FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended: June 28, 2003 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.)
Yes X__ No
----- -----
The number of shares of $.01 par value common stock outstanding as of June
28, 2003: 24,083,164
----------
HAEMONETICS CORPORATION
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Unaudited Consolidated Statements of Income -
Three Months Ended June 28, 2003 and June 29, 2002 2
Unaudited Consolidated Balance Sheets - June 28, 2003 and
March 29, 2003 3
Unaudited Consolidated Statement of Stockholders' Equity -
Three Months Ended June 28, 2003 4
Unaudited Consolidated Statements of Cash Flows -Three Months
Ended June 28, 2003 and June 29, 2002 5
Notes to Unaudited Consolidated Financial Statements 6-12
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-19
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 20
ITEM 4. Controls and Procedures 21
PART II. OTHER INFORMATION 22
ITEM 5. Other Information 22
ITEM 6. Exhibits and Reports on Form 8-K 22
Signatures
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands, except share data)
Three Months Ended
---------------------
June 28, June 29,
2003 2002
-------- --------
Net revenues $88,283 $81,935
Cost of goods sold 48,697 43,288
------- -------
Gross profit 39,586 38,647
Operating expenses:
Research and development 4,997 4,939
Selling, general and administrative 26,403 24,016
------- -------
Total operating expenses 31,400 28,955
------- -------
Operating income 8,186 9,692
Interest expense (786) (877)
Interest income 283 441
Other income, net 103 563
------- -------
Income before provision for income taxes 7,786 9,819
Provision for income taxes 2,803 3,044
------- -------
Net income $ 4,983 $ 6,775
======= =======
Basic earnings per common share $ 0.21 $ 0.27
Diluted earnings per common share $ 0.21 $ 0.26
Weighted average shares outstanding
Basic 24,063 25,318
Diluted 24,223 26,110
The accompanying notes are an integral part of these consolidated financial
statements.
2
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 28, 2003 March 29, 2003
------------- --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 50,190 $ 49,885
Accounts receivable, less allowance of $1,493
at June 28, 2003 and $1,449 at March 29, 2003 84,326 77,913
Inventories 64,178 65,805
Current investment in sales-type leases, net 2,488 2,681
Deferred tax asset 17,520 17,307
Prepaid expenses and other current assets 12,523 9,664
-------- --------
Total current assets 231,225 223,255
Total property, plant and equipment 252,217 244,499
Less: accumulated depreciation 169,294 160,512
-------- --------
Net property, plant and equipment 82,923 83,987
Other assets:
Investment in sales-type leases, net (long-term) 3,003 2,968
Other intangibles, less amortization of $4,218 at
June 28, 2003 and $3,753 at March 29, 2003 26,082 26,339
Goodwill, net 16,234 16,010
Deferred tax asset, net 3,022 2,954
Other long-term assets 3,694 3,695
-------- --------
Total other assets 52,035 51,966
-------- --------
Total assets $366,183 $359,208
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt $ 38,633 $ 39,005
Accounts payable 14,759 13,677
Accrued payroll and related costs 12,196 11,930
Accrued income taxes 11,264 12,093
Other accrued liabilities 21,292 23,670
-------- --------
Total current liabilities 98,144 100,375
Long-term debt, net of current maturities 31,502 31,612
Other long-term liabilities 4,100 3,984
Stockholders' equity:
Common stock, $0.01 par value; Authorized - 80,000,000
shares; Issued - 31,679,099 shares at June 28, 2003
and 31,664,849 shares at March 29, 2003 317 317
Additional paid-in capital 108,806 108,770
Retained earnings 297,954 292,971
Accumulated other comprehensive loss (9,961) (13,486)
-------- --------
Stockholders' equity before treasury stock 397,116 388,572
Less: Treasury stock at cost - 7,595,935 shares
at June 28, 2003 and 7,626,096 shares at
March 29, 2003 164,679 165,335
-------- --------
Total stockholders' equity 232,437 223,237
-------- --------
Total liabilities and stockholders' equity $366,183 $359,208
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited- in thousands)
Accumulated
Common Stock Additional Other Total
------------ Paid-in Treasury Retained Comprehensive Stockholders' Comprehensive
Shares $'s Capital Stock Earnings Loss Equity Income
------ --- ---------- -------- -------- ------------- ------------- -------------
Balance, March 29, 2003 31,665 $317 $108,770 ($165,335) $292,971 ($13,486) $223,237
Employee stock purchase plan --- --- (202) 656 --- --- 454
Exercise of stock options
and related tax benefit 14 --- 238 --- --- --- 238
Net income --- --- --- 4,983 --- 4,983 $4,983
Foreign currency translation
adjustment --- --- --- --- --- 3,807 3,807 3,807
Unrealized loss on derivatives --- --- --- --- --- (282) (282) (282)
------
Comprehensive income --- --- --- --- --- --- --- $8,506
------ ---- -------- --------- -------- ------- --------
Balance, June 28, 2003 31,679 $317 $108,806 ($164,679) $297,954 ($9,961) $232,437
====== ==== ======== ========= ======== ======= ========
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
4
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited- in thousands)
Three Months Ended
----------------------
June 28, June 29,
2003 2002
-------- --------
Cash Flows from Operating Activities:
Net income $ 4,983 $ 6,775
------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Non cash items:
Depreciation and amortization 7,585 7,064
Deferred tax (benefit) expense (95) 134
Tax benefit related to the exercise of stock options 3 356
Unrealized gain from hedging activities (616) (1,803)
Change in operating assets and liabilities:
Increase in accounts receivable - net (3,821) (907)
Decrease (increase) in inventories 138 (7,394)
Decrease in sales-type leases (current) 278 153
Increase in prepaid income taxes (907) (229)
