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: September 29, 2001 Commission File Number: 1-10730
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HAEMONETICS CORPORATION
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2882273
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 Wood Road, Braintree, MA 02184
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(Address of principal executive offices)
Registrant's telephone number, including area code: (781) 848-7100
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Indicate by check mark whether the registrant (1.) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) (2.) has been subject to the
filing requirements for at least the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
26,396,204 shares of Common Stock, $ .01 par value, as of
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September 29, 2001
HAEMONETICS CORPORATION
INDEX
PAGE
----
PART I. Financial Information
Unaudited Consolidated Statements of Operations -
Three and Six Months Ended September 29, 2001
and September 30, 2000 2
Unaudited Consolidated Balance Sheets - September 29, 2001
and March 31, 2001 3
Unaudited Consolidated Statements of Stockholders' Equity -
Six Months Ended September 29, 2001 4
Unaudited Consolidated Statements of Cash Flows - Six Months
Ended September 29, 2001 and September 30, 2000 5
Notes to Unaudited Consolidated Financial Statements 6-15
Management's Discussion and Analysis of Financial Condition
and Results of Operations 16-29
Quantitative and Qualitative Disclosures about Market Risk 29-30
PART II. Other Information 31
Signatures 32
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except share data)
Three Months Ended Six Months Ended
----------------------- -----------------------
Sept. 29, Sept. 30, Sept. 30, Sept. 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Net revenues $80,704 $ 70,943 $156,505 $141,208
Cost of goods sold 40,903 37,522 80,393 74,341
-------------------------------------------------
Gross profit 39,801 33,421 76,112 66,867
Operating expenses:
Research and development. 4,988 4,261 9,802 8,434
Selling, general and administrative . 21,859 20,873 43,824 41,858
In process research and development (Note 10) - 18,606 - 18,606
Other unusual charges relating to acquisition (Note 10) - 4,174 - 4,614
-------------------------------------------------
Total operating expenses 26,847 47,914 53,626 73,512
-------------------------------------------------
Operating income (loss) 12,954 (14,493) 22,486 (6,645)
Interest expense (981) (848) (1,963) (1,869)
Interest income 1,089 1,126 2,177 2,308
Other income, net 755 844 1,728 1,650
-------------------------------------------------
Income (loss) before provision for income taxes 13,817 (13,371) 24,428 (4,556)
Provision for income taxes . 3,869 1,746 6,840 4,337
-------------------------------------------------
Income (loss) before cumulative effect of change in
accounting principle $ 9,948 $(15,117) $17,588 $(8,893)
=================================================
Cumulative effect of change in accounting principle,
net of tax - - 2,304 -
-------------------------------------------------
Net income (loss) $ 9,948 $(15,117) $19,892 $(8,893)
=================================================
Basic income (loss) per common share
Income (loss) before cumulative effect of change in
accounting principle $ 0.38 $ (0.60) $ 0.67 $ (0.35)
Cumulative effect of change in accounting principle,
net of tax - - 0.09 -
Net income (loss) $ 0.38 $ (0.60) $ 0.76 $ (0.35)
Diluted income (loss) per common share
Income (loss) before cumulative effect of change in
accounting principle $ 0.37 $ (0.60) $ 0.65 $ (0.35)
Cumulative effect of change in accounting principle,
net of tax - - 0.09 -
Net income (loss) $ 0.37 $ (0.60) $ 0.73 $ (0.35)
Weighted average shares outstanding
Basic 26,287 25,133 26,133 25,191
Diluted 27,239 25,133 27,093 25,191
2
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except share data)
Sept. 29, March 31,
2001 2001
--------- ---------
ASSETS
Current assets:
Cash and short term investments $ 57,847 $ 41,441
Available-for-sale investments 45,804 33,042
Accounts receivable, less allowance of $1,337
at September 29, 2001 and $1,233 at March 31, 2001 66,800 59,842
Inventories 61,986 54,007
Current investment in sales-type leases, net 4,729 5,680
Deferred tax asset 20,017 19,982
Other prepaid and current assets 7,323 5,170
----------------------
Total current assets 264,506 219,164
----------------------
Property, plant and equipment 217,020 203,883
Less accumulated depreciation 134,610 120,632
----------------------
Net property, plant and equipment 82,410 83,251
Other assets:
Investment in sales-type leases, net 3,396 5,391
Other intangibles, less accumulated amortization of $1,217 at
September 29, 2001 and $599 at March 31, 2001 18,696 19,107
Goodwill, less accumulated amortization of $7,541 at September 29, 2001
and $7,827 at March 31, 2001 12,771 14,426
Deferred tax asset 8,138 1,737
Other long-term assets 2,095 2,238
----------------------
Total other assets 45,096 42,899
----------------------
Total assets $392,012 $345,314
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt 33,180 22,438
Accounts payable 12,254 13,350
Accrued payroll and related costs 12,549 10,072
Accrued income taxes 17,981 14,791
Other accrued liabilities 18,272 18,796
----------------------
Total current liabilities 94,236 79,447
----------------------
Long-term debt, net of current maturities 47,303 47,281
Other long-term liabilities 3,136 3,070
Stockholders' equity:
Common stock, $.01 par value;
Authorized - 80,000,000 shares;
Issued 31,324,326 shares at September 29, 2001;
30,721,723 shares at March 31, 2001 313 307
Additional paid-in capital 98,514 87,958
Retained earnings 254,245 234,325
Other comprehensive loss (16,501) (17,618)
----------------------
Stockholders' equity before treasury stock 336,571 304,972
Less: treasury stock 4,928,122 shares at cost at September 29, 2001
and 4,940,390 shares at cost at March 31, 2001 89,234 89,456
----------------------
Total stockholders' equity 247,337 215,516
----------------------
Total liabilities and stockholders' equity $392,012 $345,314
======================
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)
Common Stock Additional Other Total
------------ Paid-in Treasury Retained Comprehensive Stockholders' Comprehensive
Shares $ Capital Stock Earnings Income(loss) Equity Income (loss)
------ - ----------- -------- -------- ------------- ------------- --------------
Balance, March 31, 2001 30,722 $307 $87,958 ($89,456) $234,325 ($17,618) $215,516
Employee stock purchase
plan -- -- -- 222 28 -- 250
Exercise of stock options
and related tax benefit 602 6 10,556 -- -- -- 10,562
Net income -- -- -- -- 19,892 -- 19,892 $19,892
Foreign currency
translation adjustment -- -- -- -- -- 1,320 1,320 1,320
Unrealized loss on
derivatives -- -- -- -- -- (203) (203) (203)
--------
Comprehensive income -- -- -- -- -- -- -- $21,009
----------------------------------------------------------------------------------------------
Balance, September 29, 2001 31,324 $313 $98,514 ($89,234) $254,245 ($16,501) $247,337
==============================================================================================
4
HAEMONETICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited- in thousands)
Six Months Ended
-----------------------
Sept. 29, Sept. 30,
2001 2000
--------- ---------
Cash Flows from Operating Activities:
Net income (loss) $ 19,892 $ (8,893)
Adjustments to reconcile net income to
net cash provided by operating activities:
Non cash items:
Cumulative effect of change in accounting principle,
net of tax (2,304) --
Depreciation and amortization 15,487 11,972
Deferred tax expense (6,419) (77)
In process research and development (Note 10) -- 18,606
Equity in losses of investment (Note 10) -- 1,353
Other unusual non-cash charges (Note 10) -- 1,282
Realized gain from exchange rate fluctuations 726 --
Change in operating assets and liabilities:
Increase in accounts receivable - net (6,721) (1,572)
(Increase) decrease in inventories (10,658) 3,691
Decrease in sales-type leases (current) 951 1,686
Increase in prepaid income taxes (291) (171)
Decrease (increase) in other assets 1,184 (334)
Increase (decrease) in accounts payable, accrued
expenses and other current liabilities 4,160 (2,849)
----------------------
Net cash provided by operating activities 16,007 24,694
Cash Flows from Investing Activities:
Purchases of available-for-sale investments, net of maturities (40,251) 9,967
Gross proceeds from sale of available-for-sale investments 27,489 13,089
Capital expenditures on property, plant and equipment,
net of retirements and disposals (10,875) (6,182)
Acquisition of Transfusion Technologies Corporation, net
of cash acquired -- (26,572)
Net decrease in sales-type leases (long-term) 1,995 2,977
----------------------
Net cash used in investing activities (21,642) (6,721)
----------------------
Cash Flows from Financing Activities:
Payments on long-term real estate mortgage (174) --
Net increase (decrease) in short-term revolving
credit agreements 10,889 (15,568)
Net increase (decrease) in long-term credit agreements 216 (235)
Employee stock purchase plan purchases 250 208
Exercise of stock options and related tax benefit 10,562 2,880
Purchase of treasury stock -- (4,729)
----------------------
Net cash provided by (used in) financing activities 21,743 (17,444)
Effect of exchange rates on cash and cash equivalents 298 (183)
----------------------
Net increase in cash and cash equivalents 16,406 346
Cash and cash equivalents at beginning of period 41,441 25,911
----------------------
Cash and cash equivalents at end of period $ 57,847 $ 26,257
======================
Non-cash investing and financing activities:
Transfers from inventory to fixed assets for
Haemonetics placement equipment $ 2,824 $ 3,130
Supplemental disclosures of cash flow information:
Interest paid $ 1,846 $ 1,748
Income taxes paid $ 5,090 $ 3,354
5
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED 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.
