 2
Three Months Ended July 3, 1999
and July 4, 1998
Consolidated Balance Sheets - July 3, 1999 3
and April 3, 1999
Consolidated Statements of Stockholders' Equity - 4
Three Months Ended July 3, 1999
Consolidated Statements of Cash Flows - 5
Three Months Ended July 3, 1999 and July 4, 1998
Notes to Consolidated Financial Statements 6-10
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-20
PART II. Other Information 21
Signatures 22
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
July 3, July 4,
1999 1998
-----------------------
<S> <C> <C>
Net revenues $69,122 $71,996
Cost of goods sold 36,305 36,026
----------------------
Gross profit 32,817 35,970
Operating expenses:
Research and development 3,623 3,803
Selling, general and administrative 20,744 24,864
----------------------
Total operating expenses 24,367 28,667
----------------------
Operating income 8,450 7,303
Interest expense (1,015) (979)
Interest income 1,117 1,083
Other income, net 232 220
----------------------
Income from continuing operations
before provision for income taxes 8,784 7,627
Provision for income taxes 2,811 2,670
----------------------
Earnings from continuing operations $ 5,973 $ 4,957
======================
Discontinued operations:
Loss from operations, net of income tax
benefit of $0 in 1999 and ($31) in 1998 0 (57)
----------------------
Net Income $ 5,973 $ 4,900
======================
Basic income(loss) per common share
Continuing operations $ 0.223 $ 0.186
Discontinued operations 0.000 (0.002)
Net income 0.223 0.184
Income(loss) per common share assuming dilution
Continuing operations $ 0.223 $ 0.186
Discontinued operations 0.000 (0.002)
Net income 0.223 0.184
Weighted average shares outstanding
Basic 26,729 26,585
Diluted 26,830 26,627
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share data)
<TABLE>
<CAPTION>
July 3, April 3,
ASSETS 1999 1999
-----------------------
<S> <C> <C>
Current assets:
Cash and short term investments $ 53,297 $ 56,319
Accounts receivable, less allowance of
$780 at July 3, 1999 and $747 at
April 3, 1999 58,627 62,975
Inventories 57,757 59,773
Current investment in sales-type
leases, net 11,198 12,303
Deferred tax asset 29,325 29,741
Other prepaid and current assets 7,755 10,211
-----------------------
Total current assets 217,959 231,322
-----------------------
Property, plant and equipment 172,116 178,066
Less accumulated depreciation 89,946 95,050
-----------------------
Net property, plant and equipment 82,170 83,016
Other assets:
Investment in sales-type leases, net
(long term) 24,576 24,716
Distribution rights, net 10,439 10,518
Other assets, net 6,674 6,787
-----------------------
Total other assets 41,689 42,021
-----------------------
Total assets $341,818 $356,359
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities
of long-term debt $ 9,034 $ 6,645
Accounts payable 9,529 10,666
Accrued payroll and related costs 8,157 9,229
Accrued income taxes 17,383 21,850
Other accrued liabilities 13,676 17,476
Current liabilities and accrued
losses net of current assets of
discontinued operations 2,695 3,268
-----------------------
Total current liabilities 60,474 69,134
-----------------------
Deferred income taxes 11,295 11,684
Long-term debt, net of current maturities 52,399 52,526
Other long-term liabilities 1,576 1,008
Long-term liabilities, net of long-term
assets of discontinued operations --- 146
Stockholders' equity:
Common stock, $.01 par value;
Authorized - 80,000,000 shares;
Issued 29,706,373 shares at July 3, 1999;
29,702,623 shares at April 3, 1999 297 297
Additional paid-in capital 65,586 65,504
Retained earnings 217,762 211,834
Cumulative translation adjustments (12,306) (9,825)
-----------------------
Stockholders' equity before treasury stock 271,339 267,810
Less: treasury stock 3,264,535 shares at
cost at July 3, 1999 and 2,756,969
shares at cost at April 3, 1999 55,265 45,949
-----------------------
Total stockholders' equity 216,074 221,861
-----------------------
Total liabilities and stockholders'
equity $341,818 $356,359
=======================
Supplemental disclosure of balance sheet
information:
Net debt $8,136 $ 2,852
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Cumulative Total
------------ Paid-in Treasury Retained Translation Stockholders' Comprehensive
Shares $'s Capital Stock Earnings Adjustment Equity Income
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 3, 1999 29,703 $297 $65,504 ($45,949) $211,834 ($9,825) $221,861
=======================================================================================
Employee stock purchase
plan --- --- 230 (45) --- 185
Exercise of stock options
and related tax benefit 4 0 82 --- --- --- 82
Purchase of treasury stock --- --- --- (9,546) --- --- (9,546)
Net income --- --- --- --- 5,973 --- 5,973 $5,973
Foreign currency
translation adjustment --- --- --- --- --- (2,481) (2,481) (2,481)
------
Comprehensive income --- --- --- --- --- --- --- $3,492
--------------------------------------------------------------------------------======
Balance, July 3, 1999 29,707 $297 $65,586 ($55,265) $217,762 ($12,306) $216,074
=========================================================================
</TABLE>
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited-in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
July 3, July 4,
1999 1998
-----------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 5,973 $ 4,900
Less net loss from discontinued operations 0 (57)
----------------------
Net income from continuing operations 5,973 4,957
Adjustments to reconcile net income to
net cash provided by operating activities:
Non cash items:
Depreciation and amortization 7,359 5,128
Deferred tax benefit 1 (261)
Other 234 1,665
Change in operating assets and liabilities:
Decrease in accounts receivable - net 3,216 1,574
(Increase) decrease in inventories 1,234 (2,881)
(Increase) decrease in sales-type
leases (current) 637 (876)
Decrease in prepaid income taxes 1,208 7,725
(Increase) decrease in other assets 938 (1,464)
Decrease in accounts payable, accrued
expenses and other current
liabilities (9,461) (2,31)
----------------------
Net cash provided by operating
activities, continuing operations 11,339 13,196
----------------------
Net cash provided by (used in)
operating activities, disco (4,281) (2,306)
----------------------
Net cash provided by operating
activities 7,058 10,890
Cash Flows from Investing Activities:
Capital expenditures on property, plant
and equipment, net of retirements
and disposals (6,942) (3,834)
Net decrease in sales-type leases
(long-term) 562 2,750
----------------------
Net cash (used in) investing
activities, continuing operations (6,380) (1,084)
----------------------
Net cash provided by (used in)