Increase in other assets and other long-term liabilities (1,687) (939)
(Decrease) increase in accounts payable and accrued payroll 855 (2,546)
(Decrease) increase in accrued taxes (928) 1,792
Decrease in accrued expenses (2,890) (1,188)
------- --------
Net cash provided by operating activities 2,898 1,268
------- --------
Cash Flows from Investing Activities:
Purchases of available-for-sale investments --- (11,670)
Gross proceeds from sale of available-for-sale investments --- 44,306
Capital expenditures on property, plant and equipment,
net of retirements and disposals (2,127) (2,762)
Performance milestone payment to acquired software
development company (1,020) ---
Net decrease in sales-type leases (long-term) 90 270
------- --------
Net cash (used in) provided by investing activities (3,057) 30,144
------- --------
Cash Flows from Financing Activities:
Payments on long-term real estate mortgage (101) (93)
Net decrease in short-term revolving credit agreements (943) (498)
Employee stock purchase plan purchases 454 361
Exercise of stock options 235 1,560
Purchase of treasury stock --- (26,032)
------- --------
Net cash used in financing activities (355) (24,702)
------- --------
Effect of exchange rates on cash and cash equivalents 819 383
------- --------
Net increase in cash and cash equivalents 305 7,093
Cash and cash equivalents at beginning of period 49,885 34,913
------- --------
Cash and cash equivalents at end of period $50,190 $ 42,006
======= ========
Non-cash investing and financing activities:
Transfers from inventory to fixed assets for placements of
Haemonetics equipment $ 2,870 $ 3,133
Reclassifications from long-term credit agreements to
short-term credit agreements $ 0 $ 2,384
Supplemental disclosures of cash flow information:
Interest paid $ 1,219 $ 1,415
Income taxes paid $ 4,482 $ 778
5
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Our accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by GAAP for complete financial
statements. In the opinion of our management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. All significant intercompany transactions have been
eliminated. Operating results for the three-month period ended June 28, 2003
are not necessarily indicative of the results that may be expected for the
full fiscal year ending April 3, 2004. For further information, refer to the
audited consolidated financial statements and footnotes included in our
annual report on Form 10-K for the fiscal year ended March 29, 2003.
Certain amounts in the prior year financial statements have been
reclassified to conform to the fiscal year 2004 presentation.
Our fiscal year ends on the Saturday closest to the last day of March.
Fiscal year 2004 includes 53 weeks with the first three quarters of the
fiscal year including 13 weeks and the fourth quarter of fiscal 2004
including 14 weeks. Fiscal year 2003 included 52 weeks with all four
quarters including 13 weeks.
2. EARNINGS 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 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 potential dilutive
common shares.
For the three months ended
June 28, 2003 June 29, 2002
----------------------------------------
(in thousands, except per share amounts)
----------------------------------------
Basic EPS
Net income $ 4,983 $ 6,775
Weighted average shares 24,063 25,318
------------------------
Basic earnings per share $ 0.21 $ 0.27
------------------------
Diluted EPS
Net income $ 4,983 $ 6,775
Basic weighted average shares 24,063 25,318
Effect of stock options 160 792
------------------------
Diluted weighted average shares 24,223 26,110
------------------------
Diluted earnings per share $ 0.21 $ 0.26
------------------------
6
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-continued
3. STOCK-BASED COMPENSATION
Effective in the fourth quarter of fiscal 2003, we adopted the new
disclosure provision for employee stock-based compensation under Statement
of Financial Accounting Standards (SFAS) No. 148, "Accounting for Stock-
Based Compensation - Transition and Disclosure," issued by FASB in December
2002. We will continue to account for employee stock-based compensation
under Accounting Principles Board Opinion No. 25 ("APB No. 25").
Under APB No. 25, because our exercise price of our employee stock
options equals the market price of the underlying stock on the date of
grant, no accounting recognition is given to options granted to employees
and directors until they are exercised. Upon exercise, net proceeds,
including tax benefits realized, are credited to equity. The compensation
cost for options granted to consultants is recorded at fair value in
accordance with Emerging Issues Task Force, "EITF" issue 96-18, "Accounting
for Equity Instruments That are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services."
Had compensation costs under our stock-based compensation plans been
determined based on the fair value model of FAS 123, the effect on our
earnings per share would have been as follows:
For the three months ended
June 28, 2003 June 29, 2002
------------------------------
(in thousands, except per share amounts)
Net income (as reported): $ 4,983 $ 6,775
Deduct: Total stock-based employee
compensation expense determined
under the fair value method for all
awards, net of tax $(1,480) $(2,102)
------------------------
Pro Forma Net Income: $ 3,503 $ 4,673
========================
Earnings per share:
Basic
As Reported $ 0.21 $ 0.27
Pro forma $ 0.15 $ 0.19
Diluted
As Reported $ 0.21 $ 0.26
Pro forma $ 0.15 $ 0.18
7
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-continued
4. ACCOUNTING FOR SHIPPING AND HANDLING COSTS
Shipping and handling costs are included in costs of goods sold with
the exception of $1.3 million for both the first quarter of fiscal 2004 and
fiscal 2003. We include these costs in selling, general and administrative
expenses.