Certain reclassifications were made to prior year balances to conform to the
presentation of the consolidated financial statements for the six months
ended September 29, 2001. The accompanying consolidated financial statements
and notes should be read in conjunction with the Company's audited annual
consolidated financial statements.
2. FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to the last day
of March. Both fiscal year 2002 and 2001 include 52 weeks with the first
quarter of each fiscal year including 13 weeks.
3. ACCOUNTING FOR SHIPPING AND HANDLING COSTS
In the fourth quarter of fiscal year 2001, the Company adopted
Emerging Issues Task Force No. 00-10, ("EITF 00-10",) "Accounting for
Shipping and Handling Fees and Costs." The EITF concluded that amounts
billed to a customer in a sale transaction related to shipping and handling
should be classified as revenue. Prior to implementing EITF 00-10, shipping
and handling costs billed to a customer were netted against shipping and
handling costs recorded in cost of goods sold and selling, general and
administrative expenses. The second quarter of fiscal year 2001 has been
adjusted to comply with this change in classification of freight revenue.
The EITF consensus also requires an entity to disclose the amount of
shipping and handling costs and the line item on the income statement that
includes such costs if the costs are not in cost of goods sold and are
significant. Shipping and handling costs are included in costs of goods sold
with the exception of $1.6 million and $1.0 million for three months ended
September 29, 2001 and September 30, 2000 and $3.1 million and $1.9 million
for the six months ended September 29, 2001 and September 30, 2001,
respectively that are included in selling, general and administrative
expenses.
4. NEW PRONONCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141 ("SFAS No. 141"),
"Business Combinations." SFAS No. 141 requires all business combinations
initiated after June 30, 2001 to be accounted for using the purchase method.
This statement is effective for all business combinations initiated after
June 30, 2001.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." This statement applies to goodwill and intangible assets
acquired after June 30, 2001, as well as goodwill and intangible assets
previously acquired. Under this statement goodwill as well as certain other
intangible assets, determined to have an infinite life, will no longer be
amortized. Instead these assets will be reviewed for impairment on a
periodic basis. The Company elected early adoption of SFAS No. 142 during
the first fiscal quarter ended June 30, 2001. The goodwill associated with
past acquisitions is no longer subject to amortization over its estimated
useful life. Such goodwill is subject to an annual assessment of impairment
by applying a fair-value based test. See Notes 5 and 6 for additional
disclosure information required by SFAS No. 142.
In accordance with SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," the Company adopted SFAS No. 133, "Accounting for
Derivative
6
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--continued
Instruments and Hedging Activities" and SFAS No. 138 "Accounting for Certain
Derivative Instruments and Hedging Activities, an Amendment of FASB
Statement No. 133," (collectively, SFAS No. 133, as amended) effective April
1, 2001. These standards were adopted as of April 1, 2001 as a change in
accounting principle and cannot be applied retroactively to financial
statements of prior periods.
SFAS No. 133, as amended, 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.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement,
to the extent effective, and requires that the Company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. SFAS No. 133, as amended, in part, allows special hedge
accounting for fair value and cash flow hedges. The statement provides that
the gain or loss on a derivative instrument designated and qualifying as a
fair value hedging instrument, as well as the offsetting changes in the fair
value of the hedged item attributable to the hedged risk, be recognized
currently in earnings in the same accounting period. SFAS No. 133, as
amended, provides that the effective portion of the gain or loss on a
derivative instrument designated and qualifying as a cash flow hedging
instrument be reported as a component of other comprehensive income and be
reclassified into earnings in the same period or periods during which the
hedged forecasted transaction affects earnings. The ineffective portion of a
derivative's change in fair value is recognized currently through earnings
regardless of whether the instrument is designated as a hedge.
The Company enters into forward exchange contracts to hedge the
anticipated cash flows from forecasted foreign currency denominated
revenues. 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 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.
At September 29, 2001, the Company had 28 forward contracts
outstanding, all maturing in less than twelve months, to exchange Euro
equivalent currencies and the Japanese yen primarily for U.S. dollars
totaling $106.7 million. Of these contracts, six, totaling $22.8 million,
represented contracts with zero fair value relating to inter-company
receivables put in place at quarter-end, that settle within 35 days after
quarter-end. The Company has designated the remainder of these contracts as
cash flow hedges intended to lock-in the expected cash flows of forecasted
foreign currency denominated revenues at the available spot rate. The fair
value of the forward contracts associated with changes in forward points is
excluded from the Company's assessment of hedge effectiveness. At adoption,
the Company recorded the fair value of these contracts of $9.2 million as an
asset on the balance sheet. The change in the fair value of the contracts
associated with changes in the spot rate as of April 1, 2001 of $4.6 million
was recorded in other comprehensive income, ($6.4 million less taxes of $1.8
million). The change in the fair value of the contracts attributable to
forward points, which are excluded from the Company's assessment of hedge
effectiveness, totaled $2.3 million ($3.2 million less taxes of $0.9
million) as of April 1, 2001. This amount was recorded as a cumulative
effect of a change in accounting principle.
At September 29, 2001, the fair value of the forward contracts was
$1.4 million. Of this amount, $0.2 million was recorded in other
comprehensive income, ($0.3 million less taxes of $0.1 million). For the six
months ended September 29, 2001, the change in the fair value attributable
to forward points totaled approximately $1.9 million. This balance was
excluded from the assessment of hedge effectiveness and was recorded as part
of other income, net for the six months ended September 29, 2001 in the
Company's unaudited consolidated statement of operations.
7
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--continued
A summary of the accounting discussed above is as follows (in thousands):
Cumulative
Effect of Change
Other in Accounting
(Income)/Expense Asset-Forward Comprehensive Other (Income) Principle, net
Cash Flow Hedges - Debit (Credit) Contracts Income, net of tax Expense, net of tax
----------------------------------------------------------------------
At adoption of SFAS No. 133, net of tax $ 9,200 $(4,608) $ -- $(2,304)
For six months ended September 29, 2001 (7,835) 4,811 (1,868) --
--------------------------------------------------------------
Balance $ 1,365 $ 203
Prior to the adoption of SFAS No. 133 as amended, the Company recorded
forward points as other income when the transactions being hedged was
recognized. Under SFAS No. 133 as amended, these points are recorded on a
fair value basis over the life of the contracts. For the six months ended
September 29, 2001, income from forward points was $5.1 million or $2.3
million higher than if booked under SFAS No. 52, ("Foreign Currency
Translation.")
5. ACQUIRED OTHER INTANGIBLE ASSETS
As of September 29, 2001
-------------------------------
Gross Carrying Accumulated
(in thousands) Amount Amortization
-------------- ------------
Asset Class
Patents $ 6,495 $ 409
Unpatented technology 7,418 508
Customer contracts and
related relationships 6,000 300
-------------------------
Total $19,913 $1,217
=========================
Aggregate amortization expense for amortized other intangible assets
for the three months and six months ended September 29, 2001 is $323,000 and
$618,000, respectively. Additionally, future amortization expense on other
intangible assets for each of the succeeding five fiscal years is
approximated to be $1.2 million.