investing activities, discontinued 3,562 (186)
----------------------
Net cash used in investing activities (2,818) (1,270)
Cash Flows from Financing Activities:
Payments on long-term real
estate mortgage (62) (50)
Net increase (decrease) in
short-term revolving credit agreements 2,444 (5,038)
Net decrease in long-term
credit agreements (20) (2,083)
Employee stock purchase plan 185 0
Exercise of stock options and
related tax benefit 82 24
Purchase of treasury stock (9,546) 0
----------------------
Net cash provided by (used in)
financing activities (6,917) (7,147)
Effect of exchange rates on cash and
cash equivalents (345) 16
----------------------
Net increase (decrease) in cash and
cash equivalents (3,022) 2,489
Cash and cash equivalents at beginning
of period 56,319 21,766
----------------------
Cash and cash equivalents at end of period $53,297 $24,255
======================
Supplemental disclosures of cash
flow information:
Net decrease in cash and cash
equivalents, discontinued operations $ (719) $(2,492)
Net increase (decrease) in cash and
cash equivalents, continued $(2,303) $ 4,981
Increase (decrease) in net debt $ 5,384 $(9,660)
Interest paid $ 1,674 $ 444
Income taxes paid (refunded) $ 3,835 $(7,416)
=======================
</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. Fiscal year 2000 includes 52 weeks with the first quarter, ended
July 3, 1999 including 13 weeks. Fiscal year 1999 included 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.
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 ($12.3) million and ($9.8)
million at July 3, 1999 and April 3, 1999, respectively.
4. NEW PRONOUNCEMENTS
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 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
SFAS No. 133 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, or in the
case of a hedge of a forecasted probable transaction, a derivative's gains and
losses are included in other comprehensive income until the transaction is
consummated. Additionally, a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000. A company
may implement SFAS No. 133 as of the beginning of any fiscal quarter after
issuance. SFAS No. 133 cannot be applied retroactively. The impacts of
adopting SFAS No. 133 on the Company's financial statements or the timing
of adoption of SFAS No. 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
Foreign currency transactions and financial statements are translated
into U.S. dollars following the provisions of SFAS No. 52, "Foreign Currency
Translation." Accordingly, assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at exchange rates in effect at year end. Net
revenues and costs and expenses are translated at average rates in effect
during the year. The effects of exchange rate changes on the Company's assets
and liabilities are included in the cumulative translation adjustment account.
Included in other income (expense) in the consolidated statement of operations
in 2000 and 1999 are $2,000 and ($180,000), respectively, in foreign currency
transaction gains (losses).
The Company enters into forward exchange contracts to hedge certain firm
sales commitments to customers that are denominated in foreign currencies. The
purpose of the Company's foreign hedging activities is to minimize, for a
period of time, the unforeseen impact on the Company's results of operations of
fluctuations in foreign exchange rates. The Company also enters into forward
contracts that settle within 35 days to hedge certain intercompany receivables
denominated in foreign currencies. Actual gains and losses on all forward
contracts are recorded in operations, offsetting the gains and losses on the
underlying transactions being hedged. These derivative financial instruments
are not used for trading purposes. The cash flows related to the gains and
losses on these foreign currency hedges are classified in the consolidated
statements of cash flows as part of cash flows from operating activities.
At July 3, 1999 and July 4, 1998, the Company had forward exchange
contracts, all maturing in less than twelve months, to exchange foreign
currencies (major European currencies and Japanese yen) primarily for U.S.
dollars totaling $143,360,000 and $91,675,000 respectively. Of the respective
balances, $49,694,000 and $17,707,000 represented contracts related to
intercompany receivables that settled within 35 days. The balance of the
contracts relate to firm sales commitments. Gross unrealized gains and losses
from hedging firm sales commitments, based upon current forward rates, were a
$4,117,000 gain and a ($2,477,000) loss at July 3, 1999 and a $5,097,000 gain
at July 4, 1998. Deferred gains and losses are recognized in earnings when
the transactions being hedged are recognized. Management anticipates that
these deferred amounts at July 3, 1999 will be offset by the foreign
exchange effect on sales of products to international customers in future
periods.
The Company is exposed to credit loss in the event of nonperformance by
counter-parties on these foreign exchange contracts. The Company does not
anticipate nonperformance by any of these parties.
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 3, April 3,
1999 1999
-----------------------------
(in thousands)
<S> <C> <C>
Raw materials $13,703 $14,497
Work-in-process 4,980 5,106
Finished goods 39,074 40,170
----------------------------
$57,757 $59,773
============================
</TABLE>
7. NET INCOME PER SHARE
The following table provides a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations, as
required by Statement of Financial Accounting Standards, "SFAS" No. 128,
"Earnings Per Share." Basic EPS is computed by dividing reported earnings
available to stockholders by weighted average shares outstanding. Diluted EPS
includes the effect of other common stock equivalents.
<TABLE>
<CAPTION>
For the three months ended
--------------------------
July 3, July 4,
1999 1998
----------------------
<S> <C> <C>
Basic EPS
- ---------
Net Income(loss) $ 5,973 $ 4,900
Weighted Average Shares 26,729 26,585
----------------------
Basic income(loss) per share $ .223 $ .184
----------------------
Diluted EPS
- -----------
Net Income(loss) $ 5,973 $ 4,900
Basic Weighted Average shares 26,729 26,585
Effect of Stock options 101 42
----------------------
Diluted Weighted Average shares 26,830 26,627
----------------------
Diluted income(loss) per share $ .223 $ .184
----------------------
</TABLE>
8. DISCONTINUED OPERATIONS
During fiscal year 1999, the Company sold six of its seven regional blood
systems for total cash proceeds of $5,325,000. Additionally, on May 2, 1999,
the Company sold its one remaining center completing the divestiture of its
BBMS business.