5. FOREIGN CURRENCY
We enter into forward exchange contracts to hedge the anticipated cash
flows from forecasted foreign currency denominated revenues, principally
Japanese Yen and Euro. The purpose of our hedging strategy is to lock in
foreign exchange rates for twelve months to minimize, for this period of
time, the unforeseen impact on our results of operations of fluctuations in
foreign exchange rates. We also enter into forward contracts that settle
within 35 days to hedge certain inter-company receivables denominated in
foreign currencies. 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.
6. PRODUCT WARRANTIES
We provide a warranty on parts and labor for one year after the sale
and installation of each device. We also warrant our disposable products
through their use or expiration. We estimate our potential warranty expense
based on our historical warranty experience, and we periodically assess the
adequacy of our warranty accrual and make adjustments as necessary.
For the three months ended
June 28, 2003 June 29, 2002
------------------------------
(in thousands, except per share amounts)
Warranty accrual as of the beginning of the period $1,056 $800
Provision related to preexisting warranties -- --
Warranty Provision 158 182
Warranty Spending (492) (182)
----------------------
Warranty accrual as of the end of the period $ 722 $800
======================
8
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-continued
7. COMPREHENSIVE INCOME
Comprehensive income is the total of net income and all other non-
owner changes in stockholders' equity. For us, all other non-owner changes
are primarily foreign currency translation and the changes in fair value of
the effective portion of our outstanding cash flow hedge contracts.
Three Months Ended
------------------------------
(In thousands) June 28, 2003 June 29, 2002
------------- -------------
Net income $4,983 $6,775
Other comprehensive income:
Foreign currency translation 3,807 5,409
Unrealized loss on cash flow
hedges, net of tax (2,163) (6,059)
Reclassifications into earnings of
cash flow hedge (gains)
losses, net of tax 1,881 (428)
----------------------
Comprehensive income $8,508 $5,697
======================
8. 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:
June 28, 2003 March 29, 2003
-------------------------------
(in thousands)
Raw materials $15,207 $17,037
Work-in-process 4,416 $ 4,597
Finished goods 44,555 $44,171
------------------------
$64,178 $65,805
========================
9
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-continued
9. ACQUIRED INTANGIBLE ASSETS
As of June 28, 2003
- -------------------
Weighted
Gross Carrying Accumulated Average
Amount Amortization Useful Life
(in thousands) (in thousands) (in years)
-------------- -------------- -----------
Amortized Intangibles
- ---------------------
Patents $ 6,371 $1,238 14
Other technology 11,752 1,409 15
Customer contracts and related relationships 11,690 1,571 15
-------------------------
Subtotal $29,813 $4,218 15
Indefinite Life Intangibles
- --------------------------
Trade name 487 -- Indefinite
-------------------------
Total Intangibles $30,300 $4,218
=========================
As of March 29, 2003
- --------------------
Weighted
Gross Carrying Accumulated Average
Amount Amortization Useful Life
(in thousands) (in thousands) (in years)
-------------- -------------- -----------
Amortized Intangibles
- ---------------------
Patents $ 6,371 $1,119 14
Other technology 11,746 1,274 15
Customer contracts and related relationships 11,498 1,360 15
-------------------------
Subtotal $29,615 $3,753 15
Indefinite Life Intangibles
- ---------------------------
Trade name 477 -- Indefinite
-------------------------
Total Intangibles $30,092 $3,753
=========================
10
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-continued
The only change to the net carrying value of our intangible assets
from March 29, 2003 to June 28, 2003 was amortization expense and the effect
of rate changes in the translation of the intangibles contained in the
financial statement of our Canadian subsidiary.
Aggregate amortization expense for amortized other intangible assets
for the three months ended June 28, 2003 and the three months ended June 29,
2002 was $0.5 million and $0.4 million, respectively. Additionally, future
amortization expenses on other intangible assets for each of the succeeding
five fiscal years approximate $2.1 million.
10. GOODWILL
The change in the carrying amount of our goodwill during the three
months ended June 28, 2003 is as follows (in thousands):
Carrying amount as of March 29, 2003 $16,010
Effect of change in rates used for translation 224
-------
Carrying amount as of June 28, 2003 $16,234
=======
11. COMMITMENTS AND CONTINGENCIES
We are presently engaged in various legal actions, and although
ultimate liability cannot be determined at the present time, we believe,
based on consultation with counsel, that any such liability will not
materially affect our consolidated financial position or our results of
operations.
12. SEGMENT INFORMATION
Segment Definition Criteria
We manage our business on the basis of one operating segment: the
design, manufacture and marketing of automated blood processing systems. Our
chief operating decision-maker uses consolidated results to make operating
and strategic decisions. Manufacturing processes, as well as the regulatory
environment in which we operate, are largely the same for all product lines.
Product and Service Segmentation
Our principal product offerings include blood bank, red cell, surgical
and plasma collection products.
The blood bank products include machines, single use disposables and
solutions that perform "apheresis," (the separation of whole blood into its
components and subsequent collection of certain components, including
platelets and plasma), as well as the washing of red blood cells for certain
procedures. In addition, the blood bank product line includes solutions used
in non-apheresis applications.
11
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-continued
The main devices used for these blood component therapies are the MCS(R)+
mobile collection system and the ACP(R) 215 automated cell processing
system.
Red cell products include machines and single use disposables and
solutions that perform apheresis for the collection of red blood cells.
Devices used for the collection of red blood cells are the MCS(R)+ 8150
mobile collection systems.