8
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--continued
6. GOODWILL
The changes in the carrying amount for the six months ended September
29, 2001 are as follows (in thousands):
Carrying amount as of March 31, 2001 $14,426
Adjustment due to the change in the valuation
of acquired net operating losses of Transfusion
Technologies in September, 2000. ($2,821 gross
less $84 in accumulated amortization.) (2,737)
Adjustment due to change in the valuation of
the liabilities associated with the acquisition
of the Alpha Therapeutic Corporation plasma
collection bottle plant in January, 2001. 878
Effect of change in rates used for translation 204
-------
Carrying amount as of September 29, 2001 $12,771
=======
The proforma effect on prior year earnings of excluding amortization
expense, net of tax, is as follows:
For the three months ended For the six months ended
(in thousands except per share data) September 29, 2000 September 29, 2000
-------------------------- ------------------------
Reported net loss $(15,117) $(8,893)
Add back: goodwill amortization 191 376
--------------------------------------
Adjusted net loss $(14,926) $(8,517)
======================================
Basic and diluted loss per common share:
- ----------------------------------------
Reported net loss $ (0.60) $ (0.35)
Goodwill amortization 0.01 0.01
--------------------------------------
Adjusted net loss $ (0.59) $ (0.34)
======================================
With the adoption of SFAS No. 142, there were no changes to
amortization expense on acquired other intangible assets.
9
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--continued
7. 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:
September 29, 2001 March 31, 2001
------------------ --------------
(in thousands)
Raw materials $17,266 $16,015
Work-in-process 5,715 4,237
Finished goods 39,005 33,755
------- -------
$61,986 $54,007
======= =======
8. 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 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. The Company did not include the effect of Stock options in
its calculation of Diluted loss per share for the three and six months ended
September 30, 2000 as it was anti-dilutive.
For the three months ended
-----------------------------------------
September 29, 2001 September 30, 2000
------------------ ------------------
Basic EPS
Net income (loss) $ 9,948 $(15,117)
Weighted average shares 26,287 25,133
------------------------------
Basic income (loss) per share $ 0.378 $ (0.602)
------------------------------
Diluted EPS
Net income (loss) $ 9,948 $(15,177)
Basic weighted average shares 26,287 25,133
Effect of stock options 952 -
------------------------------
Diluted weighted average shares 27,239 25,133
------------------------------
Diluted income (loss) per share $ 0.365 $ (0.602)
------------------------------
10
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--continued
For the six months ended
-----------------------------------------
September 29, 2001 September 30, 2000
------------------ ------------------
Basic EPS
Net Income (loss) $19,892 $ (8,893)
Weighted average shares 26,133 25,191
------------------------------
Basic income (loss) per share $ 0.761 $ (0.353)
------------------------------
Diluted EPS
Net income (loss) $19,892 $ (8,893)
Basic weighted average shares 26,133 25,191
Effect of stock options 960 --
------------------------------
Diluted weighted average shares 27,093 25,191
------------------------------
Diluted income (loss) per share $ 0.734 $ (0.353)
------------------------------
9. SEGMENT 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, red
cell, surgical and plasma collection products.
The blood bank products include machines and 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
applications. The main devices used for these blood component therapies is
the MCS(R)+, mobile collection system and the Automated Cell Processing
("ACP") 215.
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 Red Cell 8150 and
MCS(R) 9000.
Surgical products include machines and single use disposables that
perform intraoperative autologous transfusion ("IAT") or surgical blood
salvage, as it is more commonly known, in orthopedic and cardiovascular
surgical applications. Surgical blood salvage is a procedure whereby shed
blood is collected, cleansed and returned back to a patient. The devices
used in the surgical area are the OrthoPat(R) System, and a full line of
Cell Saver(R) autologous blood recovery systems.
11
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--continued
Plasma collection products are machines, disposables and solutions
that 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)
Blood Bank Red Cells Surgical Plasma Other Total
---------- --------- -------- ------ ----- -----
September 29, 2001
------------------
Revenues from external customers $28,729 2,548 17,012 29,389 3,026 $ 80,704
September 30, 2000
------------------
Revenues from external customers $27,573 1,855 15,610 21,893 4,012 $ 70,943
Six months ended (in thousands)
Blood Bank Red Cells Surgical Plasma Other Total
---------- --------- -------- ------ ----- -----
September 29, 2001
------------------
Revenues from external customers $54,226 4,968 34,145 56,287 6,879 $156,505
September 30, 2000
------------------
Revenues from external customers $54,678 3,607 31,577 42,712 8,634 $141,208
10. ACQUISITION
Transfusion Technologies
On September 18, 2000, Haemonetics Corporation, ("Haemonetics")
completed the acquisition of Transfusion Technologies Corporation, a
Delaware Corporation ("Transfusion") pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") dated September 4, 2000 among Haemonetics,
Transfusion, Transfusion Merger Co., the holders of a majority of
outstanding shares of Preferred and Common Stock of Transfusion and certain
principals of Transfusion. The acquisition was effected in the form of a
merger (the "Merger") of Transfusion Merger Co., a wholly owned subsidiary
of Haemonetics, with and into Transfusion. Transfusion was the surviving
corporation in the merger.
Transfusion Technologies designs, develops and markets systems for the
processing of human blood for transfusion to patients. Its systems are based
on centrifuge technology called the Dynamic Disk TM and consist of sterile,
single-use disposable sets and computer controlled electromechanical devices
that control the blood processing procedure. The systems have applications
in both autotransfusion and blood component collection technologies.
The aggregate purchase price, before transaction costs and cash
acquired, of approximately $50.1 million was comprised of $36.5 million to
Transfusion's common and preferred stockholders, and warrant and option
holders, and $13.6 million, representing the economic value of Haemonetics'
19.8% preferred stock investment in Transfusion made in November 1999. The
cash required to purchase the remaining 80.2% interest in Transfusion, was
$26.6 million, net of cash acquired.
The Transfusion merger was accounted for using the purchase method of
accounting for business combinations. Accordingly, the accompanying
Consolidated Statement of Operations includes Transfusion Technologies'
results of
12
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--continued
operations commencing on the date of acquisition. The purchase price was
allocated to the net assets acquired based on the Company's estimates of
fair value at the acquisition date. The fair market value of liabilities
included in the net assets purchased was $6.3 million. The allocation of the
purchase price continues to be subject to adjustment upon final valuation of
certain acquired assets and liabilities. The excess of the purchase price
over the fair market value of the net assets acquired was recorded as
goodwill in the amount of $2.8 million. The goodwill is being amortized over
20 years.
At September 29, 2001, the allocation of the purchase price over the
fair market value of the assets acquired is as follows:
Consideration Paid for 80.2% $45,046
Plus other estimated transaction costs 1,607(i)
Total estimated purchase price 46,653
Less: estimated fair value of Transfusion'
identifiable net assets on September 15, 2000 43,832
Total estimated goodwill due to acquisition $ 2,821
Gross adjustment due to change in the valuation
of acquired net operating losses associated with
the Acquisition of Transfusion Technologies in
September 2000 (2,821)
-------
Balance as of September 29, 2001 $ ---
(i) Transaction costs primarily include professional fees, costs to close
down the Transfusion Technologies' facility and severance costs.
In-Process Research and Development
Included in the purchase price allocation for the acquisition of
Transfusion Technologies was an aggregate amount of purchased in-process
research and development ("IPR&D") of $21.5 million, $2.9 million of which
is reflected in the restatement of the third quarter of fiscal year 2000
relative to Haemonetics' original 19.8% investment and $18.6 million of
which is reflected in the second quarter of fiscal year 2001. The values
represent purchased in-process technology that had not yet reached technical
feasibility and had no alternative future use. Accordingly, the amounts were
immediately expensed in the consolidated statement of operations.
An independent valuation was performed to assess and allocate a value
to the purchased IPR&D. The value represents the estimated fair market value
based on risk-adjusted future cash flows generated by the products employing
the in-process projects over a ten-year period. Estimated future after-tax
cash flows for each product were based on Transfusion Technologies' and
Haemonetics' estimates of revenue, operating expenses, income taxes, and
charges for the use of contributory assets. Additionally, these cash flows
were adjusted to compensate for the existence of any core technology and
development efforts that were to be completed post-acquisition.