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 3, 1999, the operating loss for BBMS of $593 was
charged to the discontinued operations provision established in the fourth
quarter of fiscal year 1998. Effective May 1999, all blood centers within
BBMS have been divested.
The operating losses for BBMS are detailed as follows, in thousands:
<TABLE>
<CAPTION>
July 3, July 4,
1999 1998
-----------------------
(in thousands)
<S> <C> <C>
Net Revenues $ 413 $6,091
Gross Profit (24) 260
Operating expenses:
Research and Development 0 0
Selling, general and administrative 569 2,934
--------------------
Total operating expenses 569 2,934
Operating loss (593) (2,674)
Other expense -- (88)
Tax benefit (190) (967)
--------------------
Net loss (403) (1,795)
Operating loss (net of taxes)
charged to reserve 403 1,738
--------------------
Reflected on Consolidated
Statement of Operations $ --- $ (57)
====================
</TABLE>
Other income(expense) includes an allocation of corporate interest
expense of approximately $88,000 for the three months ended July 4, 1998.
No interest was allocated for the three months ended July 3, 1999 as all
blood centers have been divested effective May 1999. The allocation of
corporate interest was calculated based upon the percentage of net assets of
BBMS to total domestic assets.
The remaining obligations relate primarily to severance and operating
lease commitments. With the divestiture complete, the Company anticipates
that the remaining reserve is adequate.
The remaining net assets of BBMS included in the consolidated balance
sheet for July 3, 1999 and April 3, 1999 are as follows:
<TABLE>
<CAPTION>
July 3, April 3,
1999 1999
-----------------------
(in thousands)
<S> <C> <C>
Current Assets $ 165 $1,128
Net property, plant and equipment -- 1,075
Other assets -- 129
---------------------
Total assets $ 165 $2,332
Current liabilities and accrued losses $2,860 $4,396
Other long-term liabilities -- 1,350
---------------------
Total liabilities $2,860 $5,746
</TABLE>
9. SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION
Segment Definition Criteria
The Company manages its business on the basis of one operating segment: the
design, manufacture and marketing of automated blood processing systems.
Haemonetics chief operating decision-maker uses consolidated results to make
operating and strategic decisions. Manufacturing processes, as well as the
regulatory environment in which the company operates, are largely the same for
all product lines.
Product and Service Segmentation
The Company's principal product offerings include blood bank, surgical and
plasma products.
The blood bank products comprise machines and single use disposables that
perform "apheresis," the separation of whole blood into its components and
subsequent collection of certain components. The device used for blood
component therapy is the MCS(R)+, mobile collection system.
Surgical products comprise machines and single use disposables that perform
intraoperative autologous transfusion ("IAT") or surgical blood salvage as it
is more commonly known. Surgical blood salvage is a procedure whereby shed
blood is cleansed and then returned back to a patient. The devices used to
perform this are a full line of Cell Saver(R)autologous blood recovery
systems.
Plasma collection products are machines and disposables that, like blood bank,
perform apheresis for the separation of whole blood components and subsequent
collection of plasma. The device used in automated plasma collection is the
PCS(R)2.
Three months ended (in thousands)
<TABLE>
<CAPTION>
July 3, 1999 Blood Bank Surgical Plasma Other Total
------------- ---------- -------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
Revenues from external customers 29,051 15,851 21,684 2,536 69,122
<CAPTION>
July 4, 1998
------------
Revenues from external customers 29,652 16,831 21,738 3,775 71,996
</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 3, 1999 July 4, 1998 1999/98
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues 100.0% 100.0% 4.0%
Cost of goods sold 52.5 50.0 0.8
--------------------------------------
Gross Profit 47.5 50.0 (8.8)
Operating Expenses:
Research and development 5.3 5.3 (4.7)
Selling, general and
administrative 30.0 34.5 (16.6)
--------------------------------------
Total operating
expenses 35.3 39.8 (15.0)
Operating income 12.2 10.1 15.7
Interest expense (1.5) (1.4) 3.7
Interest income 1.6 1.5 3.1
Other income .3 0.3 5.4
--------------------------------------
Income from continuing
operations before
provision for
income taxes 12.6 10.6 15.2
Provision for income
taxes 4.0 3.7 5.3
--------------------------------------
Earnings from
continuing operations 8.6% 6.9% 20.5%
======================================
</TABLE>
Three Months Ended July 3, 1999 Compared to Three Months Ended July 4, 1998
Net Revenue Summary
- -------------------
(in thousands)
- -------------------
<TABLE>
<CAPTION>
Percent Increase / (Decrease)
------------------------------------
By geography: On a comparable*
Actual dollars basis at constant
1999 1998 as reported currency
----------------------------------------------------------------
<S> <C> <C> <C> <C>
United States $22,520 $23,013 (2.1)% 5.4%
International 46,602 48,983 (4.9) 9.2
--------------------------------------------------------
Net revenues $69,122 71,996 (4.0)% 7.9%
<CAPTION>
Percent Increase / (Decrease)
------------------------------------
By product type: On a comparable*
Actual dollars basis at constant
1999 1998 as reported currency
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Disposables $62,119 $64,470 (3.6)% 8.7%
Misc & service 2,536 3,775 (32.8) (25.1)
Equipment 4,467 3,751 19.1 27.2
--------------------------------------------------------
Net revenues $69,122 $71,996 (4.0)% 7.9%
<CAPTION>
Percent Increase / (Decrease)
Disposables ------------------------------------
By product line: On a comparable*
Actual dollars basis at constant
1999 1998 as reported currency
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Surgical $14,564 $14,908 (2.3)% 8.1%
Blood bank** 27,050 27,991 (3.4) 11.0
Plasma 20,505 21,571 (4.9) 6.3
--------------------------------------------------------
Disposable revenues 62,119 64,470 (3.6)% 8.7%
<FN>
<F*> Comparable Basis Adjustments
Adjustments made for comparison purposes only were as follows:
All Profit and Loss Statement Items
To make 1998 comparable with 1999, the additional (14th) week in Q1 of
1998 was removed.