Surgical products include machines and single use disposables that
perform surgical blood salvage in orthopedic and cardiovascular surgical
applications. Surgical blood salvage is a procedure whereby shed blood is
collected, cleansed and made available to be transfused back to the patient.
The devices used in the surgical area are the OrthoPAT(R) and the Cell
Saver(R) autologous blood recovery systems.
Plasma collection products are machines, disposables and solutions
that perform apheresis for the separation of whole blood components and
subsequent collection of plasma. The devices used in automated plasma
collection are the PCS(R)2 plasma collection system and the Superlite(TM).
Other includes revenue generated from equipment repairs performed
under preventive maintenance contracts or emergency service billings and
miscellaneous sales, including revenue from our software division, Fifth
Dimension. Fifth Dimension provides information management products and
services to plasma collectors and fractionators.
Three months ended (in thousands)
June 28, 2003
- -------------
Blood Bank Red Cells Surgical Plasma Other Total
---------- --------- -------- ------ ----- -----
Revenues from external customers $27,591 4,679 20,370 30,241 5,402 $88,283
June 29, 2002
- -------------
Revenues from external customers $26,493 3,643 18,334 29,437 4,028 $81,935
13. SUBSEQUENT EVENT
On August 12, 2003, the Company reported details of a reorganization
to divide into two worldwide "Donor" and "Patient" divisions to better serve
customers and align organizational structure and size with growth
opportunities. As a result of the reorganization, the Company reduced its
worldwide workforce of 1,500 employees by approximately 4%. No facilities
will be closed. The reductions will result in a charge for severance and
related costs of approximately $2.7 million.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
FOR THE THREE MONTHS ENDED JUNE 28, 2003 (FISCAL 2004) COMPARED TO THREE
MONTHS ENDED JUNE 29, 2002 (FISCAL 2003)
The table outlines the components of the consolidated statements of
operations as a percentage of net revenues:
Percentage of Net Revenues
For the three months ended
--------------------------
Percentage
June 28, June 29, Increase/
2003 2002 (Decrease)
-------- -------- ----------
Net revenues 100.0% 100.0% 7.7 %
Cost of goods sold 55.2 52.9 12.5
---------------------------------
Gross profit 44.8 47.1 2.4
---------------------------------
Operating expenses:
Research and development 5.6 6.0 1.2
Selling, general and administrative 29.9 29.3 9.9
---------------------------------
Total operating expenses 35.5 35.3 8.4
---------------------------------
Operating income 9.3 11.8 (15.5)
Interest expense (0.9) (1.1) (10.4)
Interest income 0.3 0.6 (35.8)
Other income, net 0.1 0.7 (81.7)
---------------------------------
Income from operations before
provision for income taxes 8.8 12.0 (20.7)
Provision for income taxes 3.2 3.7 (7.9)
---------------------------------
Net income 5.6% 8.3% (26.5)%
=================================
Net Revenue Summary
- -------------------
%
June 28, June 29, Increase/
By location 2003 2002 (Decrease)
- ----------- -------- -------- ----------
United States $31,552 $30,930 2.0%
International 56,731 51,005 11.2%
------------------------------
Net revenues $88,283 $81,935 7.7%
%
June 28, June 29, Increase/
By product type 2003 2002 (Decrease)
- --------------- -------- -------- ----------
Disposables $78,395 $73,488 6.7%
Misc. & service 5,402 4,028 34.1%
Equipment 4,486 4,419 1.5%
------------------------------
Net revenues $88,283 $81,935 7.7%
13
%
Disposable revenue by June 28, June 29, Increase/
product line 2003 2002 (Decrease)
- --------------------- -------- -------- ----------
Surgical $18,293 $17,263 6.0%
Blood bank 25,949 24,039 7.9%
Red Cell 4,564 3,528 29.4%
Plasma 29,589 28,658 3.2%
------------------------------
Total disposables revenue $78,395 $73,488 6.7%
Net Revenues
Net revenues for the three months ended June 28, 2003, increased
$6.3 million to $88.3 million from $81.9 million for the three months ended
June 29, 2002. The sales increase was a result of volume increases from
both disposable and miscellaneous and service sales, which include sales
from our software company, Fifth Dimension, and as well as positive effects
from foreign currency. See the section below entitled "Foreign Exchange"
for a complete discussion of how foreign exchange impacts our business.
International sales accounted for 64.3% of net sales for the first quarter
of fiscal 2004 as compared to 62.7% in the first quarter of fiscal 2003.
Disposable Sales
- ----------------
Disposable sales increased 6.7% or $4.9 million. By product line,
disposable sales increased in worldwide Surgical (up 6.0%), worldwide
Bloodbank (up 7.9%), worldwide Red Cell (up 29.4%), and worldwide Plasma (up
3.2%).
Surgical- Worldwide Surgical disposable sales includes our traditional
cardiovascular cell salvage business and our OrthoPAT(R) business.
Foreign currency contributed to over one-half of the increase in
Surgical sales. The remainder of the increase in worldwide surgical
revenues was due to increased OrthoPAT(R) disposable volumes in the
orthopedic markets in the U.S. and Europe as orthopedic physicians
continue to adopt cell salvage as a cost effective blood conservation
strategy.
Bloodbank- Slightly more than one-half of the increase in worldwide
Bloodbank disposable sales was due to the effects of foreign currency.
Other increases were a result of platelet volume increases in Japan
and Asia.