Revenues were estimated based on relevant market size and growth
factors, expected industry trends, individual product sales cycles, and the
estimated life of each product's underlying technology. Estimated operating
expenses include cost of goods sold, selling, general and administrative,
and research and development ("R&D") expenses. The estimated R&D expenses
include only those costs needed to maintain the products once they have been
introduced into the market. Operating expense estimates were consistent with
expense levels for similar products.
The discount rates used to present-value the projected cash flows were
based on a weighted average cost of capital relative to Transfusion
Technologies and its industry adjusted for the product-specific risk
associated with
13
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--continued
the purchased IPR&D projects. Product-specific risk includes such factors
as: the stage of completion of each project, the complexity of the
development work completed to date, the likelihood of achieving
technological feasibility, and market acceptance.
The forecast data employed in the valuation were based upon
projections created by Transfusion Technologies' management and Haemonetics
management's estimate of the future performance of the business. The inputs
used in valuing the purchased IPR&D were based on assumptions that
management believes to be reasonable but which are inherently uncertain and
unpredictable. These assumptions may be incomplete or inaccurate, and no
assurance can be given that unanticipated events or circumstances will not
occur. Accordingly, actual results may vary from the forecasted results.
While management believes that all of the development projects will be
successfully completed, failure of any of these projects to achieve
technological feasibility, and/or any variance from forecasted results, may
result in a material adverse effect on Haemonetics' financial condition and
results of operations.
A brief description of the IPR&D projects related to the acquisition
of Transfusion Technologies, including their estimated stage of completion
and associated discount rates, is outlined below.
Chairside Separator ("CSS"). The CSS is a portable, automated device
used for the donor-side collection and processing of a single unit of whole
blood into a unit of red cell concentrate and plasma. The system is designed
for use in a blood center, hospital, or mobile blood drive location and can
be powered either through a standard AC outlet or by DC battery packs.
Haemonetics estimates that the project was 95% completed at the time of
acquisition and product sales would commence by the fourth quarter of 2002.
The IPR&D value assigned to the CSS was $17.6 million. A discount rate of
33% was employed in the analysis.
Red Cell Collector ("RCC"). The RCC is a portable, automated device
used for the collection and processing of two units of red blood cells from
donors. The system collects and automatically anticoagulates the whole blood
while separating it into red blood cells and plasma. The plasma and 500ml of
saline is then re-infused back to the donor. The system is designed for use
in a blood center, hospital, or mobile blood drive location and can be
powered either through a standard AC outlet of by DC battery packs.
Haemonetics estimates that the project was 65% completed at the time of
acquisition and product sales would commence by the second quarter 2003. The
IPR&D value assigned to the RCC was $3.9 million. A discount rate of 33% was
employed in the analysis.
The following unaudited pro forma summary combines the consolidated
results of operations of Haemonetics Corporation and Transfusion
Technologies as if the acquisition had occurred as of the beginning of
fiscal year 2001 after giving effect to certain adjustments including
adjustments to reflect reductions in depreciation expense, increases in
intangible and goodwill amortization expense and lost interest income. This
pro forma summary is not necessarily indicative of the results of operations
that would have occurred if Haemonetics and Transfusion Technologies had
been combined during such periods. Moreover, the pro forma summary is not
intended to be indicative of the results of operations to be attained in the
future.
14
HAEMONETICS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--continued
Six Months Ended
September 29, 2000
---------------------
(in thousands, except
per share amounts)
Net revenues $141,639
Operating income 6,392
Income from continuing operations 5,551
Basic and diluted income per common
share for continuing operations:
Basic $ 0.22
Diluted $ 0.22
Weighted average number of common
shares outstanding
Basic 25,191
Diluted 25,738
Unusual charges expensed as a result of the acquisition of Transfusion
Technologies amounted to $4.2 and $4.6 million, respectively, for the three
and six months ended September 30, 2000. Included in the unusual charges
were $2.8 million in bonuses paid to key Transfusion executives hired by
Haemonetics and severance to Haemonetics employees laid off due to overlaps
created by the merger, a $0.5 million write-off of an investment in a
technology which the Company decided not to pursue in lieu of the
technologies acquired in the merger, and the adjustment required to modify
the 19.8% investment of Transfusion by Haemonetics in November of fiscal
year 2000 from the cost method to the equity method of accounting as
required by generally accepted accounting principles. To effect this
change, the historic cost of the 19.8% investment made by Haemonetics' was
written down by its 19.8% share of the monthly losses incurred by
Transfusion Technologies from November of fiscal year 2000 through the date
of acquisition of the remaining 80.2%. For fiscal year 2001, the charge to
the statement of operations related to this equity adjustment was $0.9 and $
1.3 million, respectively for the three and six months ended September 30,
2000. In addition, the Company restated its investment in Transfusion on the
balance sheet for losses incurred through April 1, 2000. Retained earnings
at April 1, 2000 was also reduced by $3.6 million, $0.7 million of which
related to the cost to equity method of accounting adjustment and $2.9
million of which related to IPR&D attributable to Haemonetics' initial
investment.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The table outlines the components of the consolidated statements of
income from operations as a percentage of net revenues:
Three Months Ended
Percentage of Net Revenue Percentage Increase/(Decrease)
Three Months Ended (in actual dollars)
--------------------------------- ------------------------------
Sept. 29, 2001 Sept. 30, 2000 2001/2000
-------------- -------------- ---------
Net revenues 100.0% 100.0% 13.8%
Cost of goods sold 50.7 52.9 9.0
---------------------------------------------------
Gross Profit 49.3 47.1 19.1
Operating Expenses:
Research and development 6.2 6.0 17.1
Selling, general and administrative 27.1 29.4 4.7
In process research and development -- 26.2 (100.0)
Other unusual charges related to acquisition -- 5.9 (100.0)
---------------------------------------------------
Total operating expenses 33.2 67.5 (44.0)
---------------------------------------------------
Operating income 16.1 (20.4) (189.4)
Interest expense (1.2) (1.2) 15.7
Interest income 1.3 1.6 (3.6)
Other income, net 0.9 1.1 (10.6)
---------------------------------------------------
Income (loss) before provision for income taxes 17.1 (18.9) (203.3)
Provision for income taxes 4.8 2.6 121.6
Net income (loss) 12.3% (21.3) (165.8)%
===================================================
Three Months Ended September 29, 2001 Compared to Three Months Ended
September 30, 2000
Percent Increase/(Decrease)
------------------------------
Actual dollars At constant
By geography: 2001 2000 as reported currency
- ------------- ---- ---- -------------- -----------
United States $29,895 $22,500 32.9% 32.9%
International 50,809 48,443 4.9 7.8
--------------------------------------------------
Net revenues $80,704 $70,943 13.8% 15.8%
16
Percent Increase/(Decrease)
------------------------------
Actual dollars At constant
By product type: 2001 2000 as reported currency
- ---------------- ---- ---- -------------- -----------
Disposables $72,999 $64,286 13.6% 15.1%
Misc. & service 3,026 4,012 (24.6%) (18.0%)
Equipment 4,679 2,645 76.9% 83.0%
--------------------------------------------------
Net revenues $80,704 $70,943 13.8% 15.8%
Disposable revenue Actual dollars At constant
By product line: 2001 2000 as reported currency
- ---------------- ---- ---- -------------- -----------
Surgical $15,958 $14,221 12.3% 15.1%
Blood bank 26,008 26,451 (1.7) (0.2)
Red cells 2,548 1,855 37.3 45.2
Plasma 28,485 21,769 30.9 31.0
Disposable revenues $72,999 $64,286 13.6% 15.1%
--------------------------------------------------
Three months ended September 29, 2001 compared to three months ended
September 30, 2000
Net Revenues
Net revenues in 2001 increased 13.8% to $80.7 million from $70.9
million in 2000. With currency rates held constant, net revenues increased
15.8% from 2000 to 2001.