Operating Expenses
To make 1998 comparable with 1999, the settlement cost relating to
litigation included in SG&A expenses in Q1 of 1998 was removed.
<F**> Includes red cell disposables
</FN>
</TABLE>
Three months ended July 3, 1999 compared to three months ended July 4, 1998
Net Revenues
Net revenues in 1999 decreased 4.0% to $69.1 million from $72.0
million in 1998. With currency rates held constant and reflected on a
comparable basis, net revenues increased 7.9% from 1998 to 1999. Disposable
sales decreased approximately 3.6% year over year at actual rates. With
currency rates held constant, disposable sales on a comparable basis
increased 8.7%. The 8.7% increase was a result of growth in all three
product lines, worldwide surgical 8.1%, worldwide blood bank 11.0% and
worldwide plasma 6.3%. Constant currency sales of disposable products on a
comparable basis, excluding service and other miscellaneous revenue,
accounted for approximately 89% and 90% of net revenues for 1999 and 1998,
respectively. Service generated from equipment repairs performed under
preventive maintenance contracts or emergency service billings and
miscellaneous revenues accounted for approximately 3.6% and 5.2% of the
Company's net revenues, at constant currency, for 1999 and 1998,
respectively. Equipment revenues increased approximately 19.1% from $3.8
million in 1998. With currency rates held constant and reflected on a
comparable basis, equipment revenues increased 27.2% from 1998 to 1999. The
equipment increase was primarily attributable to sales of equipment in Asia.
International sales as reported accounted for approximately 67% and 68% of
net revenues for 1999 and 1998, respectively.
Gross profit
Gross profit of $32.8 million in 1999 decreased $3.2 million from
$36.0 million 1998. At constant currency rates and with gross profit
reflected on a comparable basis, gross profit as a percent of sales
decreased slightly by 0.3% and increased in dollars by $2.3 million from
1998 to 1999. The Company's Customer Oriented Redesign for Excellence or
CORE Program contributed approximately $0.5 million to this improvement in
gross profit through labor savings.
Expenses
The Company expended $3.6 million (5.2% of net revenues) on research
and development in 1999 and $3.8 million (5.3% of net revenues) in 1998. At
constant currency rates and with research and development reflected on a
comparable basis, research and development as a percent of sales decreased
slightly by 0.4% and remained unchanged in dollars from 1998 to 1999.
Selling, general and administrative expenses decreased to $20.7
million in 1999 from 24.9 million in 1998. At constant currency rates and
with selling, general and administrative reflected on a comparable basis,
selling, general and administrative expenses increased $0.8 million, but
decreased 0.9% as a percent of sales from 1998 to 1999.
Operating Income
Operating income as a percentage of net revenues increased 2.1
percentage points to 12.2% in 1999 from 10.1% in 1998. At constant currency
rates and reflected on a comparable basis, operating income, as a percent of
sales, increased 1.2% from 1998 or $1.5 million. The $1.5 million increase
in operating income resulted from gross profit improvements.
Other Income and Expense
Interest expense, interest income and other income were relatively
unchanged from 1998 to 1999.
Taxes
The provision for income taxes, as a percentage of pretax income, was
lowered by the Company from 35.0% in 1998 to 32.0% in 1999. The Company
expects the provision rate to remain at 32.0% for the full 12 months of
fiscal 2000. Contributing to the decrease in the tax rates was a decrease
in the Japanese statutory tax rate, the allocation of income between
jurisdictions and greater utilization of foreign sales corporation benefits.
Results of Discontinued Operations (Blood Bank Management Services, "BBMS")
Three Months Ended July 3, 1999 Compared to Three Months Ended July 4, 1998
As a result of the divestiture of all BBMS centers effective May 1999,
financial activity for Q1 1999 was minimal. Net revenues in 1999 decreased
93% to $0.4 million in 1999. Gross profit (loss) decreased to $(24.0)
thousand in 1999 from $0.3 million in 1998 and operating losses decreased to
$(0.4) million in 1999.
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 3, 1999, the Company decreased its
cash balances, before the effect of exchange rates, by $2.7 million from
operating, investing and financing activities which represents a decrease of
$5.2 million from the $2.5 million generated by the Company's operating,
investing and financing activities during the three months ended July 4,
1998. The decrease was largely a result of an increase of $5.4 million in
net cash utilized by the Company's operating and investing activities offset
by $0.2 million of additional cash provided by the Company's financing
activities.
Operating Activities:
The Company generated $11.3 million in cash from operating activities
of continuing operations in 1999 as compared to $13.2 million utilized
during 1998. The $1.9 million decrease in operating cash flow from
continuing operations was a result of $2.1 million increase in net income
adjusted for non cash items, $1.6 million in account receivables; a $5.6
million decrease in inventory and short-term sales-type leases and a $2.4
million decrease in other assets. These increased sources of cash were
offset by a $6.5 million decrease recorded to the prepaid income tax account
and a $7.1 million decrease in accounts payable, accrued expenses (including
$4.5 million reduction in accrued income taxes) and other current
liabilities.
During 1999, the Company's discontinued operations utilized $4.3
million in operating cash flows, an increase of $2.0 million over the $2.3
million of uses in 1998.
Investing Activities
The Company utilized $6.4 million in cash for investing activities
from continuing operations in 1999, an increase of $5.3 million from 1998.
During the three months ended July 3, 1999, the Company incurred $6.9
million in capital expenditures net of retirements and disposals. Included
in this amount is a $0.4 million net investment in long-term demonstration
assets. During the three months ended July 4, 1998, the Company utilized
$3.8 million for capital expenditures net of retirements and disposals,
including $0.2 million of net retirements for long-term demonstration
assets. Finally, the Company reduced its investment in long-term sales-type
leases by $0.6 million in the first quarter of fiscal 1999, compared with
decreased investment of $2.8 million during the first quarter of fiscal
1999.
