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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 28, 2009.
Commission file number 1-10730
HAEMONETICS
CORPORATION
(Exact name of registrant as
specified in its charter)
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Massachusetts
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04-2882273
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(State of
Incorporation)
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(I.R.S. Employer
Identification No.)
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400 Wood Road
Braintree, Massachusetts
(Address of principal
executive offices)
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02184-9114
(Zip
Code)
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Registrants telephone number, including area code:
(781) 848-7100
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common stock, $.01 par value
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark whether the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark whether the registrant is not required to
file reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
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 twelve
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was
required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller
reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the registrant is a shell Company
(as defined in
Rule 12b-2
of the
Act) Yes o No þ
The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the Registrant (assuming for
these purposes that all executive officers and Directors are
affiliates of the Registrant) as of
September 27, 2008, the last business day of the
registrants most recently completed second fiscal quarter
was $1,423,425,951 (based on the closing sale price of the
Registrants Common Stock on that date as reported on the
New York Stock Exchange).
The number of shares of the registrants common stock,
$.01 par value, outstanding as of April 30, 2009 was
25,627,399.
Documents
Incorporated By Reference
Portions of the Companys Proxy Statement for the Annual
Meeting of Shareholders to be held on July 30, 2009, are
incorporated by reference in Part III.
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(A)
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General
History of the Business
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Our Company was founded in 1971 and became publicly owned for
the first time in 1979. In 1983, American Hospital Supply
Corporation (AHS) acquired us. When Baxter Travenol
Laboratories, Inc. (Baxter) acquired AHS in 1985,
Baxter divested the Haemonetics business to address antitrust
concerns related to the AHS acquisition. As a result, in
December 1985, a group of investors that included E. I. du Pont
de Nemours and Company (Du Pont) and present and
former Haemonetics employees purchased us. We were incorporated
in Massachusetts in 1985. In May 1991, we completed an initial
public offering.
Historically, Haemonetics has been a medical device company, a
pioneer and market leader in developing and manufacturing blood
typing and screening technology. Our systems help ensure a safe
and adequate blood supply and assist blood banks and hospitals
in their efforts to operate efficiently and in compliance with
regulatory requirements. To that end, we have been engaged in
manufacturing systems and single use consumables used in
automated blood donation, blood typing and screening, and
surgical salvage of blood. We developed our first automated
blood typing and screening system in 1971. Our direct customers
are blood and plasma collectors, hospitals and hospital service
providers.
Three years ago, we embarked on a strategy to expand our markets
and product portfolio to offer blood management solutions to our
customers. Blood banks, plasma collectors, and hospitals all
want to ensure the best patient care at optimal cost. But each
face challenges to improve operational efficiency, meet
stringent regulatory requirements, and offer the highest quality
products. As the blood management company, Haemonetics helps
customers address the growing demands on their businesses.
Through internal product development and acquisition, we have
significantly expanded our product offerings. We now offer
devices and related consumables, information technology
platforms, and consulting services. Our product portfolio helps
hospitals determine blood demand and individual patient
treatments, and then implement best practices for blood usage
and cost efficiency. For blood and plasma collectors, our
product portfolio supports increasing blood supplies, automating
manual business processes, and improving efficiencies. Over the
next several years, we will continue to add to our value
proposition in blood management to ultimately link the blood
supply chain from the point of blood and plasma donation through
to the patient point of care.
Based on our broadened product portfolio, we manage the Company
as three global product families: Donor markets
blood and plasma collection devices, consumables and other
business solutions; Patient markets into hospitals
surgical blood salvage and blood demand diagnostic devices and
consumables as well as blood management services; and
Software Solutions and Services markets information
technology platforms and consulting services to blood and plasma
collectors and hospitals.
Within our product families we offer:
Donor
Products and Services
1) Plasma systems: Our
PCS®
brand systems automate the collection of plasma from donors who,
in many markets, are paid a fee for their donation. The
collected plasma is then processed into therapeutic
pharmaceuticals.
2) Blood bank systems:
a) Our
MCS®
brand system automates the collection of platelets and other
blood components from volunteer donors. The systems enable the
donation of a larger volume of the donors platelets, which
are then generally given to cancer patients and others with
bleeding disorders.
b) Our
ACP®
brand systems automate the process used to freeze, thaw and wash
red blood cells. The ACP systems can also be used to wash other
cellular parts from red blood cells units before transfusion.
c) We also manufacture sterile intravenous solutions for
our customers.
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3) Red cell systems: Our MCS and
Cymbal®
systems automate the collection of red cells from volunteer
donors. These systems maximize the volume of red cells that can
be collected from one blood donation, thus helping to alleviate
blood shortages. The highest sales volume product in the MCS red
cell product line is our double red cell collection technology
which allows for two units of red cells to be collected from one
donor. Specialty protocols enabling the simultaneous collection
of a unit of red cells and a unit of plasma or a unit of red
cells and a unit of platelets are also available in various
parts of the world.
4) Services: Programs related to blood
supply chain efficiency and effectiveness such as InSight, a
program application supporting blood center resource allocation
and utilization, as well as other occasional training and
service programs. (Revenues from these services are currently
reported in Software Solutions and Services.)
Patient
Products and Services
1) Blood salvage: Our surgical blood
salvage systems allow for the recovery, segregation and washing
of red cells from blood lost by a patient during or after
surgery. These red cells are then available to transfuse back to
the patient if needed. In this way, a surgical patient can
receive transfusions of the safest blood possible, his or her
own. Our surgical blood salvage systems include:
a) Our Cell
Saver®
brand systems for higher blood loss surgeries and trauma:
b) Our
OrthoPAT®
brand systems for lower, slower blood loss orthopedic
procedures; and
c) Our
cardioPAT®
brand system for lower blood loss cardiovascular procedures,
like beating heart surgeries or coronary artery bypass graft
(CABG) surgeries. The cardioPAT is our newest blood
salvage system.
2) Surgical suction: Our SmartSuction
Harmony®
product clears blood and debris from the surgical field in
conjunction with surgical blood salvage.
3) Blood demand diagnostics: In November
2007, we acquired the
TEG®
Thrombelastograph®
Hemostasis Analyzer business from Haemoscope. The TEG system is
a diagnostic tool which allows surgeons to assess a
patients hemostasis enabling a clinician to determine the
best blood-related clinical treatment for the individual patient.
4) Blood management consulting and
services: In July 2007, we acquired
Infonalé, a hospital services company, focused on peer to
peer blood management consulting primarily in the
U.S. Equipped with a unique database approach, Haemonetics
provides hospitals a baseline view of their blood management
metrics and then monitors and measures key improvements
associated with recommended best practice approaches to
transfusion therapy and the avoidance of transfusions. (Revenues
from these services are currently reported in Software Solutions
and Services.)
Software
Solutions and Services
1) Software Solutions: At this time, our
software solutions and services business principally provides
support to our plasma and blood collection customers. Our goal
in expanding the business is to add complementary products and
services for our Patient and Donor Division customers. Our
software offerings are managed through Haemonetics Software
Solutions, a division comprised of the former
5Dtm
Information Management (5D), Information Data
Management (IDM), and Altivation Software (acquired
in March 2009). We provide information technology platforms and
technical support for blood drive management and for efficient
and compliant operations of blood and plasma collection centers.
For plasma customers, we also provide information technology
platforms for managing back office functions and distribution at
plasma fractionation facilities.
2) Services: Through our services group,
we offer business solutions to support process excellence, donor
recruitment, business design, and blood management efforts. We
also provide hospital blood management assessment tools to
hospitals. Included in our services reporting are equipment
repair services under preventive maintenance contracts or
emergency service visits, training programs and spare part sales.
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Our principal operations are in the United States, Europe, Japan
and other parts of Asia. Our products are marketed in more than
80 countries around the world via a direct sales force as well
as independent distributors and agents.
In fiscal year 2009, we executed our plan to supply plasma
collection systems to support rapid growth in the plasma
collections market. We placed approximately 2,600 additional
plasma collection systems globally. We remained focused on
increasing sales of our red cell collection technology, software
offerings, and orthopedic surgical blood salvage systems. In the
year, we integrated the TEG diagnostic business. TEG sales
further strengthened fiscal year 2009 revenue growth as
1) we acquired the TEG business in November 2007 and
2) the TEG sales increased in fiscal year 2009. Finally, we
strengthened our blood management solutions product portfolio
through the strategic acquisition of Altivation Software.
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(B)
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Financial
Information about Industry Segments
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Although we address our customer constituents through three
global product families (Donor, Patient, and Software Solutions
and Services), we manage our business as one operating segment:
automated blood typing and screening systems. Our chief
operating decision maker uses consolidated financial 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.
The financial information required for the business segment is
included herein in Note 16 of the financial statements,
entitled Segment, Geographic and Customer Information.
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(C)
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Narrative
Description of the Business
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(i)
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Products
and Services
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We market a full suite of products, including devices and
consumables, information technology platforms, and consulting
services for hospitals and blood collectors to better manage
blood supply and demand. Specifically, we develop and market a
variety of systems used with blood donors and surgical patients
that automate the collection and processing of blood. We also
market information technology platforms to promote efficient and
compliant operations of blood and plasma collectors. And, we
market business services to support best practice in blood
management.
All of our blood systems involve the extracorporeal processing
of human blood, which is made up of components including red
blood cells, plasma, platelets, and white blood cells.
Physicians today generally treat patients with a transfusion of
only the blood component needed, rather than with whole blood.
The different components have different clinical applications.
For example, plasma derived products treat a variety of
illnesses and hereditary disorders such as hemophilia; red cells
treat trauma patients or patients undergoing major surgeries
involving high blood loss, such as open heart surgery or organ
transplant; and platelets treat cancer patients undergoing
chemotherapy.
With our automated blood collection systems, a blood donation
can be targeted to the specific blood component needed by a
blood collector. More of that blood component can be collected
during any one donation event because the blood components not
targeted are returned to the donor through a sterile,
closed-circuit disposable set used for the blood donation
procedure. (See Plasma, Blood Bank and
Red Cell product lines referred to in General
History of the Business.)
With our automated blood typing and screening systems, blood
collectors and hospitals can freeze and thaw red cells so that
they can maintain a frozen blood reserve. Blood reserves are
often maintained to enable the blood provider to respond
adequately to large-scale emergencies where many people require
blood transfusions or to treat patients who require transfusions
of very rare blood types. Our blood typing and screening systems
can also remove plasma from red cells for patients who need
specially treated blood. (See ACP product referred
to in General History of the Business.)
Our surgical blood salvage systems can collect blood lost by a
surgical patient during or after the surgery, clean it, and make
it available for transfusion back to the patient. These systems
ensure that elective surgery
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will not be cancelled due to lack of available blood, and that a
patient receives the safest blood possible his or
her own. (See Cell Saver, OrthoPAT, and
cardioPAT product lines referred to in General
History of the Business.)
Our surgical suction systems can clear the surgical field of
blood and debris to support a safe and effective operating
environment. (See SmartSuction product referred to
in General History of the Business.)
Our TEG Thrombelastograph Hemostasis Analyzer helps surgeons
assess the patients hemostasis. Armed with this knowledge,
surgeons can plan a patients treatment to support the best
possible clinical outcome, which can lead to lower hospital
costs through reduced adverse transfusion reactions, shorter ICU
and hospital stays, and fewer needs for exploratory surgery.
We invented the technology that first created the market in
plasma, red cell, and platelet collection as well as in surgical
blood salvage. We continue to innovate our product offerings
with next generation technologies.
DONOR
FAMILY OF PRODUCTS AND SERVICES
The
Plasma Collection Market for Fractionation
Automated plasma collection technology allows for the safe and
efficient collection of plasma from donors who are often paid a
fee by collection centers for their plasma donation. There are
approximately 20 million liters of plasma collected
worldwide annually. The plasma collected is processed
(fractionated) by pharmaceutical companies into
therapeutic and diagnostic products that aid in the treatment of
immune diseases, coagulation disorders, and blood loss from
trauma. Plasma is also used in the manufacture of vaccines and
blood testing and quality control reagents. Our role in the
plasma industry is limited. We supply plasma collection and
information technology platforms to plasma collectors and
fractionators, many of whom also process the plasma which they
collect. Our business does not include the actual collection,
fractionation, or distribution of plasma-derived pharmaceuticals.
Haemonetics
Automated Plasma Collection Systems (reported as
plasma product line)
Until Haemonetics introduced automated plasma collection
technology in the 1980s, plasma for fractionation was collected
manually. Manual collection was time-consuming, labor-intensive,
produced relatively poor yields, and posed risk to donors.
Currently the vast majority of plasma collections worldwide are
performed using automated collection technology because it is
safe and cost-effective. We market our PCS2 automated plasma
collection systems to commercial plasma collectors as well as to
not-for-profit
blood banks and government affiliated plasma collectors
worldwide.
We offer one stop shopping to our plasma collection
customers, enabling them to source from us the full range of
products necessary for their plasma collection operations. To
that end, in addition to providing plasma collection equipment
and disposables, we offer plasma collection containers and
intravenous solutions necessary for plasma collection and
storage, as well as information technology platforms through our
Haemonetics Software Solutions division to automate plasma
collectors operations.
The
Blood Collection Market for Transfusion
There are millions of blood donations throughout the world every
year that produce blood products for transfusion to surgical,
trauma, or chronically ill patients. In the U.S. alone,
approximately 15 million units of blood are collected each
year.
Patients requiring blood are rarely transfused with whole blood.
Instead, a patient typically receives only the blood component
necessary to treat a particular clinical condition: for example,
red cells to surgical or trauma patients, platelets to surgical
or cancer patients, and plasma to surgical patients.
Worldwide demand for blood continues to rise as the population
ages and more patients have need for and access to medical
therapies that require blood transfusions. Furthermore, highly
populated countries are
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advancing their healthcare coverage and as greater numbers of
people gain access to more advanced medical treatment,
additional demand for blood components, plasma derived drugs and
surgical procedures increases directly. Offsetting the noted
increased demand for blood are less invasive procedures
requiring reduced quantities of blood. Thus, this worldwide
market is growing modestly in the low single digits. At the same
time, tighter donor eligibility requirements to improve blood
safety have decreased the number of donors willing or able to
donate blood.
Most donations worldwide are non-automated procedures (also
referred to as manual or whole blood donations). In a manual
donation, a person donates about a pint of whole blood, bleeding
by gravity directly into a blood collection bag. After the
donation, a laboratory worker manually processes the blood and
separates it into its constituent parts: red cells, platelets
and plasma. One pint of whole blood contains one transfusible
dose of red cells, one-half to one transfusible dose of plasma,
and one-fifth to one-eighth transfusible dose of platelets.
While the Company currently does not sell whole blood collection
disposables for the large, non-automated part of the blood
collection market for transfusions, others supply this market
with whole blood collection supplies such as needles, plastic
blood bags, solutions and tubing.
In contrast to manual collections, automated procedures
eliminate the need to manually separate whole blood at a remote
laboratory. Instead, the blood separation process is automated
and occurs real-time while a person is donating
blood. In this separation method, only the specific blood
component targeted is collected, and the remaining components
are returned to the blood donor. Among other things, automated
blood collection allows significantly more of the targeted blood
component to be collected during a donation event. Importantly,
it also allows the blood banker or plasma operator to collect
two transfusible blood components from one donor providing an
optimization opportunity. An automated collection system
comprises an electromechanical device which is fitted for each
collection with a single-use, sterile set of chambers and
tubing, the latter of which is commonly referred to as a
disposable.
Today in the U.S., automated collection systems are used
annually to collect more than 700,000 red cell units and about
1 million platelet units (called single donor
platelets). Our products address the small part of the blood
collection market that uses automation to enhance blood
collection safety and efficiency, as well as regulatory
compliance.
Haemonetics
Automated Red Cell Collection Systems (reported as red
cell product line)
Automated red cell collection, a technology we created, allows
for the safe, efficient collection of more red cells from a
single donor than are collected in a manual, whole blood
collection. Most red cells are derived from manually collected
whole blood. This manual procedure involves time-consuming,
error-prone secondary handling and processing in a laboratory.
Red cell shortages are a common problem plaguing many healthcare
systems worldwide, particularly those in the U.S.
Our MCS brand systems help blood collectors address their
operational challenges. The system automates the blood
separation function, eliminating the need for laboratory
processing, and enables the collection of two transfusible doses
of red cells from a single donor thus alleviating blood
shortages. We call this our two unit protocol or double red cell
collection.
In addition to the two unit protocol, blood collectors can use
the MCS brand system to collect either one unit of red cells and
a jumbo (double) unit of plasma or one unit of red
cells and one unit of platelets from a single donor or they may
leukoreduce the
two-unit red
cell collections. Leukoreduction is the removal of potentially
harmful white blood cells from the collected red cells to
prevent or mitigate adverse reactions by the patient who
eventually receives the product. Leukoreduction has been adopted
in many countries worldwide, and an estimated 80% of all red
cells in the U.S. are now leukoreduced.
The Cymbal brand red cell collection system is an automated
device that also collects and processes two units of red cells
from a single donor. The Cymbal system is a second generation
red cell collection system (to the MCS system) which is smaller,
lighter and more portable than previous red cell collection
technologies. This mobility, including battery power, allows our
customers to more easily use the device on mobile blood drives.
Cymbal is currently sold in Europe and the U.S.
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Haemonetics
Automated Platelet Collection Systems (reported as blood
bank product line)
Automated platelet collection systems collect one or more
therapeutic doses of platelets during a single
donation by a volunteer blood donor. Platelets derived from a
non-automated donation of whole blood (also called a manual
collection) must be pooled together with platelets
from 4-7 other manual donations to make a single therapeutically
useful dose because platelets are only a very small portion of
whole blood volume. We commercialized the automation of platelet
collection, resulting in improved platelet yields and improved
patient safety.
Platelet therapy is frequently used to alleviate the effects of
bone marrow suppression, a condition in which bone marrow is
unable to produce a sufficient quantity of platelets. Bone
marrow suppression is most commonly a side effect of
chemotherapy. Physicians who prescribe platelet therapy
increasingly turn to single donor platelet products
(i.e., enough platelets collected from one donor, during an
automated collection, to constitute a transfusible dose) to
minimize a patients exposure to multiple donors and
possible blood-borne diseases.
Haemonetics
Intravenous Solutions (reported as blood bank
product line)
During an automated blood donation, intravenous solutions and
other solutions are used. We manufacture solutions in our
facility in Union, South Carolina.
Automated
Blood Cell Processing Systems (reported as blood
bank product line)
Our cell processing business is based on technology that enables
users to add and remove solutions or other substances to and
from blood components. We have several technologies that support
this business.
The most significant technology allows the freezing and thawing
of blood to enable blood banks to better manage their red cell
inventory; this allows them to manage collection volumes
impacted by seasonality shifts in supply as well as rare blood
demands. Although it has been possible for many years to freeze
red cells for up to ten years, the freezing and thawing
processes took place in a manual, open-circuit system, which
exposed red cells to the potential for bacterial contamination.
Once the cells were thawed, they had to be transfused within
24 hours or discarded. Our ACP 215 automated cell
processing system extends thawed cells shelf life to
14 days by performing the freezing and thawing processes in
an automated, closed-circuit system. We also invented this
technology.
LEAN
and Six Sigma training services:
Our internal use of these business practice improvement tools
spawned the request from our U.S. customer base to seek our
training to their selected staff with the intent to develop
expertise in problem solving and solution creation skills.
Ongoing instruction is provided.
Insighttm
Opportunity Model:
This program supports blood collector management of their
operations. It provides data to quantify the opportunity for
increased units, maximize machine utilization for increased
return on investment and benchmarking blood center performance.
PATIENT
FAMILY OF PRODUCTS AND SERVICES
The
Autotransfusion Market
Surgical blood salvage, also known as autotransfusion, involves
the collection of a patients own blood during and after
surgery, for reinfusion to that patient. In surgical blood
salvage, blood is suctioned from a wound site, processed and
washed through a centrifuge-based system which yields
concentrated red cells available for transfusion back to the
patient. This process occurs in a sterile, closed-circuit,
single-use processing set which is fitted into an
electromechanical device. We market our surgical blood salvage
products to hospital-based medical specialists, primarily
cardiovascular, orthopedic, and trauma surgeons or to surgical
suite service providers.
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Loss of blood is common in open heart, trauma, transplant,
vascular, and orthopedic procedures, and the need for
transfusion of oxygen-carrying red cells to make up for lost
blood volume is routine. Prior to the introduction of our
technology, patients were transfused with blood from volunteer
donors. Donor blood (also referred to as allogeneic
blood) carries various potential risks including
(1) risk of transfusion with the wrong blood type (the most
common cause of transfusion-related death), (2) risk of
transfusion reactions including death, but more commonly chills,
fevers or other side effects that can prolong a patients
recovery, and (3) risk of transfusion of blood with a
blood-borne disease or infectious agent.
As a result of numerous blood safety initiatives, todays
blood transfusions are extremely safe, especially in developed
and resourced health care systems. However, transfusions are not
risk free. Surgical blood salvage reduces or eliminates a
patients need for blood donated from others and ensures
that the patient receives the safest blood possible
his or her own.
Surgical blood salvage is also a cost effective alternative to
transfusing donor blood. Blood shortages have also reinforced
the benefits of surgical blood salvage. As hospitals are forced
to consider canceling elective surgeries due to unavailability
of blood, they can turn to surgical blood salvage as a means of
conserving their blood supply for other patients.
Haemonetics
Surgical Product Line
The Cell Saver brand system is a surgical blood salvage system
targeted to procedures that involve rapid, high volume blood
loss such as cardiovascular surgeries. It has become the
standard of care for high blood-loss surgeries. The new
cardioPAT system is a surgical blood salvage system targeted to
open heart surgeries when there is less blood loss and the blood
loss continues post-surgery. The system is designed to remain
with the patient following surgery to recover blood and produce
a washed red cell product for autotransfusion. We have recently
introduced the Quick-Connect cardioPAT feature which permits
customers to utilize the processing set selectively, depending
on the patients need.
Also included in our surgical product line is the SmartSuction
product. This product is an advanced suction system for removal
of blood and debris from the surgical field. The system is used
in conjunction with surgical blood salvage.
Haemonetics
OrthoPAT Product Line
The OrthoPAT system is targeted to orthopedic procedures that
involve slower, lower volume blood loss that often occurs well
after surgery. The system is designed to operate both during and
after surgery to recover and wash the patients red cells
to prepare them for reinfusion. We have recently introduced the
Quick-Connect OrthoPAT feature which permits customers to
utilize the processing set selectively, depending on the
patients need.
Haemonetics
TEG Product Line (reported on the Surgical &
Diagnostic line)
In November 2007 we acquired the assets of Haemoscope
Corporation, which marketed the TEG Thromobelastograph
Hemostasis Analyzer. The TEG system is used to help assess a
surgical patients hemostasis during and after surgery,
which helps health care providers plan for the transfusion of
particular blood components or the administration of other
therapies. Armed with this knowledge, surgeons can plan a
patients treatment to support the best possible clinical
outcome, which can lead to lower hospital costs through reduced
adverse transfusion reactions, shorter ICU and hospital stays,
and fewer needs for exploratory surgery. The TEG system is
comprised of an electromechanical device, single use containers
and reagents.
Blood
Management Consulting:
Infonalé, a hospital services company, focuses on peer to
peer blood management consulting primarily in the
U.S. Equipped with a unique database approach Haemonetics
provides hospitals a baseline view of their blood management
metrics and then monitors and measures key improvements
associated with recommended best practice approaches to
transfusion therapy and the avoidance of transfusions.
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SOFTWARE
SOLUTIONS AND SERVICES
Our Haemonetics Software Solutions division (HSS)
offers a range of software products that enable blood banks and
plasma collection centers to automate their operations and
comply with regulatory requirements. Its principal products
include
eQuetm
Automated Interview and Assessment, a donor registration and
assessment tool to assist blood banks and plasma centers in
determining a persons eligibility to donate blood;
LOGICtm
and
DMStm
software for managing inventories of collected blood product
inventories; and
Symphonytm
software which automates blood bank operations. In March 2009,
we acquired Altivation Software and its primary product,
Hemasphere. Hemasphere is a software system focused on mobile
blood drive management. About 70% of blood in the U.S. is
collected on mobile blood drives.
We include customer maintenance and repair service programs
related to our equipment in our Software Solutions and Services
revenue reporting.
We discuss our revenues using the following categories:
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Disposables (including the sale of single-use collection sets
for blood component collection and processing and surgical blood
salvage, plus the fees for the use of our equipment);
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Equipment (the sale of devices);
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Software Solutions and Services (including HSS software systems
and equipment service contracts).
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In fiscal year 2009, sales of disposable products accounted for
approximately 86.7% of net revenues. Sales of our disposable
products were 16.7% higher in 2009 than in 2008. The favorable
effects of foreign exchange contributed 3.0% of the increase in
net sales during fiscal year 2009 with the remaining 13.7%
increase resulting primarily from increases in disposable
revenues across our plasma and surgical & diagnostic
product lines. This increase in revenues is largely related to
recent acquisitions, including $19.8 million of revenues
related to the TEG Thrombelastograph Hemostasis Analyzer
business which was acquired in the third quarter of fiscal year
2008 and the Medicell business which was acquired in the first
quarter of fiscal year 2009.
Sales of equipment accounted for approximately 5.9% of net
revenues in fiscal year 2009 and approximately 6.4% of net
revenues in fiscal year 2008. The increase in equipment revenue
during fiscal year 2009 was the result of platelet equipment
sales primarily in distribution markets and cell processing
equipment to military customers.
Software solutions and services revenues accounted for
approximately 7.4% and 7.6% of net revenues in fiscal year 2009
and 2008, respectively. The software solutions and services
increase during fiscal year 2009 was driven by three factors:
(1) increased sales to commercial plasma customers,
(2) increase sales to the U.S. Department of Defense,
and (3) the recognition of $2.0 million of revenue,
that would otherwise not have been recognizable until fiscal
year 2010, in the fourth quarter of fiscal year 2009 as a result
of a customers decision to forego the option year on a
software development contract.
|
|
(iii)
|
Marketing/Sales/Distribution
|
We market and sell our products to commercial plasma collectors,
blood systems and independent blood banks, hospitals and
hospital service providers, and national health organizations
through our own direct sales force (including full-time sales
representatives and clinical specialists) as well as independent
distributors. Sales representatives target the primary
decision-makers within each of those organizations.
In fiscal year 2009, for the ninth consecutive year, we received
the Omega NorthFace ScoreBoard Award for exemplary service to
customers. This award is presented to the highest-ranked
organizations based on customer ratings of performance against
customer expectations in areas such as phone support,
on-site
operations, technical services, and training.
8
In fiscal year 2009, approximately 47% of consolidated net
revenues were generated in the U.S., where we primarily use a
direct sales force to sell our products.
|
|
(v)
|
Outside
the United States
|
In fiscal year 2009, approximately 53% of consolidated net
revenues were generated through sales to
non-U.S. customers.
Our direct sales force in Europe and Asia includes full-time
sales representatives and clinical specialists based in the
United Kingdom, Germany, France, Sweden, the Netherlands, Italy,
Austria, Hong Kong, Canada, Japan, Switzerland, Czech Republic,
China, Taiwan, and Belgium. We also use various distributors to
market our products in parts of: Europe, including Russia, South
America, the Middle East, Africa, and the Far East.
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|
(vi)
|
Research,
Development and Engineering
|
Our manufacturing research, development and engineering
(RD&E) centers in the United States and
Switzerland ensure that protocol variations are incorporated to
closely match local customer requirements. In addition, our
Haemonetics Software Solutions subsidiary maintains development
operations in Edmonton, Alberta, Canada and Illinois, USA.
Customer collaboration is also an important part of our
technical strength and competitive advantage. These
collaboration customers and transfusion experts provide us with
ideas for new products and applications, enhanced protocols, and
potential test sites as well as objective evaluations and expert
opinions regarding technical and performance issues.
The development of extracorporeal blood typing and screening
systems has required us to maintain technical expertise in
various engineering disciplines, including mechanical,
electrical, software, and biomedical engineering and material
science. Innovations resulting from these various engineering
efforts enable us to develop systems that are faster, smaller,
and more user-friendly, or that incorporate additional features
important to our customer base.