Disposable sales increased 13.6% year over year at actual rates. With
currency rates held constant, disposable sales increased 15.1%. Year over
year constant currency disposable sales growth was a result of disposable
growth in worldwide Red Cells (up 45.2%), worldwide Surgical (up 15.1%) and
worldwide Plasma (up 31.0%). The increase in worldwide red cell sales is
primarily attributable to volume increases in the U.S. market as the rollout
of this new technology continues to gain strength. The growth in the
worldwide surgical disposable sales is mainly attributed to volume increase
in the U.S. and Europe with the success of the Company's newly acquired
OrthoPAT(R) into the orthopedic market and the strengthening demand for
autotransfusion due to increasing number of blood shortages. Worldwide, the
OrthoPAT(R) accounted for 9.6% of the constant currency growth in surgical
disposable sales. The growth in worldwide Plasma disposables sales is mainly
attributed to volume increases of products sold in the U.S. due to an upturn
in plasma collections as demand for plasma outpaces supply. Of the 31.0%
constant currency Plasma growth, approximately 8.0% of it was due to sales
of bottles related to the Company's acquisition of the plasma container
business in the fourth quarter of last year. Worldwide Platelet disposable
sales were relatively flat as compared to 2000.
Constant currency sales of disposable products, excluding service and
other miscellaneous revenue, accounted for 90.4% and 91.0% of net revenues
for 2001 and 2000, respectively.
Service revenue generated from equipment repairs performed under
preventive maintenance contracts or emergency service billings and
miscellaneous revenues accounted for 5.4% and 3.8% of the Company's net
revenues, at constant currency, for 2001 and 2000, respectively.
17
Equipment revenues increased 76.9% from $2.6 million in 2000 at actual
rates and increased 83.0% or $2.2 million year over year with currency rates
held constant. The increase is attributable to sales of platelet and plasma
machines internationally and to sales of the new ACP 215 product
domestically.
International sales as reported accounted for 63.0% and 68.3% of net
revenues for 2001 and 2000, respectively. As in the U.S., sales outside the
U.S. are susceptible to risks and uncertainties from regulatory changes, the
Company's ability to forecast product demand and market acceptance of the
Company's products, changes in economic conditions, the impact of
competitive products and pricing, changes in health care policy and the
events of September 11, 2001 and their aftermath.
Gross profit
Gross profit of $39.8 million for the three months ended September 29,
2001 increased $6.4 million or 2.2% as a percent of sales from $33.4 million
for the three months ended September 30, 2000. At constant currency, gross
profit as a percent of sales increased by 3.2% and increased in dollars by
$7.7 million or 23.9% from 2000 to 2001. The $7.7 million constant currency
gross profit increase from 2000 was primarily a result of higher sales,
efficiency gains due to higher manufacturing volumes, and cost reductions.
In 1998, the Company initiated the Company's Customer Oriented
Redesign for Excellence ("CORE") Program to increase operational
effectiveness and improve all aspects of customer service. The CORE Program
is based on Total Quality of Management ("TQM") principals, and the Program
aims to increase the efficiency, and the quality of processes and products,
and to improve the quality of management at Haemonetics. For the three
months ending September 29, 2001, the CORE program has generated
approximately $1.0 million of cost savings benefiting the Company's gross
profit. The estimated savings for the full twelve months of fiscal year 2002
is expected from initiatives to lower product costs by automating and
redesigning the way certain products are made so that less material and
labor is needed and by negotiating lower material prices with vendors. These
savings will help to offset increases in other product costs.
Expenses
The Company expended $5.0 million (6.2% of net revenues) on research
and development in 2001 and $4.3 million (6.0% of net revenues) in 2000. At
constant currency rates, research and development as a percent of sales
increased by 0.3% and increased in dollars by $0.8 million from 2000 to
2001. The increase in research and development is a result of the Company's
objective to reinvest available funds into new product development.
Selling, general and administrative expenses increased $1.0 million
from $21.0 million in 2000 to approximately $22.0 million in 2001. At
constant currency, selling, general and administrative expenses increased
$2.1 million from 2000 yet decreased 1.4% as a percent of sales from 2000 to
2001. Higher sales and increased spending behind the Company's new product
selling and marketing activities contributed to the dollar increase year
over year. The CORE Program is not expected to have a notable impact in
savings related to selling, general and administrative expenses during the
current year as most savings are expected in cost of goods sold.
In Process Research and Development (IPR&D) and Other Unusual charges
Relating to the Acquisition
a) In Process Research and Development (IPR&D)
Upon consummation of the Transfusion Technologies acquisition in the
second quarter of fiscal 2001, the Company incurred costs representing the
value of the research and development projects. Included in the purchase
price allocation for the acquisition of Transfusion Technologies was an
aggregate amount of purchased in-process research and development ("IPR&D")
of $21.5 million, $2.9 million of which is reflected in the restatement of
fiscal year 2000 relative to Haemonetics' original 19.8% investment and
$18.6 million of which is reflected in consolidated statement of operations
for the three months ending September 30, 2000 (fiscal year 2001). The
values represent purchased in-process technology that had not yet reached
technical feasibility and had no alternative future use.
18
Accordingly, the amounts were immediately expensed in the consolidated
statement of operations (see Note 10 in the unaudited consolidated financial
statements for further discussion of the acquisition and IPR&D charges).
An independent valuation was performed to assess and allocate a value
to the purchased IPR&D. The value represents the estimated fair market value
based on risk-adjusted future cash flows generated by the products employing
the in-process technology over a 10-year period. Estimated future after-tax
cash flows for each product were based on Transfusion's and Haemonetics'
estimates of revenue, operating expenses, income taxes, and charges for the
use of contributory assets. Additionally, these cash flows were adjusted to
compensate for the existence of any core technology and development efforts
that were to be completed post-acquisition.
Revenues were estimated based on relevant market size and growth
factors, expected industry trends, individual product sales cycles, and the
estimated life of each product's underlying technology. Estimated operating
expenses include cost of goods sold, selling, general and administrative,
and research and development ("R&D") expenses. The estimated R&D expenses
include only those costs needed to maintain the products once they have been
introduced into the market. Operating expense estimates were consistent with
expense levels for similar products.
The discount rates used to present-value the projected cash flows were
based on a weighted average cost of capital relative to Transfusion
Technologies and its industry adjusted for the product-specific risk
associated with the purchased IPR&D projects. Product-specific risk includes
such factors as: the stage of completion of each project, the complexity of
the development work completed to date, the likelihood of achieving
technological feasibility and market acceptance.
The forecast data employed in the valuation were based upon
projections created by Transfusion's management and Haemonetics management's
estimate of the future performance of the business. The inputs used in
valuing the purchased IPR&D were based on assumptions that management
believes to be reasonable, but which are inherently uncertain and
unpredictable. These assumptions may be incomplete or inaccurate, and no
assurance can be given that unanticipated events or circumstances will not
occur. Accordingly, actual results may vary from the forecasted results.
While management believes that all of the development projects will be
successfully completed, failure of any of these projects to achieve
technological feasibility, and/or any variance from forecasted results, may
result in a material adverse effect on Haemonetics' financial condition and
results of operations.
A brief description of the IPR&D projects related to the acquisition
of Transfusion, including their estimated stage of completion and associated
discount rates is outlined below.
Chairside Separator ("CSS"). The CSS is a portable, automated device
used for the donor-side collection and processing of a single unit of whole
blood into a unit of red cell concentrate and plasma. The system is designed
for use in a blood center, hospital, or mobile blood drive location and can
be powered either through a standard AC outlet or by DC battery packs. At
the time of the acquisition, Haemonetics estimated that the CSS project was
95% complete and that product sales would commence by the fourth quarter of
2002. The IPR&D value assigned to the CSS was $17.6 million. A discount rate
of 33% was employed in the analysis.
The Company now considers the CSS project 100% complete, having
completed the clinical safety study on July 13, 2001 and submission of the
510K to the Food and Drug Administration ("FDA") on September 22, 2001.
Product sales will commence upon approval by the FDA which could be one
year, or greater, from the submission date.
Red Cell Collector ("RCC"). The RCC is a portable, automated device
used for the collection and processing of two units of red blood cells from
donors. The system collects and automatically anticoagulates the whole blood
while separating it into red blood cells and plasma. The plasma and 500 ml
of saline is then re-infused back to the donor. The system is designed for
use in a blood center, hospital, or mobile blood drive location and can be
powered either through a standard AC outlet or by DC battery packs. At the
time of the acquisition, Haemonetics estimated that the RCC project was 65%
complete and that product sales would commence by the second quarter 2003.
The IPR&D value assigned to the RCC was $3.9 million. A discount rate of 33%
was employed in the analysis.