During the three months ended July 3, 1999, discontinued operations
provided $3.6 million in cash. This reflects a decrease in capital investing
of $3.8 million compared to the $0.2 million invested during the three
months ended July 4, 1998.
Financing Activities:
During the three months ended July 3, 1999, the Company's net debt
increased $5.4 million, a $15.0 million increase as compared to the three
months ended July 4, 1998. This $15.0 million increase stems from the
operating and investing activities in 1999 which provided $5.4 million less
cash than 1998 and the Company's repurchase in 1999 of 521,337 shares of
common stock for its treasury for a cost of $ 9.6 million.
At July 3, 1999, the Company had working capital of $157.5 million.
This reflects an decrease of $4.7 million in working capital for the three
months ended July 3, 1999. The Company believes its sources of cash are
adequate to meet its projected needs.
Recent Accounting Pronouncements
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 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 SFAS No. 133 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, or in the case of a hedge of a
forecasted probable transaction, a derivative's gains and losses are
included in other comprehensive income until the transaction is consummated.
Additionally, a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. SFAS No. 133
is effective for fiscal years beginning after June 15, 2000. A company may
implement SFAS No. 133 as of the beginning of any fiscal quarter after
issuance. SFAS No. 133 cannot be applied retroactively. The impacts of
adopting SFAS No. 133 on the Company's financial statements or the timing of
adoption of SFAS No. 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.
Cautionary Statement Regarding Forward-Looking Information
Statements contained in this report, as well as oral statements made
by the Company that are prefaced with the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," "designed" and
similar expressions, are intended to identify forward looking statements
regarding events, conditions and financial trends that may affect the
Company's future plans of operations, business strategy, results of
operations and financial position. These statements are based on the
Company's current expectations and estimates as to prospective events and
circumstances about which the Company can give no firm assurance. Further,
any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date
on which such statement is made. As it is not possible to predict every new
factor that may emerge, forward-looking statements should not be relied upon
as a prediction of actual future financial condition or results. These
forward-looking statements, like any forward-looking statements, involve
risks and uncertainties that could cause actual results to differ materially
from those projected or unanticipated. Such risks and uncertainties include
technological advances in the medical field and the Company's ability to
successfully implement products that incorporate such advances, product
demand and market acceptance of the Company's products, regulatory
uncertainties, the effect of economic conditions, the impact of competitive
products and pricing, foreign currency exchange rates, changes in customers'
ordering patterns, the effect of uncertainties in markets outside the U.S.
(including Europe and Asia) in which the Company operates, and the
implications of Year 2000 including but not limited to the cost and expense
of updating software and hardware and any potential system interruptions.
The foregoing list should not be construed as exhaustive.
YEAR 2000 COMPLIANCE UPDATE
Haemonetics is aware of the potential for industry wide business
disruption that could occur due to problems related the "Year 2000" issue.
It is the belief of Haemonetics Management that the Company has a prudent
plan in place to address these issues within the Company and its supply
chain. The components of its plan include: an assessment of internal
systems for modification and/or replacement; communication with external
vendors to determine their state of readiness and their ability 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
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 prudent action steps are
being taken; and the development of a contingency plan.
State of Readiness
Haemonetics has developed a comprehensive plan to reduce the
probability of operational difficulties due to Year 2000 related failures.
While there is still a significant amount of work to do, the Company
believes that it is on track towards a timely completion. Overall
Haemonetics believes that it has completed the inventory of systems and
non-systems related Year 2000 exposures. The Company continues to make
progress in remediating known Year 2000 exposures. The Company will
develop additional remediation approaches as issues are identified.
Internal Systems (IT)
The process Haemonetics is following to achieve
Year 2000 compliance for internal IT systems is as follows:
1. Develop an inventory of all IT components (hardware, software)
2. Determine the Year 2000 compliance status of each
3. Determine the importance of Year 2000 compliance for each
component (implications of failure)
4. Prioritize non-compliant components based on importance
5. Determine method to be used to achieve compliance for each
component (modify, replace, cease use)
6. Complete the planned action
7. Test the component
The inventory of all IT components in use throughout the Company has
been completed. The assessment of Year 2000 status for all components has
been completed. Fifteen systems, all commercial packages, are used
company-wide for business transaction processing and accounting. All
fifteen systems are Year 2000 compliant. The Company has identified 326
other business applications in use by the Company that are less critical.
Of these systems 323 are currently compliant. Year 2000 compliance of the
remaining three applications is expected by August 31, 1999. The Company
has completed an assessment of its 1,019 pieces of IT infrastructure
(servers, networks, phone systems, system software). Currently 1,016
pieces are Year 2000 compliant. The Company intends to have the remaining
three systems, which are phone systems, Year 2000 compliant by August 31,
1999. In addition, the Company is in the process of a second round of
testing for critical components of infrastructure and applications that
have been assessed as compliant.
Suppliers
The Company is in the process of communicating with its external
vendors of goods and services to gain an understanding of their state of
Year 2000 readiness and their ability to maintain an uninterrupted supply
to Haemonetics. The Company has sent letters to over 1,000 vendors
outlining its approach towards the Year 2000 issue and asking for the
vendors' commitment to resolve any issues they may have. They have also
been asked to complete a short questionnaire and to inform us of any known
compliance issues. The Company has received many responses to the
questionnaire and is in the process of reviewing them. The Company has sent
a detailed questionnaire to vendors it views as critical to its business.
A critical vendor is one whose inability to continue to provide goods and
services would have a serious adverse impact on the Company's ability to
produce, deliver, and collect payment for Haemonetics goods and/or
services. Senior management members are coordinating the identification of
these vendors for their respective business units. Many of these vendors
have been contacted and requested to complete the detailed questionnaire on
Year 2000. The Company anticipates contacting the remaining critical
vendors as part of its contingency planning process. Haemonetics will
visit and/or audit one or more of these critical vendors to validate their
statements regarding Year 2000 readiness.