Our expenditures for RD&E were $23.9 million for
fiscal year 2009 (4.0% of sales), $24.3 million for fiscal
year 2008 (4.7% of sales), and $23.9 million for fiscal
year 2007 (5.3% of sales) exclusive of the Arryx
In-process Research and Development costs (see Note 3 -
Acquisition). With the exception of the capitalization of
software development costs (see Note 18), all RD&E
costs are expensed as incurred. We expect to continue to invest
resources in RD&E.
In fiscal year 2009, RD&E resources were allocated to
supporting a next generation surgical blood salvage device, an
automated whole blood collection system and several projects to
enhance our current product portfolio. We also allocated
resources to our Arryx subsidiary for on-going research into
nanotechnology applications in the blood typing and screening
field.
Our principal manufacturing operations (equipment, disposables,
and solutions) are located in Niles, Illinois; Braintree,
Massachusetts; Leetsdale, Pennsylvania; Union, South Carolina;
and Bothwell, Scotland.
In general, our production activities occur in a controlled
setting or clean room environment. Each step of the
manufacturing and assembly process is quality checked,
qualified, and validated. Critical process steps and materials
are documented to ensure that every unit is produced
consistently and meets performance requirements.
Plastics are the principal component of our disposable products.
Contracts with our suppliers help mitigate some of the
short-term effects of price volatility in petroleum products.
Over time, however, increases in the price of petroleum
derivatives could result in corresponding increases in our costs
to procure plastic raw materials.
9
Some component manufacturing is performed by outside contractors
according to our specifications. We maintain important
relationships with two Japanese manufacturers that produce
finished consumables in Singapore, Japan, and Thailand. Certain
parts and components are purchased from various single sources.
If necessary, we believe that, in most cases, alternative
sources of supply could be identified and developed within a
relatively short period of time. Nevertheless, an interruption
in supply could temporarily interfere with production schedules
and affect our operations. All of our equipment and disposable
manufacturing sites are certified to the ISO 13485 standard and
to the Medical Device Directive allowing placement of the CE
mark of conformity.
Each blood processing machine is designed in-house and assembled
from components that are either manufactured by us or by others
to our specifications. The completed instruments are programmed,
calibrated, and tested to ensure compliance with our engineering
and quality assurance specifications. Inspection checks are
conducted throughout the manufacturing process to verify proper
assembly and functionality. When mechanical and electronic
components are sourced from outside vendors, those vendors must
meet detailed qualification and process control requirements.
During fiscal year 2009, we manufactured the majority of our
equipment. The remainder was manufactured for us by outside
contractors.
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|
(viii)
|
Intellectual
Property
|
We consider our patent rights to be important to our business.
We hold patents in the United States and many international
jurisdictions on some of our machines, processes, disposables
and related technologies. These patents cover certain elements
of our systems, including protocols employed in our equipment
and certain aspects of our processing chambers and disposables.
Our patents may cover current products, products in markets we
plan to enter, or products in markets we plan to license, or the
patents may be defensive in that they are directed to
technologies not currently embodied in our current products. We
also license patent rights from third parties that cover
technologies that we use or plan to use in our business. To
maintain our competitive position, we rely on the technical
expertise and know-how of our personnel and on our patent
rights. We pursue an active and formal program of invention
disclosure and patent application in both the United States and
foreign jurisdictions. We own various trademarks that have been
registered in the United States and certain other countries.
Our policy is to obtain patent and trademark rights in the
U.S. and foreign countries where such rights are available
and we believe it is commercially advantageous to do so.
However, the standards for international protection of
intellectual property vary widely. We cannot assure that pending
patent and trademark applications will result in issued patents
and registered trademarks, that patents issued to or licensed by
us will not be challenged or circumvented by competitors, or
that our patents will not be found to be invalid.
We created our technologies and have established a record of
innovation and market leadership in each of the areas in which
we compete. Although we compete directly with others, no one
company competes with us across our full line of products and
services.
To remain competitive, we must continue to develop and acquire
cost-effective new products, information technology platforms,
and services. We believe that our ability to maintain a
competitive advantage will continue to depend on a combination
of factors, including factors largely within our control
(reputation, regulatory approvals, patents, unpatented
proprietary know-how in several technological areas, product
quality, safety and cost effectiveness and continual and
rigorous documentation of clinical performance) as well as
factors outside of our control (regulatory standards, medical
standards and the practice of medicine).
In the automated plasma collection markets, we principally
compete with Fenwal, Inc. on the basis of quality, ease of use,
services and technical features of systems, and on the long-term
cost-effectiveness of equipment and disposables. (Fenwal, Inc.
is an independent company founded in March 2007 when Texas
Pacific Group and Maverick Capital, Ltd. acquired the
Transfusion Therapies division of Baxter Healthcare Group).
10
In the automated platelet collection business, competition is
based on continual performance improvement, as measured by the
time and efficiency of platelet collection and the quality of
the platelets collected. Our major competitors in automated
platelet collection are Caridian BCT (formerly Gambro BCT) and
Fenwal. Each of these companies has taken a different
technological approach in designing their systems for automated
platelet collection. In the platelet collection market, we also
compete with whole blood collections from which pooled platelets
are derived.
In the Japanese automated plasma and platelet collection
markets, we also compete against a local company, Terumo Medical
Corporation.
In the cell processing market, competition is based on level of
automation, labor-intensiveness, and system type (open versus
closed). Open systems may be weaker in good manufacturing
process compliance. Moreover, blood processed through open
systems has a 24 hour shelf life. We have an open system
cell processor as well as a closed system cell processor which
gives blood processed through it a 14 day shelf life. We
compete with Caridian BCTs open systems.
Our automated red cell collection systems were pioneered in the
early 1990s. We preceded one competitor, Caridian BCT, to market
by two years, and the other competitor, Fenwal, to market by six
years. However, it is important to note that approximately 5% of
the forty million units of red cells collected worldwide and
only about 10% of the 15 million units of red cells
collected in the U.S. annually are collected via automation
today by these three companies combined. So, we more often
compete with traditional (manual/whole blood) methods of
deriving red cells by collecting and separating a pint of whole
blood on the basis of total cost, process control, product
quality, and inventory management.
In the high blood loss surgical blood salvage market,
competition is based on reliability, ease of use, service,
support, and price. Each manufacturers technology is
similar, and we compete principally with Medtronic, Fresenius,
and Sorin Biomedica. Our newly introduced cardioPAT system is
the only washed surgical blood salvage device designed to
recover red cells for transfusion where blood loss continues
post operatively in heart surgery.
In the orthopedic surgical blood salvage market we compete
against non-automated processing systems whose end product is an
unwashed red blood cell unit for transfusion to the patient. The
OrthoPAT system is the only system that washes the blood and
operates preoperatively. It is designed specifically for use in
orthopedic surgeries where a patient often bleeds more slowly,
bleeds less, and continues to bleed long after surgery.
In the diagnostics market, the TEG Thrombelastograph Hemostasis
Analyzer is used primarily in the surgical arena. There is one
direct competitor, Rotem, with whom we compete in Europe. Other
competitive technologies may not be used in surgery but
represent potential competition as we expand from the operating
room into other clinical applications such as trauma, stroke and
cardiology.
In the software market, we compete with MAK Systems, Wyndgate
Technologies (also known as Global Med Technologies), and
Mediware. These companies provide software to blood and plasma
collectors and to hospitals for managing donors, collections,
and blood units. None of these companies competes in other
Haemonetics markets.
Our technical staff is highly skilled, but many competitors have
substantially greater financial resources and larger technical
staffs at their disposal. There can be no assurance that
competitors will not direct substantial efforts and resources
toward the development and marketing of products competitive
with those of Haemonetics.
Net revenues have historically been higher in the second half of
our fiscal year, reflecting principally the seasonal buying
patterns of our customers. This has proven true in our last five
fiscal years.
11
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|
(xi)
|
Government
Regulation
|
The products we manufacture and market are subject to regulation
by the Center of Biologics Evaluation and Research
(CBER) and the Center of Devices and Radiological
Health (CDRH) of the United States Food and Drug
Administration (FDA), and other
non-United
States regulatory bodies.
All medical devices introduced to the United States market since
1976 are required by the FDA, as a condition of marketing, to
secure either a 510(k) pre-market notification clearance or an
approved Pre-market Approval Application (PMA). In
the United States, software used to automate blood center
operations and blood collections and to track those components
through the system are considered by FDA to be medical devices,
subject to 510(k) pre-market notification. Intravenous solutions
(blood anticoagulants and solutions for storage of red blood
cells) marketed by us for use with our automated systems
requires us to obtain from CBER an approved New Drug Application
(NDA) or Abbreviated New Drug Application
(ANDA). A 510(k) pre-market clearance indicates
FDAs agreement with an applicants determination that
the product for which clearance is sought is substantially
equivalent to another legally marketed medical device. The
process of obtaining a 510(k) clearance may take up to
twenty-four months and involves the submission of clinical data
and supporting information. The process of obtaining NDA
approval for solutions is likely to take much longer than 510(k)
approvals because the FDA review process is more complicated.
We maintain customer complaint files, record all lot numbers of
disposable products, and conduct periodic audits to assure
compliance with FDA regulations. We place special emphasis on
customer training and advise all customers that device operation
should be undertaken only by qualified personnel.
We are also subject to regulation in the countries outside the
United States in which we market our products. Many of the
regulations applicable to our products in such countries are
similar to those of the FDA. However, the national health or
social security organizations of certain countries require our
products to be registered by those countries before they can be
marketed in those countries. We have complied with these
regulations and have obtained such registrations.
Federal, state and foreign regulations regarding the manufacture
and sale of products such as ours are subject to change. We
cannot predict what impact, if any, such changes might have on
our business.
|
|
(xii)
|
Environmental
Matters
|
Compliance with international, federal and local environmental
protection laws or regulations could have a material adverse
impact upon our business or could require material capital
expenditures. We continue to monitor changes in U.S. and
international environmental regulations that may present a
significant risk to the business, including laws or regulations
relating to the manufacture or sale of products using plastics.
Action plans are developed to mitigate identified risks.
As of March 28, 2009, we employed the full-time equivalent
of 2,016 persons assigned to the following functional
areas: manufacturing, 961; sales and marketing, 250; general and
administrative, 464; research, development, and engineering,
102; and quality control and field service, 239. We consider our
employee relations to be satisfactory.
|
|
(xiv)
|
Availability
of Reports and Other Information
|
All of our corporate governance materials, including the
Principles of Corporate Governance, the Business Conduct Policy
and the charters of the Audit, Compensation, and Nominating and
Governance Committees are published on the Investor Relations
section of our website at
http://www.haemonetics.com/site/content/investor/corp_gov.asp.
Such information is also available in print to any shareholder
who requests it. All requests should be directed to our
Companys Secretary. On this web site the public can also
access, free of charge, our annual, quarterly and current
reports and other documents filed or furnished to the Securities
and Exchange Commission as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the
SEC.
12
The Company submitted the certification of its Chief Executive
Officer required by Section 303A.12(a) of the New York
Stock Exchange (NYSE) Listed Company Manual,
relating to the Companys compliance with the NYSEs
corporate governance listing standards, to the NYSE on
August 22, 2008 with no qualifications.
|
|
(D)
|
Financial
Information about Foreign and Domestic Operations and Export
Sales
|
The financial information required by this item is included
herein in Note 16 of the financial statements, entitled
Segment, Geographic and Customer Information. Sales to
the Japanese Red Cross accounted for 12.2% of net revenues in
fiscal year 2009. No other customer accounted for more than 10%
of our net revenues. For more information concerning significant
customers, see subheading of Note 2 of the financial
statements, entitled, Concentration of Credit Risk and
Significant Customers.
Cautionary
Statement
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, the impact of
industry consolidation, foreign currency exchange rates, changes
in customers ordering patterns, the effect of industry
consolidation as seen in the Plasma market, 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.
Set forth below are the risks that we believe are material to
our investors. This section contains forward-looking statements.
You should refer to the explanation of the qualifications and
limitations on forward-looking statements beginning on
page 12 and 41.
If we are unable to successfully expand our business, through
internal research and development, marketing partnerships and
acquisitions, our business may be materially and adversely
affected. Promising partnerships and acquisitions
may not be completed for reasons such as competition among
prospective partners or buyers, our inability to reach
satisfactory terms, or the need for regulatory approvals. Any
acquisition that we complete may be dilutive to earnings and
require that we invest significant resources. We may not be able
to integrate any acquired businesses successfully into our
existing business, make such businesses profitable, or realize
anticipated market growth or cost savings. The current economic
environment may constrain the companys ability to access
capital that may be needed for acquisitions and other capital
investments.
If we are unable to successfully keep pace with technological
advances in the medical field and the standards for transfusion
medicine, our business, financial condition and results of
operation could be adversely affected. The
success of our products will depend upon our ability to
anticipate and meet the needs of the medical field, particularly
those who practice transfusion medicine. Additionally, we must
be able to manufacture the products in a cost effective manner,
with high quality and obtain permission to market and sell the
products from various regulatory authorities.
13
As a medical device manufacturer we are subject to a number
of existing laws and regulations. Non-compliance with those laws
or regulations could adversely affect our financial condition
and results of operations. The manufacture,
distribution and marketing of our products are subject to
regulation by the FDA and other
non-United
States regulatory bodies. Some regulatory authorities outside
the United States may have a bias in favor of locally produced
goods that could delay or prevent our achieving regulatory
approval to market our products in such geographies. We must
obtain specific regulatory clearance prior to selling any new
product or service, and our operations are also subject to
continuous review and monitoring by the FDA and other regulatory
authorities. The process of obtaining approval to market and
distribute our products is costly and time-consuming. Export of
U.S. technology or goods manufactured in the United States
to some jurisdictions requires special U.S. export
authorization that may be influenced by factors, including
political dynamics, outside our control. Changes in privacy
regulations and other developments in human subject clinical
trials could make it more difficult and more expensive to
conduct clinical trials necessary for product approval.
Regulations about the use of certain materials in the
manufacture of our products could also require us to convert our
production to alternate material(s), which may be at higher
costs. The number of eligible blood donors is influenced by
government regulations (including travel restrictions, health
history, etc.) and other economic and sociological factors.
Changes in donation related regulations could have significant
immediate effects on the population of eligible donors.
We are subject to various actions by government authorities
that regulate medical devices including: product recalls, orders
to cease manufacturing or distribution activities, and other
sanctions or penalties. Compliance with these
regulations is costly and additional regulation could adversely
affect our results of operations. Our customers are also subject
to these regulations. Our customers compliance with
applicable regulations could also affect our results of
operations. Our Patient Division product lines are used in
surgical procedures that are the subject of reimbursement to
certain of our customers by third party payors, including
governmental programs. Marketing practices for these products
are strictly regulated and violations may subject the Company to
fines and other penalties.
Many of our competitors have significantly greater financial
and other resources. Their greater financial resources may allow
them to more rapidly develop new technologies and more quickly
address changes in customer
requirements. Although no one company competes
with us across our full line of products, we face competition in
each of our product lines. Our ability to remain competitive
depends on a combination of factors, including those within our
control (reputation, regulatory approvals, patents, unpatented
proprietary know-how in several technological areas, product
quality, safety, cost effectiveness and continued rigorous
documentation of clinical performance) as well as factors
outside of our control (regulatory standards, medical standards,
reimbursement policies and practices, and the practice of
medicine). Also, sales of unauthorized copies of our products by
local competitors in China could affect the demand and price
paid for our products.
As a global corporation, we are exposed to fluctuations in
currency exchange rates, which could adversely affect our cash
flows and results of operations. International
revenues account for a substantial portion of our revenues, and
we intend to continue expanding our presence in international
markets. In fiscal year 2009, our international revenues
accounted for 53% of our total revenues. The exposure to
fluctuations in currency exchange rates takes different forms.
Reported revenues for sales made in foreign currencies by our
international businesses, when translated into U.S. dollars
for financial reporting purposes, fluctuate due to exchange rate
movement. Fluctuations in exchange rates could adversely affect
our profitability in U.S. dollars of products and services
sold by us into international markets, where payment for our
products and services is made in local currencies.
Plastics are the principal component of our disposables,
which are the main source of our revenues. We
have certain contractual mechanisms in place to mitigate some of
the short-term effects of price volatility in petroleum
products. Over time, however, increases in the price of
petroleum derivatives could result in corresponding increases in
our costs to procure plastic raw materials. Increases in the
costs of other commodities may affect our procurement costs to a
lesser degree.
14
Loss of a significant customer could adversely affect our
business. The Japan Red Cross Society (JRC) is a
significant customer that represented 12.2% of our revenues in
fiscal year 2009. Because of the size of this relationship we
could experience a significant reduction in revenue if the JRC
decided to significantly reduce its purchases from us for any
reason including a desire to rebalance its purchases between
vendors, or if we are unable to obtain and maintain necessary
regulatory approvals in Japan. We also have a concentration of
credit risk due to our outstanding accounts receivable balances
with the JRC.
We are subject to the risks of international economic and
political conditions. Our international
operations are subject to risks which are inherent in conducting
business overseas and under foreign laws, regulations and
customs. These risks include possible nationalization,
expropriation, importation limitations, violations of
U.S. or local laws, pricing restrictions, and other
restrictive governmental actions. Any significant changes in the
competitive, political, legal, regulatory, reimbursement or
economic environment where we conduct international operations
may have a material impact on our business, financial condition
or results of operations.
We are subject to the risks associated with communicable
diseases. A significant outbreak of a disease could reduce the
demand for our products and affect our ability to provide our
customers with products and services. An eligible
donors willingness to donate is affected by concerns about
their personal health and safety. Concerns about communicable
diseases (such as HIV, SARS or pandemic flu) could reduce the
number of donors, and accordingly reduce the demand for our
products for a period of time. A significant outbreak of a
disease could also affect our employees ability to work,
which could limit our ability to produce product and service our
customers.
We sell our products in certain emerging
economies. Emerging economies have less mature
product regulatory systems, and can have more volatile financial
markets. In addition, government controlled health care
systems willingness or ability to invest in our products
and systems may abruptly change due to changing government
priorities or funding capacity. Our ability to sell products in
these economies is dependent upon our ability to hire qualified
employees or agents to represent our products locally, and our
ability to obtain the necessary regulatory approvals in a less
mature regulatory environment. If we are unable to retain
qualified representatives or maintain the necessary regulatory
approvals, we will not be able to continue to sell products in
these markets. We are exposed to a higher degree of financial
risk, if we extend credit to customers in these economies.
In many of the international markets in which we do business,
including certain parts of Europe, Russia and Asia, our
employees, agents or distributors offer to sell our products in
response to public tenders issued by various governmental
agencies. Selling our products through agents or
distributors, particularly in public tenders, can expose the
Company to a higher degree of risk. Our agents and distributors
are third parties who we retain to work in developing markets.
We retain these agents or distributors after completing due
diligence on their capabilities and background. However, agents
and distributors are independent third parties. If they
misrepresent our products, do not provide appropriate service
and delivery, or commit a violation of local or U.S. law,
our reputation could be harmed, and we could be subject to
fines, sanctions or both. We also conduct diligent examinations
of businesses we have targeted for acquisition or other business
combinations. However, confidentiality obligations and
compressed timeframes for completing these examinations may
constrain our ability to fully discover and resolve all risks
attendant to the operation of the targets business until
after closing of the transaction.
We have a complex international supply
chain. Any disruption to one or more of our
suppliers production or delivery of sufficient volumes of
subcomponents conforming to our specifications could disrupt or
delay our ability to deliver finished products to our customers.
Certain countries, particularly China, do not enforce compliance
with laws that protect intellectual property (IP)
rights with the same degree of vigor as is available under the
U.S. and European systems of justice. For this reason,
there is a risk that the Companys IP may be subject to
misappropriation in such countries. Further, certain of the
Companys IP rights are not registered in China, or if they
were, have since expired. This may permit others to produce
copies of products in China that are not covered by currently
valid patent registrations. There is also a risk that such
products may be exported from China to other countries.
15
The technologies that cover our products are the subject of
active patent prosecution. There is a risk that one or more of
our products may be determined to infringe a patent held by
another party. If this were to occur we may be subject to an
injunction or to payment of royalties, or both, which may
adversely affect our ability to market the affected product(s).
In addition, competitors may patent technological advances which
may give them a competitive advantage.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None
Our main facility is located on 14 acres in Braintree,
Massachusetts. This facility is located in a light industrial
park and was constructed in the 1970s. The building is
approximately 180,000 square feet, of which
70,000 square feet are devoted to manufacturing and quality
control operations, 35,000 square feet to warehousing,
72,000 square feet for administrative and research,
development and engineering activities and 3,000 square
feet available for expansion. See Note 8 to the financial
statements for details of our mortgage on the Braintree facility.
On property adjacent to the Braintree facility the Company
leases 43,708 square feet of additional office space. This
facility is used for sales, marketing, finance, legal, and other
administrative services. Annual lease expense for this facility
is $477,130.
The Company leases an 81,929 square foot facility in
Leetsdale, Pennsylvania. This facility is used for warehousing,
distribution and manufacturing operations supporting our plasma
business. Annual lease expense is $344,244 for this facility.
The Company is also leasing a temporary facility of
28,309 square feet in Leetsdale, Pennsylvania for their
distribution space as we complete the installation of a new
automated bowl line. The annual lease expense is $130,339.
The Company owns a facility in Bothwell, Scotland used to
manufacture disposable components for European customers. The
original facility is approximately 22,200 square feet. An
addition of 18,000 square feet was added in early fiscal
year 2006. This expansion provided additional office space and
13,500 square feet of warehouse replacing space previously
leased for this purpose.
The Company leases 26,264 square feet of office space in
Signy, Switzerland. This facility is used for sales, marketing,
finance and other administrative services. Annual lease expense
for this space is $700,747.
The Company leases 42,745 square feet of space in Tokyo,
Japan, of which 35,670 is used for warehousing and distribution
and 7,075 square feet is for sales, marketing, finance and
other administrative offices. Annual lease expense is $1,056,890.
The Company owns a facility in Union, South Carolina. This
facility is used for manufacture of sterile solutions to support
our blood bank (component therapy) and plasma businesses. The
facility is approximately 69,300 square feet.
The Company also leases a 55,000 square foot facility in
Stoughton, Massachusetts. This facility is used for warehousing
and distribution of products. The annual lease expense is
$327,573.
Haemonetics Software Solutions, which develops and markets
software for the blood bank and plasma business, retains two
leases. The first is 25,856 square feet of office space in
Edmonton, Alberta, Canada. Annual lease expense is $528,219. The
second is 17,624 square feet of office space in Rosemont,
Illinois. Annual lease expense is $440,313.
Arryx Inc., which performs research for the Company, leases
10,830 square feet of office and laboratory space in
Chicago, Illinois. Annual lease expense is $229,019.
Haemoscope Corporation, which performs research and
manufacturing for the Company, leases 16,478 square feet of
office and manufacturing space in Niles, Illinois. Annual lease
expense is $137,714.
16
The Company also leases sales, service, and distribution
facilities in Japan, Europe (Austria, Belgium, Czech Republic,
France, Germany, Italy, Sweden, Switzerland, the Netherlands,
and United Kingdom) China, Hong Kong and Taiwan to support our
international business.
|
|
Item 3.
|
Legal
Proceedings
|
We are presently engaged in various legal actions, and although
our ultimate liability cannot be determined at the present time,
we believe that any such liability will not materially affect
our consolidated financial position or our results of operations.
Our products are relied upon by medical personnel in connection
with the treatment of patients and the collection of blood from
donors. In the event that patients or donors sustain injury or
death in connection with their condition or treatment, we, along
with others, may be sued, and whether or not we are ultimately
determined to be liable, we may incur significant legal
expenses. In addition, such litigation could damage our
reputation and, therefore, impair our ability to market our
products or to obtain professional or product liability
insurance or cause the premiums for such insurances to increase.
We carry product liability coverage. While we believe that the
aggregate current coverage is sufficient, there can be no
assurance that such coverage will be adequate to cover
liabilities which may be incurred. Moreover, we may in the
future be unable to obtain product and professional liability
coverage in amounts and on terms that we find acceptable, if at
all.
In order to aggressively protect our intellectual property
throughout the world, we have a program of patent disclosures
and filings in markets where we conduct significant business.
While we believe this program is reasonable and adequate, the
risk of loss is inherent in litigation as different legal
systems offer different levels of protection to intellectual
property, and it is still possible that even patented
technologies may not be protected absolutely from infringement.
In December 2005, we filed a lawsuit against Baxter Healthcare
SA and Fenwal Inc. (Baxter) in the federal district
court of Massachusetts, in Boston, seeking an injunction and
damages on account of Baxters infringement of a
Haemonetics patent, through the sale of Baxters Alyx brand
automated red cell collection system which competes with
Haemonetics automated red cell collection systems. In
March, 2007 Baxter sold the Transfusion Technologies Division
(which markets the Alyx product) to private investors, Texas
Pacific Group and Maverick Capital, Ltd. The new company which
resulted from the sale was renamed Fenwal. In January 2009, a
jury found that the Fenwal Alyx system infringed
Haemonetics patent and awarded Haemonetics
$15.7 million in damages for past infringement. We
subsequently filed motions for an injunction and for additional
damages. The federal court held a hearing on these motions on
May 11, 2009 and we await the Courts ruling.
In January 2007, a reseller of the Companys products in
Portugal brought suit against Haemonetics SA in Portugal,
alleging improper termination of a distribution relationship and
seeking damages. Haemonetics intends to defend vigorously the
lawsuit. The litigation has not progressed significantly since
the case was filed.
In April 2008, our subsidiary Haemonetics Italia, Srl. and two
of its employees were found guilty by a court in Milan, Italy of
charges arising from allegedly improper payments made under a
consulting contract with a local physician and in pricing
products supplied under a tender from a public hospital. In
parallel proceedings concluded contemporaneously in Genoa,
Italy, the same parties were entirely exonerated of all charges.
Both matters involved several other individuals and companies
and arose in 2004 and 2005, respectively. When the matters first
arose, our Board of Directors commissioned independent legal
counsel to conduct investigations on its behalf. Based upon its
evaluation of counsels report, the Board concluded that no
disciplinary action was warranted in either case. All
Haemonetics parties have appealed the guilty verdicts. The Milan
ruling has not impacted the Companys business in Italy. A
third proceeding was referred by the Milan court for hearing in
Bergamo, Italy. There have been evidentiary hearings, but no
material developments in that case.
17
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
Not applicable.
Executive
Officers of the Registrant
The information concerning our Executive Officers is as follows.
Executive officers are elected by and serve at the discretion of
our Board of Directors.
PETER ALLEN joined our Company in 2003 as President,
Donor Division. Mr. Allen was appointed Chief Marketing
Officer for Haemonetics in 2008. Prior to joining Haemonetics,
Mr. Allen was Vice President of The Aethena Group, a
private equity firm providing services to the global healthcare
industry. From 1998 to 2001, he held various positions including
Vice President of Sales and the Oncology Business at Syncor
International, a provider of radiopharmaceutical and
comprehensive medical imaging services. Previously, he held
executive level positions in sales, marketing and operations in
DataMedic, Inc., Enterprise Systems, Inc./HBOC, and Robertson
Lowstuter, Inc. Mr. Allen has also worked in sales and
marketing at American Hospital Supply Corporation and Baxter
International, Inc.
BRIAN CONCANNON joined our Company in 2003 as President,
Patient Division and was promoted to President, Global Markets,
in 2006. In 2007, Mr. Concannon was promoted to Chief
Operating Officer. In April 2009, Mr. Concannon was
promoted to President and Chief Executive Officer and elected to
the Haemonetics Board of Directors. Immediately prior to joining
the Company, Mr. Concannon was President, Northeast Region,
Cardinal Health Medical Products and Services where he was
employed since 1998. From 1985 to 1998, he was employed by
American Hospital Supply Corporation, Baxter Healthcare Corp.
and Allegiance Healthcare in a series of sales and operations
management positions of increasing responsibility.
ROBERT EBBELING joined our Company in 1987 as Manager of
Injection Molding. Throughout his career at our Company,
Mr. Ebbeling has held various management and executive
positions in manufacturing and operations. In 1996, he was
appointed to Senior Vice President, Manufacturing. In February
2003, Mr. Ebbeling was promoted to Executive Vice
President, Manufacturing; in August 2003, he was promoted to
Vice President, Operations; in May 2006, Mr. Ebbeling added
the management of RD&E to his VP Operations role; and in
August 2007, Mr. Ebbeling was promoted to Vice President,
Technical Operations. Prior to joining Haemonetics,
Mr. Ebbeling was Vice President, Manufacturing, for Data
Packaging Corporation.