19
As of September 29, 2001, the estimated percent completion of the RCC
project is 67%. The expected date that product sales will commence is fiscal
year 2004. All other estimates for cost of sales, S, G&A costs and income
tax rates relative to the RCC project remain unchanged. Significant design,
software programming, disposable set development and sourcing requirements
are still to be completed. In addition, clinical trials will be conducted
prior to submission of a 510K to the FDA. The estimated cost to be incurred
to develop the purchased in-process RCC technology into a commercially
viable product is approximately $1.5 million in fiscal 2002, $1.9 million in
fiscal 2003 and $1.0 million in fiscal 2004.
The Company incurred a charge in the second quarter of fiscal 2001
related to the acquisition of Transfusion Technologies Corporation of $18.6
million representing the value of the research and development projects that
were in process, that had not yet reached technical feasibility and had no
alternative future use at the time of the acquisition. Accordingly, the
amounts were immediately expensed in the consolidated statement of
operations. (See footnote 10 to the unaudited consolidated financial
statements for a further description of the acquisition and an explanation
as to how the IPR&D was valued.)
b) Other Unusual Charges Relating to the Acquisition
Unusual charges expensed in the second quarter of fiscal 2001, as a
result of the acquisition of Transfusion Technologies amounted to $4.2
million which included $2.8 million in bonuses paid to key Transfusion
executives hired by Haemonetics and severance to employees laid off due to
overlaps created by the merger, a $0.5 million write-off of an investment in
a technology which Haemonetics decided not to pursue in lieu of the
technologies acquired in the merger, and the adjustment required to modify
the 19.8% investment of Transfusion by Haemonetics in November of fiscal
year 2000 from the cost method to the equity method of accounting as
required by generally accepted accounting principles. To effect this change,
the historic cost of the 19.8% investment made by Haemonetics' was written
down by its 19.8% share of the monthly losses incurred by Transfusion
Technologies from November of fiscal 2000 through the date of acquisition of
the remaining 80.2%. For fiscal year 2001, the charge to the statement of
operations related to this equity adjustment was $0.9 for the three months
ended September 30, 2000.
Operating Income
Operating income, as a percentage of net revenues, increased to 16.1%
from (20.4%) in 2000. At constant currency, operating income increased $27.6
million and increased 36.7 percentage points as a percent of sales from
(21.4%) in 2000. The $27.6 million increase in operating income resulted
largely from the $22.8 million in combined IPR&D and other unusual charges
incurred as a result of the Company's acquisition of Transfusion
Technologies in the prior year. Exclusive of these charges, operating income
at constant currency increased $4.8 million and increased 4.4 percentage
points as a percentage of sales to 15.3% from 10.9% as a result of the $7.7
million of constant currency improvement in gross profit offset by increases
in research and development and selling, general and administrative
expenses.
Other Income, Net
Interest expense in 2001 was relatively flat as compared to 2000.
Because 93% of the Company's long-term debt is at fixed rates, the Company
has not benefited from the falling interest rates in the marketplace.
Interest income was also relatively unchanged year over year. Other income
net decreased $0.1 million due to a decline in income earned from points on
forward contracts, which was offset by the reduction of amortization expense
as a result of the Company's adoption of Statement of Financial Accounting
Standards No. 142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets,"
effective April 1, 2001 which required that the Company cease amortization
of goodwill.
Taxes
The provision for income taxes, as a percentage of pretax income, was
28.0% for the three months ended September 29, 2001 and 29.4% for the three
months ended September 30, 2000. The decrease in the effective tax
20
rate from 2000 to 2001 was primarily attributable to the cost to equity
adjustment of $0.9 million during the three months ended September 30, 2000.
(See note 10 to the unaudited consolidated financial statements).
Six Months Ended September 29, 2001 Compared to Six Months Ended September
30, 2000
Percentage Increase/(Decrease)
Percentage of Net Revenues Six Months Ended
Six Months Ended (in actual dollars)
--------------------------------- ------------------------------
Sept. 29, 2001 Sept. 30, 2000 2001/2000
-------------- -------------- ---------
Net revenues 100.0% 100.0% 10.8%
Cost of goods sold 51.4 52.6 8.1
Gross Profit 48.6 47.4 13.8
Operating Expenses:
Research and development 6.2 6.0 16.2
Selling, general and administrative 28.0 29.6 4.7
In process research and development -- 13.2 (100.0)
Other unusual charges relating to acquisition -- 3.3 (100.0)
---------------------------------------------------
Total operating expenses 34.2 52.1 (27.1)
---------------------------------------------------
Operating income 14.4 (4.7) (438.4)
Interest expense (1.3) (1.3) 5.0
Interest income 1.4 1.6 (5.7)
Other income, net 1.1 1.2 4.7
---------------------------------------------------
Income before provision for income taxes 15.6 (3.2) (636.2)
Provision for income taxes 4.4 3.1 57.7
---------------------------------------------------
Income (loss) before cumulative effect of
change in accounting 11.2 (6.3) (297.8)
Cumulative effect of change in accounting
principle, net of tax 1.5 -- 100.0
---------------------------------------------------
Net income (loss) 12.7% (6.3%) (323.7)%
===================================================
21
Percent Increase/(Decrease)
------------------------------
Actual dollars At constant
By geography: 2001 2000 as reported currency
- ------------- ---- ---- -------------- -----------
United States $ 58,780 $ 45,190 30.1% 30.1%
International 97,725 96,018 1.8 3.7
-------------------------------------------------
Net revenues $156,505 $141,208 10.8% 12.2%
Percent Increase/(Decrease)
------------------------------
Actual dollars At constant
By product type 2001 2000 as reported currency
- ---------------- ---- ---- -------------- -----------
United States $142.703 $126,905 12.4% 13.2%
International 6,875 8,633 (20.4) (14.2)
--------------------------------------------------
Net revenues $156,505 $142,208 10.8% 12.2%
Percent Increase/(Decrease)
------------------------------
Disposable revenue Actual dollars At constant
By product line 2001 2000 as reported currency
- ---------------- ---- ---- -------------- -----------
Surgical $ 32,169 $ 29,056 12.7% 13.3%
Blood bank 50,347 51,844 (2.9) (2.6)
Red cells 4,941 3,528 40.0 48.5
Plasma 55,246 42,477 30.1 29.7
-------------------------------------------------
Disposable revenues $142,703 $126,905 12.4% 13.2%
Six Months Ended September 29, 2001 Compared to Six Months Ended September
30, 2000
Net Revenues
Net revenues in 2001 increased 10.8% to $156.5 million from $141.2
million in 2000. With currency rates held constant, net revenues increased
12.2% from 2000 to 2001.
Disposable sales increased 12.4% year over year at actual rates. With
currency rates held constant, disposable sales increased 13.2%. Year over
year constant currency disposable sales growth was a result of disposable
growth in worldwide Red Cells (up 48.5%), worldwide Surgical (up 13.3%) and
worldwide Plasma (up 29.7%). The increase in worldwide red cell sales is
primarily attributable to volume increases in the U.S. market as the rollout
of this new technology continues to gain strength. The growth in the
worldwide surgical disposable sales is mainly attributed to volume increase
in the U.S. and Europe with the success of the Company's newly acquired
OrthoPAT(R) into the orthopedic market and the strengthening demand for
autotransfusion due to increasing number of blood
22
shortages. Worldwide, the OrthoPAT(R) accounted for 9.1 % of the constant
currency growth in Surgical disposable sales. The growth in worldwide Plasma
disposables sales is mainly attributed to volume increases of products sold
in the U.S. due to an upturn in plasma collections as demand for plasma
outpaces supply. In addition, of the 29.7% constant currency plasma growth,
approximately 3.4% of it was due to the sale of collection bottles related
to the Company's acquisition of the plasma container business in the fourth
quarter of last year. Offsetting these increases in Surgical, Red Cell and
Plasma disposable sales were decreases in Platelets disposable sales in
Europe, Japan and in the U.S. Platelet disposable sales have decreased as
the double collection protocol has become more prevalent in the market.
Constant currency sales of disposable products, excluding service and
other miscellaneous revenue, accounted for 91.1% and 90.3% of net revenues
for 2001 and 2000, respectively.
Service revenue generated from equipment repairs performed under
preventive maintenance contracts or emergency service billings and
miscellaneous revenues accounted for 4.5% and 4.0% of the Company's net
revenues, at constant currency, for 2001 and 2000, respectively.