Red Cell - Worldwide Red Cell sales grew primarily due to volume
increases in the U.S. as customers (new and existing) reacted to red
cell shortages by introducing automation into their collection
operations as a means to increase the number of units of blood
collected from a declining number of eligible donors.
14
Plasma -Foreign currency accounted for substantially all of the
increase in worldwide Plasma disposables sales. Plasma sales increased
due to the expansion of our Plasma product line with the addition of
solutions and containers and because of disposable volume increases in
Europe. These increases were offset by disposable volume decreases in
Japan and the U.S. The decrease in Japan was due to a decline in
collections over the previous year as the Japanese Red Cross decreased
collection targets. The U.S. volume decrease was due to the loss of
all revenue from a customer as a result of industry consolidation and
a decrease in sales to another customer, Alpha Therapeutic Corporation
(Alpha). Although Baxter announced its intent to acquire certain
assets of Alpha in early calendar 2003, the acquisition has not been
completed. We cannot estimate future Alpha revenues as it is not clear
whether or when the acquisition will be completed, or if completed,
Baxter's plans for the collection centers. Our sales to Alpha in the
first quarter of fiscal 2004 were $4.1 million. Alpha has several
exclusive purchasing contracts with us which begin to lapse in January
2005 through 2009.
Miscellaneous and Service Sales
- -------------------------------
Miscellaneous and service sales include revenues generated from
equipment repairs performed under preventive maintenance contracts or
emergency service billings and revenue from our software division, Fifth
Dimension.
Miscellaneous and service sales increased 34.1% or $1.4 million
year over year. Both components of miscellaneous and service sales
contributed almost equally to this increase.
Equipment Sales
- ---------------
Equipment sales increased exclusively due to the effects of foreign
currency. Most of our equipment sales occur in markets outside the U.S., as
in the U.S. we generally place equipment with a customer in exchange for an
agreement to purchase disposables or to pay a rental fee.
Gross profit
Gross profit of $39.6 million for the first quarter of fiscal 2004
increased $0.9 million from $38.6 million for the first quarter of fiscal
2003. Foreign currency and the cost reductions generated by our Customer
Oriented Redesign for Excellence ("CORE") program were the most significant
reasons for the increase. These increases were partly offset by the $0.9
million provision for excess and obsolete inventory. We took this provision
for two reasons: 1) the decision to phase out an earlier generation device
and 2) revised demand estimates for certain purchased equipment and
disposables.
For the first three months of fiscal 2004, the CORE program generated
a $1.0 million improvement in our gross profit by automating and redesigning
the way certain products are made and by negotiating reduced raw material
prices from suppliers.
Expenses
* Research and Development
------------------------
15
We spent $5.0 million on research and development for the first
quarter of fiscal 2004 (5.6% as a percentage of sales) and $4.9 million for
the first quarter of fiscal 2003 (6.0% as a percentage of sales). The
increase in research and development expense is related primarily to foreign
exchange.
* Selling, general and administrative
-----------------------------------
Selling, general and administrative expenses increased $2.4 million
in the first quarter of fiscal 2004 from $24.0 million in the first quarter
of fiscal 2003. A little more than one-half of the increase in spending is
related to foreign exchange. The remainder of the increase is due to
increased spending in selling, marketing, and field support to support
revenue growth.
Operating Income
Operating income for the first quarter of fiscal 2004 decreased
$1.5 million from the first quarter of fiscal 2003 and decreased to 9.3% of
sales in the first quarter of fiscal 2004 from 11.8% in the first quarter of
fiscal 2003. The $1.5 million decrease in operating income is primarily a
result of the effects of foreign currency. While foreign currency
contributed to an increase in gross profit, this was more than fully offset
by the increase foreign currency caused in our operating expenses.
Foreign Exchange
Approximately 64% of our sales are generated outside the U.S., yet
our reporting currency is the U.S. dollar. Foreign exchange risk arises
because we engage in business in foreign countries in local currency,
primarily the Euro and the Japanese Yen. Exposure is partially mitigated by
producing and sourcing product in local currency and expenses incurred by
local sales offices. However, whenever the U.S. dollar strengthens relative
to the other major currencies, there is an adverse affect on our results of
operations and alternatively, whenever the U.S. dollar weakens relative to
the other major currencies there is a positive effect on our results of
operations.
It is our policy to lock in for a period of time the impact on our
financial results of fluctuations in foreign exchange rates by using
derivative financial instruments known as forward contracts to hedge the
anticipated cash flows from forecasted foreign currency denominated sales.
We refer to these contracts as our plan hedges. Hedging through the use of
forward contracts does not eliminate the volatility of foreign exchange
rates, but because we enter into forward contracts one year in advance,
exchange rates are fixed for a one-year period, thereby facilitating
financial planning and resource allocation.
We compute a composite rate index for purposes of measuring,
comparatively, the change in foreign currency hedge spot rates from the
hedge spot rates of the corresponding period in the prior year. The relative
value of currencies in the index is weighted by sales in those currencies.
The composite was set at 1.00 based upon the weighted rates at March 31,
1997. The composite rate is presented in the period corresponding to the
maturity of the underlying forward contracts.
The favorable or (unfavorable) changes are in comparison to the same
period of the prior year. A favorable change is recorded when we will obtain
relatively more U.S. dollars for each of the underlying foreign currencies
than we did in the prior period. An unfavorable change is recorded when we
obtain relatively fewer U.S. dollars for each of the underlying foreign
currencies than we did in the prior period. These indexed hedge rates impact
sales, and as a result also gross profit, operating income, and net
16
income, in our financial statements. The final impact of currency
fluctuations on the results of operations is dependent on the local currency
amounts hedged and the actual local currency results.