JOSEPH FORISH joined our Company in 2005 as Vice
President, Human Resources. Prior to joining Haemonetics,
Mr. Forish held various global human resources leadership
roles, including Vice President, Corporate Human Resources for
Rohm and Haas Company, an $8 billion specialty materials
company. Prior to that, Mr. Forish was Vice President,
Human Resources for the ConvaTec Division of Bristol-Myers
Squibb Company.
MIKAEL GORDON joined our Company in 2007 as President,
Europe and was promoted to President, Global Markets in February
2009. Prior to joining Haemonetics, Mr. Gordon was Regional
Executive Manager North & West Europe for GE
Healthcare Clinical Systems. From 1997 to 2007 he held various
executive positions as Vice President IT, VP Laboratory
Products, VP Strategic Planning and VP Global Sales within
Amersham Biosciences until the company was acquired by General
Electric in 2004. Mr. Gordon has broad international
business experience in the healthcare environment and has lived
several years outside his home country. Mr. Gordon has a
B.Sc. from the Stockholm School of Economics and is a Swedish
national.
CHRISTOPHER LINDOP joined our Company in January of 2007
as Vice President and Chief Financial Officer. In 2007,
Mr. Lindop also assumed responsibility for business
development. Prior to joining Haemonetics, Mr. Lindop was
Chief Financial Officer at Inverness Medical Innovations, a
rapidly growing global developer of advanced consumer and
professional diagnostic products from 2003 to 2006. Prior to
this, he was Partner in the Boston offices of Ernst &
Young LLP and Arthur Andersen LLP and was engagement partner to
the Haemonetics account at both firms. Mr. Lindop has no
continuing relationship with Ernst & Young that would
preclude its continued service as our independent auditor.
Additionally, there was a sufficient interval between
Mr. Lindops work for the Company as our engagement
partner and his appointment as CFO to comply with all applicable
SEC rules and regulations.
18
ALICIA R. LOPEZ joined our Company in 1988 as General
Counsel and Director of Human Resources. Since 1990, she has
served as Secretary to the Board of Directors. In 2000,
Ms. Lopez was appointed Senior Vice President. In 2003,
Ms. Lopez was named Vice President and General Counsel and
in 2004 she was promoted to General Counsel and Vice President
of Administration. In 2007, Ms. Lopez was promoted to Vice
President, Corporate Affairs. Currently, she has responsibility
for world wide legal, quality, regulatory, medical, clinical,
environmental health and safety, and public affairs. Prior to
joining Haemonetics, Ms. Lopez was employed by the law firm
of Sullivan & Worcester, counsel at the time to
Haemonetics.
BRAD NUTTER joined our Company in 2003 as Board Member,
President and Chief Executive Officer. In January 2008,
Mr. Nutter was named Chairman of the Board. In April 2009,
Mr. Nutter stepped down from his position as Chief
Executive Officer and assumed his new role as Executive Chairman
of the Board. Prior to joining Haemonetics, Mr. Nutter was
President and Chief Executive Officer of Gambro Healthcare, an
international dialysis provider, a division of Gambro AB. From
1997 to 2000, he was Executive Vice President and Chief
Operating Officer of Syncor International, an international
provider of radiopharmaceuticals and medical imaging.
Previously, Mr. Nutter held senior level positions at
American Hospital Supply Corporation and Baxter International,
Inc.
DR. JONATHAN WHITE joined our Company in 2008 as Vice
President, Research and Development. Dr. White joined
Haemonetics from Pfizer, where he held a number of roles
including Chief Information Officer. He previously worked at
McKinsey and Company in New York. Dr. White is a Fellow of
the Royal College of Surgery in England. He completed his
qualifications as a neurosurgeon and worked in both clinical and
academic medical settings. In addition, he holds a Masters
degree in Computer Science from Cambridge in England, and a
Masters degree in Business Administration from INSEAD in France.
PART II
|
|
Item 5.
|
Market
for the Registrants Common Equity Related Stockholder
Matters and Issuer Purchases of Equity Securities
|
Our common stock is listed on the New York Stock Exchange under
symbol HAE. The following table sets forth for the periods
indicated the high and low sales prices of such common stock,
which represent actual transactions as reported by the New York
Stock Exchange.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Fiscal year ended March 28, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
61.29
|
|
|
$
|
66.97
|
|
|
$
|
63.27
|
|
|
$
|
65.33
|
|
Low
|
|
$
|
51.72
|
|
|
$
|
51.18
|
|
|
$
|
48.79
|
|
|
$
|
50.32
|
|
Fiscal year ended March 29, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
53.93
|
|
|
$
|
54.60
|
|
|
$
|
64.25
|
|
|
$
|
63.76
|
|
Low
|
|
$
|
45.22
|
|
|
$
|
47.13
|
|
|
$
|
48.33
|
|
|
$
|
53.60
|
|
There were approximately 361 holders of record of the
Companys common stock as of April 30, 2009. The
Company has never paid cash dividends on shares of its common
stock and does not expect to pay cash dividends in the
foreseeable future.
19
The following graph compares the cumulative
5-year total
return provided to shareholders on Haemonetics
Corporations common stock relative to the cumulative total
returns of the S & P 500 index and the S & P
Health Care Equipment index. An investment of $100 (with
reinvestment of all dividends) is assumed to have been made in
our common stock and in each of the indexes on
3/31/2004
and its relative performance is tracked through
3/31/2009.
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Haemonetics Corporation, The S&P 500 Index
And The S&P Health Care Equipment Index
|
|
|
* |
|
$100 invested on 3/31/04 in stock or index, including
reinvestment of dividends.
Fiscal year ending March 31. |
|
|
|
Copyright©
2009 S&P, a division of The McGraw-Hill Companies Inc. All
rights reserved. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/04
|
|
|
3/05
|
|
|
3/06
|
|
|
3/07
|
|
|
3/08
|
|
|
3/09
|
Haemonetics Corporation
|
|
|
|
100.00
|
|
|
|
|
134.05
|
|
|
|
|
161.43
|
|
|
|
|
148.65
|
|
|
|
|
189.44
|
|
|
|
|
175.14
|
|
S&P 500
|
|
|
|
100.00
|
|
|
|
|
106.69
|
|
|
|
|
119.20
|
|
|
|
|
133.31
|
|
|
|
|
126.54
|
|
|
|
|
78.34
|
|
S&P Health Care Equipment
|
|
|
|
100.00
|
|
|
|
|
101.58
|
|
|
|
|
104.44
|
|
|
|
|
113.42
|
|
|
|
|
117.37
|
|
|
|
|
80.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The stock price performance included in this graph is not
necessarily indicative of future stock price performance.
20
|
|
Item 6.
|
Selected
Consolidated Financial Data
|
Haemonetics
Corporation and Subsidiaries Five-Year Review
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006(a)
|
|
|
2005(a)
|
|
|
|
(In thousands, except share and employee data)
|
|
|
Summary of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
597,879
|
|
|
$
|
516,440
|
|
|
$
|
449,607
|
|
|
$
|
419,733
|
|
|
$
|
383,598
|
|
Cost of goods sold
|
|
$
|
289,709
|
|
|
$
|
258,715
|
|
|
$
|
222,307
|
|
|
$
|
199,198
|
|
|
$
|
185,722
|
|
Gross profit
|
|
$
|
308,170
|
|
|
$
|
257,725
|
|
|
$
|
227,300
|
|
|
$
|
220,535
|
|
|
$
|
197,876
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering
|
|
$
|
23,859
|
|
|
$
|
24,322
|
|
|
$
|
23,884
|
|
|
$
|
26,516
|
|
|
$
|
19,994
|
|
Selling, general and administrative
|
|
$
|
198,744
|
|
|
$
|
163,116
|
|
|
$
|
137,073
|
|
|
$
|
121,351
|
|
|
$
|
118,039
|
|
Cost to Equity
|
|
|
|
|
|
|
|
|
|
$
|
225
|
|
|
$
|
680
|
|
|
$
|
406
|
|
In process research and development
|
|
|
|
|
|
|
|
|
|
$
|
9,073
|
|
|
|
|
|
|
|
|
|
Arbitration & Settlement Income
|
|
|
|
|
|
|
|
|
|
$
|
(5,700
|
)
|
|
$
|
(26,350
|
)
|
|
|
|
|
Total operating expenses
|
|
$
|
222,603
|
|
|
$
|
187,438
|
|
|
$
|
164,555
|
|
|
$
|
122,197
|
|
|
$
|
138,439
|
|
Operating income
|
|
$
|
85,567
|
|
|
$
|
70,287
|
|
|
$
|
62,745
|
|
|
$
|
98,338
|
|
|
$
|
59,437
|
|
Other income (expense), net
|
|
$
|
(565
|
)
|
|
$
|
7,015
|
|
|
$
|
9,591
|
|
|
$
|
7,864
|
|
|
$
|
(2
|
)
|
Income before provision for income taxes
|
|
$
|
85,002
|
|
|
$
|
77,302
|
|
|
$
|
72,336
|
|
|
$
|
106,202
|
|
|
$
|
59,435
|
|
Provision for income taxes
|
|
$
|
25,698
|
|
|
$
|
25,322
|
|
|
$
|
23,227
|
|
|
$
|
37,806
|
|
|
$
|
20,202
|
|
Net income
|
|
$
|
59,304
|
|
|
$
|
51,980
|
|
|
$
|
49,109
|
|
|
$
|
68,396
|
|
|
$
|
39,233
|
|
Income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.34
|
|
|
$
|
2.01
|
|
|
$
|
1.84
|
|
|
$
|
2.58
|
|
|
$
|
1.54
|
|
Diluted
|
|
$
|
2.27
|
|
|
$
|
1.94
|
|
|
$
|
1.78
|
|
|
$
|
2.49
|
|
|
$
|
1.50
|
|
Weighted average number of shares
|
|
|
25,389
|
|
|
|
25,824
|
|
|
|
26,746
|
|
|
|
26,478
|
|
|
|
25,523
|
|
Common stock equivalents
|
|
|
784
|
|
|
|
922
|
|
|
|
903
|
|
|
|
996
|
|
|
|
622
|
|
Weighted average number of common and common equivalent shares
|
|
|
26,173
|
|
|
|
26,746
|
|
|
|
27,649
|
|
|
|
27,474
|
|
|
|
26,145
|
|
|
|
|
(a) |
|
Reflects the adjustment to convert our investment in Arryx, Inc.
to the equity method for periods prior to the acquisition. See
Note 3 to our consolidated financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Financial and Statistical Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
289,530
|
|
|
$
|
261,757
|
|
|
$
|
321,654
|
|
|
$
|
330,288
|
|
|
$
|
255,689
|
|
Current ratio
|
|
|
4.1
|
|
|
|
3.7
|
|
|
|
4.9
|
|
|
|
4.7
|
|
|
|
3.9
|
|
Property, plant and equipment, net
|
|
$
|
137,807
|
|
|
$
|
116,484
|
|
|
$
|
90,775
|
|
|
$
|
75,266
|
|
|
$
|
69,337
|
|
Capital expenditures
|
|
$
|
56,379
|
|
|
$
|
57,790
|
|
|
$
|
40,438
|
|
|
$
|
33,774
|
|
|
$
|
17,530
|
|
Depreciation and amortization
|
|
$
|
36,462
|
|
|
$
|
31,197
|
|
|
$
|
27,504
|
|
|
$
|
25,150
|
|
|
$
|
27,756
|
|
Total assets
|
|
$
|
649,693
|
|
|
$
|
608,950
|
|
|
$
|
572,735
|
|
|
$
|
545,457
|
|
|
$
|
467,757
|
|
Total debt
|
|
$
|
6,038
|
|
|
$
|
12,363
|
|
|
$
|
28,876
|
|
|
$
|
39,153
|
|
|
$
|
45,843
|
|
Stockholders equity
|
|
$
|
539,884
|
|
|
$
|
494,188
|
|
|
$
|
479,648
|
|
|
$
|
440,564
|
|
|
$
|
355,135
|
|
Return on average equity
|
|
|
11.47
|
%
|
|
|
10.52
|
%
|
|
|
10.67
|
%
|
|
|
17.19
|
%
|
|
|
12.50
|
%
|
Debt as a % of stockholders equity
|
|
|
1.12
|
%
|
|
|
2.50
|
%
|
|
|
6.02
|
%
|
|
|
8.89
|
%
|
|
|
12.90
|
%
|
Employees
|
|
|
2,016
|
|
|
|
1,875
|
|
|
|
1,826
|
|
|
|
1,661
|
|
|
|
1,546
|
|
Net revenues per employee
|
|
$
|
297
|
|
|
$
|
275
|
|
|
$
|
246
|
|
|
$
|
254
|
|
|
$
|
248
|
|
21
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Haemonetics is a blood management solutions company for our
customers. Anchored by our reputable medical devices systems, we
also provide information technology platforms and value added
services to provide customers with business solutions which
support improved clinical outcomes for patients and efficiency
in the blood supply chain.
Our systems automate the collection and processing of donated
blood; assess likelihood for blood loss; and salvage and process
surgical patient blood. These systems include devices and
single-use, proprietary disposable sets
(disposables) that operate only with our specialized
devices. Our systems allow users to collect and process only the
blood component(s) they target plasma, platelets, or
red blood cells increasing donor and patient safety
as well as collection efficiencies. Our information technology
platforms are used by blood and plasma collectors to improve the
safety and efficiency of blood collection logistics by
eliminating previously manual functions at
not-for-profit
blood banks and commercial plasma centers. Our business services
products include consulting, Six Sigma, LEAN manufacturing and
Insight Opportunity Model offerings that support our
customers needs for regulatory compliance and operational
efficiency in the blood supply chain.
We either sell our devices to customers (resulting in equipment
revenue) or place our devices with customers subject to certain
conditions. When the device remains our property, the customer
has the right to use it for a period of time as long as the
customer meets certain conditions we have established, which
among other things, generally include one or more of the
following:
|
|
|
|
|
Purchase and consumption of a minimum level of disposables
products;
|
|
|
|
Payment of monthly rental fees; and
|
|
|
|
An asset utilization performance metric, such as performing a
minimum level of procedures per month per device.
|
Our disposable revenue stream (including sales of disposables
and fees for the use of our equipment) accounted for
approximately 87% of our total revenues for fiscal year 2009,
86% of our total revenues for fiscal year 2008 and 88% of our
total revenues for fiscal year 2007.
Although we manage our business as one operating segment, we
address our customer constituents through three global product
families: Donor, Patient, and Software Solutions and Services.
Our donor products include systems to collect plasma, platelets
and red cells from blood donors. We market our donor products
primarily to blood collectors which include both for-profit
plasma collectors and
not-for-profit
blood banks.
Our patient products include systems to collect blood during and
after surgery, wash and filter unwanted substances from the
blood, and prepare the blood for reinfusion to the surgical
patient. Our patient products also include a surgical diagnostic
system that measures a patients likelihood to bleed during
surgery. We market these patient products to hospitals and
hospital service providers.
Software solutions and services revenues includes revenue
generated from Haemonetics Software Solutions and our business
services contracts, such as blood management consulting, as well
as revenue from equipment repairs performed under preventive
maintenance contracts or emergency service billings, training
programs and spare part sales.
Donor
Products and Services
1) Plasma systems: Our PCS brand systems
automate the collection of plasma from donors who are most often
paid a fee for their donation. The collected plasma is then
processed into therapeutic
22
pharmaceuticals. Automated plasma collection is a safe and
cost-effective improvement to manual (non-automated) plasma
collection which is time-consuming, labor-intensive, produces
relatively poor yields, and poses risks to donors. Currently the
majority of plasma collections worldwide are automated
collections.
2) Blood bank systems:
a) Our MCS brand system automates the collection of
platelets and other blood components from volunteer donors. The
systems enable the donation of a larger volume of the
donors platelets, which are then generally given to cancer
patients and others with bleeding disorders. Before the advent
of our platelet collections technology, the pooling
or combination of platelets from 4 to 7 different donors was the
only alternative to prepare a single therapeutic dose for
transfusion to a patient. Our MCS line of products allows the
collection of a sufficient number of platelets from only one
donor to produce one or two therapeutic doses.
b) Our ACP brand systems automate the process used to
freeze, thaw and wash red blood cells which enables blood
collectors and the military to better manage blood inventories.
The ACP systems can also be used to wash other cellular parts
from red blood cells units before transfusion to patients with
special transfusion requirements.
3) Red cell systems: Our MCS and Cymbal
systems automate the collection of red cells from volunteer
donors. The systems improve the blood collectors
operational efficiency by increasing the volume of blood
components collected per donation event and number of red cells
than the traditional (non-automated) collection method. It helps
blood collectors address red cell shortages that commonly plague
health care systems. The Cymbal system received CE marking in
February 2006 and received FDA clearance in February 2007. The
highest sales volume product in the MCS red cell product line is
our double red cell collection technology which allows for two
units of red cells to be collected from one donor. Specialty
protocols enabling the simultaneous collection of a unit of red
cells and a unit of plasma or a unit of red cells and a unit of
platelets are also available in various parts of the world.
4) Services and programs related to blood supply chain
efficiency and effectiveness such as LEAN and Six Sigma
consulting as well as InSight, a program application supporting
blood center resource allocation and utilization, are available
to Donor customers generally associated with broad commitments.
Patient
Products and Services
1) Blood salvage: Our surgical blood
salvage systems allow for the recovery, segregation and washing
of red cells from blood lost by a patient during or after
surgery, so that red cells can be made available to transfuse
back to the patient if needed. In this way, a surgical patient
can receive transfusions of the safest blood possible, his or
her own. Our surgical blood salvage systems include:
a) Our Cell Saver brand systems for higher blood loss
surgeries and trauma;
b) Our OrthoPAT brand systems for lower, slower blood loss
orthopedic procedures; and
c) Our cardioPAT brand system for lower blood loss
cardiovascular procedures, like beating heart surgeries or
coronary artery bypass graft (CABG) surgeries. The cardioPAT is
our newest blood salvage system.
2) Surgical suction: Our SmartSuction
product clears blood and debris from the surgical field in
conjunction with surgical blood salvage.
3) Blood demand assessment: In November
2007, we acquired the TEG Thrombelastograph Hemostasis Analyzer
business from Haemoscope. The TEG system is a diagnostic tool
which allows surgeons to determine if a patient will need a
transfusion so the surgeon can then decide the best
blood-related clinical treatment for the individual patient.
4) Blood Management consulting: In July
2007, we acquired Infonalé, a hospital services company,
focused on peer to peer blood management consulting primarily in
the US. Equipped with a unique database approach Haemonetics
provides hospitals a baseline view of their blood management
metrics and then
23
monitors and measures key improvements associated with
recommended best practice approaches to transfusion therapy and
the avoidance of transfusions.
Software
Solutions and Services
1) Software: At this time, our software
solutions and services business principally provides support to
our plasma and blood collection customers. Our goal in expanding
the business is to add complementary products and services for
our Patient and Donor Division customers. Through our
Haemonetics Software Solutions division, (formerly
5Dtm
Information Management (5D) and Information Data
Management (IDM)), we provide information technology
platforms and technical support for blood drive management that
facilitate the efficient and compliant operations of blood and
plasma collection centers. For plasma customers, we also provide
information technology platforms for managing distribution of
plasma units to, and within, plasma fractionation facilities.
This division also provides data maintenance services that
include hosting of these applications.
2) Services: Through our services group,
we offer business solutions to support process excellence, donor
recruitment, business design, and blood management efforts. For
example, we provide Six Sigma and LEAN manufacturing consulting
services to blood banks. We also provide hospital blood
management assessment tools to hospitals through our
Infonalé subsidiary, acquired in July 2007. Included in our
services reporting are equipment repair services under
preventive maintenance contracts or emergency service visits,
training programs and spare part sales.
Financial
Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
% Increase/
|
|
|
% Increase/
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
597,879
|
|
|
$
|
516,440
|
|
|
$
|
449,607
|
|
|
|
15.8
|
%
|
|
|
14.9
|
%
|
Gross profit
|
|
$
|
308,170
|
|
|
$
|
257,725
|
|
|
$
|
227,300
|
|
|
|
19.6
|
%
|
|
|
13.4
|
%
|
% of net revenues
|
|
|
51.5
|
%
|
|
|
49.9
|
%
|
|
|
50.6
|
%
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
85,567
|
|
|
$
|
70,287
|
|
|
$
|
62,745
|
|
|
|
21.7
|
%
|
|
|
12.0
|
%
|
% of net revenues
|
|
|
14.3
|
%
|
|
|
13.6
|
%
|
|
|
14.0
|
%
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
(64
|
)
|
|
$
|
(377
|
)
|
|
$
|
(1,256
|
)
|
|
|
(49.3
|
)%
|
|
|
(70.0
|
)%
|
Interest income
|
|
$
|
1,968
|
|
|
$
|
5,418
|
|
|
$
|
7,864
|
|
|
|
(61.4
|
)%
|
|
|
(31.1
|
)%
|
Other income/(expense), net
|
|
$
|
(2,469
|
)
|
|
$
|
1,974
|
|
|
$
|
2,983
|
|
|
|
(225.1
|
)%
|
|
|
(33.8
|
)%
|
Income before taxes
|
|
$
|
85,002
|
|
|
$
|
77,302
|
|
|
$
|
72,336
|
|
|
|
10.0
|
%
|
|
|
6.9
|
%
|
Provision for income tax
|
|
$
|
25,698
|
|
|
$
|
25,322
|
|
|
$
|
23,227
|
|
|
|
1.5
|
%
|
|
|
9.0
|
%
|
% of pre-tax income
|
|
|
30.2
|
%
|
|
|
32.8
|
%
|
|
|
32.1
|
%
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59,304
|
|
|
$
|
51,980
|
|
|
$
|
49,109
|
|
|
|
14.1
|
%
|
|
|
5.8
|
%
|
% of net revenues
|
|
|
9.9
|
%
|
|
|
10.1
|
%
|
|
|
10.9
|
%
|
|
|
|
|
|
|
|
|
Net revenues for fiscal year 2009 increased 15.8% over fiscal
year 2008. The effects of foreign exchange accounted for an
increase of 2.8% over fiscal year 2008. The remaining increase
of 13.0% is mainly due to increases in our disposables revenue,
software solutions revenues and equipment sales. The increase in
disposables revenue resulted primarily from disposable unit
increases in Plasma and Surgical & Diagnostic.
Surgical & Diagnostic disposables revenue include
$19.8 million of revenues related to the TEG
Thrombelastograph Hemostasis Analyzer business which was
acquired in the third quarter of fiscal year 2008 and the
Medicell business which was acquired in the first quarter of
fiscal year 2009. The software solutions growth was driven by
two factors: (1) increased sales to commercial plasma
customers and (2) the recognition of $2.0 million of
revenue, that would otherwise not have been recognizable until
fiscal year 2010, in the fourth quarter of fiscal year 2009 as a
result of a customers decision to forego the option year
on a software development contract.
24
Gross profit increased 19.6% over fiscal year 2008. The
favorable effects of foreign exchange accounted for an increase
of 5.8% over fiscal year 2008. The remaining increase of 13.8%
was due primarily to increased sales driving fixed cost
leverage. This was partly offset by changes in product mix
driven by higher sales of lower margin plasma products.
Operating income increased 21.7% over fiscal year 2008. The
effects of foreign exchange accounted for an increase in
operating income of 16.7%. Without the effects of foreign
exchange operating income increased 5.0% over fiscal year 2008.
This increase was a result of the gross profit changes described
above offset by higher operating expenses of 17.5% for the
fiscal year 2009. The noted higher operating expenses are
largely related to the expenses from the recent acquisitions,
including the TEG system, increased employee performance based
compensation expense in fiscal year 2009 based on strong Company
performance versus pre-established targets, and higher expenses
due to increased sales.
Net income increased 14.1% over fiscal year 2008. The main
factors that affected net income were the increase in operating
income, due to the reasons mentioned above, partly offset by
reductions in interest income and other income. The decrease in
interest income was the result of a lower investment yield. The
reduction in other income/(expense), net was the result of
foreign exchange losses on foreign currency denominated assets
increase and lower hedge points on forward contracts.
Net revenues for fiscal year 2008 increased 14.9% over fiscal
year 2007. The effects of foreign exchange accounted for an
increase of 2.2% over fiscal year 2007. The remaining increase
of 12.7% is mainly due to increases in our disposables revenue,
software revenues and equipment sales. The increase in
disposable revenue resulted primarily from disposable unit
increases across all of our Donor and Patient product lines, and
reflects the acquired TEG business which took place in fiscal
year 2008. The software growth was due to growth in the existing
business and the acquisition of IDM, Inc. which took place in
fiscal year 2007.
Gross profit increased 13.4% over fiscal year 2007. The
favorable effects of foreign exchange accounted for an increase
of 1.5% over fiscal year 2007. The remaining increase of 11.9%
was due primarily to increased sales offset partly by changes in
product mix.
Operating income increased 12.0% over fiscal year 2007. The
effects of foreign exchange accounted for a decrease in
operating income of 2.1%. Without the effects of foreign
exchange operating income increased 14.1% over fiscal year 2007.
The increase in operating income was primarily the result of the
increases in gross profit and a reduction in in-process research
and development expenses that were incurred during fiscal year
2007 in connection with the acquisition of Arryx, Inc.
These increases were partly offset by an increase in Selling,
General and Administrative expenses of 19.0% which were largely
related to the acquisitions of IDM and Haemoscope, to increases
in administrative spending as we implemented a new global
enterprise planning system for automated services, field
services and finance, to increased employee performance based
compensation expense, and to a reduction in settlement income.
Net income increased 5.8% over fiscal year 2007. The main
factors that affected net income were the increases in operating
income due to the reasons mentioned above, partly offset by
lower interest income and other income, and an increase in the
income tax rate.
Market
Trends
Plasma
Market
The continued increase in demand for plasma derived
pharmaceuticals, particularly intravenous immunoglobulin
(IVIG), is a key driver of increased plasma
collections in the worldwide commercial plasma collection
markets. Various factors related to the supply of plasma and the
production of plasma derived pharmaceuticals also affect the
demand, including the following:
|
|
|
|
|
There has been significant industry consolidation among plasma
collectors and fractionators. Industry consolidation impacts us
when a collector changes the total number of its collection
centers, the total
|
25
|
|
|
|
|
number of collections performed per center or changes the plasma
collection system (Haemonetics or competitive technology) used
to perform some or all of those collections.
|
|
|
|
|
|
The supply of source plasma also affects demand for additional
collections of source plasma. During fiscal year 2009, the
supply and demand for plasma in the U.S. and Europe came
into balance. In Asia, supply and demand remains balanced.
|
|
|
|
The newer plasma fractionation facilities are more efficient in
their production processes, utilizing less plasma to make
similar quantities of pharmaceuticals and vaccines.
|
|
|
|
Reimbursement guidelines affect the demand for end product
pharmaceuticals.
|
|
|
|
Newly approved indications and diagnosis of new patients
requiring plasma derived therapies increase the demand for
plasma.
|
Blood
Bank Market
Despite modest increases in the demand for platelets in our
major markets, improved collection efficiencies that increase
the yield of platelets per collection and more efficient use of
collected platelets have resulted in a flat market for
disposables.
Red Cell
Market
Increased demand for red cell transfusions, a general shortage
of volunteer donors (currently and predicted to decline over
time), a need for greater operating efficiency among collectors,
and a stringent regulatory environment continue to drive demand
for our red cell products. Our business continues to grow as we
gain new customers and expand the use of our products at
existing customer sites.
Patient
Market
Our Cell Saver brand system is aimed at high blood loss
cardiovascular procedures. This part of the surgical blood
salvage market is declining and will probably continue to
decline due to improved surgical techniques which minimizes
blood loss and a decrease in the number of open-heart (bypass)
surgeries performed. The cardioPAT system, a surgical blood
salvage system targeted at open heart surgeries when there is
less blood loss, is designed to meet the market needs created by
these improved surgical techniques. The cardioPAT is used
post-operatively while the patient is in recovery.
The main driver of growth in the Patient market is the lower
blood loss orthopedic procedures, including hip and knee
replacement surgeries, served by our OrthoPAT system. The
OrthoPAT is the only system on the market designed to collect a
patients blood lost during and after surgery. Cell salvage
is not yet a standard of care for U.S. orthopedic
procedures. We are positioning this device as an effective
alternative to patient pre-donation or non-washed
autotransfusion systems.