Equipment revenues increased 22.2% from $5.7 million in 2000 at actual
rates and increased 26.9% year over year with currency rates held constant.
The 26.9% constant currency increase was a result of increased equipment
revenues primarily in the U.S. and in Europe. The increase is attributable
to sales of platelet and plasma machines internationally and to sales of the
new ACP technology domestically.
International sales as reported accounted for 62.5% and 68.0% of net
revenues for 2001 and 2000, respectively. As in the U.S., sales outside the
U.S. are susceptible to risks and uncertainties from regulatory changes, the
Company's ability to forecast product demand and market acceptance of the
Company's products, changes in economic conditions, the impact of
competitive products and pricing, changes in health care policy and the
events of September 11, 2001 and their aftermath.
Gross profit
Gross profit of $76.1 million for the six months ended September 29,
2001 increased $9.2 million or 1.2% as a percent of sales from $66.9 million
for the six months ended September 30, 2000. At constant currency, gross
profit as a percent of sales increased by 1.6% and increased in dollars by
$10.5 million or 15.9% from 2000 to 2001. The $10.5 million constant dollar
gross profit increase from 2000 was primarily a result of higher sales and
efficiency gains due to higher manufacturing volumes and cost reductions.
For the six months ending September 29, 2001, the CORE program has
contributed approximately $1.3 million of cost savings benefiting the
Company's gross profit. The estimated savings for the full twelve months of
fiscal year 2002 is expected from initiatives to lower product costs by
automating and redesigning the way certain products are made so that less
material and labor is needed and by negotiating lower material prices with
vendors. These savings are expected to be partially offset by increases in
other product costs.
Expenses
The Company expended $9.8 million (6.2% of net revenues) on research
and development in 2001 and $8.4 million (6.0% of net revenues) in 2000. At
constant currency rates, research and development as a percent of sales
increased by 0.3% and increased in dollars by $1.5 million from 2000 to
2001. The increase in research and development was a result of the Company's
objective to reinvest available funds into new product development.
Selling, general and administrative expenses increased $2.0 million
from $42.0 million in 2000 to approximately $44.0 million in 2001. At
constant currency, selling, general and administrative expenses increased
$4.0 million from 2000 yet decreased 0.6% as a percent of sales from 2000 to
2001. Higher sales and increased spending behind the Company's new product
selling and marketing activities contributed to the increase in selling,
general and administrative dollars spent and to the decrease as a percentage
of sales. The CORE Program is not expected to have
23
a notable impact in savings on selling, general and administrative expenses
during the current year as most savings are expected in cost of goods sold.
In Process Research and Development (IPR&D) and Other Unusual charges
Relating to the Acquisition
a) In Process Research and Development (IPR&D)
Included in the purchase price allocation for the acquisition of
Transfusion Technologies was an aggregate amount of purchased in-process
research and development ("IPR&D") of $21.5 million, $2.9 million of which
is reflected in the restatement of fiscal year 2000 relative to Haemonetics'
original 19.8% investment. The values represent purchased in-process
technology that had not yet reached technical feasibility and had no
alternative future use. Accordingly, the amounts were immediately expensed
in the consolidated statement of operations (see Note 10 in the unaudited
consolidated financial statements for further discussion of the acquisition
and IPR&D charges).
b) Other Unusual Charges Relating to the Acquisition
Included in other unusual charges is the adjustment required to modify
the 19.8% investment of Transfusion Technologies by Haemonetics in November
of fiscal year 2000 from the cost method to the equity method of accounting
as required by generally accepted accounting principles. To effect this
change, the Company recorded its 19.8% share of the monthly losses incurred
by Transfusion Technologies from November of fiscal year 2000 through the
date of acquisition of the remaining 80.2%. In 2000, the charge to the
statement of operations related to this cost to equity adjustment was $1.3
million for the six months ended September 30, 2000.
Operating Income
Operating income, as a percentage of net revenues, increased to 14.4%
from (4.7%) in 2000. At constant currency, operating income increased $28.2
million and increased 18.3 percentage points as a percent of sales from an
operating loss of (4.9%) in 2000. The $28.2 million increase in operating
income resulted largely from the $23.2 million in combined IPR&D and other
unusual charges incurred as a result of the Company's acquisition of
Transfusion Technologies in the prior year. Exclusive of these charges,
operating income at constant currency increased $4.9 million and increased
1.8 percentage points to 13.4% from 11.6% as a result of the $10.5 million
of constant currency improvement in gross profit offset by increases in
research and development and selling, general and administrative expenses.
Foreign Exchange
The Company generates approximately 63% of its revenues outside the
U.S. in foreign currencies. As such, the Company uses a combination of
business and financial tools comprised of various natural hedges,
(offsetting exposures from local production costs and operating expenses),
and forward contracts to hedge its balance sheet and P&L exposures. Hedging
through the use of forward contracts does not eliminate the volatility of
foreign exchange rates, but because the Company generally enters into
forward contracts one year out, rates are fixed for a one-year period,
thereby facilitating financial planning and resource allocation.
The Company computes 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 corresponds to the value of sales in those
currencies. The composite was set at 1.00 based upon the weighted rates at
March 31, 1997.
For fiscal year 2001 and 2002, the indexed hedge rates were 9.1% more
favorable and 2.0% less favorable than the respective prior years. For the
first and second quarters of fiscal 2002, the indexed hedge spot rates
appreciated 5.2% and 3.3%, respectively and for the first and second
quarters of fiscal 2003, the indexed hedge spot rates depreciated 8.9% and
10.3%, respectively over the corresponding quarters of the preceding years.
These indexed hedge rates represent the change in spot value (value on the
day the hedge contract is undertaken) of the
24
Haemonetics specific hedge rate index. These indexed hedge rates impact
sales in the Company's 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 vs Prior Year
---------------- -----------------------
FY1999 Q1 0.98 (9.4%)
Q2 1.06 (13.4%)
Q3 1.03 (5.9%)
Q4 1.05 (7.4%)
1999 Total 1.03 (9.1%)
FY2000 Q1 1.10 (10.8%)
Q2 1.09 (2.8%)
Q3 1.04 (0.6%)
Q4 1.07 (1.0%)
2000 Total 1.07 (3.9%)
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%)
Other Income, Net
Interest expense for the six months ended September 29, 2001 was
relatively flat as compared to 2000. Because 93% of the Company's long-term
debt is at fixed rates the Company has not benefited from the falling
interest rates in the marketplace. Interest income was also relatively flat
from 2000 to 2001. Other income net increased $0.2 million due to a decline
in income earned from points on forward contracts, which was offset by the
reduction of amortization expense as a result of the Company's adoption of
Statement of Financial Accounting Standards No. 142 ("SFAS No. 142"),
"Goodwill and Other Intangible Assets," effective April 1, 2001 which
required that the Company cease amortization of goodwill.
25
Taxes
The provision for income taxes, as a percentage of pretax income, was
28.0% for the six months ended September 29, 2001 and September 30, 2000
before the effect of the Company's acquisition of Transfusion Technologies
(See Note 10 to the unaudited consolidated financial statements).
Cumulative Effect of Accounting Change, Net of Tax
In accordance with Statement of Financial Accounting Standards No.
137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," the Company
adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" and SFAS No. 138 "Accounting for Certain Derivative Instruments
and Hedging Activities, an Amendment of FASB Statement No. 133,"
(collectively, SFAS No. 133, as amended) effective, April 1, 2001, the
beginning of the Company's 2002 fiscal year. As required, these standards
were adopted as a change in accounting principle and accordingly, the effect
at adoption of $3.2 million was shown net of taxes of $0.9 million as a
cumulative effect of a change in accounting principle on the face of the
unaudited consolidated statements of operations in the six months ended
September 29, 2001.
26
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 six months ended September 29, 2001, the Company increased
its cash balances, before the effect of exchange rates, by $16.1 million
from operating, investing and financing activities which represents
an increase in cash generated of $15.6 million from the $0.5 million
generated in the Company's operating, investing and financing activities
during the six months ended September 30, 2000. The $15.6 million of
additional cash generated results from the additional $39.2 million provided
by the Company's financing activities in 2001 offset by the $23.6 of
additional cash utilized by the Company's operating and investing
activities.