Composite Index Favorable / (Unfavorable)
Hedge Spot Rates Change versus Prior Year
---------------- -------------------------
FY2001 Q1 1.04 5.4%
Q2 1.00 8.2%
Q3 0.92 12.9%
Q4 0.97 10.2%
----------------------------
2001 Total 0.98 9.1%
FY2002 Q1 0.99 5.2%
Q2 0.97 3.3%
Q3 1.01 (8.6%)
Q4 1.05 (7.5%)
----------------------------
2002 Total 1.00 (2.0%)
FY2003 Q1 1.09 (8.9%)
Q2 1.08 (10.3%)
Q3 1.10 (8.1%)
Q4 1.17 (11.0%)
----------------------------
2003 Total 1.11 (9.5%)
FY2004 Q1 1.13 (3.6%)
Q2 1.05 3.6%
Q3 1.06 3.2%
Q4 1.01 15.9%
----------------------------
2004 Total 1.06 4.9%
FY2005 Q1 0.97 15.7%
Q2 0.99 5.1%
----------------------------
Other income (expense), net
Interest expense for the first quarter of fiscal 2004 was slightly
down compared to the first quarter of fiscal 2003. Nearly all of our long-
term debt is at fixed rates. Interest income decreased $0.2 million from
2003 to 2004, due primarily to lower average balances of cash invested and
lower investment yields. Other income, net decreased $0.5 million from the
first quarter of fiscal 2003 to the first quarter of fiscal 2004 due to a
decrease in income earned from points on forward contracts in the first
quarter of fiscal 2004 as compared to the first quarter of fiscal 2003.
Points on forward contracts are amounts, either expensed or earned, based on
the interest rate differential between two foreign currencies in a forward
hedge contract.
17
Income Taxes
The income tax provision, as a percentage of pretax income, was
36.0% for the first quarter in fiscal year 2004. This increase from 31.0%
for the first quarter in fiscal year 2003 is attributable to tax efficient
cash repatriations and other non-recurring tax benefits in the prior year.
We expect our tax rate to continue at 36.0% for fiscal 2004.
Liquidity and Capital Resources
Our primary sources of capital include cash and short-term
investments, internally generated cash flows, and bank borrowings. We
believe these sources to be sufficient to fund our requirements, which are
primarily capital expenditures, acquisitions, new business development,
share repurchases, working capital, and severance and related costs
associated with a reorganization announced on August 11, 2003 (see note 13
to the interim financial statements), for at least the next twelve months.
During the first quarter of fiscal 2004, we funded our activities
primarily with $2.9 million of cash flows generated by operations.
Working capital at June 28, 2003, was $133.1 million. This reflects an
increase of $5.3 million in working capital from the same period in the
prior year largely due to an increase in cash and cash equivalents, accounts
receivable, short-term borrowings, accounts payable and accrued payroll and
related costs offset by a decrease in inventory and deferred tax asset.
Cash Flow Overview:
Cash and short-term investments for the first quarter of fiscal 2004,
before the effect of exchange rates, decreased $0.5 million, which
represents a decrease in cash flow of $7.2 million compared to the $6.7
million in cash provided during the first quarter of fiscal 2003. The $7.2
million decrease was a result of the $32.6 million in cash provided from the
liquidation of available-for-sale investments in the prior year, offset by
the $26.0 million spent in the prior year on treasury stock purchases.
Operating Activities:
Cash provided by operating activities was $2.9 million for the
first quarter of fiscal 2004, as compared to $1.3 million in the first
quarter of fiscal 2003. The $1.6 million increase was primarily related to
inventory changes in fiscal 2003 offset by changes in accounts receivable
and additional tax payments in fiscal 2004. Cash spent on inventory
decreased in the first quarter of fiscal 2004 as compared to fiscal 2003 due
to lower inventory balances in fiscal 2004. Accounts receivable increased
due to the increase in sales and the timing of payments.
Investing Activities:
We used $3.1 million for investing activities in the first quarter
of fiscal 2004, which represents a decrease of $33.2 million from the $30.1
million in cash provided in the first quarter of fiscal 2003. The
18
$33.2 million decrease in cash provided was a result of the liquidation of
our available for sale investments in fiscal 2003. Also in the first
quarter of fiscal 2004, we made a performance milestone payment relating to
the acquisition of Fifth Dimension.
Financing Activities:
Our financing activities in the first quarter of fiscal 2004 utilized
$0.4 million in cash as compared to $24.7 million utilized in the first
quarter of fiscal 2003. This decrease in cash utilized was due to the fact
that we did not purchase any treasury stock in the first quarter of fiscal
2004 while we used $26.0 million in the first quarter of fiscal 2003 to
purchase treasury stock.
Inflation
We do not believe that inflation has had a significant impact on
our results of operations for the periods presented. Historically, we
believe we have been able to minimize the effects of inflation by improving
our manufacturing and purchasing efficiency, by increasing employee
productivity and by adjusting the selling prices of new products we
introduce.
Cautionary Statement Regarding Forward-Looking Information
Statements contained in this report, as well as oral statements we
make which 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 our
future plans of operations, business strategy, results of operations, and
financial position. These statements are based on our current expectations
and estimates as to prospective events and circumstances about which we can
give no firm assurance. Further, any forward-looking statement speaks only
as of the date on which such statement is made, and we undertake 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 our 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 anticipated.