During the fiscal year, we integrated the TEG diagnostic
business. TEG product line sales further strengthened fiscal
year 2009 revenue growth as the TEG business grew organically in
fiscal year 2009. The TEG system is a diagnostic tool which
allows surgeons to assess a patients hemostasis so the
surgeon can then decide the best blood-related clinical
treatment for the individual patient.
RESULTS
OF OPERATIONS
Net
Revenues by Geography
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
% Increase
|
|
|
% Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
279,029
|
|
|
$
|
232,812
|
|
|
$
|
211,044
|
|
|
|
19.9
|
%
|
|
|
10.3
|
%
|
International
|
|
|
318,850
|
|
|
|
283,628
|
|
|
|
238,563
|
|
|
|
12.4
|
%
|
|
|
18.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
597,879
|
|
|
$
|
516,440
|
|
|
$
|
449,607
|
|
|
|
15.8
|
%
|
|
|
14.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
International
Operations and the Impact of Foreign Exchange
Our principal operations are in the U.S., Europe, Japan and
other parts of Asia. Our products are marketed in more than 80
countries around the world via a direct sales force as well as
independent distributors.
Approximately 53%, 55% and 57% of our revenues were generated
outside the U.S. during fiscal year 2009, 2008 and 2007,
respectively. During fiscal years 2009, 2008 and 2007 revenues
from Japan accounted for approximately 16%, 17% and 20% of our
total revenues, respectively and revenues from Europe comprised
approximately 29%, 30% and 28% of our total revenues,
respectively. These sales are primarily conducted in local
currencies, specifically the Japanese Yen and the Euro.
Accordingly, our results of operations are significantly
affected by changes in the value of the Yen and the Euro
relative to the U.S. dollar. For fiscal year 2009 as
compared to fiscal year 2008, the favorable effects of foreign
exchange resulted in a 2.8% increase in sales. For fiscal year
2008 as compared to fiscal year 2007, the favorable effects of
foreign exchange accounted for a 2.2% increase in sales.
Please see section entitled Foreign Exchange in
managements discussion for a more complete discussion of
how foreign currency affects our business and our strategy to
manage this exposure.
Net
Revenues by Product Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
% Increase
|
|
|
% Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Disposables
|
|
$
|
518,101
|
|
|
$
|
444,130
|
|
|
$
|
393,660
|
|
|
|
16.7
|
%
|
|
|
12.8
|
%
|
Software Solutions and Services
|
|
|
44,263
|
|
|
|
39,498
|
|
|
|
33,718
|
|
|
|
12.1
|
%
|
|
|
17.1
|
%
|
Equipment
|
|
|
35,515
|
|
|
|
32,812
|
|
|
|
22,229
|
|
|
|
8.2
|
%
|
|
|
47.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
597,879
|
|
|
$
|
516,440
|
|
|
$
|
449,607
|
|
|
|
15.8
|
%
|
|
|
14.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposables
Revenue by Product Line
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
% Increase
|
|
|
% Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Donor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plasma
|
|
$
|
202,176
|
|
|
$
|
155,219
|
|
|
$
|
126,971
|
|
|
|
30.3
|
%
|
|
|
22.2
|
%
|
Blood Bank
|
|
|
143,420
|
|
|
|
136,148
|
|
|
|
126,216
|
|
|
|
5.3
|
%
|
|
|
7.9
|
%
|
Red Cell
|
|
|
49,508
|
|
|
|
46,377
|
|
|
|
43,406
|
|
|
|
6.8
|
%
|
|
|
6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
395,104
|
|
|
$
|
337,744
|
|
|
$
|
296,593
|
|
|
|
17.0
|
%
|
|
|
13.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surgical & Diagnostic
|
|
$
|
87,578
|
|
|
$
|
72,085
|
|
|
$
|
66,552
|
|
|
|
21.5
|
%
|
|
|
8.3
|
%
|
OrthoPAT
|
|
$
|
35,419
|
|
|
$
|
34,301
|
|
|
$
|
30,515
|
|
|
|
3.3
|
%
|
|
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
122,997
|
|
|
$
|
106,386
|
|
|
$
|
97,067
|
|
|
|
15.6
|
%
|
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total disposables revenue
|
|
$
|
518,101
|
|
|
$
|
444,130
|
|
|
$
|
393,660
|
|
|
|
16.7
|
%
|
|
|
12.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donor
Donor products include the Plasma, Blood Bank and Red Cell
product lines. Disposable revenue for donor products increased
17.0% over that of fiscal year 2008. Foreign exchange resulted
in a 3.4% increase over fiscal year 2008. The remaining increase
of 13.6% was primarily driven by increases in Plasma along with
increases in the other product lines, as discussed below.
27
For fiscal year 2008 as compared to fiscal year 2007, disposable
revenue for donor products increased 13.9%. Foreign exchange
resulted in a 1.9% increase over fiscal year 2007. The remaining
increase of 12.0% was the result of increases across all of our
Donor product lines, as discussed below.
Plasma
During fiscal year 2009, plasma disposable revenue increased
30.3%. Foreign exchange resulted in a 1.9% increase over fiscal
year 2008. The main reason for the remaining 28.4% increase was
increased demand for our products due to the demand for plasma
derived pharmaceuticals. Demand for source plasma to make
pharmaceuticals remains strong, increasing collections by our
customers and resulting in higher sales. To meet this higher
demand, over the past year we have continued to place additional
equipment with existing and new customers. Over the next twelve
to twenty-four months, as market growth rates trend down and our
customers demand levels normalize, we expect plasma
disposable growth rates to moderate to a low to mid double-digit
rate.
During fiscal year 2008, plasma disposable revenue increased
22.2%. Foreign exchange resulted in a 2.7% increase over fiscal
year 2007. The remaining increase of 19.5% was driven by
increased plasma disposable sales in the U.S. and Europe.
The U.S. increase was due to market growth. Growth in
Europe also reflected the market trends and the implementation
of expanded business with Haema AG and Octapharma. The market
growth is the result of increases in collections by our
customers as the demand for source plasma continues to
strengthen.
Blood
Bank
During fiscal year 2009, blood bank disposable revenue increased
5.3%. Foreign exchange resulted in a 5.6% increase in blood bank
disposable revenue over fiscal year 2008. Without the effect of
currency, blood bank revenue decreased 0.3%. This decrease was
due to share loss in both Europe and Japan, as well as
challenges in South Korea associated with the significant
devaluation of South Koreas currency, the Won. The
decrease was partially offset by strength in North American and
China and other emerging markets.
During fiscal year 2008, blood bank disposable revenue for donor
products increased 7.9%. Foreign exchange resulted in a 1.4%
increase in blood bank disposable revenue over fiscal year 2007.
Without the effect of currency, blood bank revenue increased
6.5%. This increase was due to increased sales in Asia and our
European distribution markets. These increases were a result of
market growth in these emerging markets and increases in market
share.
Red
Cell
During fiscal year 2009, red cell disposable revenue increased
6.8% compared to fiscal year 2008. Foreign exchange accounted
for an increase of 0.8%. Without this effect, disposables
revenue increased 6.0%. Our red cell products are sold primarily
to blood collectors, such as blood banks and government
agencies. Sales are driven by the total level of red cell
collections, the percentage of those collections done with
apheresis devices and our market share of those automated
collections. With worldwide blood donation increasing low single
digits, sales increases are driven primarily by collectors
adopting our apheresis technology over manual whole blood
collection. The non-currency related increase of 6.0% was
primarily due to additional equipment placements over the last
year in North America and increased direct sales in Europe.
During fiscal year 2008, red cell disposable revenue increased
6.8% compared to fiscal year 2007. Foreign exchange accounted
for an increase of 1.0%. This increase was due to increased
sales in the U.S. due to increased penetration at existing
customer sites and the introduction, through a Limited Market
Release of our new Cymbal brand red cell collection system.
Patient
The patient product line includes the following brand platforms:
the Cell Saver brand, the TEG products, the OrthoPAT brand, the
cardioPAT brand, and the SmartSuction Harmony products. During
fiscal year 2009,
28
Patient disposables revenue increased 15.6% compared to fiscal
year 2008. Foreign exchange resulted in a 2.0% increase over
fiscal year 2008. The remaining increase of 13.6% was the result
of increases in each of the product lines and the acquisition of
the TEG products, as discussed below.
Surgical &
Diagnostic
During fiscal year 2009, revenues from our surgical and
diagnostic disposables increased 21.5%. Surgical and diagnostic
disposables revenue consists principally of the Cell Saver,
cardioPAT, and TEG products. Foreign exchange resulted in a 2.0%
increase in surgical and diagnostic disposables revenue. Without
the effect of currency, surgical and diagnostic disposables
revenue increased 19.5%. The growth is principally driven by the
impact of adding the TEG product line, which had sales of
$19.8 million in fiscal year 2009 as compared to
$5.8 million in fiscal year 2008, to the surgical product
portfolio. The TEG product line was added through its
acquisition from Haemoscope Corporation in the third quarter of
fiscal year 2008. In the first quarter of fiscal year 2009,
Medicell (previously, Haemoscopes UK distributor) was
acquired.
During fiscal year 2008 our surgical and diagnostic disposables
increased 8.3%. Foreign exchange resulted in a 2.7% increase in
our surgical and diagnostic disposables. Without the effect of
currency, surgical disposable revenue increased 5.6%. The
acquisition of the Haemoscope products resulted in an increase
of 8.7%. Reduced revenue of our Cell Saver brand products in
Europe and the U.S. partially offset this increase.
OrthoPAT
During fiscal year 2009, OrthoPAT disposables revenue increased
3.3% over fiscal year 2008. Foreign exchange resulted in a 1.8%
increase in OrthoPAT revenue. Without the effect of currency,
OrthoPAT disposables revenue increased 1.5%. The growth was
driven by increases in Japan and European markets.
During fiscal year 2008, OrthoPAT disposables revenue increased
12.4% over fiscal year 2007. Foreign exchange resulted in a 1.9%
increase in OrthoPAT revenue. Without the effect of currency,
OrthoPAT disposables revenue increased 10.5%. The increase was
primarily due to volume growth in the U.S. and Europe, as
we have introduced a sales approach that enables us to
demonstrate a total value proposition to our customers.
Other
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
% Increase
|
|
|
% Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Software Solutions and Services
|
|
$
|
44,263
|
|
|
$
|
39,498
|
|
|
$
|
33,718
|
|
|
|
12.1
|
%
|
|
|
17.1
|
%
|
Equipment
|
|
|
35,515
|
|
|
|
32,812
|
|
|
|
22,229
|
|
|
|
8.2
|
%
|
|
|
47.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
79,778
|
|
|
$
|
72,310
|
|
|
$
|
55,947
|
|
|
|
10.3
|
%
|
|
|
29.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our software solutions and services revenues include revenue
from software sales and services revenues from repairs performed
under preventive maintenance contracts or emergency service
visits, spare part sales, and various services and training
programs.
During fiscal year 2009, software solutions and services
revenues increased 12.1% as compared to fiscal year 2008,
including a 30.7% increase in software solutions revenues over
fiscal year 2008. Foreign exchange had only a minor impact on
the results as sales were primarily in U.S. dollars. The
software solutions and services increase during fiscal year 2009
was driven by three factors: (1) increased sales to
commercial plasma customers, (2) increase sales to the
U.S. Department of Defense, and (3) the recognition of
$2.0 million of revenue, that would otherwise not have been
recognizable until fiscal year 2010, in the fourth quarter of
fiscal year 2009 as a result of a customers decision to
forego the option year on a software development contract.
Services revenues declined 17.4% as compared to fiscal year
2008. Without foreign exchange, services revenues decreased by
23.6% in fiscal year 2009 as compared to fiscal year 2008. The
decrease in revenues is primarily due to the existence of a
non-recurring consulting contract in North America that
completed toward the end of fiscal year 2008.
29
During fiscal year 2008, software solutions and services
revenues increased 17.1% as compared to fiscal year 2007.
Foreign exchange resulted in a 2.1% increase over fiscal year
2007. Without the effect of currency, software solutions and
services revenues increased 15.0%. Software revenues which were
$23.6 million in fiscal year 2008 increased 61%. The
increase is due to the acquisition of IDM, which was only
included in our Q4 fiscal year 2007 results, and organic growth
of 20% in our software business. Our services revenue which was
$15.9 million in fiscal year 2008 declined 17% due to
reductions in certain Six Sigma consulting revenues and sales of
other non-core products.
During fiscal year 2009, revenue from equipment sales increased
8.2% over fiscal year 2008. Foreign exchange resulted in a 1.4%
increase in equipment revenue. The remaining increase of 6.8%
relates to platelet equipment sales primarily in distribution
markets and cell processing equipment to military customers.
During fiscal year 2008, revenue from equipment sales increased
47.6% over fiscal year 2007. Foreign exchange resulted in a 6.7%
increase in equipment revenue. Without the effect of currency,
equipment revenue increased 40.9%. The increase over fiscal year
2007 is principally the result of increased sales of Plasma
equipment, in connection with the implementation of the Haema AG
and Octapharma agreements in Europe, and sales of our new Cymbal
brand red cell collection system. Equipment sales fluctuate from
period to period.
Gross
Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
% Increase
|
|
|
% Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
308,170
|
|
|
$
|
257,725
|
|
|
$
|
227,300
|
|
|
|
19.6
|
%
|
|
|
13.4
|
%
|
During fiscal year 2009, gross profit increased 19.6%. Foreign
exchange resulted in a 5.8% increase from fiscal year 2008. The
remaining increase of 13.8% was due primarily to the net
increase in sales and manufacturing efficiencies. Our gross
profit margin percent improved 160 basis points for fiscal
year 2009 as compared to fiscal year 2008. Major factors
impacting the gross margin percent improvement of 160 basis
points included foreign exchange, manufacturing efficiencies,
and fixed cost leverage.
During fiscal year 2008, gross profit increased 13.4%. Foreign
exchange resulted in a 1.5% increase from fiscal year 2007. The
remaining increase of 11.9% was due primarily to the net
increase in sales. Our gross profit margin percent decreased due
to product mix. A greater proportion of our sales resulted from
products with lower gross margins: relatively more commercial
plasma disposables, equipment and software.
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% (Decrease)
|
|
|
% Increase/
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
/Increase
|
|
|
(Decrease)
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Research, development and engineering
|
|
$
|
23,859
|
|
|
$
|
24,322
|
|
|
$
|
23,884
|
|
|
|
(1.9
|
)%
|
|
|
1.8
|
%
|
% of net revenues
|
|
|
4.0
|
%
|
|
|
4.7
|
%
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
$
|
198,744
|
|
|
$
|
163,116
|
|
|
$
|
137,073
|
|
|
|
21.8
|
%
|
|
|
19.0
|
%
|
% of net revenues
|
|
|
33.2
|
%
|
|
|
31.6
|
%
|
|
|
30.5
|
%
|
|
|
|
|
|
|
|
|
Cost to equity
|
|
|
|
|
|
|
|
|
|
$
|
225
|
|
|
|
|
|
|
|
(100.0
|
)%
|
% of net revenues
|
|
|
|
|
|
|
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
In Process R&D
|
|
|
|
|
|
|
|
|
|
$
|
9,073
|
|
|
|
|
|
|
|
(100.0
|
)%
|
% of net revenues
|
|
|
|
|
|
|
|
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
Arbitration & Settlement Income
|
|
|
|
|
|
|
|
|
|
$
|
(5,700
|
)
|
|
|
|
|
|
|
(100.0
|
)%
|
% of net revenues
|
|
|
|
|
|
|
|
|
|
|
(1.3
|
)%
|
|
|
|
|
|
|
|
|
Total Operating Expense
|
|
$
|
222,603
|
|
|
$
|
187,438
|
|
|
$
|
164,555
|
|
|
|
18.8
|
%
|
|
|
13.9
|
%
|
% of net revenues
|
|
|
37.2
|
%
|
|
|
36.3
|
%
|
|
|
36.6
|
%
|
|
|
|
|
|
|
|
|
30
Research,
Development and Engineering
During fiscal year 2009, research, development and engineering
expenses decreased 1.9%. Foreign exchange resulted in a 0.7%
decrease in research, development and engineering during the
year. The decrease in fiscal year 2009 was attributable to lower
spending earlier in the fiscal year, as we rationalized our
research and development activities to focus on one platform at
a time in our core technology projects.
During fiscal year 2008, research, development and engineering
expenses increased 1.8%. Foreign exchange resulted in a 0.2%
increase in research, development and engineering during the
year. Increased spending on new products research was the
primary factor in the increase. The significant factors in the
increase during fiscal year 2008 related to Arryx and IDM,
acquisitions that took place during fiscal year 2007.
Selling,
General and Administrative
During fiscal year 2009, selling, general and administrative
expenses increased 21.8%. The effect of foreign exchange
accounted for an increase of 1.5%. Excluding the impact of
foreign exchange, selling, general and administrative expense
increased 20.3% for fiscal year 2009 as compared to fiscal year
2008. The increase was due largely to several factors identified
below:
|
|
|
|
|
Increased employee performance based compensation expense of
$8.8 million based on several factors, including: strong
Company performance versus pre-established targets resulting in
formula driven payouts to eligible employees in accordance with
the terms of the management bonus plan and a $2.8 million
discretionary bonus to company wide employees (excluding
executive management) in fiscal year 2009, contrasted with lower
than target performance in fiscal year 2008.
|
|
|
|
Increased selling, general and administrative costs of
$5.5 million relating to the acquisition of Haemoscope
(including Medicell).
|
|
|
|
Legal costs of $2.0 million resulting primarily from a
lawsuit that sought an injunction and damages for infringement
of a Haemonetics patent. In January 2009, a jury found that our
patent was infringed and awarded Haemonetics $15.7 million.
The court has not yet ruled on the parties post trial
motions.
|
|
|
|
General selling, marketing and handling costs necessary to
support the 15.8% increase in sales.
|
|
|
|
In fiscal year 2009, we incurred total restructuring and other
transformation related costs of approximately $7.0 million
at consistent levels with those costs incurred in fiscal year
2008. As we have completed our transformation initiatives, we
dont expect to incur significant transformation costs in
fiscal year 2010.
|
During fiscal year 2008, selling, general and administrative
expenses increased 19.0%. The effect of foreign exchange
accounted for an increase of 3.4%. Excluding the impact of
foreign exchange, selling, general and administrative expense
increased 15.6% as compared to fiscal year 2007. The increase
was due largely to several actors identified below:
|
|
|
|
|
Total Enterprise Resource Planning (ERP) expense of
$7.5 million relating to certain internal personnel and
third party consulting and training costs, an increase of
$3.4 million from fiscal year 2007.
|
|
|
|
Selling, general and administrative costs of $3.2 million
and $2.7 million relating to the acquisition of IDM and
Haemoscope, respectively.
|
|
|
|
Restructuring costs of $6.3 million in fiscal year 2008
compared to $3.5 million in fiscal year 2007 relating to
the reorganization of our international sales and service
organizations. These costs include employee related costs and
certain other employee benefits and lease termination and
related facility closure costs.
|
|
|
|
General selling, marketing and handling costs necessary to
support the 14.9% increase in sales.
|
31
In
Process Research and Development
The $9.1 million purchased in process research and
development that was charged to operating expenses in the second
quarter of fiscal year 2007 consists of a project for the
advancement and development of the technology in blood
diagnostics applications, and for the purpose of licensing the
technology outside of the blood marketplace. The project
included work to reduce the size of systems which apply the
technology, including reducing the size of the laser, and
developing mechanisms to label samples and collections.
Arbitration &
Settlement Income
During fiscal year 2007 we recorded settlement income of
$5.7 million. In December 2005, we filed a claim for
binding arbitration against Baxter, seeking damages as well as
an arbitrators determination of the rights and obligations
of Baxter and Haemonetics, under the Technology Development
Agreement between them dated December 2001 concerning platelet
pathogen inactivation. Our arbitration claim arose out of
Baxters decision to exit the pathogen inactivation market.
The parties settled the claim in January 2007 for
$6.0 million. We incurred $0.3 million in external
legal fees to bring this action.
Operating
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
% Increase
|
|
|
% Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
85,567
|
|
|
$
|
70,287
|
|
|
$
|
62,745
|
|
|
|
21.7
|
%
|
|
|
12.0
|
%
|
% of net sales
|
|
|
14.3
|
%
|
|
|
13.6
|
%
|
|
|
14.0
|
%
|
|
|
|
|
|
|
|
|
During fiscal year 2009, operating income increased 21.7%
compared to fiscal year 2008. Foreign exchange resulted in a
16.7% increase in operating income during the fiscal year.
Without the effects of foreign currency, operating income
increased 5.0% over fiscal year 2008. The increase is due
primarily to sales and gross profit growth, partially offset by
increases in operating expenses.
During fiscal year 2008, operating income increased 12.0%
compared to fiscal year 2007. Foreign exchange resulted in a
2.1% decrease in operating income during the fiscal year.
Without the effects of foreign currency, operating income
increased 14.1% over fiscal year 2007. The increase is due
primarily to sales and gross profit growth, the reduction in the
in-process research and development charge as described above,
partially offset by increases in operating expenses.
Other
Income (Expense), Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
% Decrease
|
|
|
% Decrease
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
$
|
(64
|
)
|
|
$
|
(377
|
)
|
|
$
|
(1,256
|
)
|
|
|
(83.0
|
)%
|
|
|
(70.0
|
)%
|
Interest income
|
|
$
|
1,968
|
|
|
$
|
5,418
|
|
|
$
|
7,864
|
|
|
|
(63.7
|
)%
|
|
|
(31.1
|
)%
|
Other (expense)/income, net
|
|
$
|
(2,469
|
)
|
|
$
|
1,974
|
|
|
$
|
2,983
|
|
|
|
(225.1
|
)%
|
|
|
(33.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense)/income, net
|
|
$
|
(565
|
)
|
|
$
|
7,015
|
|
|
$
|
9,591
|
|
|
|
(108.1
|
)%
|
|
|
(26.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During fiscal year 2009, total other income, net decreased
108.1% as compared to fiscal year 2008 due primarily to a
decrease in interest income and a decrease in other
income/(expense), net. The decrease in interest income was the
result of a lower investment yield. The reduction in other
income/(expense), net was the result of increased foreign
exchange losses on foreign currency denominated assets and lower
hedge points on forward contracts. 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.
During fiscal year 2008, total other income, net decreased 26.9%
as compared to fiscal year 2007 due to (i) the decrease in
interest income due to lower invested cash resulting from the
Companys share repurchase programs in fiscal years 2007
and 2008 and the acquisition of Haemoscopes TEG
Thrombelastograph Hemostasis Analyzer business, and (ii) a
decrease in other income associated with hedge points and an
32
increase in foreign exchange transaction losses offset by
(iii) a decrease in interest expense due to lower average
fixed rate debt outstanding and an increase in interest expense
capitalized on in-process software development projects and the
ERP system.
Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Rate
|
|
|
Tax Rate
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
Decrease
|
|
|
Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs. 08
|
|
|
08 vs. 07
|
|
|
Reported Tax Rate
|
|
|
30.2
|
%
|
|
|
32.8
|
%
|
|
|
32.1
|
%
|
|
|
(2.6
|
)%
|
|
|
0.7
|
%
|
Our reported tax rate includes two principal components: an
expected annual tax rate and discrete items resulting in
additional provisions or benefits that are recorded in the
quarter that an event arises, events or items that give rise to
discrete recognition include finalizing audit examinations for
open tax years, a statute of limitations expiration, or a
stock acquisition.
The reported tax rate was 30.2% for the current fiscal year. The
reported tax rate includes:
|
|
|
|
|
A 32.8% effective annual tax rate which reflects tax benefits
from foreign taxes (including our Swiss principal) and a
domestic manufacturing deduction, state tax provision, and stock
compensation expenses not deductible in all jurisdictions.
|
|
|
|
A $2.1 million reversal of previously accrued income taxes
because of the expiration of foreign and domestic statute of
limitations.
|
|
|
|
A $0.8 million benefit from the remittance of a Japanese
dividend before the restructuring of that subsidiary.
|
|
|
|
A $0.3 million increase in tax expense due to finalizing
our prior year income tax return.
|
|
|
|
A $0.7 million increase in tax expense for potential
foreign and state tax assessment.
|
The reported tax rate was 32.8% for the 2008 fiscal year. The
reported tax rate includes:
|
|
|
|
|
A 34.25% expected annual tax rate which reflects tax benefits
from foreign taxes, reduced tax exempt income than in prior
periods and stock compensation expenses that are not deductible
in all jurisdictions.
|
|
|
|
A $2.1 million reversal of previously accrued income taxes
because of the expiration of foreign and domestic statute of
limitations.
|
|
|
|
A $0.7 million increase in U.S. deferred tax provided
on the portion of unremitted earnings of a foreign subsidiary
that are not permanently reinvested.
|
|
|
|
A $0.4 million increase in tax expense due to finalizing
our prior year income tax return.
|
Critical
Accounting Policies
Our significant accounting policies are summarized in
Note 2 of our consolidated financial statements. While all
of these significant accounting policies impact our financial
condition and results of operations, we view certain of these
policies as critical. Policies determined to be critical are
those policies that have the most significant impact on our
financial statements and require management to use a greater
degree of judgment
and/or
estimates. Actual results may differ from those estimates.
The accounting policies identified as critical are as follows:
Revenue
Recognition
Our revenue recognition policy is to recognize revenues from
product sales, software solutions and services in accordance
with SAB No. 104, Revenue Recognition,
EITF 00-21,
Revenue Arrangements with Multiple Deliverables and
Statement of Position (SOP)
97-2,
Software Revenue Recognition, as amended. These
standards require that revenues are recognized when persuasive
evidence of an arrangement exists,
33
product delivery, including customer acceptance, has occurred or
services have been rendered, the price is fixed or determinable
and collectibility is reasonably assured. When more than one
element such as equipment, disposables and services are
contained in a single arrangement, we allocate revenue between
the elements based on each elements relative fair value,
provided that each element meets the criteria for treatment as a
separate unit of accounting. An item is considered a separate
unit of accounting if it has value to the customer on a stand
alone basis and there is objective and reliable evidence of the
fair value of the undelivered items. The fair value of the
undelivered elements is determined by the price charged when the
element is sold separately, or in cases when the item is not
sold separately, by the using other objective evidence as
defined in
EITF 00-21,
or vendor specific objective evidenced under
SOP 97-2.
We generally do not allow our customers to return products. We
offer sales rebates and discounts to certain customers. We treat
sales rebates and discounts as a reduction of revenue and
classify the corresponding liability as current. We estimate
rebates for products where there is sufficient historical
information available to predict the volume of expected future
rebates. If we are unable to estimate the expected rebates
reasonably, we record a liability for the maximum potential
rebate or discount that could be earned.
Inventories
Inventories are stated at the lower of the actual cost to
purchase
and/or
manufacture or the current estimated market value of the
inventory. On a quarterly basis, inventory quantities on hand
are reviewed and an analysis of the provision for excess and
obsolete inventory is performed based primarily on our estimates
of product demand and production requirements for the next
twenty-four months. A change in the estimated timing or amount
of demand for our products could result in additional provisions
for excess inventory quantities on hand. Any significant
unanticipated changes in demand could have a significant impact
on the value of our inventory and reported operating results.
Goodwill
and Other Intangible Assets
Intangible assets acquired in a business combination, including
licensed technology, are recorded under the purchase method of
accounting at their estimated fair values at the date of
acquisition. Goodwill represents the excess purchase price over
the fair value of the net tangible and other identifiable
intangible assets acquired. We amortize our other intangible
assets over their useful lives using the estimated economic
benefit method, as applicable.
Goodwill and certain other intangible assets, determined to have
an indefinite life, are not amortized. Instead these assets are
reviewed for impairment at least annually in accordance with
SFAS No. 142, Goodwill and Other Intangible
Assets. We perform our annual impairment test on
January 1st (or the first business day immediately
following that date). We have three reporting units. The test is
based on a discounted cash flow analysis for each reporting
unit. The test showed no evidence of impairment to our goodwill
and other indefinite lived assets for fiscal year 2009 or 2008.