Production Equipment
The Company has completed an inventory of production equipment
currently used at Haemonetics. The Year 2000 readiness of this equipment
is being determined through communication with the equipment manufacturers
and testing where appropriate. Through this inventory and assessment
process the Company has identified fewer than 10 pieces of equipment with
Year 2000 issues. All production equipment, which has been identified as
not Year 2000 compliant has either been repaired, replaced, or is scheduled
for such action. At this time the Company is not aware of any production
equipment whose current or anticipated use is affected by the Year 2000
issue and which is not expected to be made compliant. In the event that
any Year 2000 issues are identified in the future, it is the Company's
intention to continue to repair or replace non-compliant production
equipment prior to operating difficulties, or develop alternative means of
operation. Haemonetics remains aware of the potential for imbedded logic
within microchips to cause equipment failure. The Company believes that
its action plan provides a sound approach towards evaluating production
equipment, however, it may be impracticable or impossible to test certain
items of production equipment for Year 2000 readiness. To the extent such
untested equipment is not Year 2000 ready, it may fail to operate on
January 1, 2000, resulting in possible production delays.
Facility Related Issues
The Company is in the process of completing an inventory and
evaluating facilities related equipment such as security, heating,
elevator, telephone and other service equipment with the potential for Year
2000 related failures. The Year 2000 readiness of this equipment will be
determined through communication with the equipment manufacturers and
testing where appropriate. At this time the Company is not aware of any
facilities related equipment which is affected by the Year 2000 issue. The
Company's objective is to complete its inventory and evaluation of
facilities related equipment in conjunction with its contingency planning
program. The Company intends to repair or replace non-compliant facilities
related equipment prior to operating difficulties. Haemonetics remains
aware of the potential for imbedded logic within microchips to cause
equipment failure. The Company believes that its action plan provides a
thorough approach towards evaluating facilities related equipment, however,
it may be impracticable or impossible to test certain items of facilities
related equipment for Year 2000 readiness. To the extent such untested
equipment is not Year 2000 ready, it may fail to operate on or after
January 1, 2000, resulting in possible interruptions of security, heating,
elevator, telephone and other services.
Technical and Advisory Expertise
Haemonetics has engaged a leading professional services and
consulting firm experienced in Year 2000 compliance to assist in project
planning, testing methodologies, and evaluating its Year 2000 remediation
activities. This firm will also contribute to the development and
documentation of the contingency plan.
Haemonetics Products
The Company makes products in two major categories: blood processing
equipment and the single use disposables that are used in this equipment
for each procedure. The disposables have no date related functions aside
from lot numbering and expiry dating printed on the packaging. The
equipment itself does not rely on date related data for its mechanical
function. There is no calendar-related logic in the Haemonetics software
that controls the function of the machine. The Company has undertaken a
detailed review of hardware components and software code for the current
revisions of all products. The Company is continuing to test its equipment
to evaluate any potential for issues related to logic embedded within
microchips. At this time the Company is not aware of any issues related to
equipment it sells which would prevent its customers from continuing their
operations or which would impact the safety of patients or donors in any
way.
Costs
At this time the Company estimates that the total cost of completing
Year 2000 related activities would be between $2.5 million and $3.3
million. This amount includes both IT and non-IT related expenses. Of
this amount, approximately 85% has already been spent representing 30% of
the total IT budget during the spending period. Approximately 30% of the
spending to date has been on capital investments. The Company anticipates
capital expenditures to total between $1 million and $1.3 million and
expense to total $1.5 million to $2 million. This amount includes the
replacement of hardware and applications that are outdated and were due for
replacement regardless of Year 2000 issues.
Contingency Plan
Although the Company believes it is taking appropriate action related
to the identification and resolution of issues related to the Year 2000,
its assessment is still in progress. The Company may never know with
certainty whether third parties in the Company's supply chain are
compliant. Failure of such third parties to achieve Year 2000 compliance
could result in delayed deliveries to or shipments by the Company. If such
delays are extended, they could have a material adverse effect on the
Company's business, financial condition, and results of operations.
As the Company continues to assess the state of readiness within its
unique set of business partners, production processes, and internal
systems, the Company will develop its formal contingency plan in an effort
to alleviate high potential or serious failures. The framework for this
contingency plan has been completed and includes a matrix of factors which
will permit the Company to identify key portions of its supply chain and
consider the potential impact of Year 2000 failures and amount of time the
Company's operations could be subjected to a potential failure. The
Company is integrating the ongoing critical vendor identification and
communication process with the development of its contingency plan. At
this time, the Company plans to increase its inventory of raw materials and
finished goods by increasing production through the third quarter of 1999.
The company recognizes the importance of an appropriate contingency plan
and is working closely with external consultants in its development.
Risks
The Company continues to evaluate the risks associated with potential
Year 2000 related failures. The failure to correct a material Year 2000
problem could result in an interruption in, or a failure of, certain normal
business activities or operations. Such failures could materially and
adversely affect the Company's business, financial condition, and results
of operations. Due to the general uncertainty inherent in the Year 2000
problem, resulting in part from the uncertainty of the Year 2000 readiness
of third-parties, the Company is unable to determine at this time whether
the consequences of Year 2000 failures will have a material impact on the
Company's business, financial condition, and results of operations. The
Company's Year 2000 project is expected to significantly reduce the
Company's level of uncertainty about the Year 2000 problem and, in
particular, about the Year 2000 compliance and readiness of its critical
vendors. The Company believes that, with the implementation of new
business systems and completion of the Company's Year 2000 project as
scheduled, the possibility of significant interruptions of normal
operations should be reduced.
EURO CURRENCY
Effective January 1, 1999, 11 of the 15 countries in the European
Union or EU (Austria, Belgium, Finland, France, Germany, Holland, Ireland,
Italy, Luxembourg, Portugal and Spain) adopted a single currency known as
the Euro. For the next three years, these 11 countries which participate
in the European Monetary Union or EMU will be allowed to transact business
in both the Euro and in their own currencies at fixed exchange rates.