Such risks and uncertainties include technological advances in the medical
field and our standards for transfusion medicine and our ability to
successfully implement products that incorporate such advances and
standards, product demand and market acceptance of our products, regulatory
uncertainties, the effect of economic and political conditions, the impact
of competitive products and pricing, foreign currency exchange rates,
changes in customers' ordering patterns, the effect of communicable diseases
and the effect of uncertainties in markets outside the U.S. (including
Europe and Asia) in which we operate. The foregoing list should not be
construed as exhaustive.
19
ITEM 3. 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
See the section entitled Foreign Exchange for a discussion of how
foreign currency affects our business. It is our policy to minimize for a
period of time, the unforeseen impact on our financial results of
fluctuations in foreign exchange rates by using derivative financial
instruments known as forward contracts to hedge anticipated cash flows from
forecasted foreign currency denominated sales. We do not use the financial
instruments for speculative or trading activities. At June 28, 2003, we had
the following significant foreign exchange contracts to hedge the
anticipated cash flows from forecasted foreign currency denominated sales
outstanding:
Hedged (BUY) / SELL Weighted Spot Weighted Forwar
Currency Local Currency Contract Rate Contract Rate Fair Value Maturity
-------- -------------- ------------- --------------- ---------- --------
Euro 8,400,000 $0.980 $0.966 ($1,517,537) Jul-Sep 2003
Euro 9,700,000 $0.986 $0.973 ($1,303,088) Oct-Dec 2003
Euro 9,500,000 $1.100 $1.088 ($511,157) Jan-Feb 2004
Euro 6,000,000 $1.149 $1.137 ($30,468) Mar-May 2004
Japanese Yen 1,775,000,000 120.7 per US$ 118.6 per US$ ($70,191) Jul-Sep 2003
Japanese Yen 1,725,000,000 121.6 per US$ 119.8 per US$ ($255,833) Oct-Dec 2003
Japanese Yen 1,615,000,000 118.3 per US$ 116.7 per US$ $69,009 Jan-Feb 2004
Japanese Yen 1,265,000,000 117.3 per US$ 115.8 per US$ $110,266 Mar-May 2004
-----------
Total: ($3,508,998)
-----------
We estimate 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 change in fair value of all forward contracts would result
in a $8.8 million increase in the fair value of the forward contracts;
whereas a 10% weakening of the U.S. dollar would result in a $9.9 million
decrease in the fair value of the forward contracts.
Interest Rate Risk
All of our long-term debt is at fixed rates. Accordingly, a change
in interest rates has an insignificant effect on our interest expense
amounts. The fair value of our long-term debt, however, does change in
response to interest rates movements due to its fixed rate nature. At June
28, 2003, the fair value of our long-term debt was approximately $3.6
million higher than the value of the debt reflected on our
20
financial statements. This higher fair market is entirely related to our
$22.9 million, 7.05% fixed rate senior notes and our $8.6 million, 8.41%
real estate mortgage.
At June 29, 2002, the fair value of our long-term debt was
approximately $3.0 million higher than the value of the debt reflected on
our financial statements. This higher fair value was primarily related to
the $28.6 million, 7.05% fixed rate senior notes and the $9.1 million, 8.41%
real estate mortgage.
Using scenario analysis, if we changed the interest rate on all long-
term maturities by 10% from the rate levels that existed at March 29, 2003
the fair value of our long-term debt would change by approximately $0.5
million.
ITEM 4. CONTROLS AND PROCEDURES
We conducted an evaluation, as of June 28, 2003, under the supervision
and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer (our principal executive officer and
principal financial officer, respectively) regarding the effectiveness of
the design and operation of our disclosure controls and procedures as
defined in Rule 13a-15 of the Securities Exchange Act of 1934 (the "Exchange
Act"). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective to ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to them by others
within those entities.
There was no change in our internal control over financial reporting
during the quarter ended June 28, 2003 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
21
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
None
Item 5. Other Information
On August 12, 2003, the Company reported details of a
reorganization to divide into two worldwide "Donor" and
"Patient" divisions to better serve customers and align
organizational structure and size with growth opportunities. As
a result of the reorganization, the Company reduced its
worldwide workforce of 1,500 employees by approximately 4%. No
facilities will be closed. The reductions will result in a
charge for severance and related costs of approximately $2.7
million. Attached as exhibit 99 is a press release made by the
Company on August 12, 2003.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley
Act of 2002, of Brad Nutter, President and Chief Executive
Officer of the Company
31.2 Certification pursuant to Section 302 of Sarbanes-Oxley of
2002, of Ronald J. Ryan, Senior Vice President and Chief
Financial Officer of the Company
22
32.1 Certification Pursuant to 18 United States Code Section
1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, of Brad Nutter, President and Chief Executive
Officer of the Company
32.2 Certification Pursuant to 18 United States Code Section
1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, of Ronald J. Ryan, Senior Vice President and Chief
Financial Officer of the Company
99 Press release made by the Company on August 12, 2003
(b) Reports on Form 8-K
We filed a report on Form 8-K on April 24, 2003 furnishing a
press release we issued on April 23, 2003 announcing our fiscal
2003 fourth quarter and year-end results.