We review our intangible assets, subject to amortization, and
their related useful lives at least once a year to determine if
any adverse conditions exist that would indicate the carrying
value of these assets may not be recoverable. We conduct more
frequent impairment assessments if certain conditions exist,
including: a change in the competitive landscape, any internal
decisions to pursue new or different technology strategies, a
loss of a significant customer, or a significant change in the
market place including changes in the prices paid for our
products or changes in the size of the market for our products.
There were no indicators of impairment in either fiscal year
2009 or 2008.
An impairment results if the carrying value of the asset exceeds
the estimated fair value of the asset based on the sum of the
future undiscounted cash flows expected to result from the use
and disposition of the asset. If the estimate of an intangible
assets remaining useful life is changed, the remaining
carrying amount of the intangible asset is amortized
prospectively over the revised remaining useful life.
34
Property,
Plant and Equipment
Property, plant and equipment are depreciated over their useful
lives. Useful lives are based on our estimate of the period that
the assets will generate revenue. Any change in conditions that
would cause us to change our estimate as to the useful lives of
a group or class of assets may significantly impact our
depreciation expense on a prospective basis. Haemonetics
equipment includes devices that we have placed at our customers
under contractual arrangements that allow them to use the device
in exchange for rental payments or the purchase of disposables.
In addition to periodically reviewing the useful lives of these
devices, we also periodically perform reviews to determine if a
group of these devices is impaired. To conduct these reviews we
must estimate the future amount and timing of demand for these
devices. Changes in expected demand can result in additional
depreciation expense, which is classified as cost of goods sold.
Any significant unanticipated changes in demand could have a
significant impact on the value of equipment and our reported
operating results.
Consistent with the impairment tests noted above for intangible
assets, subject to amortization, we review our property, plant,
and equipment assets, subject to depreciation, and their related
useful lives once a year, or more frequently if certain
conditions arise, to determine if any adverse conditions exist
that would indicate the carrying value of these assets may not
be recoverable. There were no indicators of impairment in either
fiscal year 2009 or 2008.
Change
in Depreciable Lives of Property and Equipment
In accordance with our policy, the Company reviews the estimated
useful lives of our property, plant and equipment on an ongoing
basis. During fiscal year 2007, we increased the estimated
useful life of our PCS2 device, used by our commercial plasma
customers. Driven by the signing of several long term contracts
for the use of this device, the change increased the useful life
of these devices from 4 years to 6 years to reflect
the estimated periods during which these assets will remain in
service.
Capitalized
Software Costs
In connection with the development of our next generation Donor
apheresis platform, software development costs have been
capitalized in accordance with SFAS No. 86,
Accounting for the Cost of Computer Software to be Sold,
Leased or Otherwise Marketed, which specifies that costs
incurred internally in researching and developing a computer
software product should be charged to expense until
technological feasibility has been established for the product.
Once technological feasibility is established, all software
costs should be capitalized until the product is available for
general release to customers. Technological feasibility is
established when we have a detailed design of the software and
when research and development activities on the underlying
device, if applicable, are completed.
Income
Taxes
In preparing our consolidated financial statements, income tax
expense is calculated for all jurisdictions in which we operate.
This process involves estimating actual current taxes due plus
assessing temporary differences arising from differing treatment
for tax and accounting purposes that are recorded as deferred
tax assets and liabilities. Deferred tax assets are periodically
evaluated to determine their recoverability. A valuation
allowance is established and a corresponding additional income
tax expense is recorded in our consolidated statement of income
if their recovery is not likely. The provision for income taxes
could also be materially impacted if actual taxes due differ
from our earlier estimates.
We file income tax returns in all jurisdictions in which we
operate. We established reserves in accordance with FIN 48
to provide for additional income taxes that may be due in future
years as these previously filed tax returns are audited. These
reserves have been established based on managements
assessment as to the potential exposure attributable to
permanent differences and interest applicable to both permanent
and
35
temporary differences. All tax reserves are analyzed
periodically and adjustments made as events occur that warrant
modification.
Stock-Based
Compensation
We use the Black-Scholes option-pricing model to calculate the
grant-date fair value of our stock options. The following
assumptions, which involve the use of judgment by management,
are used in the computation of the grant-date fair value of our
stock options:
Expected Volatility We have principally used
our historical volatility as a basis to estimate expected
volatility in our valuation of stock options.
Expected Term We estimate the expected term
of our options using historical exercise and forfeiture data. We
believe that this historical data is currently the best estimate
of the expected term of our new option grants.
Additionally, after determining the fair value of our stock
options, we use judgment in establishing an estimated forfeiture
rate, to determine the amount of stock based compensation to
record each period:
Estimated Forfeiture Rate We have applied,
based on an analysis of our historical forfeitures, an annual
forfeiture rate of 8% to all unvested stock options as of
March 28, 2009, which represents the portion that we expect
will be forfeited each year over the vesting period. We
reevaluate this analysis periodically and adjust the forfeiture
rate as necessary. Ultimately, we will only recognize expense
for those shares that vest.
Valuation
of Acquisitions
We allocate the amounts we pay for each acquisition to the
assets we acquire and liabilities we assume based on their fair
values at the dates of acquisition, including acquired
identifiable intangible assets, and purchased research and
development. We base the fair value of identifiable intangible
assets on detailed valuations that use information and
assumptions provided by management. We allocate any excess
purchase price over the fair value of the net tangible and
intangible assets acquired to goodwill. The use of alternative
valuation assumptions, including estimated cash flows and
discount rates, and alternative estimated useful life
assumptions could result in different purchase price
allocations, purchased research and development charges, and
intangible asset amortization expense in current and future
periods.
The valuation of purchased research and development represents
the estimated fair value at the dates of acquisition related to
in-process projects. Our purchased research and development
represents the value of an in-process project that has not yet
reached technological feasibility and has no alternative future
use as of the date of acquisition. We expensed the value
attributable to the in-process project at the time of the
acquisition. If the project is not successful or completed in a
timely manner, we may not realize the financial benefits
expected from this project or for the acquisition as a whole.
We use the income approach to determine the fair values of our
purchased research and development. This approach determines
fair value by estimating the after-tax cash flows attributable
to an in-process project over its useful life and then
discounting these after-tax cash flows back to a present value.
We base our revenue assumptions on estimates of relevant market
sizes, expected market growth rates, expected trends in
technology and expected product introductions by competitors. In
arriving at the value of the in-process projects, we consider,
among other factors: the in-process projects stage of
completion; the complexity of the work completed as of the
acquisition date; the costs already incurred; the projected
costs to complete; the contribution of core technologies and
other acquired assets; the expected introduction date; and the
estimated useful life of the technology. We base the discount
rate used to arrive at a present value as of the date of
acquisition on the time value of money and medical technology
investment risk factors. For the in-process project we acquired
in fiscal year 2007, we used a 26% risk-adjusted discount rate
to discount our projected cash flows. We believe that the
estimated purchased research and development amounts so
determined represent the fair value at the date of acquisition
and do not exceed the amount a third party would pay for the
project.
36
Liquidity
and Capital Resources
The following table contains certain key performance indicators
that depict our liquidity and cash flow position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
Cash & cash equivalents
|
|
$
|
156,721
|
|
|
$
|
133,553
|
|
|
$
|
229,227
|
|
Working capital
|
|
$
|
289,530
|
|
|
$
|
261,757
|
|
|
$
|
321,654
|
|
Current ratio
|
|
|
4.1
|
|
|
|
3.7
|
|
|
|
4.9
|
|
Net cash position(1)
|
|
$
|
150,683
|
|
|
$
|
121,190
|
|
|
$
|
200,351
|
|
Days sales outstanding (DSO)
|
|
|
67
|
|
|
|
78
|
|
|
|
68
|
|
Disposables finished goods inventory turnover
|
|
|
7.1
|
|
|
|
6.9
|
|
|
|
5.1
|
|
|
|
|
(1) |
|
Net cash position is the sum of cash and cash equivalents less
total debt. |
Our primary sources of capital include cash and cash
equivalents, internally generated cash flows and bank
borrowings. We believe these sources to be sufficient to fund
our requirements, which are primarily capital expenditures
(including enterprise resource planning systems and devices),
share repurchases, including a $40.0 million share
repurchase program authorized by the Board of Directors in May
2009, acquisitions, new business and product development and
working capital for at least the next twelve months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ Increase/
|
|
|
$ Increase/
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
(Decrease)
|
|
|
(Decrease)
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
09 vs 08
|
|
|
08 vs 07
|
|
|
|
(In thousands)
|
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
116,364
|
|
|
$
|
77,669
|
|
|
$
|
83,563
|
|
|
$
|
38,695
|
|
|
$
|
(5,894
|
)
|
Investing activities
|
|
|
(60,000
|
)
|
|
|
(102,847
|
)
|
|
|
(71,116
|
)
|
|
|
42,847
|
|
|
|
(31,731
|
)
|
Financing activities
|
|
|
(30,737
|
)
|
|
|
(73,228
|
)
|
|
|
(35,554
|
)
|
|
|
42,491
|
|
|
|
(37,674
|
)
|
Effect of exchange rate changes on cash(1)
|
|
|
(2,459
|
)
|
|
|
2,732
|
|
|
|
1,667
|
|
|
|
(5,191
|
)
|
|
|
1,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents:
|
|
$
|
23,168
|
|
|
$
|
(95,674
|
)
|
|
$
|
(21,440
|
)
|
|
$
|
118,842
|
|
|
$
|
(74,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The balance sheet is affected by spot exchange rates used to
translate local currency amounts into U.S. dollars. In
comparing spot exchange rates at March 28, 2009 versus
March 29, 2008 and at March 29, 2008 versus
March 31, 2007, (i) the European currencies, primarily
the Euro, weakened and strengthened, respectively, against the
U.S. dollar and (ii) the Yen strengthened against the U.S.
dollar during both comparison periods. |
Cash Flow
Overview:
In fiscal year 2009, the Company repurchased approximately
1.1 million shares of its common stock for an aggregate
purchase price of $60.0 million. This completed a
$60.0 million share repurchase program that was announced
in May 2008.
In fiscal year 2008, the Company repurchased approximately
1.46 million shares of its common stock for an aggregate
purchase price of $75.0 million. This completed a
$75.0 million share repurchase that was announced in May
2007.
In fiscal year 2007, the Company repurchased approximately
0.9 million shares of its common stock for an aggregate
purchase price of $40.0 million. This completed a
$40.0 million share repurchase that was announced in August
2006.
37
The Company reflects stock repurchases in its financial
statements on a trade date basis and as Authorized
Unissued shares (Haemonetics is a Massachusetts company and
Massachusetts Law mandates that repurchased shares are to be
treated as authorized but unissued).
As discussed in our Earnings Release on May 4, 2008, the
Company announced that its Board of Directors approved a
$40.0 million share repurchase.
FISCAL
YEAR 2009 AS COMPARED TO FISCAL YEAR 2008
Operating
Activities:
Net cash provided by operating activities increased
$38.7 million in 2009 as compared to 2008 due primarily to:
|
|
|
|
|
$7.3 million increase in net income,
|
|
|
|
$15.6 million increase in cash provided by non-cash items,
|
|
|
|
$18.2 million reduced investment in accounts receivable due
to improvements in days sales outstanding that outpaced business
growth,
|
|
|
|
$5.2 million reduced investment in prepaid income taxes,
|
partially offset by
|
|
|
|
|
$8.4 million increased investment in inventories associated
with increased levels of business and preparation for the
subsequent implementation phase of our ERP system.
|
Investing
Activities:
Net cash used in investing activities decreased
$42.8 million in 2009 as compared to 2008 due primarily to
the $40.9 million decreased investment in acquisitions and
the $1.4 million decrease in capital expenditures on
property, plant and equipment.
Financing
Activities:
Net cash used by financing activities decreased by
$42.5 million in 2009 as compared to 2008 due primarily to:
|
|
|
|
|
$15.0 million decrease in cash expended relating to stock
repurchase,
|
|
|
|
$14.0 million increase in exercise of stock options and tax
benefit of stock compensation,
|
|
|
|
$13.1 million decrease in the payments against short-term
revolving credit agreements.
|
FISCAL
YEAR 2008 AS COMPARED TO FISCAL YEAR 2007
Operating
Activities:
Net cash provided by operating activities decreased
$5.9 million in 2008 as compared to 2007 due primarily to:
|
|
|
|
|
$2.9 million increase in cash provided by net income
adjusted for non-cash items.
|
|
|
|
$18.3 million increased investment in Accounts Receivable
due to an increase in sales of $66.8 million compared to
2007 (sales of $516.4 million in 2008 versus
$449.6 million in 2007) and an increase in DSO from
68 days in 2007 to 78 days in 2008.
|
|
|
|
$5.6 million decrease in Inventory due to the higher level
of sales. We plan to increase our investment in inventory in the
near term.
|
|
|
|
The payment of refundable VAT associated with the formation of
our European shared services center of $3.0 million.
|
38
Investing
Activities:
Net cash used in investing activities increased
$31.7 million in 2008 as compared to 2007 due primarily to:
|
|
|
|
|
$46.9 million in cash used for acquisitions during the
fiscal year 2008 compared to $32.5 million used in the same
period in fiscal year 2007.
|
|
|
|
$17.3 million of increased capital expenditures
predominantly related to the increase in the installed base of
plasma devices and investments in our ERP system.
|
Financing
Activities:
Net cash used by financing activities increased by
$37.7 million, primarily due to share repurchases.
|
|
|
|
|
$75.0 million used to repurchase shares of Company common
stock during fiscal year 2008 as compared to the
$40.0 million used in fiscal year 2007.
|
Contractual
Obligations and Contingencies
A summary of our contractual and commercial commitments as of
March 28, 2009, is as follows (for more information
concerning our debt see Note 8 to the consolidated
financial statements and for our operating lease obligations see
Note 10):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
Total
|
|
|
Less Than 1 Year
|
|
|
1-3 Years
|
|
|
4-5 Years
|
|
|
After 5 Years
|
|
|
|
(In thousands)
|
|
|
Debt
|
|
$
|
6,038
|
|
|
$
|
695
|
|
|
$
|
2,468
|
|
|
$
|
2,025
|
|
|
$
|
850
|
|
Operating leases
|
|
$
|
25,685
|
|
|
$
|
6,855
|
|
|
$
|
9,518
|
|
|
$
|
6,114
|
|
|
$
|
3,198
|
|
Purchase commitments*
|
|
$
|
94,208
|
|
|
$
|
94,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
125,931
|
|
|
$
|
101,758
|
|
|
$
|
11,986
|
|
|
$
|
8,139
|
|
|
$
|
4,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes amounts we are committed to spend on purchase orders
entered in the normal course of business for capital equipment
and for the purpose of manufacturing our products including
contract manufacturers, specifically Nova Biomedical, for the
purchase of devices and JMS Co. Ltd., and Kawasumi Laboratories
for the manufacture of certain disposable products. The majority
of our operating expense spending does not require any advance
commitment. |
Contingent
Commitments
On January 29, 2007, we received $6 million in full
satisfaction of its claims against Baxter Healthcare
Corporation, Baxter International Inc. and Baxter Healthcare SA
(together Baxter) related to certain platelet
pathogen reduction contracts. In connection with the settlement
of these claims, the Technology Development Agreement and
Requirements Contract between us and Baxter is terminated, and
Haemonetics no longer retains any rights to distribute the
INTERSOL product (note INTERSOL is a registered trademark
of Baxter). Haemonetics recorded the receipt of this settlement
in the fourth quarter ending March 31, 2007.
In December 2005, we filed a lawsuit against Baxter and Fenwal
in the Federal District Court of Massachusetts, in Boston,
seeking an injunction and damages on account of Baxters
infringement of a Haemonetics patent, through the sale of
Baxters Alyx brand automated red cell collection system
which competes with Haemonetics automated red cell
collection systems. In March, 2007 Baxter sold the Transfusion
Technologies Division (which markets the Alyx product) to
private investors, Texas Pacific Group and Maverick Capital,
Ltd. The new company which resulted from the sale was renamed
Fenwal. In January 2009, a jury found that the Fenwal Alyx
system infringed Haemonetics patent and awarded
Haemonetics $15.7 million in damages for past infringement.
We subsequently filed motions for an injunction and for
additional damages. The court has not ruled on the parties
post trial motions. Haemonetics has not recorded a gain related
to this verdict.
39
Inflation
We do not believe that inflation had a significant impact on our
results of operations for the periods presented. Historically,
we believe we have been able to mitigate the effects of
inflation by improving our manufacturing and purchasing
efficiencies, by increasing employee productivity and by
adjusting the selling prices of products. We continue to monitor
inflation pressures generally and raw materials indices that may
affect our procurement and production costs.
Foreign
Exchange
Approximately 53% of our sales are generated outside the
U.S. in local currencies, yet our reporting currency is the
U.S. dollar. The majority our foreign currency sales are
conducted in the Japanese Yen and the Euro. Foreign exchange
risk arises because we engage in business in foreign countries
in local currency. 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 effect 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 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 the anticipated cash flows
from forecasted foreign currency denominated sales. Hedging
through the use of forward contracts does not eliminate the
volatility of foreign exchange rates, but because we generally
enter into forward contracts one year out, rates are fixed for a
one-year period, thereby facilitating financial planning and
resource allocation. We enter into forward contracts that mature
one month prior to the anticipated timing of the forecasted
foreign currency denominated sales. These contracts are
designated as cash flow hedges and are intended to lock in the
expected cash flows of forecasted foreign currency denominated
sales at the available spot rate. Actual spot rate gains and
losses on these contracts are recorded in sales, at the same
time the underlying transactions being hedged are recorded.
We compute a composite rate index for purposes of measuring,
comparatively, the change in foreign currency hedge spot rates
related to sales from the hedge spot rates related to sales 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.
40
The favorable or (unfavorable) changes are in comparison to the
same period of the prior year. A favorable change is presented
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 presented 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 income, in our consolidated
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Favorable/
|
|
|
|
|
|
|
|
|
|
Composite Index
|
|
|
Unfavorable
|
|
|
|
|
|
|
|
|
|
Hedge Spot
|
|
|
Change Versus
|
|
|
|
|
|
|
|
|
|
Rates
|
|
|
Prior Year
|
|
|
FY2005
|
|
|
|
|
|
|
Q1
|
|
|
|
0.97
|
|
|
|
15.7
|
%
|
|
|
|
|
|
|
|
Q2
|
|
|
|
0.99
|
|
|
|
5.1
|
%
|
|
|
|
|
|
|
|
Q3
|
|
|
|
0.92
|
|
|
|
15.5
|
%
|
|
|
|
|
|
|
|
Q4
|
|
|
|
0.89
|
|
|
|
14.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
Total
|
|
|
|
|
|
|
|
0.94
|
|
|
|
12.7
|
%
|
FY2006
|
|
|
|
|
|
|
Q1
|
|
|
|
0.92
|
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
Q2
|
|
|
|
0.91
|
|
|
|
9.1
|
%
|
|
|
|
|
|
|
|
Q3
|
|
|
|
0.87
|
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
Q4
|
|
|
|
0.86
|
|
|
|
2.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
Total
|
|
|
|
|
|
|
|
0.89
|
|
|
|
5.1
|
%
|
FY2007
|
|
|
|
|
|
|
Q1
|
|
|
|
0.89
|
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
Q2
|
|
|
|
0.92
|
|
|
|
(1.1
|
)%
|
|
|
|
|
|
|
|
Q3
|
|
|
|
0.96
|
|
|
|
(9.4
|
)%
|
|
|
|
|
|
|
|
Q4
|
|
|
|
0.95
|
|
|
|
(9.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
Total
|
|
|
|
|
|
|
|
0.93
|
|
|
|
(4.2
|
)%
|
FY2008
|
|
|
|
|
|
|
Q1
|
|
|
|
0.92
|
|
|
|
(3.1
|
)%
|
|
|
|
|
|
|
|
Q2
|
|
|
|
0.93
|
|
|
|
(1.0
|
)%
|
|
|
|
|
|
|
|
Q3
|
|
|
|
0.93
|
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
Q4
|
|
|
|
0.93
|
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
Total
|
|
|
|
|
|
|
|
0.93
|
|
|
|
0.4
|
%
|
FY2009
|
|
|
|
|
|
|
Q1
|
|
|
|
0.92
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
Q2
|
|
|
|
0.90
|
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
Q3
|
|
|
|
0.86
|
|
|
|
8.3
|
%
|
|
|
|
|
|
|
|
Q4
|
|
|
|
0.82
|
|
|
|
13.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
Total
|
|
|
|
|
|
|
|
0.87
|
|
|
|
6.3
|
%
|
FY2010
|
|
|
|
|
|
|
Q1
|
|
|
|
0.77
|
|
|
|
19.5
|
%
|
|
|
|
|
|
|
|
Q2
|
|
|
|
0.81
|
|
|
|
10.4
|
%
|
|
|
|
|
|
|
|
Q3
|
|
|
|
0.83
|
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
Q4
|
|
|
|
0.83
|
|
|
|
(1.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
Total
|
|
|
|
|
|
|
|
0.81
|
|
|
|
7.9
|
%
|
During the fiscal year ended March 28, 2009, in response to
the global economic turmoil and sharply increased volatility in
the foreign exchange rates, we added to our hedging program. In
addition to hedging the anticipated cash flows from forecasted
Japanese Yen and Euro denominated sales, we entered into forward
contracts to hedge the anticipated cash flows from forecasted
Great British Pound and Canadian Dollar denominated expenses.
The index referenced above does not include the Great British
Pound hedge spot rates.
41
Recent
Accounting Pronouncements
In September 2008, the FASB issued FASB Staff Position (FSP)
No. 133-1
and
FIN 45-4,
Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45. The FSP is intended to improve
disclosures about credit derivatives by requiring more
information about the potential adverse effects of changes in
credit risk on the financial position, financial performance,
and cash flows of the sellers of credit derivatives. It amends
FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, to require disclosures
by sellers of credit derivatives, including credit derivatives
embedded in hybrid instruments. The provisions of the FSP that
amend Statement 133 and Interpretation 45 are effective for
reporting periods (annual or interim) ending after
November 15, 2008. These statements became effective during
fiscal year 2009 and did not have an impact on our financial
position and results of operation as we have not issued or
purchased credit derivatives.
In May 2008, the FASB issued SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles,
which will provide framework for selecting accounting principles
to be used in preparing financial statements that are presented
in conformity with U.S. generally accepted accounting
principles (GAAP) for nongovernmental entities. Prior to the
issuance of SFAS No. 162, the GAAP hierarchy was
defined in the American Institute of Certified Public
Accountants (AICPA) Statement on Auditing Standards (SAS)
No. 69, The Meaning of Present Fairly in Conformity
With Generally Accepted Accounting Principles. With the
issuance of SFAS No. 162, the GAAP hierarchy for
nongovernmental entities will move from auditing literature to
accounting literature. SFAS No. 162 will be effective
60 days following the SECs approval of the Public
Company Accounting Oversight Board (PCAOB) amendments to AU
Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.
This statement became effective during fiscal year 2009 and did
not have an impact on our financial position and results of
operations.
In March 2008, the FASB issued FASB No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB
No. 133. FASB No. 161 is intended to improve
financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors
to better understand their effects on an entitys financial
position, financial performance, and cash flows.
SFAS No. 161 is effective for any reporting period
(annual or quarterly interim) beginning on or after
November 15, 2008. This statement became effective during
fiscal year 2009 see Note 7 to our consolidated
financial statements for the related disclosure.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS 141(R)). In SFAS 141(R), the FASB
retained the fundamental requirements of Statement No. 141
to account for all business combinations using the acquisition
method (formerly the purchase method) and for an acquiring
entity to be identified in all business combinations. However,
the new standard requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and
liabilities assumed in the transaction; establishes the
acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the
information they need to evaluate and understand the nature and
financial effect of the business combination. SFAS 141(R)
is effective for annual periods beginning on or after
December 15, 2008. We are currently evaluating the
potential impact of FASB No. 141(R) on our financial
position and results of operations. This statement is effective
for our fiscal year 2010.
In December 2007, the FASB issued FASB No. 160
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51 of
which the objective is to improve the relevance, comparability,
and transparency of the financial information that a reporting
entity provides in its consolidated financial statements by
establishing accounting and reporting standards by requiring all
entities to report noncontrolling (minority) interests in
subsidiaries in the same way as equity in the
consolidated financial statements. Moreover, Statement 160
eliminates the diversity that currently exists in accounting for
transactions between an entity and noncontrolling interests by
requiring they be treated as equity transactions. FASB
No. 160 is effective for annual periods beginning on or
after December 15, 2008. We are currently evaluating the
potential impact of FASB No. 160 on our financial position
and results of operations. This statement is effective for our
fiscal year 2010.
42
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, the impact of
industry consolidation, foreign currency exchange rates, changes
in customers ordering patterns, the effect of industry
consolidation as seen in the Plasma market, 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.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
The Companys exposures relative to market risk are due
principally 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
March 28, 2009, we held the following significant foreign
exchange contracts to hedge the anticipated cash flows from
forecasted foreign currency denominated sales outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
(BUY)/SELL
|
|
|
Spot
|
|
|
Forward
|
|
|
|
|
|
|
|
Hedged Currency
|
|
Local Currency
|
|
|
Contract Rate
|
|
|
Contract Rate
|
|
|
Fair Value
|
|
|
Maturity
|
|
|
Euro
|
|
|
8,500,000
|
|
|
|
$ 1.558
|
|
|
|
$ 1.534
|
|
|
$
|
1,470,469
|
|
|
|
Apr 2009 - May 2009
|
|
Euro
|
|
|
11,200,000
|
|
|
|
$ 1.489
|
|
|
|
$ 1.464
|
|
|
$
|
1,138,615
|
|
|
|
Jun 2009 - Aug 2009
|
|
Euro
|
|
|
11,307,000
|
|
|
|
$ 1.319
|
|
|
|
$ 1.313
|
|
|
$
|
(527,681
|
)
|
|
|
Sep 2009 - Nov 2009
|
|
Euro
|
|
|
10,584,808
|
|
|
|
$ 1.281
|
|
|
|
$ 1.282
|
|
|
$
|
(808,515
|
)
|
|
|
Dec 2009 - Feb 2010
|
|
Japanese Yen
|
|
|
845,000,000
|
|
|
|
106.1 per US$
|
|
|
|
104.14 per US$
|
|
|
$
|
(562,717
|
)
|
|
|
Apr 2009 -May 2009
|
|
Japanese Yen
|
|
|
1,116,000,000
|
|
|
|
107.3 per US$
|
|
|
|
105.19 per US$
|
|
|
$
|
(863,139
|
)
|
|
|
Jun 2009 - Aug 2009
|
|
Japanese Yen
|
|
|
1,198,061,000
|
|
|
|
95.40 per US$
|
|
|
|
94.08 per US$
|
|
|
$
|
338,681
|
|
|
|
Sep 2009 -Nov 2009
|
|
Japanese Yen
|
|
|
1,394,096,500
|
|
|
|
93.50 per US$
|
|
|
|
92.58 per US$
|
|
|
$
|
576,252
|
|
|
|
Dec 2009 -Feb 2010
|
|
GBP
|
|
|
(1,713,412
|
)
|
|
|
$ 1.448
|
|
|
|
$ 1.448
|
|
|
$
|
11,924
|
|
|
|
Apr 2009 - May 2009
|
|
GBP
|
|
|
(2,784,294
|
)
|
|
|
$ 1.439
|
|
|
|
$ 1.439
|
|
|
$
|
45,375
|
|
|
|
Jun 2009 - Aug 2009
|
|
GBP
|
|
|
(2,494,822
|
)
|
|
|
$ 1.413
|
|
|
|
$ 1.414
|
|
|
$
|
102,789
|
|
|
|
Sep 2009 - Nov 2009
|
|
GBP
|
|
|
(2,234,284
|
)
|
|
|
$ 1.409
|
|
|
|
$ 1.411
|
|
|
$
|
100,458
|
|
|
|
Dec 2009 - Feb 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,002,511
|
|
|
|
|
|
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
43
U.S. dollar, the change in fair value of all forward
contracts would result in a $12.6 million increase in the
fair value of the forward contracts; whereas a 10% weakening of
the U.S. dollar would result in a $14.1 million
decrease in the fair value of the forward contracts.
Interest
Rate Risk
All of our long-term debt is at fixed interest 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 March 28,
2009, the fair value of our long-term debt was approximately
$0.8 million higher than the value of the debt reflected on
our financial statements. This higher fair market is entirely
related to our $6.0 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 28, 2009 the fair value of our long-term debt would
change by approximately $0.1 million.