Operating Activities:
The Company generated $16.0 million in cash from operating activities
during the six months ended September 29, 2001 as compared to $24.7 million
generated during the six months ended September 30, 2000. The $8.7 million
decrease in operating cash flow from fiscal year 2001 to fiscal year 2002
was a result of a $14.3 million increase in inventories due to higher
finished goods equipment and raw material inventory levels, a $5.2 million
increase in accounts receivable resulting from higher sales as compared to a
year ago and $0.7 million lower relative reductions in current sales type
leases as part of the continuing trend of customer preference for, and the
Company's policy of, moving toward placing on loan Company-owned equipment
versus selling it under sales-type leases. These additional uses of cash
were offset by additional sources of cash including $3.1 million from net
income adjusted for depreciation, amortization and other non-cash items,
$1.4 million from changes in other assets and prepaid income taxes, a $7.0
million increase in accounts payable and accrued expenses partially due to
higher than normal reductions in accounts payable during the six months
ended September 29, 2000 related to treasury stock repurchases.
The Company measures its performance using an operating cash flow
metric defined as net income adjusted for depreciation, amortization and
other non-cash items; capital expenditures for property, plant and equipment
together with the investment in Haemonetics equipment at customer sites,
including sales-type leases; and the change in operating working capital,
including change in accounts receivable, inventory, accounts payable and
accrued expenses, excluding tax accounts and the effects of currency
translation. This alternative measure of operating cash flows is a non-GAAP
measure that may not be comparable to similarly titled measures reported by
other companies. It is intended to assist readers of the report who employ
"free cash flow" and similar measures that do not include tax assets and
liabilities, equity investments and other sources and uses that are outside
the day-to-day activities of a Company.
As measured by the Company's operating cash flow metric, the Company
generated $13.3 million and $25.5 million of operating cash during the six
months ended September 29, 2001 and September 30, 2000, respectively. The
$13.3 million of operating cash flow generated for the six months ended
September 29, 2001 resulted from $19.5 million of net income adjusted for
non-cash items and $8.0 million from the reduction of the Company's net
investment in property, plant and equipment and sales-type leases offset by
$14.2 million from increased working capital investment, primarily due to
higher inventories, higher accounts receivable and lower accrued payables
and payroll. The $25.5 million of operating cash generated for the six
months ended September 30, 2000 excluded the $26.6 of cash spent to acquire
Transfusion Technologies. The $25.5 of operating cash flow resulted from
$14.3 million of net income adjusted for non-cash items, $9.2 million from
the reduction of the Company's net investment in property plant and
equipment and sales-type leases, and from a $2.0 million lower working
capital investment, due mainly to lower inventories. The working capital and
capital investment components of the Company's operating cash flow metric
have been adjusted by non-cash transfers (from inventory to property, plant
and equipment) which amounted to approximately $2.8 million and $3.1 million
during the six-month periods for 2001and 2000, respectively.
27
Investing Activities
The Company utilized $21.6 million in cash for investing activities
during the six months ended September 29, 2001, an increase of $14.9 million
from the same period a year ago. The increased utilization of cash is
largely due to the Company's significant increase in the amount of cash it
invested into higher yielding available-for-sale securities. Offsetting this
increased investment, was the change in year over year investing cash flows
for the Company's acquisition of Transfusion Technologies utilizing $26.6
million of cash in 2000.
Financing Activities:
During the six months ended September 29, 2001, the Company generated
$39.2 million more cash from its financing activities than during the six
months ended September 30, 2000 due to a $26.5 million increase in short-
term credit agreements in 2001 as compared to 2000, a $7.7 million increase
in cash from stock option exercises in 2001 and $4.7 million in cash savings
as a result of the Company's decision not to purchase any treasury shares
during the six months ended September 29, 2001. The $26.5 million increase
in short-term credit agreements in 2001 as compared to 2000 was due largely
to additional borrowings of $10.6 million in Japan in 2001 and $15.0 million
in debt reductions in 2000 as the Company paid both the remaining $8.0
million balance on its Braintree Headquarter real estate mortgage and $7.0
million in Japanese short term debt.
At September 29, 2001, the Company had working capital of $170.3
million. This reflects an increase of $62.6 million in working capital from
the six months ended September 30, 2000.
Inflation
The Company does not believe that inflation has had a significant
impact on the Company's results of operations for the periods presented.
Historically, the Company believes it has been able to minimize the effects
of inflation by improving its manufacturing and purchasing efficiency, by
increasing employee productivity and by reflecting the effects of inflation
in the selling prices of new products it introduces each year.
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.
28
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
Approximately 63% 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 U.S.
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 weakens 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 anticipated cash flows from forecasted foreign
currency denominated revenues. 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.
At September 29, 2001, the Company had the following significant
foreign exchange contracts to hedge the anticipated cash flows from
forecasted foreign currency denominated revenues outstanding:
Weighted
Forward Discounted
Hedged (BUY)/SELL Contract US$ @ Unrealized Unrealized
Currency Local Currency Rate Current Fwd. Gain/(Loss) Gain/(Loss) Maturity
- -------- -------------- --------- ------------ ----------- ----------- --------
Euro 5,150,000 $0.860 4,745,557 ($314,562) (306,435) Oct-Dec 2001
Euro 8,000,000 $0.942 7,353,850 $183,400 176,064 Jan-Mar 2002
Euro 7,550,000 $0.857 6,924,896 ($453,271) (428,140) Apr-Jun 2002
Euro 7,350,000 $0.890 6,730,244 ($189,179) (177,771) Jul-Sept 2002
Japanese Yen 1,350,000,000 117.7 per US$ 11,009,544 $459,978 448,089 Oct-Dec 2001
Japanese Yen 1,600,000,000 117.1 per US$ 13,159,703 $505,337 485,370 Jan-Mar 2002
Japanese Yen 1,850,000,000 116.4 per US$ 15,371,533 $521,414 492,654 Apr-Jun 2002
Japanese Yen 1,825,000,000 115.6 per US$ 15,586,309 $198,166 186,217 Jul-Sept 2002
Total: 80,881,635 911,285 876,046
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 change in fair value of all forward contracts would
result in a $9.2 million unrealized gain; whereas a 10% weakening of the
U.S. dollar would result in a $10.4 million unrealized loss.
29
Interest Rate Risk
Approximately 93%, 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 September 29, 2001, the fair value of the
Company's long-term debt was approximately $4.1 million higher than the
value of the debt reflected on the Company's financial statements. This
higher fair market is primarily related to the $40.0 million, 7.05% fixed
rate senior notes the Company holds. These notes collectively represent
approximately 72% of the Company's outstanding long-term borrowings at
September 29, 2001. At September 30, 2000, the fair value of the Company's
long-term debt was approximately $1.1 million higher than the value of the
debt reflected on the Company's consolidated financial statements.
Using scenario analysis, the Company changed the interest rate on all
long-term maturities by 10% from the rate levels, which existed at September
29, 2001. The effect was a change in the fair value of the Company's long-
term debt, of approximately $1.1 million.
30
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
---------------------------------------------------
On July 24, 2001, the Company held its annual meeting of
stockholders. At the meeting, Dr. Yutaka Sakurada, Donna C. E.
Williamson, and Dr. Harvey Klein were re-elected as Directors
for terms ending in 2004. The voting results were as follows:
Dr. Yutaka Sakurada For 22,483,792 Withheld 1,723,731
Donna C. E. Williamson For 24,199,524 Withheld 7,999
Dr. Harvey Klein For 24,199,524 Withheld 7,999
The other members of the Board of Directors whose terms
continued after the meeting were:
Serving a Term Ending in 2002 - James L. Peterson and Benjamin
L. Holmes.
Serving a Term Ending in 2003 - Sir Stuart Burgess; Ronald G.
Gelbman and N. Colin Lind
At the meeting, the stockholders ratified the selection by the
Board of Directors of Arthur Andersen LLP as independent public
accountants for the current fiscal year. The vote was as
follows:
For 24,186,466 Against 16,002 Abstain 5,055
Item 5. Other Information
-----------------
None
Item 6 . Exhibits and Reports on Form 8-K.
---------------------------------
None
31
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: November 6, 2001 By: /s/ James L. Peterson
---------------------------------
James L. Peterson, President and
Chief Executive Officer
Date: November 6, 2001 By: /s/ Ronald J. Ryan
---------------------------------
Ronald J. Ryan, Senior Vice
President and Chief Financial
Officer, (Principal Accounting
Officer)
32