23
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 12, 2003 By: /s/Brad Nutter
--------------------------------
Brad Nutter, President and Chief
Executive Officer
Date: August 12, 2003 By: /s/ Ronald J. Ryan
--------------------------------
Ronald J. Ryan, Senior Vice
President and Chief Financial
Officer (Principal Financial
Officer)
24
EXHIBIT 31.1
------------
CERTIFICATION
-------------
I, Brad Nutter, President and Chief Executive Officer of Haemonetics
Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Haemonetics Corporation;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements were
made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that
material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities,
particularly during the period in which this report
is being prepared;
b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in
this report our conclusions about the effectiveness
of the disclosure controls and procedures as of the
end of the period covered by this report based on
such evaluation; and
c) Disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has
materially affected, or is reasonably likely to
materially affect the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
Date: August 12, 2003
s/Brad Nutter
-----------------------------
Brad Nutter, President and
Chief Executive Officer
(Principal Executive Officer)
25
EXHIBIT 31.2
------------
CERTIFICATION
-------------
I, Ronald J. Ryan, Senior Vice President and Chief Financial Officer of
Haemonetics Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Haemonetics Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-
15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the
period covered by this report based on such evaluation;
and
c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal control over financial
reporting.
Date: August 12, 2003
s/Ronald J. Ryan
-----------------------------
Ronald J. Ryan, Senior Vice
President and Chief Financial
Officer (Principal Financial
Officer)
26
EXHIBIT 32.1
------------
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes/Oxley Act of 2002
In connection with the Quarterly Report of Haemonetics Corporation (the
"Company") on Form 10-Q for the period ending June 28, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"),
I, Brad Nutter, President and Chief Executive Officer of the Company,
certify, pursuant to Section 1350 of Chapter 63 of Title 18, United States
Code, that this Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that the
information contained in this Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: August 12, 2003
s/Brad Nutter
--------------------------------
Brad Nutter,
President and Chief Executive
Officer
A signed original of this written statement required by Section 906, or
other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Haemonetics
and will be retained by Haemonetics and furnished to the Securities and
Exchange Commission or its staff upon request.
27
EXHIBIT 32.2
------------
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes/Oxley Act of 2002
In connection with the Quarterly Report of Haemonetics Corporation (the
"Company") on Form 10-Q for the period ending June 28, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"),
I, Ronald J. Ryan, Senior Vice President and Chief Financial Officer of the
Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18,
United States Code, that this Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
the information contained in this Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: August 12, 2003
s/Ronald J. Ryan
-------------------------
Ronald J. Ryan,
Senior Vice President and
Chief Financial Officer
A signed original of this written statement required by Section 906, or
other document authenticating, acknowledging, or otherwise adopting the
signature that appears in typed form within the electronic version of this
written statement required by Section 906, has been provided to Haemonetics
and will be retained by Haemonetics and furnished to the Securities and
Exchange Commission or its staff upon request.
28
Exhibit 99
FOR RELEASE: CONTACT:
Date: August 12, 2003 Lisa Lopez
Time: 8:30 am Tel. (781) 356-9517
Alternate Tel. (617) 320-2401
fallon@haemonetics.com
HAEMONETICS ANNOUNCES REORGANIZATION TO ALIGN OPERATIONS
--------------------------------------------------------
WITH GROWTH OPPORTUNITIES
-------------------------
Braintree, MA, August 12, 2003 - Haemonetics Corporation today reported
additional details regarding its previously-announced plan to divide the
Company into two worldwide "Donor" and "Patient" divisions to better serve
customers and align organizational structure and size with growth
opportunities.
Brad Nutter, the Company's President and CEO, commented, "There are
numerous emerging opportunities for growth at Haemonetics; our new
structure will allow us to appropriately allocate resources and better
capitalize on those opportunities. In addition, our flatter organization
will better serve customers through speedier decision making and
execution."
As a result of the reorganization, the Company reduced its worldwide
workforce of 1,500 employees by approximately 4%. No facilities will be
closed. The reductions will result in a reserve for severance and related
costs of approximately $2.7 million. Annualized cost savings of
approximately $4 million are expected.
Mr. Nutter commented, "Although the reorganization and its effects on some
of our employees is difficult, Haemonetics is now organized, sized, and
will be managed for the continued good health of the enterprise."
Haemonetics also reaffirmed that it remains on track to meet fiscal 2004
guidance including high single digit revenue growth; gross margin in the
mid- to high 40% range; modest operating margin improvement over the
previous year; a tax rate of 36%; positive contribution in the second half
from foreign exchange of $0.05 to $0.10 compared with fiscal 2003; and
earnings per share flat with those reported in fiscal 2003. The second
quarter reserve for restructuring costs will not change the fiscal 2004
guidance.
About Haemonetics Corporation
Haemonetics (NYSE: HAE) is a global company engaged in the design,
manufacture and worldwide marketing of automated blood processing systems.
These systems address important medical markets: surgical blood salvage,
blood component collection, plasma collection, and blood component safety.
Haemonetics has been recognized by Forbes magazine as one of the nation's
best small companies. To learn more about Haemonetics, visit the Company's
web site at http://www.haemonetics.com.
This release contains forward looking statements that involve risks and
uncertainties, including technological advances in the medical field,
product demand, market acceptance, regulatory and political uncertainties,
the effect of economic conditions, the impact of competitive products and
pricing, blood product reimbursement policies and practices, foreign
currency exchange rates and other risks detailed in the Company's filings
with the Securities and Exchange Commission. The forward looking statements
are based on estimates and assumptions made by management of the Company
and are believed to be reasonable, though are inherently uncertain and
difficult to predict. Actual results and experience could differ materially
from the forward looking statements.
# # #