Concentration
of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash
equivalents, accounts receivable and investment in sales type
lease receivables. Sales to one unaffiliated Japanese customer,
the Japanese Red Cross Society, amounted to $73.0 million,
$73.3 million and $70.3 million in 2009, 2008 and
2007, respectively. Accounts receivable balances attributable to
this customer accounted for 17.5%, 15.9% and 15.8% of our
consolidated accounts receivable at fiscal year 2009, 2008 and
2007, respectively. While the accounts receivable related to the
Japanese Red Cross Society may be significant, we do not believe
the credit loss risk to be significant given the consistent
payment history by this customer.
Certain other markets and industries can expose us to
concentrations of credit risk. For example, in our commercial
plasma business, we tend to have only a few customers in total
but they are large in size. As a result, our accounts receivable
extended to any one of these commercial plasma customers can be
somewhat significant at any point in time.
44
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
HAEMONETICS
CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28
|
|
|
March 29
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
Net revenues
|
|
$
|
597,879
|
|
|
$
|
516,440
|
|
|
$
|
449,607
|
|
Cost of goods sold
|
|
|
289,709
|
|
|
|
258,715
|
|
|
|
222,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
308,170
|
|
|
|
257,725
|
|
|
|
227,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development, and engineering
|
|
|
23,859
|
|
|
|
24,322
|
|
|
|
23,884
|
|
Selling, general, and administrative
|
|
|
198,744
|
|
|
|
163,116
|
|
|
|
137,073
|
|
Cost to equity(a)
|
|
|
|
|
|
|
|
|
|
|
225
|
|
In process research & development
|
|
|
|
|
|
|
|
|
|
|
9,073
|
|
Arbitration & settlement Income
|
|
|
|
|
|
|
|
|
|
|
(5,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
222,603
|
|
|
|
187,438
|
|
|
|
164,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
85,567
|
|
|
|
70,287
|
|
|
|
62,745
|
|
Interest expense
|
|
|
(64
|
)
|
|
|
(377
|
)
|
|
|
(1,256
|
)
|
Interest income
|
|
|
1,968
|
|
|
|
5,418
|
|
|
|
7,864
|
|
Other (expense)/income, net
|
|
|
(2,469
|
)
|
|
|
1,974
|
|
|
|
2,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
85,002
|
|
|
|
77,302
|
|
|
|
72,336
|
|
Provision for income taxes
|
|
|
25,698
|
|
|
|
25,322
|
|
|
|
23,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59,304
|
|
|
$
|
51,980
|
|
|
$
|
49,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2.34
|
|
|
$
|
2.01
|
|
|
$
|
1.84
|
|
Income per common share assuming dilution
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2.27
|
|
|
$
|
1.94
|
|
|
$
|
1.78
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,389
|
|
|
|
25,824
|
|
|
|
26,746
|
|
Diluted
|
|
|
26,173
|
|
|
|
26,746
|
|
|
|
27,649
|
|
|
|
|
(a) |
|
Reflects the adjustment to convert our investment in Arryx, Inc.
to the equity method for periods prior to the acquisition. See
Note 3. |
The accompanying notes are an integral part of these
consolidated financial statements.
45
HAEMONETICS
CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except share data)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
156,721
|
|
|
$
|
133,553
|
|
Accounts receivable, less allowance of $2,312 in 2009 and $2,365
in 2008
|
|
|
113,598
|
|
|
|
120,252
|
|
Inventories
|
|
|
76,522
|
|
|
|
65,388
|
|
Deferred tax asset
|
|
|
7,190
|
|
|
|
12,058
|
|
Prepaid expenses and other current assets
|
|
|
28,362
|
|
|
|
28,183
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
382,393
|
|
|
|
359,434
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
|
|
|
Land, building and building & leasehold improvements
|
|
|
42,540
|
|
|
|
43,873
|
|
Plant equipment and machinery
|
|
|
108,572
|
|
|
|
88,811
|
|
Office equipment and information technology
|
|
|
52,461
|
|
|
|
52,787
|
|
Haemonetics equipment
|
|
|
194,290
|
|
|
|
178,827
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
397,863
|
|
|
|
364,298
|
|
Less accumulated depreciation
|
|
|
(260,056
|
)
|
|
|
(247,814
|
)
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
|
137,807
|
|
|
|
116,484
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Other intangibles, less accumulated amortization of $25,508 in
2009 and $19,821 in 2008
|
|
|
65,261
|
|
|
|
64,333
|
|
Goodwill
|
|
|
56,426
|
|
|
|
54,222
|
|
Deferred tax asset, long-term
|
|
|
3,007
|
|
|
|
9,244
|
|
Other long-term assets
|
|
|
4,799
|
|
|
|
5,233
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
129,493
|
|
|
|
133,032
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
649,693
|
|
|
$
|
608,950
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Notes payable and current maturities of long-term debt
|
|
$
|
695
|
|
|
$
|
6,326
|
|
Accounts payable
|
|
|
20,652
|
|
|
|
19,724
|
|
Accrued payroll and related costs
|
|
|
30,771
|
|
|
|
19,824
|
|
Accrued income taxes
|
|
|
2,833
|
|
|
|
5,285
|
|
Deferred tax liability
|
|
|
17
|
|
|
|
|
|
Other accrued liabilities
|
|
|
37,895
|
|
|
|
46,518
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
92,863
|
|
|
|
97,677
|
|
Long-term debt, net of current maturities
|
|
|
5,343
|
|
|
|
6,037
|
|
Deferred tax liability, long-term
|
|
|
3,129
|
|
|
|
3,253
|
|
Other long-term liabilities
|
|
|
8,474
|
|
|
|
7,795
|
|
Commitments and contingencies (Note 10)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value; Authorized
150,000,000 shares; Issued 25,622,449 in 2009 and
25,694,769 in 2008
|
|
|
256
|
|
|
|
256
|
|
Additional paid-in capital
|
|
|
226,829
|
|
|
|
186,933
|
|
Retained earnings
|
|
|
309,516
|
|
|
|
302,196
|
|
Accumulated other comprehensive income
|
|
|
3,283
|
|
|
|
4,803
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
539,884
|
|
|
|
494,188
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
649,693
|
|
|
$
|
608,950
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
46
HAEMONETICS
CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
$s
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income/(Loss)
|
|
|
Equity
|
|
|
Income
|
|
|
|
(In thousands)
|
|
|
Balance, April 1, 2006
|
|
|
26,829
|
|
|
$
|
268
|
|
|
$
|
141,371
|
|
|
$
|
301,759
|
|
|
$
|
(2,834
|
)
|
|
$
|
440,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock purchase plan
|
|
|
48
|
|
|
|
|
|
|
|
1,929
|
|
|
|
|
|
|
|
|
|
|
|
1,929
|
|
|
|
|
|
Exercise of stock options and related tax benefit
|
|
|
493
|
|
|
|
5
|
|
|
|
15,155
|
|
|
|
|
|
|
|
|
|
|
|
15,160
|
|
|
|
|
|
Shares repurchased Authorized Unissued
|
|
|
(853
|
)
|
|
|
(8
|
)
|
|
|
(4,891
|
)
|
|
|
(35,101
|
)
|
|
|
|
|
|
|
(40,000
|
)
|
|
|
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
10,251
|
|
|
|
|
|
|
|
|
|
|
|
10,251
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,109
|
|
|
|
|
|
|
|
49,109
|
|
|
$
|
49,109
|
|
Initial impact upon adoption of SFAS No. 158, net of
taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(90
|
)
|
|
|
(90
|
)
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,096
|
|
|
|
6,096
|
|
|
|
6,096
|
|
Unrealized loss on hedges, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,300
|
)
|
|
|
(3,300
|
)
|
|
|
(3,300
|
)
|
Reclassification of hedge gain to earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(71
|
)
|
|
|
(71
|
)
|
|
|
(71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
51,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2007
|
|
|
26,517
|
|
|
$
|
265
|
|
|
$
|
163,815
|
|
|
$
|
315,767
|
|
|
$
|
(199
|
)
|
|
$
|
479,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock purchase plan
|
|
|
56
|
|
|
|
1
|
|
|
|
2,208
|
|
|
|
|
|
|
|
|
|
|
|
2,209
|
|
|
|
|
|
Exercise of stock options and related tax benefit
|
|
|
575
|
|
|
|
5
|
|
|
|
20,488
|
|
|
|
|
|
|
|
|
|
|
|
20,493
|
|
|
|
|
|
Shares repurchased Authorized Unissued
|
|
|
(1,463
|
)
|
|
|
(15
|
)
|
|
|
(9,430
|
)
|
|
|
(65,551
|
)
|
|
|
|
|
|
|
(74,996
|
)
|
|
|
|
|
Issuance of restricted stock, net of cancellations
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
9,852
|
|
|
|
|
|
|
|
|
|
|
|
9,852
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,980
|
|
|
|
|
|
|
|
51,980
|
|
|
$
|
51,980
|
|
Impact of defined benefit plans, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276
|
|
|
|
276
|
|
|
|
276
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,748
|
|
|
|
11,748
|
|
|
|
11,748
|
|
Unrealized loss on hedges, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,055
|
)
|
|
|
(10,055
|
)
|
|
|
(10,055
|
)
|
Reclassification of hedge loss to earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,033
|
|
|
|
3,033
|
|
|
|
3,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
56,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 29, 2008
|
|
|
25,695
|
|
|
$
|
256
|
|
|
$
|
186,933
|
|
|
$
|
302,196
|
|
|
$
|
4,803
|
|
|
$
|
494,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock purchase plan
|
|
|
59
|
|
|
|
1
|
|
|
|
2,658
|
|
|
|
|
|
|
|
|
|
|
|
2,659
|
|
|
|
|
|
Exercise of stock options and related tax benefit
|
|
|
950
|
|
|
|
10
|
|
|
|
35,060
|
|
|
|
|
|
|
|
|
|
|
|
35,070
|
|
|
|
|
|
Shares repurchased Authorized Unissued
|
|
|
(1,100
|
)
|
|
|
(11
|
)
|
|
|
(8,003
|
)
|
|
|
(51,984
|
)
|
|
|
|
|
|
|
(59,998
|
)
|
|
|
|
|
Issuance of restricted stock, net of cancellations
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
10,181
|
|
|
|
|
|
|
|
|
|
|
|
10,181
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,304
|
|
|
|
|
|
|
|
59,304
|
|
|
$
|
59,304
|
|
Impact of defined benefit plans, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(697
|
)
|
|
|
(697
|
)
|
|
|
(697
|
)
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,045
|
)
|
|
|
(10,045
|
)
|
|
|
(10,045
|
)
|
Unrealized gain on hedges, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,858
|
|
|
|
4,858
|
|
|
|
4,858
|
|
Reclassification of hedge loss to earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,364
|
|
|
|
4,364
|
|
|
|
4,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
57,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 28, 2009
|
|
|
25,622
|
|
|
$
|
256
|
|
|
$
|
226,829
|
|
|
$
|
309,516
|
|
|
$
|
3,283
|
|
|
$
|
539,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
47
HAEMONETICS
CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59,304
|
|
|
$
|
51,980
|
|
|
$
|
49,109
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
36,462
|
|
|
|
31,197
|
|
|
|
27,504
|
|
In-process research and development and cost to equity
|
|
|
|
|
|
|
|
|
|
|
9,298
|
|
Stock compensation expense
|
|
|
10,181
|
|
|
|
9,852
|
|
|
|
10,251
|
|
Deferred tax expense/(benefit)
|
|
|
1,645
|
|
|
|
(882
|
)
|
|
|
927
|
|
(Gain)/Loss on sales of property, plant and equipment
|
|
|
(124
|
)
|
|
|
222
|
|
|
|
(1,073
|
)
|
Unrealized loss/(gain) from hedging activities
|
|
|
3,812
|
|
|
|
(3,995
|
)
|
|
|
(3,109
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease/(Increase) in accounts receivable, net
|
|
|
2
|
|
|
|
(18,229
|
)
|
|
|
77
|
|
Increase in inventories
|
|
|
(11,236
|
)
|
|
|
(2,874
|
)
|
|
|
(8,520
|
)
|
(Increase)/Decrease in prepaid income taxes
|
|
|
(2,913
|
)
|
|
|
(8,082
|
)
|
|
|
3,775
|
|
Decrease/(Increase) in other assets and other long-term
liabilities
|
|
|
(4,241
|
)
|
|
|
6,439
|
|
|
|
(2,755
|
)
|
Tax benefit of exercise of stock options
|
|
|
3,368
|
|
|
|
1,586
|
|
|
|
2,213
|
|
Increase/(Decrease) in accounts payable and accrued expenses
|
|
|
20,104
|
|
|
|
10,455
|
|
|
|
(4,134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
116,364
|
|
|
|
77,669
|
|
|
|
83,563
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures on property, plant and equipment
|
|
|
(56,379
|
)
|
|
|
(57,790
|
)
|
|
|
(40,438
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
2,383
|
|
|
|
1,834
|
|
|
|
2,843
|
|
Acquisition of Altivation
|
|
|
(3,545
|
)
|
|
|
|
|
|
|
|
|
Acquisition of Medicell
|
|
|
(2,459
|
)
|
|
|
|
|
|
|
|
|
Acquisition of HaemoScope
|
|
|
|
|
|
|
(45,591
|
)
|
|
|
|
|
Acquisition of Infonale
|
|
|
|
|
|
|
(1,300
|
)
|
|
|
|
|
Acquisition of Information Data Management (IDM)
|
|
|
|
|
|
|
|
|
|
|
(9,274
|
)
|
Acquisition of Arryx, Inc.
|
|
|
|
|
|
|
|
|
|
|
(23,227
|
)
|
Software development company milestone payments
|
|
|
|
|
|
|
|
|
|
|
(1,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(60,000
|
)
|
|
|
(102,847
|
)
|
|
|
(71,116
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on long-term real estate mortgage
|
|
|
(694
|
)
|
|
|
(638
|
)
|
|
|
(588
|
)
|
Net decrease in short-term revolving credit agreements
|
|
|
(5,580
|
)
|
|
|
(18,709
|
)
|
|
|
(4,127
|
)
|
Payments on long-term credit agreements
|
|
|
|
|
|
|
|
|
|
|
(5,715
|
)
|
Employee stock purchase plan
|
|
|
2,659
|
|
|
|
2,209
|
|
|
|
1,929
|
|
Exercise of stock options
|
|
|
25,406
|
|
|
|
17,245
|
|
|
|
10,747
|
|
Excess tax benefit on exercise of stock options
|
|
|
7,470
|
|
|
|
1,661
|
|
|
|
2,200
|
|
Stock repurchase
|
|
|
(59,998
|
)
|
|
|
(74,996
|
)
|
|
|
(40,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(30,737
|
)
|
|
|
(73,228
|
)
|
|
|
(35,554
|
)
|
Effect of Exchange Rates on Cash and Cash Equivalents
|
|
|
(2,459
|
)
|
|
|
2,732
|
|
|
|
1,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase/(Decrease) in Cash and Cash Equivalents
|
|
|
23,168
|
|
|
|
(95,674
|
)
|
|
|
(21,440
|
)
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
133,553
|
|
|
|
229,227
|
|
|
|
250,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period
|
|
$
|
156,721
|
|
|
$
|
133,553
|
|
|
$
|
229,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers from inventory to fixed assets for placements of
Haemonetics equipment
|
|
$
|
6,818
|
|
|
$
|
1,672
|
|
|
$
|
2,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
545
|
|
|
$
|
991
|
|
|
$
|
1,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
19,391
|
|
|
$
|
23,851
|
|
|
$
|
27,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
48
HAEMONETICS
CORPORATION AND SUBSIDIARIES
|
|
1.
|
DESCRIPTION
OF THE BUSINESS
|
Haemonetics is a blood management solutions company for our
customers. Anchored by our reputable medical devices systems, we
also provide information technology platforms and valued added
services to provide customers with business solutions which
support improved clinical outcomes for patients and efficiency
in the blood supply chain.
Our systems automate the collection and processing of donated
blood; assess likelihood for blood loss; and salvage and process
surgical patient blood. These systems include devices and
single-use, proprietary disposable sets that operate only on our
specialized equipment. Our systems allow users to collect and
process only the blood component(s) they target, plasma,
platelets, or red blood cells, increasing donor and patient
safety as well as collection efficiencies. Our information
technology platforms are used by blood and plasma collectors to
improve the safety and efficiency of blood collection logistics
by eliminating previously manual functions at
not-for-profit
blood banks and commercial plasma centers. Our business services
products include consulting, Six Sigma, and LEAN manufacturing
offerings that support our customers needs for regulatory
compliance and operational efficiency in the blood supply chain.
|
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Fiscal
Year
Our fiscal year ends on the Saturday closest to the last day in
March. Fiscal years 2009, 2008, and 2007 all included
52 weeks.
Principles
of Consolidation
The accompanying consolidated financial statements include all
accounts including those of our subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Use of
Estimates
The preparation of financial statements in conformity with GAAP
requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could vary from the
amounts derived from our estimates and assumptions.
Reclassifications
Certain reclassifications have been made to prior years
amounts to conform to the current years presentation.
Revenue
Recognition
Our revenue recognition policy is to recognize revenues from
product sales, software solutions and services in accordance
with SAB No. 104, Revenue Recognition,
EITF 00-21,
Revenue Arrangements with Multiple Deliverables and
Statement of Position (SOP)
97-2,
Software Revenue Recognition, as amended. These
standards require that revenues are recognized when persuasive
evidence of an arrangement exists, product delivery, including
customer acceptance, has occurred or services have been
rendered, the price is fixed or determinable and collectibility
is reasonably assured. When more than one element such as
equipment, disposables and services are contained in a single
arrangement, we allocate revenue between the elements based on
each elements relative fair value, provided that each
element meets the criteria for treatment as a separate unit of
accounting. An item is considered a separate unit of accounting
if it has value to the customer on a stand alone basis and there
is objective and reliable evidence of the fair value of the
undelivered items.
49
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The fair value of the undelivered elements is determined by the
price charged when the element is sold separately, or in cases
when the item is not sold separately, by the using other
objective evidence as defined in
EITF 00-21,
or vendor specific objective evidenced under
SOP 97-2.
Product
Revenues
Product sales consist of the sale of our equipment devices, the
related disposables used in these devices and intravenous
solutions manufactured for pharmaceutical companies. On product
sales to customers, revenue is recognized when both the title
and risk of loss have transferred to the customer as determined
by the shipping terms and all obligations have been completed.
Examples of common post delivery obligations are installation
and training. For product sales to distributors, we recognize
revenue for both equipment and disposables upon shipment of
these products to our distributors. Our standard contracts with
our distributors state that title to the equipment passes to the
distributors at point of shipment to a distributors
location. The distributors are responsible for shipment to the
end customer along with installation, training and acceptance of
the equipment by the end customer. All shipments to distributors
are at contract prices and payment is not contingent upon resale
of the product.
Software
Solutions and Services Revenues
At this time, our software solutions and services business
principally provides support to our plasma and blood collection
customers. Through our Haemonetics Software Solutions division,
we provide information technology platforms and technical
support for blood drive management and for efficient and
compliant operations of blood and plasma collection centers. For
plasma customers, we also provide information technology
platforms for managing back office functions and distribution at
plasma fractionation facilities. Software license revenues are
generally billed periodically, monthly or quarterly and
recognized for the period for which the service is provided. Our
software solutions and services business model includes the
provision of services, including in some instances hosting,
technical support, and maintenance, for the payment of periodic,
monthly or quarterly fees. We recognize these fees and charges
as earned, typically as these services are provided during the
contract period.
Translation
of Foreign Currencies
All assets and liabilities of foreign subsidiaries are
translated at the rate of exchange at year-end while sales and
expenses are translated at an average rate in effect during the
year. The net effect of these translation adjustments is shown
in the accompanying financial statements as a component of
stockholders equity.
Cash
and Cash Equivalents
Cash and cash equivalents are recorded at cost, which
approximates fair market value. As of March 28, 2009,
Haemonetics cash and cash equivalents consisted solely of
investments in money market funds invested in United States
Government Agency securities. Throughout the year, cash
equivalents may include various instruments such as money market
funds, U.S. government obligations and commercial paper
with maturities of three months or less at date of acquisition.
Allowance
for Doubtful Accounts
We establish a specific allowance for customers when it is
probable that they will not be able to meet their financial
obligation. Customer accounts are reviewed individually on a
regular basis and appropriate reserves are established as deemed
appropriate. We also maintain a general reserve using a
percentage that is established based upon the age of our
receivables. We establish percentages for balances not yet due
and past due accounts based on past experience.
50
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Concentration
of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash
equivalents and accounts receivable. Sales to one unaffiliated
Japanese customer, the Japanese Red Cross Society, amounted to
$73.0 million, $73.3 million and $70.3 million
for 2009, 2008 and 2007, respectively. Accounts receivable
balances attributable to this customer accounted for 17.5%,
15.9% and 15.8% of our consolidated accounts receivable at
fiscal year end 2009, 2008 and 2007. While the accounts
receivable related to the Japanese Red Cross Society may be
significant, we do not believe the credit loss risk to be
significant given the consistent payment history by this
customer.
Certain other markets and industries can expose us to
concentrations of credit risk. For example, in our commercial
plasma business, we tend to have only a few customers in total
but they are large in size. As a result, our accounts receivable
extended to any one of these commercial plasma customers can be
somewhat significant at any point in time.
Property,
Plant and Equipment
Property, Plant and Equipment is recorded at historical cost. We
provide for depreciation and amortization by charges to
operations using the straight-line method in amounts estimated
to recover the cost of the building and improvements, equipment,
and furniture and fixtures over their estimated useful lives as
follows:
|
|
|
|
|
|
|
Estimated
|
|
Asset Classification
|
|
Useful Lives
|
|
|
Building
|
|
|
30 Years
|
|
Building improvements
|
|
|
5-20 Years
|
|
Leasehold improvements
|
|
|
5 Years
|
|
Plant equipment and machinery
|
|
|
3-10 Years
|
|
Office equipment and information technology
|
|
|
3-9 Years
|
|
Haemonetics equipment
|
|
|
2-6 Years
|
|
Depreciation expense was $30.5 million, $27.2 million
and $24.4 million for fiscal years 2009, 2008 and 2007,
respectively.
Leasehold improvements are amortized over the lesser of their
useful lives or the term of the lease. Maintenance and repairs
are expensed to operations as incurred. When equipment and
improvements are sold or otherwise disposed of, the asset cost
and accumulated depreciation are removed from the accounts, and
the resulting gain or loss, if any, is included in the
statements of income. Fully depreciated assets are removed from
the accounts when they are no longer in use.
Our installed base of devices includes devices owned by us and
devices sold to the customer. The asset on our balance sheet
entitled Haemonetics equipment consists of medical devices
installed at customer sites but owned by Haemonetics (these
devices remain our property). Generally the customer has the
right to use it for a period of time as long as they meet the
conditions we have established, which among other things,
generally include one or more of the following:
|
|
|
|
|
Purchase and consumption of a certain level of disposable
products
|
|
|
|
Payment of monthly rental fees
|
|
|
|
An asset utilization performance metric, such as performing a
minimum level of procedures per month per device
|
Consistent with the impairment tests noted for goodwill and
other intangible assets, subject to amortization, we review our
property, plant, and equipment assets, subject to depreciation,
and their related useful lives at least once a year, or more
frequently if certain conditions arise, to determine if any
adverse conditions exist
51
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
that would indicate the carrying value of these assets may not
be recoverable. To conduct these reviews we estimate the future
amount and timing of demand for these devices. Changes in
expected demand can result in additional depreciation expense,
which is classified as cost of goods sold. Any significant
unanticipated changes in demand could impact the value of our
devices and our reported operating results. There were no
indicators of impairment in either fiscal year 2009 or 2008.
Expenditures for normal maintenance and repairs are charged to
expense as incurred.
Change
in Depreciable Lives of Property and Equipment
In accordance with our policy, the Company reviews the estimated
useful lives of our property, plant and equipment on an ongoing
basis. During fiscal year 2007, we increased the estimated
useful life of our PCS2 device, used by our commercial plasma
customers. Driven by the signing of several long term contracts
for the use of this device, the change increased the useful life
of these devices from 4 years to 6 years to reflect
the estimated periods during which these assets will remain in
service.
Goodwill
and Other Intangible Assets
Intangible assets acquired in a business combination, including
licensed technology, are recorded under the purchase method of
accounting at their estimated fair values at the date of
acquisition. Goodwill represents the excess purchase price over
the fair value of the net tangible and other identifiable
intangible assets acquired. We amortize our other intangible
assets over their useful lives using the estimated economic
benefit method, as applicable.
Goodwill and certain other intangible assets, determined to have
an indefinite life, are not amortized. Instead these assets are
reviewed for impairment at least annually in accordance with
SFAS No. 142, Goodwill and Other Intangible
Assets. We perform our annual impairment test on
January 1st (or the first business day immediately
following that date). We have three reporting units. The test is
based on a discounted cash flow analysis for each reporting
unit. The test showed no evidence of impairment to our goodwill
and other indefinite lived assets for fiscal year 2009 or 2008.
We review our intangible assets, subject to amortization, and
their related useful lives at least once a year to determine if
any adverse conditions exist that would indicate the carrying
value of these assets may not be recoverable. We conduct more
frequent impairment assessments if certain conditions exist,
including: a change in the competitive landscape, any internal
decisions to pursue new or different technology strategies, a
loss of a significant customer, or a significant change in the
market place including changes in the prices paid for our
products or changes in the size of the market for our products.
There were no indicators of impairment in either fiscal year
2009 or 2008.
An impairment results if the carrying value of the asset exceeds
the estimated fair value of the asset based on the sum of the
future undiscounted cash flows expected to result from the use
and disposition of the asset. If the estimate of an intangible
assets remaining useful life is changed, the remaining
carrying amount of the intangible asset is amortized
prospectively over the revised remaining useful life.
Accounting
for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed
SFAS No. 86, Accounting for the Cost of Computer
Software to be Sold, Leased or Otherwise Marketed,
specifies that costs incurred internally in researching and
developing a computer software product should be charged to
expense until technological feasibility has been established for
the product. Once technological feasibility is established, all
software costs should be capitalized until the product is
available for general release to customers. Technological
feasibility is established when we have a detailed design of the
software and when research and development activities on the
underlying device, if applicable, are completed.
52
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Additionally, the Company has capitalized $3.3 million in
other software development costs during fiscal year 2009 for
other ongoing initiatives. We will begin to amortize these costs
when the products are released for sale.
Other
Accrued Liabilities
Other accrued liabilities represent costs incurred within the
current year and payable within the next twelve months. Other
accrued liabilities were $37.9 million and
$46.5 million as of March 28, 2009 and March 29,
2008, respectively.
The significant items included in the fiscal year end balances
were:
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
VAT Liabilities
|
|
$
|
6,696
|
|
|
$
|
10,377
|
|
Forward Contract Loss
|
|
|
2,914
|
|
|
|
9,690
|
|
Deferred Revenue
|
|
|
10,833
|
|
|
|
7,645
|
|
All Other
|
|
|
17,452
|
|
|
|
18,806
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
37,895
|
|
|
$
|
46,518
|
|
|
|
|
|
|
|
|
|
|
Research,
Development and Engineering Expenses
All research, development and engineering costs are expensed as
incurred. Research, development and engineering expense was
$23.9 million for fiscal year 2009, $24.3 million for
fiscal year 2008, and $23.9 million for fiscal year
2007,exclusive of the Arryx In-process Research and Development
costs (see Note 3 Acquisitions).
Accounting
for Shipping and Handling Costs
Shipping and handling costs are included in costs of goods sold
with the exception of $14.9 million for fiscal year 2009,
$9.8 million for fiscal year 2008, and $7.0 million
for fiscal year 2007 that are included in selling, general and
administrative expenses. Freight is classified in cost of goods
sold when the customer is charged for freight and in selling,
general and administration when the customer is not explicitly
charged for freight.
Income
Taxes
The income tax provision is calculated for all jurisdictions in
which we operate. This process involves estimating actual
current taxes due plus assessing temporary differences arising
from differing treatment for tax and accounting purposes that
are recorded as deferred tax assets and liabilities. Deferred
tax assets are periodically evaluated to determine their
recoverability and a valuation allowance is established with a
corresponding additional income tax provision recorded in our
consolidated statements of income if their recovery is not
considered likely. The provision for income taxes could also be
materially impacted if actual taxes due differ from our earlier
estimates.