Beginning on July 1, 2002, the Euro will become the only currency for these
11 countries of the EMU.
Operations in Europe
The introduction of the Euro may have a significant impact on the
Company's operations. The Company has 10 subsidiaries located throughout
Europe that generate one-third of its sales.
State of Readiness
The Company has formed a Euro Steering Committee (the "Committee") to
address all issues related to the Euro. This Committee is now preparing a
detailed action plan which will cover all areas of concern including
information systems, finance, tax, treasury, legal, marketing and human
resources. The plan is expected to be finalized during fiscal year 2000 and
subsequently submitted to the Board of Directors for approval.
Accordingly, all components of this disclosure noted below are subject to
change.
Date of conversion
The target date for conversion of the Company's local and corporate
information systems to the Euro is April 2, 2001, which is the first day of
the Company's fiscal year 2002.
Business activities
Although the introduction of the Euro will likely result in greater
transparency of pricing throughout Europe, it is anticipated that these
changes will have little impact on Haemonetics. The Company's products are
heavily regulated by organizations specific to each country and as a
result, transactions between countries are infrequent.
Information systems
The Company is aware that the Euro conversion will create technical
challenges to adapt information technology and other systems to accommodate
Euro-denominated transactions. The Committee is in the process of
identifying all systems and determining their state of Euro readiness. The
cost of adapting these systems is not yet known, but the Company does not
believe it to be significant.
Accounting, Finance & Treasury
At the point the Company adopts the Euro, it expects to experience
the benefits of simplified hedging, banking and financial transaction
systems.
Tax
It is expected that some of the European countries will allow costs
related to the introduction of the Euro to be fully deductible.
Additionally, it is anticipated that most countries will allow tax relief
by means of a one time depreciation or amortization charge related to
assets utilized in the Euro conversion.
Legal
The EU has adopted regulations precluding a party from using the Euro
conversion as the reason for breaching or changing its contractual
obligations, unless the other parties to the contract are in agreement. The
Company is now in the process of identifying any contracts between the
Company and parties outside the USA which fall under these regulations. At
this point, the Company is not aware of substantial risk related to such
contracts.
The conversion to Euro on April 2, 2001 will result in the conversion
of the share capital of the 6 subsidiaries within the EMU. The amount of
the converted share capital must be modified in order to eliminate uneven
amounts and decimals resulting from the conversion. The Committee is in the
process of identifying the new amounts of the share capital, the requested
minimum capital requirements issued by the EU, the number of shares and all
activities related to these changes such as meetings of the Board of
Directors, shareholder meetings, and changes in by-laws. The Company
anticipates that all required changes will be completed during fiscal year
2001. The Company does not anticipate material exposure resulting from the
share capital conversion.
Human Resources
All employee contracts in subsidiaries located in the EMU, will be
rewritten during fiscal year 2001 using Euro. The effective date of all
contracts will be changed to April 2, 2001. Salaries will be paid in Euro
beginning in April 2001.
Costs
Although the total cost of the Euro conversion has not yet been
quantified, the Company does not believe that the total cost will be
significant or have a material impact on its business, results of
operations, financial position or cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposures relative to market risk are due to foreign
exchange risk and interest rate risk.
Foreign exchange risk
Over two-thirds of the Company's revenues are generated outside the
U.S. yet the Company's reporting currency is the U.S. dollar. Foreign
exchange risk arises because the Company engages in business in foreign
countries in local currency. Exposure is partially mitigated by producing
and sourcing product in local currency. Accordingly, whenever the US
dollar strengthens relative to the other major currencies, there is an
adverse affect on the Company's results of operations and alternatively,
whenever the U.S. dollar weakness relative to the other major currencies,
there is a positive effect on the Company's results of operations.
It is the Company's policy to minimize for a period of time, the
unforeseen impact on its results of operations of fluctuations in foreign
exchange rates by using derivative financial instruments known as forward
contracts to hedge the majority of its firm sales commitments to customers
that are denominated in foreign currencies. The Company also enters into
forward contracts that settle within 35 days to hedge certain intercompany
receivables denominated in foreign currencies. Actual gains and losses on
all forward contracts are recorded in operations, offsetting the gains and
losses on the underlying transactions being hedged. These derivative
financial instruments are not used for trading purposes. The Company's
primary foreign currency exposures in relation to the U.S. dollar are the
Japanese Yen and the Euro equivalent of the French Franc, Deutsche Mark and
Italian Lire.
At July 3, 1999, the Company had the following significant foreign
exchange contracts to hedge certain firm sales commitments denominated in
foreign currency outstanding:
<TABLE>
<CAPTION>
Hedged (BUY) / SELL Weighted Forward US$ @ Unrealized
Currency Local Currency Contract Rate Forward Rate Gain / (Loss) Maturity
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Euro Equivalent 7,943,508 $1.205 $ 8,149,022 $ 1,419,104 Jul-Sep 1999
Euro Equivalent 8,620,513 $1.213 $ 8,901,889 $ 1,553,509 Oct-Dec 1999
Euro Equivalent 7,500,000 $1.146 $ 7,802,500 $ 788,750 Jan-Mar 2000
Euro Equivalent 7,500,000 $1.054 $ 7,858,750 $ 47,400 Apr-Jun 2000
Japanese Yen 1,750,000,000 137.9 per US$ $14,554,048 $(1,861,413) Jul-Sep 1999
Japanese Yen 1,970,000,000 126.9 per US$ $16,591,041 $(1,063,262) Oct-Dec 1999
Japanese Yen 1,670,000,000 125.4 per US$ $14,260,651 $ (946,837) Jan-Mar 2000
Japanese Yen 1,850,000,000 117.3 per US$ $16,023,746 $ (249,266) Apr-Jun 2000
</TABLE>
The Company estimated the change in the fair value of all forward
contracts assuming both a 10% strengthening and weakening of the U.S.
dollar relative to all other major currencies. In the event of a 10%
strengthening of the U.S. dollar, the fair value of all forward contracts
would increase by $8.8 million. Assuming a 10% weakening of the U.S.
dollar relative to all other major currencies, the fair value of all
forward contracts would decrease by $10.5 million.