We adopted the provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income
Taxes an Interpretation of FASB Statement 109,
(FIN 48) effective April 1, 2007. FIN 48
provides a comprehensive model for the financial statement
recognition, measurement, presentation and disclosure of
uncertain tax positions taken or expected to be taken in income
tax returns. Unrecognized tax benefits represent tax positions
for which reserves have been established. Under FIN 48 the
financial statements reflect expected future tax consequences of
such positions presuming the taxing authorities full
knowledge of the position and all relevant facts.
53
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We file income tax returns in all jurisdictions in which we
operate. We establish reserves in accordance with FIN 48 to
provide for additional income taxes that may be due in future
years as these previously filed tax returns are audited. These
reserves have been established based on managements
assessment as to the potential exposure attributable to
permanent differences and interest applicable to both permanent
and temporary differences. All tax reserves are analyzed
periodically and adjustments are made as events occur that
warrant modification.
Foreign
Currency
We recognize all derivative financial instruments in our
consolidated financial statements at fair value in accordance
with Financial Accounting Standards Board (FASB) Statement
No. 133, Accounting for Derivative Instruments and
Hedging Activities. In accordance with Statement
No. 133, for those derivative instruments that are
designated and qualify as hedging instruments, the hedging
instrument must be designated, based upon the exposure being
hedged, as a fair value hedge, cash flow hedge, or a hedge of a
net investment in a foreign operation. For those derivative
instruments that qualify as hedging instruments
The accounting for changes in the fair value (i.e., gains or
losses) of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship.
The gains or losses on the forward exchange contracts designated
as hedges are recorded in net revenues in our consolidated
statements of income when the underlying hedged transaction
affects earnings. The cash flows related to the gains and losses
are classified in the consolidated statements of cash flows as
part of cash flows from operating activities. For those
derivative instruments that are not designated as part of a
hedging relationship we record the gains or losses in earnings
currently. These gains and losses are intended to offset the
gains and losses recorded on net monetary assets or liabilities
that are denominated in foreign currencies. The Company recorded
foreign currency losses of $2.3 million and
$0.6 million in fiscal year 2009 and fiscal year 2008,
respectively.
Our derivative instruments do not subject our earnings or cash
flows to material risk, as gains and losses on these derivatives
are intended to offset losses and gains on the item being
hedged. We do not enter into derivative transactions for
speculative purposes and we do not have any non-derivative
instruments that are designated as hedging instruments pursuant
to Statement No. 133.
Stock-Based
Compensation
We use the Black-Scholes option-pricing model to calculate the
grant-date fair value of our stock options. The following
assumptions, which involve the use of judgment by management,
are used in the computation of the grant-date fair value of our
stock options:
Expected Volatility We have principally used
our historical volatility as a basis to estimate expected
volatility in our valuation of stock options.
Expected Term We estimate the expected term
of our options using historical exercise and forfeiture data. We
believe that this historical data is currently the best estimate
of the expected term of our new option grants.
Additionally, after determining the fair value of our stock
options, we use judgment in establishing an estimated forfeiture
rate, to determine the amount of stock based compensation to
record each period:
Estimated Forfeiture Rate We have applied,
based on an analysis of our historical forfeitures, an annual
forfeiture rate of 8% to all unvested stock options as of
March 28, 2009, which represents the portion that we expect
will be forfeited each year over the vesting period. We
reevaluate this analysis periodically and adjust the forfeiture
rate as necessary. Ultimately, we will only recognize expense
for those shares that vest.
54
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Valuation
of Acquisitions
We allocate the amounts we pay for each acquisition to the
assets we acquire and liabilities we assume based on their fair
values at the dates of acquisition, including acquired
identifiable intangible assets, and purchased research and
development. We base the fair value of identifiable intangible
assets on detailed valuations that use information and
assumptions provided by management. We allocate any excess
purchase price over the fair value of the net tangible and
intangible assets acquired to goodwill. The use of alternative
valuation assumptions, including estimated cash flows and
discount rates, and alternative estimated useful life
assumptions could result in different purchase price
allocations, purchased research and development charges, and
intangible asset amortization expense in current and future
periods.
The valuation of purchased research and development represents
the estimated fair value at the dates of acquisition related to
in-process projects. Our purchased research and development
represents the value of an in-process project that has not yet
reached technological feasibility and had no alternative future
use as of the date of acquisition. We expensed the value
attributable to the in-process project at the time of the
acquisition. If the project is not successful or completed in a
timely manner, we may not realize the financial benefits
expected from this project or for the acquisition as a whole.
We use the income approach to determine the fair values of our
purchased research and development. This approach determines
fair value by estimating the after-tax cash flows attributable
to an in-process project over its useful life and then
discounting these after-tax cash flows back to a present value.
We base our revenue assumptions on estimates of relevant market
sizes, expected market growth rates, expected trends in
technology and expected product introductions by competitors. In
arriving at the value of the in-process projects, we consider,
among other factors: the in-process projects stage of
completion; the complexity of the work completed as of the
acquisition date; the costs already incurred; the projected
costs to complete; the contribution of core technologies and
other acquired assets; the expected introduction date; and the
estimated useful life of the technology. We base the discount
rate used to arrive at a present value as of the date of
acquisition on the time value of money and medical technology
investment risk factors. For the in-process project we acquired
in fiscal year 2007, we used a 26% risk-adjusted discount rate
to discount our projected cash flows. We believe that the
estimated purchased research and development amounts so
determined represent the fair value at the date of acquisition
and do not exceed the amount a third party would pay for the
project.
Recent
Accounting Pronouncements
In September 2008, the FASB issued FASB Staff Position (FSP)
No. 133-1
and
FIN 45-4,
Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45. The FSP is intended to improve
disclosures about credit derivatives by requiring more
information about the potential adverse effects of changes in
credit risk on the financial position, financial performance,
and cash flows of the sellers of credit derivatives. It amends
FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, to require disclosures
by sellers of credit derivatives, including credit derivatives
embedded in hybrid instruments. The provisions of the FSP that
amend Statement 133 and Interpretation 45 are effective for
reporting periods (annual or interim) ending after
November 15, 2008. These statements became effective during
fiscal year 2009 and did not have an impact on our financial
position and results of operation as we have not issued or
purchased credit derivatives.
In May 2008, the FASB issued SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles,
which will provide framework for selecting accounting principles
to be used in preparing financial statements that are presented
in conformity with U.S. generally accepted accounting
principles (GAAP) for nongovernmental entities. Prior to the
issuance of SFAS No. 162, the GAAP hierarchy was
defined in the American Institute of Certified Public
Accountants (AICPA) Statement on Auditing Standards (SAS)
No. 69, The Meaning of Present Fairly in Conformity
With Generally Accepted Accounting Principles. With the
55
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
issuance of SFAS No. 162, the GAAP hierarchy for
nongovernmental entities will move from auditing literature to
accounting literature. SFAS No. 162 will be effective
60 days following the SECs approval of the Public
Company Accounting Oversight Board (PCAOB) amendments to AU
Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.
This statement became effective during fiscal year 2009 and did
not have an impact on our financial position and results of
operations.
In March 2008, the FASB issued FASB No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB
No. 133. FASB No. 161 is intended to improve
financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors
to better understand their effects on an entitys financial
position, financial performance, and cash flows.
SFAS No. 161 is effective for any reporting period
(annual or quarterly interim) beginning on or after
November 15, 2008. This statement became effective during
fiscal year 2009 see Note 7 for the related
disclosure.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS 141(R)). In SFAS 141(R), the FASB
retained the fundamental requirements of Statement No. 141
to account for all business combinations using the acquisition
method (formerly the purchase method) and for an acquiring
entity to be identified in all business combinations. However,
the new standard requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and
liabilities assumed in the transaction; establishes the
acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the
information they need to evaluate and understand the nature and
financial effect of the business combination. SFAS 141(R)
is effective for annual periods beginning on or after
December 15, 2008. We are currently evaluating the
potential impact of FASB No. 141(R) on our financial
position and results of operations. This statement is effective
for our fiscal year 2010.
In December 2007, the FASB issued FASB No. 160
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51 of
which the objective is to improve the relevance, comparability,
and transparency of the financial information that a reporting
entity provides in its consolidated financial statements by
establishing accounting and reporting standards by requiring all
entities to report noncontrolling (minority) interests in
subsidiaries in the same way as equity in the
consolidated financial statements. Moreover, Statement 160
eliminates the diversity that currently exists in accounting for
transactions between an entity and noncontrolling interests by
requiring they be treated as equity transactions. FASB
No. 160 is effective for annual periods beginning on or
after December 15, 2008. We are currently evaluating the
potential impact of FASB No. 160 on our financial position
and results of operations. This statement is effective for our
fiscal year 2010.
Haemoscope
Corporation Acquisition
On November 20, 2007 the Company acquired Haemoscope
Corporations
TEG®
Thrombelastograph®
Hemostasis Analyzer business for approximately
$45.6 million in cash. Haemoscope Corporation is a provider
of whole blood hemostasis monitoring systems. The TEG system can
assess a patients hemostasis and therefore required blood
management as well as potential thrombotic complications, which
facilitates individualized therapy. The results of
Haemoscopes operations have been included in our
consolidated financial statements for periods after the
acquisition date.
Purchase
Price
The Company has accounted for the acquisition of Haemoscope
Corporation as the purchase of a business under
U.S. Generally Accepted Accounting Principles. Under the
purchase method of accounting, the assets
56
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and liabilities of Haemoscope Corporation were recorded as of
the acquisition date, at their respective fair values, and
consolidated with those of Haemonetics. The purchase price is
based upon estimates of the fair value of assets acquired and
liabilities assumed. The purchase price allocation will be
finalized no later than one year from the acquisition date. The
preparation of the valuation requires the use of significant
assumptions and estimates. Critical estimates included, but were
not limited to, future expected cash flows, including product
revenues, costs and operating expenses and the applicable
discount rates. These estimates were based on assumptions that
the Company believes to be reasonable. However, actual results
may differ from these estimates.
The purchase price allocation, including the valuation of
intangible assets, is as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Consideration for Haemoscope Corporation
|
|
|
|
|
Cash portion of consideration
|
|
$
|
45,080
|
|
Other acquisition-related costs:
|
|
|
|
|
Acquisition-related costs
|
|
|
511
|
|
|
|
|
|
|
Total acquisition related costs
|
|
$
|
45,591
|
|
|
|
|
|
|
Purchase
Price Allocation
The following chart summarizes the purchase price allocation:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Intangible assets subject to amortization
|
|
$
|
26,060
|
|
Goodwill
|
|
|
17,530
|
|
Other assets
|
|
|
2,876
|
|
Current liabilities
|
|
|
(875
|
)
|
|
|
|
|
|
Total
|
|
$
|
45,591
|
|
|
|
|
|
|
The excess of the purchase price over the fair value of net
tangible assets acquired was allocated to specific intangible
asset categories as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-Adjusted
|
|
|
|
|
|
|
Weighted Average
|
|
|
Discount Rate Used
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
in Purchase Price
|
|
|
|
Assigned
|
|
|
Period
|
|
|
Allocation
|
|
|
|
(In thousands)
|
|
|
Amortizable intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology -developed
|
|
$
|
9,500
|
|
|
|
12.0 years
|
|
|
|
23.0
|
%
|
Customer relationships
|
|
$
|
15,960
|
|
|
|
11.0 years
|
|
|
|
23.0
|
%
|
Trade names
|
|
$
|
600
|
|
|
|
12.0 years
|
|
|
|
23.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
17,530
|
|
|
|
|
|
|
|
|
|
The Company believes that the estimated intangible assets
represent the fair value at the date of acquisition and do not
exceed the amount a third party would pay for the assets. The
Company used the income approach to determine the fair value of
the amortizable intangible assets.
Various factors contributed to the establishment of goodwill,
including: the value of Haemoscope Corporations highly
trained work force as of the acquisition date, the expected
business plans and associated revenue from future products. The
goodwill acquired is deductible for tax purposes.
57
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The developed technology acquired represents the value
associated with currently marketed product, the TEG system. This
system includes a patented device, application software and
assays. The system is used by hospitals and laboratories to
predict a patients risk of bleeding. We also acquired the
customer relationships that Haemoscope developed. Haemoscope
conducted the majority of its business on the basis of purchase
orders and repeat purchases of consumables. These customer
relationships are predicated on the technology that the customer
has invested in, both through the initial purchase of the TEG
device, but also the investment in the training and staff
development associated with using a technology like TEG. The
Company used the income approach to estimate the fair value of
the developed technology and customer relationships as of the
acquisition date. The Company determined that the estimated
useful life of the intangible assets ranges from
11-12 years
and are amortized over period of the estimated economic benefit.
On December 4, 2008, the FDA sent Haemonetics a Warning
Letter relating to deficiencies in the Haemoscope
operations compliance to cGMP requirements. Haemonetics
continues to manufacture and distribute TEG systems, including
the device, application software and assays. Haemonetics is
working diligently to address FDAs concerns.
Arryx,
Inc. Acquisition
On July 18, 2006, the Company acquired the remaining
outstanding shares of Arryx, Inc. for $26 million. We
previously had a $5 million cost method investment in
Arryx, Inc. as well as a license agreement for the use of its
technology in a defined field of use with a carrying value of
approximately $3 million. The results of Arryx, Inc. have
been included in our consolidated financial statements for
periods after the acquisition date, and we have restated our
prior period financial results to record our cost method
investment on the equity method of accounting in accordance with
Accounting Principles Board, Opinion No. 18, The
Equity Method of Accounting for Investments in Common
Stock which resulted in recognizing our 18.6%
proportionate share of Arryx, Inc. losses in periods prior to
the current acquisition. We recorded cumulative equity method
losses of $1.3 million for periods prior to the acquisition
date. We recorded an in-process research and development charge
of $9.1 million in connection with this acquisition.
Purchase
Price
The Company has accounted for the acquisition of Arryx, Inc. as
the purchase of a business under U.S. Generally Accepted
Accounting Principles. Under the purchase method of accounting,
the assets and liabilities of Arryx, Inc. were recorded as of
the acquisition date, at their respective fair values, and
consolidated with those of Haemonetics. The purchase price is
based upon estimates of the fair value of assets acquired and
liabilities assumed. The preparation of the valuation required
the use of significant assumptions and estimates. Critical
estimates included, but were not limited to, future expected
cash flows, including product and license revenues, and the
applicable discount rates. These estimates were based on
assumptions that the Company believes to be reasonable. However,
actual results may differ from these estimates.
58
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The purchase price is as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Consideration for Arryx, Inc.
|
|
|
|
|
Cash portion of consideration
|
|
$
|
26,521
|
|
License agreement with Arryx, Inc.
|
|
|
3,298
|
|
Cost Method Investment, representing 18.6% of outstanding Arryx,
Inc. Shares
|
|
|
5,000
|
|
Adjust cost method investment to equity method in accordance
with Accounting Principles Board Opinion No. 18
|
|
|
(1,311
|
)
|
|
|
|
|
|
Total Consideration
|
|
|
33,508
|
|
Other acquisition-related costs
|
|
|
|
|
Other estimated acquisition-related costs
|
|
|
447
|
|
|
|
|
|
|
Total acquisition related costs
|
|
$
|
33,955
|
|
|
|
|
|
|
We applied the guidance under
EITF 04-1,
Accounting for Preexisting Relationships between the
Parties to a Business Combination, to determine if any
gain or loss was inherent in our existing license agreement with
Arryx, Inc. We determined that no loss was inherent in this
existing contractual relationship with Arryx, Inc., and
accordingly included it at its net book value at the acquisition
date in the purchase price determination.
Purchase
Price Allocation
The following chart summarizes the purchase price allocation:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
3,900
|
|
Intangible assets subject to amortization
|
|
|
7,427
|
|
Goodwill
|
|
|
10,743
|
|
Other assets
|
|
|
565
|
|
Deferred tax asset, long term
|
|
|
5,776
|
|
In-process research and development
|
|
|
9,073
|
|
Current liabilities
|
|
|
(785
|
)
|
Deferred tax liabilities
|
|
|
(2,744
|
)
|
|
|
|
|
|
Total
|
|
$
|
33,955
|
|
|
|
|
|
|
The deferred tax asset relates to an acquired federal net
operating loss of $15.6 million.
The deferred tax liability primarily relates to the tax impact
of future amortization associated with the identified intangible
assets acquired, which are not deductible for tax purposes.
59
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The excess of the purchase price over the fair value of net
tangible assets acquired was allocated to specific intangible
asset categories as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-Adjusted
|
|
|
|
|
|
|
Weighted
|
|
|
Discount Rate
|
|
|
|
|
|
|
Average
|
|
|
Used in
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Purchase Price
|
|
|
|
Assigned
|
|
|
Period
|
|
|
Allocation
|
|
|
|
(In thousands)
|
|
|
Amortizable intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology developed
|
|
$
|
4,134
|
|
|
|
12.0 years
|
|
|
|
26
|
%
|
Patents
|
|
|
3,293
|
|
|
|
10.0 years
|
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,427
|
|
|
|
11.1 years
|
|
|
|
|
|
Goodwill
|
|
$
|
10,743
|
|
|
|
|
|
|
|
|
|
In-process research and development
|
|
$
|
9,073
|
|
|
|
|
|
|
|
29
|
%
|
The Company believes that the estimated intangible assets
represent the fair value at the date of acquisition and do not
exceed the amount a third party would pay for the assets. The
Company used the income approach to determine the fair value of
the amortizable intangible assets and purchased research and
development.
Various factors contributed to the establishment of goodwill,
including: the value of Arryx, Inc.s highly trained work
force as of the acquisition date, the expected business plans
and associated revenue from future products and license
opportunities. The goodwill acquired is not deductible for tax
purposes.
The developed technology acquired represents the value
associated with currently marketed product, the BioRx device.
This device employs holographic optical trapping
(HOT) technology, and is currently used by large
research and educational institutions. The Company used the
income approach to estimate the fair value of the developed
technology as of the acquisition date. The Company determined
that the estimated useful life of the developed technology is
12 years.
The estimated fair value of the patents was determined by using
the income approach. The estimated revenues and associated cash
flows attributable to the patent portfolio were discounted. The
estimated useful life of the patent asset is estimated to be
10 years.
In-process
Research and Development
The $9.1 million purchased research and development that
was charged to operating expenses in fiscal year 2007 consists
of a project for the advancement and development of the
technology in the blood collection and processing applications
and for the purposes of licensing the technology outside of the
blood collection and processing marketplace. The project
includes work to reduce the size of the technology, including
reducing the size of the laser, and developing mechanisms to
label samples and collections.
For purposes of valuing the acquired purchased research and
development, the Company estimated total costs to complete the
current development of the platform of approximately
$11 million. For the in-process project the Company
acquired in connection with the acquisition of Arryx, Inc., it
used a risk-adjusted discount rate of 29% to discount the
projected cash flows. The Company believes that the estimated
purchased research and development amounts so determined
represented the fair value at the date of acquisition and did
not exceed the amount a third party would pay for the projects.
The major risks and uncertainties associated with the timely and
successful completion of the in-process research and development
project include the ability to both complete the development of
the platform and to establish its effectiveness for different
applications for the purposes of licensing the technology
outside of the blood collection and processing marketplace.
60
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
IDM
Acquisition
On January 30, 2007 Haemonetics Corporation acquired the
assets of Information Data Management, Inc. (IDM), a
leading developer of software for blood collection agencies for
approximately $9 million in cash. IDMs software
applications for blood collection, blood laboratory operations,
and services complement Haemonetics 5D suite of software
products and services. The purchase price was principally
allocated to intangible assets including customer contractual
relationships, completed technology and goodwill. The results of
IDM have been included in our consolidated financial statements
for periods after the acquisition date.
Purchase
Price
The Company has accounted for the acquisition of IDM as the
purchase of a business under U.S. Generally Accepted
Accounting Principles. Under the purchase method of accounting,
the assets and liabilities of IDM were recorded as of the
acquisition date, at their respective fair values, and
consolidated with those of Haemonetics. The purchase price is
based upon estimates of the fair value of assets acquired and
liabilities assumed. The preparation of the valuation required
the use of significant assumptions and estimates. Critical
estimates included, but were not limited to, future expected
cash flows, including projected revenues and expenses, and the
applicable discount rates. These estimates were based on
assumptions that the Company believes to be reasonable. However,
actual results may differ from these estimates.
The purchase price is as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Consideration for IDM
|
|
|
|
|
Cash portion of consideration
|
|
$
|
8,850
|
|
Other estimated acquisition-related costs
|
|
|
374
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
9,224
|
|
|
|
|
|
|
Purchase
Price Allocation
The following chart summarizes the purchase price allocation:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Accounts receivable and unbilled
|
|
$
|
186
|
|
Current liabilities
|
|
|
(898
|
)
|
Intangible assets subject to amortization
|
|
|
5,300
|
|
Goodwill
|
|
|
4,559
|
|
Other assets
|
|
|
77
|
|
|
|
|
|
|
Total
|
|
$
|
9,224
|
|
|
|
|
|
|
61
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The excess of the purchase price over the fair value of net
tangible assets acquired was allocated to specific intangible
asset categories as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
|
Assigned
|
|
|
Period
|
|
|
|
(In thousands)
|
|
|
Amortizable intangible assets
|
|
|
|
|
|
|
|
|
Technology developed
|
|
$
|
1,400
|
|
|
|
7.0 years
|
|
Customer relationships
|
|
|
3,900
|
|
|
|
11.0 years
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,300
|
|
|
|
9.2 years
|
|
Goodwill
|
|
$
|
4,559
|
|
|
|
|
|
The Company believes that the estimated intangible assets
represent the fair value at the date of acquisition and do not
exceed the amount a third party would pay for the assets. The
Company used the income approach to determine the fair value of
the amortizable intangible assets and purchased research and
development.
Various factors contributed to the establishment of goodwill,
including: the value of IDMs highly trained work force as
of the acquisition date, the expected business plans and
opportunities to introduce future products to its customer base.
Blood collection centers have found that information technology
can maximize staff productivity, assist with regulatory
compliance, optimize donor resource management and provide
management tools to continually improve operations. IDM marketed
software products which meet the unique needs of blood
collectors and which aid customers in blood drive management,
blood component manufacturing, distribution, and laboratory
testing.
Infonalé,
Inc. Acquisition
On July 9, 2007, the Company acquired the assets of
Infonalé, Inc. (Infonalé) for
approximately $1.3 million in cash plus contingent
consideration based upon future operating performance.
Infonalé is a leading developer of IT software and
consulting services for optimizing hospital blood use and
management. The purchase price was principally allocated to
intangible assets including other technology and goodwill. The
results of the Infonalé operations are included in our
consolidated results for periods after the acquisition date.
Medicell
Ltd. Acquisition
On April 4, 2008, the Company acquired Medicell Ltd.
(Medicell) for approximately $2.5 million in
cash plus contingent consideration based upon future operating
performance. Medicell has been the exclusive distributor in the
United Kingdom for the Haemoscope product line since 1998. The
purchase price was principally allocated to intangible assets
including goodwill. The results of the Medicell operations are
included in our consolidated results
Altivation
Software Acquisition
On March 27, 2009, the Company acquired Altivation Software
(Altivation) for approximately $3.5 million in
cash plus contingent consideration based upon future operating
performance. Altivation is a provider of blood drive and
resource management software for the blood banking industry. The
purchase price was principally allocated to intangible assets
including goodwill. The purchase price allocation will be
finalized no later than one year from the acquisition date. The
results of the Altivation operations will be included in our
consolidated results for periods after the acquisition date.
62
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Warranty accrual as of the beginning of the period
|
|
$
|
929
|
|
|
$
|
734
|
|
Warranty provision
|
|
|
2,155
|
|
|
|
2,416
|
|
Warranty spending
|
|
|
(1,249
|
)
|
|
|
(2,221
|
)
|
|
|
|
|
|
|
|
|
|
Warranty accrual as of the end of the period
|
|
$
|
1,835
|
|
|
$
|
929
|
|
|
|
|
|
|
|
|
|
|
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 basis.
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Raw materials
|
|
$
|
23,778
|
|
|
$
|
16,107
|
|
Work-in-process
|
|
|
8,732
|
|
|
|
14,430
|
|
Finished goods
|
|
|
44,012
|
|
|
|
34,851
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
76,522
|
|
|
$
|
65,388
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
GOODWILL
AND OTHER INTANGIBLE ASSETS
|
The changes in the carrying amount of goodwill for fiscal year
2009, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Carrying amount as of March 31, 2007
|
|
$
|
34,958
|
|
Arryx, Inc.(a)
|
|
|
16
|
|
IDM, Inc.(b)
|
|
|
81
|
|
Haemoscope(c)
|
|
|
17,530
|
|
Effect of change in rates used for translation
|
|
|
1,637
|
|
|
|
|
|
|
Carrying amount as of March 29, 2008
|
|
$
|
54,222
|
|
Medicell Ltd.(d)
|
|
|
1,238
|
|
Altivation Software Inc.(e)
|
|
|
1,690
|
|
Effect of change in rates used for translation
|
|
|
(724
|
)
|
|
|
|
|
|
Carrying amount as of March 28, 2009
|
|
$
|
56,426
|
|
|
|
|
|
|
|
|
|
(a) |
|
See Note 3 Acquisition for a full description of the
acquisition of Arryx, Inc. which occurred on July 18, 2006. |
|
(b) |
|
See Note 3 Acquisition for a full description of the
acquisition of Information Data Management, Inc.
(IDM), which occurred on January 30, 2007. |
63
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(c) |
|
See Note 3, Acquisitions for a full description of the
acquisition of Haemoscope Corporation (Haemoscope),
which occurred on November 20, 2007. |
|
(d) |
|
See Note 3, Acquisitions for a full description of the
acquisition of Medicell Ltd. (Medicell), which
occurred on April 4, 2008. |
|
(e) |
|
See Note 3, Acquisitions for a full description of the
acquisition of Altivation Software (Altivation),
which occurred on March 27, 2009. |
Other
Intangible Assets
Other intangible assets include the value assigned to license
rights and other technology, patents, customer contracts and
relationships, software technology, and a trade name. The
estimated useful lives for all of these intangible assets are 5
to 20 years.
Aggregate amortization expense for amortized other intangible
assets for fiscal year 2009, 2008, and 2007 was
$6.0 million, $4.1 million, and $2.8 million,
respectively. Future annual amortization expense on other
intangible assets is expected to approximate $7.0 million
for fiscal year 2010, $6.8 million for fiscal year 2011,
$6.4 million for fiscal year 2012, $6.3 million for
fiscal year 2013, and $6.9 million for fiscal year 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Weighted Average
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Useful Life
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
(In years)
|
|
|
As of March 28, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Intangibles
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
|
|
$
|
12,008
|
|
|
$
|
4,945
|
|
|
|
11
|
|
Capitalized software
|
|
|
18,994
|
|
|
|
572
|
|
|
|
6
|
|
Other technology
|
|
|
28,784
|
|
|
|
11,501
|
|
|
|
10
|
|
Customer contracts and related relationships
|
|
|
29,886
|
|
|
|
8,240
|
|
|
|
12
|
|
Trade name
|
|
|
1,097
|
|
|
|
250
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Intangibles
|
|
$
|
90,769
|
|
|
$
|
25,508
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Weighted Average
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Useful Life
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
(In years)
|
|
|
As of March 29, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Intangibles
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
|
|
$
|
11,744
|
|
|
$
|
4,073
|
|
|
|
11
|
|
Capitalized software
|
|
|
14,185
|
|
|
|
216
|
|
|
|
5
|
|
Other technology
|
|
|
27,761
|
|
|
|
9,899
|
|
|
|
10
|
|
Customer contracts and related relationships
|
|
|
29,342
|
|
|
|
5,616
|
|
|
|
12
|
|
Trade name
|
|
|
1,122
|
|
|
|
17
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Intangibles
|
|
$
|
84,154
|
|
|
$
|
19,821
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
DERIVATIVES
AND FAIR VALUE MEASUREMENTS
|
We manufacture, market and sell our products globally.
Approximately 53% of our sales are generated outside the
U.S. in local currencies. We also incur certain
manufacturing, marketing and selling costs in international
markets in local currency. Accordingly, our earnings and cash
flows are exposed to market risk from changes in foreign
currency exchange rates relative to the U.S. dollar, our
reporting currency.