Interest Rate Risk
Approximately 94%, of the Company's long-term debt is at fixed rates.
Accordingly, a change in interest rates has an insignificant effect on the
Company's interest expense amounts. The fair value of the Company's long-
term debt however would change in response to interest rates movements due
to its fixed rate nature. At July 3, 1999, the fair value of the Company's
long-term debt was approximately $1.6 million higher than the value of the
debt reflected on the Company's financial statements. This higher fair
market is primarily related to the $40 million, 7.05% fixed rate senior
notes the Company holds. These notes represent approximately 76% of the
Company's outstanding long-term borrowings at April 3, 1999.
Using scenario analysis, the Company changed the interest rate on all
long-term maturates by 10% from the rate levels, which existed at July 3,
1999. The effect was a change in the fair value of the Company's long-term
debt, of approximately $1.6 million.
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
-----------------
None
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 Third Amendment, dated April 21, 1999 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.
none
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 , 1999 By: /s/ James L. Peterson
-------------- ------------------------------------
James L. Peterson,
President and Chief Executive Officer
Date: August , 1999 By: /s/ Ronald J. Ryan
-------------- ------------------------------------
Ronald J. Ryan,
Sr. Vice President and Chief
Financial Officer, (Principal
Accounting Officer)
EXHBIT 10A
THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Third Amendment to Revolving Credit Agreement ("Third Amendment") is
made as of April 21, 1999, among HAEMONETICS CORPORATION (the "Borrower"),
MELLON BANK, N.A. (the "Bank"), and MELLON BANK, N.A., as Agent (the
"Agent").
Preliminary Statements
----------------------
WHEREAS, the Borrower, the Bank and the Agent are parties to that certain
Revolving Credit Agreement dated and effective as of June 25, 1997 (as
amended by that certain First Amendment to Revolving Credit Agreement dated
as of December 26, 1997 (the "First Amendment"), and that certain Second
Amendment to Revolving Credit Agreement dated as of April 30, 1998 (the
"Second Amendment"; the Credit Agreement as so amended, together with any
and all subsequent amendments, the "Credit Agreement"), pursuant to which
the Bank has made available to the Borrower a $20,000,000 line of credit;
WHEREAS, the Borrower has requested that the Bank and the Agent amend the
Credit Agreement to correct an error in the Second Amendment; and
WHEREAS, the Bank and the Agent are willing to amend the Credit Agreement on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound, the parties hereby agree that the Credit
Agreement shall be amended as follows:
ARTICLE I
AMENDMENT TO CREDIT AGREEMENT
-----------------------------
1.1. The last two paragraphs of Section 6.11(a), being clauses (i) and
(ii) of such Section, are deleted and replaced with the following:
(x) $25,000,000; plus
(y) 50% of Consolidated Net Income (or if such Consolidated
Net Income is a deficit figure, then minus 100% of such
deficit) for such period determined on a cumulative
basis for said entire period; plus
(z) an amount equal to the aggregate net cash proceeds
received by the Borrower from the sale on or after the
date of this Agreement of shares of its common stock or
other securities convertible into common stock of the
Borrower."
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1. In order to induce the Bank and the Agent to enter into this Third
Amendment, the Borrower represents and warrants that, at the time of
entering into this Third Amendment and after giving effect hereto:
(a) No Potential Default or Event of Default has occurred and
is continuing;
(b) The representations and warranties set forth in Article
III of the Credit Agreement are true and correct on and as of the
date hereof as if made on the date hereof;
(c) The Borrower is in compliance in all material respects
with all of the terms and provisions set forth in the Credit Agreement
and the Note and the Credit Agreement and the Note are hereby ratified
in all respects;
(d) There are no defenses, offsets or counterclaims against
obligations owed to the Bank evidenced by the Note and/or the Credit
Agreement and, to the extent any such defenses, offsets or
counterclaims do exist, they are hereby waived; and
(e) The Borrower has taken all necessary action to authorize
the execution and delivery hereof and the performance of its
obligations hereunder, and the Credit Agreement, as amended by this
Third Amendment, is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with the
terms thereof.
ARTICLE III
EFFECTIVENESS
-------------
3.1. This Third Amendment shall be effective as of the date first
written above upon receipt by the Agent of a fully executed copy of this
Third Amendment.
ARTICLE IV
MISCELLANEOUS PROVISIONS
------------------------
4.1. Except as expressly amended hereby, the Credit Agreement shall be
and remain in full force and effect.
4.2. All capitalized terms used herein and not otherwise defined herein
shall have the meanings given them in the Credit Agreement.
4.3. This Third Amendment constitutes the entire agreement between the
parties with respect to the subject matter hereof, and supersedes all prior
agreements and understandings about such subject matter, both written and
oral.
4.4. This Third Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute
one and the same instrument.
4.5. This Third Amendment shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without
regard to conflicts of law principles thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to
Revolving Credit Agreement to be duly executed and delivered by their proper
and duly authorized officers as of the day and year first above written.
HAEMONETICS CORPORATION
By: /s/ Ronald J. Ryan
-------------------------
Signature
Name: Ronald J. Ryan
Title Senior Vice President and CFO
MELLON BANK, N.A.,
individually and as Agent
By: /s/ R. Jane Westrich
-------------------------
Signature
Name: R. Jane Westrich
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-01-2000
<PERIOD-END> JUL-03-1999
<CASH> 53,297
<SECURITIES> 0
<RECEIVABLES> 59,407
<ALLOWANCES> 780
<INVENTORY> 57,757
<CURRENT-ASSETS> 217,959
<PP&E> 172,116
<DEPRECIATION> 89,946
<TOTAL-ASSETS> 341,818
<CURRENT-LIABILITIES> 60,474
<BONDS> 52,399
0
0
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