64
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We have a program in place that is designed to mitigate our
exposure to changes in foreign currency exchange rates. That
program includes the use of derivative financial instruments to
minimize for a period of time, the unforeseen impact on our
financial results from changes in foreign exchange rates. We
utilize forward foreign currency contracts to hedge the
anticipated cash flows from transactions denominated in foreign
currencies, primarily the Japanese Yen and the Euro, and to
lesser extent the Great British Pound Sterling and the Canadian
Dollar. This does not eliminate the volatility of foreign
exchange rates, but because we generally enter into forward
contracts one year out, rates are fixed for a one-year period,
thereby facilitating financial planning and resource allocation.
Designated
Foreign Currency Hedges
All of our designated currency hedge contracts as of
March 28, 2009 and March 29, 2008 were cash flow
hedges under Statement No. 133. We record the effective
portion of any change in the fair value of foreign currency cash
flow hedges in other comprehensive income (OCI) in the Statement
of Stockholders Equity until the related third-party
transaction occurs. Once the related third-party transaction
occurs, we reclassify the effective portion of any related gain
or loss on the foreign currency cash flow hedge to earnings. In
the event the hedged forecasted transaction does not occur, or
it becomes probable that it will not occur, we would reclassify
the amount of any gain or loss on the related cash flow hedge to
earnings at that time. We had currency derivative instruments
designated as cash flow hedges outstanding in the contract
amount of $117.1 million as of March 28, 2009 and
$97.4 million as of March 29, 2008.
During fiscal year 2009, we recognized net losses of
$4.4 million in earnings on our cash flow hedges. All
currency cash flow hedges outstanding as of March 28, 2009
mature within twelve months. As of March 28, 2009,
$4.9 million of net gains, net of tax, were recorded in OCI
to recognize the effective portion of the fair value of any
currency derivative instruments that are, or previously were,
designated as foreign currency cash flow hedges, as compared to
net losses of $10.1 million as of March 29, 2008. As
of March 28, 2009, $4.9 million of net gains, net of
tax, may be reclassified to earnings within the next twelve
months.
Non-designated
Foreign Currency Contracts
We manage our exposure to changes in foreign currency on a
consolidated basis to take advantage of offsetting transactions
and balances. We use currency forward contracts as a part of our
strategy to manage exposure related to foreign currency
denominated monetary assets and liabilities. These currency
forward contracts are not designated as cash flow or fair value
hedges under Statement No. 133. These forward contracts are
marked-to-market
with changes in fair value recorded to earnings; and are entered
into for periods consistent with currency transaction exposures,
generally one month. We had currency derivative instruments not
designated as hedges under Statement No. 133 outstanding in
the contract amount of $51.6 million as of March 28,
2009 and $77.9 million as of March 29, 2008.
65
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair
Value of Derivative Instruments
The following tables present the effect of our derivative
instruments designated as cash flow hedges and those not
designated as hedging instruments under Statement No. 133
in our consolidated statement of income for fiscal year 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings on
|
|
|
|
|
|
|
|
|
|
Amount of Loss
|
|
|
|
|
|
Ineffective
|
|
|
|
|
|
|
Amount of
|
|
|
Reclassified
|
|
|
|
|
|
Portion and
|
|
|
|
|
|
|
Gain
|
|
|
from OCI into
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
Recognized in
|
|
|
Earnings
|
|
|
Location in
|
|
|
Excluded from
|
|
|
Location in
|
|
|
|
OCI (Effective
|
|
|
(Effective
|
|
|
Statement of
|
|
|
Effectiveness
|
|
|
Statement of
|
|
Cash Flow Hedges
|
|
Portion)
|
|
|
Portion)
|
|
|
Income
|
|
|
Testing (*)
|
|
|
Income
|
|
|
|
(In thousands)
|
|
|
Foreign exchange contracts
|
|
$
|
4,858
|
|
|
$
|
(4,364
|
)
|
|
|
Net revenues
|
|
|
$
|
(478
|
)
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,858
|
|
|
$
|
(4,364
|
)
|
|
|
|
|
|
$
|
(478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
We exclude the difference between the spot rate and hedge rate
from our effectiveness testing. |
We did not have fair value hedges or net investment hedges
outstanding as of March 28, 2009 or March 29, 2008.
Statement No. 133 requires all derivative instruments to be
recognized at their fair values as either assets or liabilities
on the balance sheet. We determine the fair value of our
derivative instruments using the framework prescribed by FASB
Statement No. 157, Fair Value Measurements, by
considering the estimated amount we would receive to sell or
transfer these instruments at the reporting date and by taking
into account current interest rates, currency exchange rates,
the creditworthiness of the counterparty for assets, and our
creditworthiness for liabilities. In certain instances, we may
utilize financial models to measure fair value. Generally, we
use inputs that include quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or
similar assets or liabilities in markets that are not active;
other observable inputs for the asset or liability; and inputs
derived principally from, or corroborated by, observable market
data by correlation or other means. As of March 28, 2009,
we have classified our derivative assets and liabilities within
Level 2 of the fair value hierarchy prescribed by Statement
No. 157, as discussed below, because these observable
inputs are available for substantially the full term of our
derivative instruments.
The following tables present the fair value of our derivative
instruments as they appear in our consolidated balance sheets as
of March 28, 2009 by type of contract and whether it is a
qualifying hedge under Statement No. 133.
|
|
|
|
|
|
|
|
|
Location in
|
|
Balance as of
|
|
|
|
Balance Sheet
|
|
March 28, 2009
|
|
|
|
(In thousands)
|
|
|
Derivative Assets:
|
|
|
|
|
|
|
Designated Hedging Instruments
|
|
|
|
|
|
|
Currency Exchange Contracts
|
|
Other current assets
|
|
$
|
3,936
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,936
|
|
|
|
|
|
|
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
Designated Hedging Instruments
|
|
|
|
|
|
|
Currency Exchange Contracts
|
|
Other accrued liabilities
|
|
$
|
2,914
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,914
|
|
|
|
|
|
|
|
|
66
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other
Fair Value Measurements
We adopted Financial Accounting Standards Board (FASB) Statement
No. 157, Fair Value Measurements, as of
March 30, 2008. Statement No. 157 defines fair value,
establishes a framework for measuring fair value in accordance
with U.S. GAAP, and expands disclosures about fair value
measurements. Statement No. 157 does not require any new
fair value measurements; rather, it applies to other accounting
pronouncements that require or permit fair value measurements.
In February 2008, the FASB released Staff Position
No. 157-2,
Effective Date of FASB Statement No. 157, which
delays the effective date of Statement No. 157 for all
nonfinancial assets and nonfinancial liabilities, except for
those that are recognized or disclosed at fair value in the
financial statements on a recurring basis. In accordance with
Staff Position
No. 157-2,
we have not applied the provisions of Statement No. 157 to
the following nonfinancial assets and nonfinancial liabilities:
|
|
|
|
|
Nonfinancial assets and nonfinancial liabilities initially
measured at fair value in a business combination or other new
basis event, but not measured at fair value in subsequent
reporting periods;
|
|
|
|
Reporting units and nonfinancial assets and nonfinancial
liabilities measured at fair value for our goodwill impairment
test in accordance with FASB Statement No. 142, Goodwill
and Other Intangible Assets;
|
|
|
|
Indefinite-lived intangible assets measured at fair value for
impairment assessment in accordance with Statement No. 142;
|
|
|
|
Nonfinancial long-lived assets or asset groups measured at fair
value for impairment assessment or disposal under FASB Statement
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets; and
|
|
|
|
Nonfinancial liabilities associated with exit or disposal
activities initially measured at fair value under FASB Statement
No. 146, Accounting for Costs Associated with Exit or
Disposal Activities.
|
We will be required to apply the provisions of Statement
No. 157 to these nonfinancial assets and nonfinancial
liabilities effective fiscal year 2010 and are currently
evaluating the impact of the application of Statement
No. 157 as it pertains to these items. The application of
Statement No. 157 for financial assets and financial
liabilities did not have a material impact on our financial
position, results of operations or cash flows.
On a recurring basis, we measure certain financial assets and
financial liabilities at fair value, including our money market
funds and foreign currency derivative contracts. Statement
No. 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date. As such, fair value is a market-based
measurement that should be determined based on assumptions that
market participants would use in pricing an asset or liability.
We base fair value upon quoted market prices, where available.
Where quoted market prices or other observable inputs are not
available, we apply valuation techniques to estimate fair value.
Statement No. 157 establishes a three-level valuation
hierarchy for disclosure of fair value measurements. The
categorization of financial assets and financial liabilities
within the valuation hierarchy is based upon the lowest level of
input that is significant to the measurement of fair value. The
three levels of the hierarchy are defined as follows:
|
|
|
|
|
Level 1 Inputs to the valuation
methodology are quoted market prices for identical assets or
liabilities.
|
|
|
|
Level 2 Inputs to the valuation
methodology are other observable inputs, including quoted market
prices for similar assets or liabilities and market-corroborated
inputs.
|
67
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Level 3 Inputs to the valuation
methodology are unobservable inputs based on managements
best estimate of inputs market participants would use in pricing
the asset or liability at the measurement date, including
assumptions about risk.
|
Our money market funds carried at fair value are generally
classified within Level 1 of the fair value hierarchy
because they are valued using quoted market prices.
We recognize all derivative financial instruments in our
consolidated financial statements at fair value in accordance
with FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. We determine the fair
value of these instruments using the framework prescribed by
Statement No. 157 by considering the estimated amount we
would receive or pay to terminate these agreements at the
reporting date and by taking into account current interest
rates, the creditworthiness of the counterparty for assets, and
our creditworthiness for liabilities. We use a discounted cash
flow model to value these forward foreign exchange contracts.
The most significant input to this model is the current foreign
exchange spot rate. We have classified our derivative assets and
liabilities within Level 2 of the fair value hierarchy
because these observable inputs are available for substantially
the full term of our derivative instruments.
Fair
Value Measured on a Recurring Basis
Financial assets and financial liabilities measured at fair
value on a recurring basis consist of the following as of
March 28, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Market Prices
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
for Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
113,184
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
113,184
|
|
Forward currency exchange contracts
|
|
|
|
|
|
|
3,936
|
|
|
|
|
|
|
|
3,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
113,184
|
|
|
$
|
3,936
|
|
|
$
|
|
|
|
$
|
117,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency exchange contracts
|
|
$
|
|
|
|
$
|
2,914
|
|
|
$
|
|
|
|
$
|
2,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
2,914
|
|
|
$
|
|
|
|
$
|
2,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no assets or liabilities measured at fair value using
significant unobservable inputs (Level 3) during the
year ended March 28, 2009.
Statement
No. 159
In February 2007, the FASB issued Statement No. 159, The
Fair Value Option for Financial Assets and Financial
Liabilities, including an amendment of FASB Statement
No. 115, which allows an entity to elect to record
financial assets and financial liabilities at fair value upon
their initial recognition on a
contract-by-contract
basis. We adopted Statement No. 159 as of March 30,
2008 and did not elect the fair value option for our eligible
financial assets and financial liabilities.
Other
Fair Value Disclosures
The fair value of our long-term debt obligations was
$6.2 million and $7.1 million at March 28, 2009
and March 29, 2008, respectively. Refer to
Note 8 Notes Payable and Long-Term Debt for a
discussion of our debt obligations.
68
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
NOTES PAYABLE
AND LONG-TERM DEBT
|
Notes payable and long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Real estate mortgage
|
|
$
|
6,038
|
|
|
$
|
6,676
|
|
Haemonetics Japan Co. Ltd.
|
|
|
|
|
|
|
5,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,038
|
|
|
|
12,363
|
|
Less Current portion
|
|
$
|
695
|
|
|
$
|
6,326
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,343
|
|
|
$
|
6,037
|
|
|
|
|
|
|
|
|
|
|
Real
Estate Mortgage Agreement
In December 2000, we entered into a $10.0 million real
estate mortgage agreement (the Mortgage Agreement)
with an investment firm. The Mortgage Agreement requires
principal and interest payments of $0.1 million per month
for a period of 180 months, commencing February 1,
2001. The entire balance of the loan may be repaid at any time
after February 1, 2006, subject to a prepayment premium,
which is calculated based upon the change in the current weekly
average yield of Ten (10)-year U.S. Treasury Constant
Maturities, the principal balance due and the remaining loan
term. The Mortgage Agreement provides for interest to accrue on
the unpaid principal balance at a rate of 8.41% per annum.
Borrowings under the Mortgage Agreement are secured by the land,
building and building improvements at our headquarters and
manufacturing facility in the U.S. with a collective
carrying value of approximately $4.4 million and
$5.5 million as of March 28, 2009 and March 29,
2008, respectively. There are no financial covenants in the
terms and conditions of this agreement.
Senior
Notes
On October 15, 2007, the Company made its final payment of
$5.7 million on the 7.05% Senior Notes.
Haemonetics
Japan Co. Ltd.
As of March 28, 2009, Haemonetics Japan Co. Ltd. had no
balance outstanding in unsecured debt.
The weighted average short-term rates for U.S. and
non-U.S. borrowings
were 1.03%, 2.23% and 2.41%, as of March 28, 2009,
March 29, 2008, and March 31, 2007, respectively.
As of March 28, 2009, notes payable and long-term debt,
which consists of our real estate mortgage agreement, matures as
follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Fiscal Year Ending
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
695
|
|
|
|
|
|
2011
|
|
|
755
|
|
|
|
|
|
2012
|
|
|
821
|
|
|
|
|
|
2013
|
|
|
892
|
|
|
|
|
|
2014
|
|
|
970
|
|
|
|
|
|
2015 and thereafter
|
|
|
1,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Domestic and foreign income before provision for income tax is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Domestic
|
|
$
|
55,240
|
|
|
$
|
53,365
|
|
|
$
|
58,969
|
|
Foreign
|
|
|
29,762
|
|
|
|
23,937
|
|
|
|
13,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
85,002
|
|
|
$
|
77,302
|
|
|
$
|
72,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax provision contains the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
16,809
|
|
|
$
|
18,763
|
|
|
$
|
17,440
|
|
State
|
|
|
1,768
|
|
|
|
1,586
|
|
|
|
1,787
|
|
Foreign
|
|
|
5,476
|
|
|
|
5,855
|
|
|
|
3,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
24,053
|
|
|
|
26,204
|
|
|
|
22,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
1,779
|
|
|
|
(1,314
|
)
|
|
|
(6
|
)
|
State
|
|
|
(1
|
)
|
|
|
(304
|
)
|
|
|
(4
|
)
|
Foreign
|
|
|
(133
|
)
|
|
|
736
|
|
|
|
937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
1,645
|
|
|
|
(882
|
)
|
|
|
927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax expense
|
|
$
|
25,698
|
|
|
$
|
25,322
|
|
|
$
|
23,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the federal income tax provisions for fiscal years
2009, 2008 and 2007 are approximately $6.8 million,
$1.7 million and $0.3 million, respectively, provided
on foreign source income of approximately $19.6 million,
$6.0 million and $1.4 million for fiscal year 2009,
2008 and 2007, respectively, for taxes which are payable in the
United States.
70
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Tax affected, significant temporary differences comprising the
net deferred tax asset are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Depreciation
|
|
$
|
(3,345
|
)
|
|
$
|
2,729
|
|
Amortization
|
|
|
(8,985
|
)
|
|
|
(6,363
|
)
|
Inventory
|
|
|
2,012
|
|
|
|
2,888
|
|
Hedging
|
|
|
(907
|
)
|
|
|
3,816
|
|
Accruals and reserves
|
|
|
5,126
|
|
|
|
3,511
|
|
Net operating loss carryforward
|
|
|
3,861
|
|
|
|
5,675
|
|
Stock Based Compensation
|
|
|
7,087
|
|
|
|
3,731
|
|
Tax credit carryforward, net
|
|
|
2,580
|
|
|
|
2,440
|
|
|
|
|
|
|
|
|
|
|
Gross Deferred Taxes
|
|
|
7,429
|
|
|
|
18,427
|
|
Less valuation allowance
|
|
|
(378
|
)
|
|
|
(378
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
7,051
|
|
|
$
|
18,049
|
|
|
|
|
|
|
|
|
|
|
As of March 28, 2009, we have approximately
$10.4 million in U.S. acquisition related net
operating loss carry forwards subject to separate limitations
that will expire beginning in 2020. We have $3.6 million in
gross federal and state tax credits available to offset future
tax.
Approximately $70 million of our foreign subsidiary
undistributed earnings are deemed to be permanently reinvested
outside the US. Accordingly we have not provided US income taxes
on these earnings. Upon repatriation, we provide the appropriate
U.S. income taxes on these earnings. In fiscal year 2009
and early fiscal year 2010, we did repatriate dividends from
Japan of approximately $20.7 million in anticipation of our
Japanese reorganization. No additional US income taxes were due
upon repatriation.
The income tax provision from operations differs from tax
provision computed at the 35% U.S. federal statutory income
tax rate due to the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Tax at federal statutory rate
|
|
$
|
29,751
|
|
|
|
35.0
|
%
|
|
$
|
27,044
|
|
|
|
35.0
|
%
|
|
$
|
25,318
|
|
|
|
35.0
|
%
|
Domestic Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deduction and Extraterritorial Income Exclusion
|
|
|
(1,396
|
)
|
|
|
(1.6
|
)%
|
|
|
(987
|
)
|
|
|
(1.3
|
)%
|
|
|
(1,410
|
)
|
|
|
(1.9
|
)%
|
Difference between U.S. and foreign tax
|
|
|
(4,267
|
)
|
|
|
(5.0
|
)%
|
|
|
(1,099
|
)
|
|
|
(1.4
|
)%
|
|
|
392
|
|
|
|
0.5
|
%
|
State income taxes net of federal benefit
|
|
|
1,461
|
|
|
|
1.7
|
%
|
|
|
1,192
|
|
|
|
1.5
|
%
|
|
|
1,402
|
|
|
|
1.9
|
%
|
Tax exempt interest
|
|
|
|
|
|
|
|
|
|
|
(1,432
|
)
|
|
|
(1.9
|
)%
|
|
|
(2,456
|
)
|
|
|
(3.4
|
)%
|
Tax Audit Settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,967
|
)
|
|
|
(5.5
|
)%
|
In Process Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,254
|
|
|
|
4.5
|
%
|
Japan Dividend
|
|
|
(795
|
)
|
|
|
(1.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
944
|
|
|
|
1.1
|
%
|
|
|
604
|
|
|
|
0.8
|
%
|
|
|
694
|
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
$
|
25,698
|
|
|
|
30.2
|
%
|
|
$
|
25,322
|
|
|
|
32.8
|
%
|
|
$
|
23,227
|
|
|
|
32.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Adoption
of FIN 48
We adopted the provision of FASB Interpretation No. 48
accounting for Uncertainty in Income
Taxes an Interpretation of FASB Statement
No. 109, (FIN 48) effective April 1, 2007.
FIN 48 provides a comprehensive model for the financial
statement recognition, measurement, presentation and disclosure
of uncertain tax positions taken or expected to be taken in
income tax returns. Unrecognized tax benefits represent tax
positions for which reserves have been established.
Upon adoption of FIN 48, we had $6.5 million of gross
unrecognized tax benefits, which if recognized would impact the
effective tax rate. As a result of the implementation of
FIN 48, we recognized no material adjustment in the
liability for unrecognized income tax benefits. As of
March 28, 2009, we have $3.9 million of unrecognized
tax benefits, of which $3.2 million will impact the
effective tax rate, if recognized.
Each year the statute of limitations for income tax returns
filed in various jurisdictions closes, sometimes without
adjustments. During the year ended March 28, 2009 our
unrecognized tax benefits were reduced by $2.1 million as a
result of the expiration of the statute of limitations in
several jurisdictions. This was offset in part by the
establishment of reserves of $1.0 million for various
matters. Total unrecognized tax benefits on March 28, 2009
were $3.9 million.
The following table summarizes the activity related to our gross
unrecognized tax benefits for the years ending March 29,
2008 and March 28, 2009.
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Beginning Balance
|
|
$
|
4,965
|
|
|
$
|
6,255
|
|
Additions based upon positions related to the current year
|
|
|
293
|
|
|
|
232
|
|
Additions for tax positions of prior years
|
|
|
716
|
|
|
|
1,465
|
|
Closure of statute of limitations
|
|
|
(2,084
|
)
|
|
|
(2,987
|
)
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
3,890
|
|
|
$
|
4,965
|
|
|
|
|
|
|
|
|
|
|
As of March 28, 2009, we anticipate that the liability for
unrecognized tax benefits for uncertain tax positions could
change by up to $1.8 million in the next twelve months, as
a result of the resolution of state positions as well as the
closure of various statutes of limitations.
Our historic practice has been and continues to be to recognize
interest and penalties related to Federal, state and foreign
income tax matters in income tax expense. Approximately
$0.8 million and $0.8 million is accrued for interest
at March 28, 2009 and March 29, 2008, respectively and
is not included in the amounts above.
We conduct business globally and, as a result, file consolidated
and separate Federal, state and foreign income tax returns in
multiple jurisdictions. In the normal course of business, we are
subject to examination by taxing authorities throughout the
world in jurisdictions including the U.S., Japan, Germany,
France, the United Kingdom, and Switzerland. With a few
exceptions overseas, we are no longer subject to
U.S. federal, state and local, or foreign income tax
examinations for years before 2006.
|
|
10.
|
COMMITMENTS
AND CONTINGENCIES
|
We lease facilities and certain equipment under operating leases
expiring at various dates through fiscal year 2016. Facility
leases require us to pay certain insurance expenses, maintenance
costs and real estate taxes.
72
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Approximate future basic rental commitments under operating
leases as of March 28, 2009 are as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Fiscal Year Ending
|
|
|
|
|
2010
|
|
$
|
6,855
|
|
2011
|
|
|
5,508
|
|
2012
|
|
|
4,010
|
|
2013
|
|
|
3,248
|
|
2014
|
|
|
2,866
|
|
Thereafter
|
|
|
3,198
|
|
|
|
|
|
|
|
|
$
|
25,685
|
|
|
|
|
|
|
Rent expense in fiscal year 2009, 2008 and 2007 was
$8.0 million, $8.8 million and $7.7 million,
respectively.
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.
On January 29, 2007, the Company received $6 million
in full satisfaction of its claims against Baxter Healthcare
Corporation, Baxter International Inc. and Baxter Healthcare SA
(together Baxter) related to certain platelet
pathogen reduction contracts. In connection with the settlement
of these claims, the Technology Development Agreement and
Requirements Contract between the Company and Baxter are
terminated, and Haemonetics no longer retains any rights to
distribute the INTERSOL product (note INTERSOL is a
registered trademark of Baxter). Haemonetics recorded the
receipt of this settlement in fiscal year 2007.
In December 2005, we filed a lawsuit against Baxter and Fenwal
in the Federal District Court of Massachusetts, in Boston,
seeking an injunction and damages on account of Baxters
infringement of a Haemonetics patent, through the sale of
Baxters Alyx brand automated red cell collection system
which competes with Haemonetics automated red cell
collection systems. In March 2007, Baxter sold the Transfusion
Technologies Division (which markets the Alyx product) to
private investors, Texas Pacific Group and Maverick Capital,
Ltd. The new company which resulted from the sale was renamed
Fenwal. In January 2009, a jury found that the Fenwal Alyx
system infringed Haemonetics patent and awarded
Haemonetics $15.7 million in damages for past infringement.
We subsequently filed motions for an injunction and for
additional damages. The court has not ruled on the parties
post trial motions. Haemonetics has not recorded a gain related
to this verdict.
Stock
Plans
The Company has an incentive compensation plan, (the 2005
Incentive Compensation Plan). The 2005 Incentive
Compensation Plan permits the award of nonqualified stock
options, incentive stock options, stock appreciation rights,
restricted stock, deferred stock/restricted stock units, other
stock units and performance shares to the Companys key
employees, officers and directors. The 2005 Incentive
Compensation Plan is administered by the Compensation Committee
of the Board of Directors (the Committee) consisting
of two or more independent members of our Board of Directors.
The maximum number of shares available for award under the 2005
Incentive Compensation Plan is 4,575,566. The maximum number of
shares that may be issued pursuant to incentive stock options
may not exceed 500,000. Any shares that are subject to the award
of stock options shall be counted against this limit as one
(1) share for every one (1) share issued. Any shares
that are
73
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
subject to awards other than stock options shall be counted
against this limit as 2.1 shares for every one
(1) share granted. The exercise price for the nonqualified
stock options, incentive stock options, stock appreciation
rights, restricted stock, deferred stock/restricted stock units,
other stock units and performance shares granted under the 2005
Incentive Compensation Plan is determined by the Committee, but
in no event shall such option price be less than the fair market
value of the common stock at the time of the grant. Options,
Restricted Stock Awards and Restricted Stock Units become
exercisable, or in the case of restricted stock the resale
restrictions are released in a manner determined by the
Committee, generally over a four year period for employees and
one year from grant for non-employee directors, and all options
expire not more than 7 years from the date of the grant. At
March 28, 2009, there were 2,090,359 options, 10,956
restricted stock awards and 102,302 restricted stock units
outstanding under this plan; leaving 1,968,598 shares
available for future grant.
The Company had a long-term incentive stock option plan and a
non-qualified stock option plan, (the 2000 Long-term
Incentive Plan) which permitted the issuance of a maximum
of 3,500,000 shares of our common stock pursuant to
incentive and non-qualified stock options granted to key
employees, officers and directors. The plan was terminated in
connection with the adoption of the 2005 Incentive Compensation
Plan. At March 28, 2009, there were 875,540 options
outstanding under this plan and no further options will be
granted under this plan.
The Company had a non-qualified stock option plan under which
options were granted to non-employee directors and two previous
plans under which options were granted to key employees. At
March 28, 2009, there were 88,775 options outstanding
related to these plans. No further options will be granted under
these plans.
The Company has an Employee Stock Purchase Plan (the
Purchase Plan) under which a maximum of
700,000 shares (subject to adjustment for stock splits and
similar changes) of common stock may be purchased by eligible
employees. Substantially all of our full-time employees are
eligible to participate in the Purchase Plan.
The Purchase Plan provides for two purchase periods
within each of our fiscal years, the first commencing on
November 1 of each year and continuing through April 30 of the
next calendar year, and the second commencing on May 1 of each
year and continuing through October 31 of such year. Shares are
purchased through an accumulation of payroll deductions (of not
less than 2% nor more than 15% of compensation, as defined) for
the number of whole shares determined by dividing the balance in
the employees account on the last day of the purchase
period by the purchase price per share for the stock determined
under the Purchase Plan. The purchase price for shares is the
lower of 85% of the fair market value of the common stock at the
beginning of the purchase period, or 85% of such value at the
end of the purchase period.
Stock-based compensation expense of $10.2 million and
$9.8 million was recognized under SFAS No. 123(R)
for the year ended March 28, 2009 and March 29, 2008,
respectively. The related income tax benefit recognized was
$2.9 million and $2.8 million for the year ended
March 28, 2009 and March 29, 2008, respectively. We
recognize stock-based compensation on a straight line basis.
SFAS No. 123(R) requires that cash flows relating to
the benefits of tax deductions in excess of compensation cost
recognized (in our reported or proforma results) be reported as
a financing cash flow, rather than as an operating cash flow, as
previously required. This excess tax benefit was
$7.5 million and $1.6 million for the year ended
March 28, 2009 and March 29, 2008, respectively.
74
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of stock option activity for the three years ended
March 28, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
per Share
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
Shares
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Average
|
|
|
Life
|
|
|
Value
|
|
|
|
Outstanding
|
|
|
Exercise Price
|
|
|
(Years)
|
|
|
($000s)
|
|
|
Outstanding at March 29, 2008
|
|
|
3,657,566
|
|
|
$
|
37.05
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
428,560
|
|
|
$
|
54.99
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(949,975
|
)
|
|
$
|
26.71
|
|
|
|
|
|
|
|
|
|
Terminated
|
|
|
(81,477
|
)
|
|
$
|
46.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 28, 2009
|
|
|
3,054,674
|
|
|
$
|
42.54
|
|
|
|
4.23
|
|
|
$
|
37,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 28, 2009
|
|
|
1,925,733
|
|
|
$
|
37.32
|
|
|
|
3.66
|
|
|
$
|
33,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to Vest at March 28, 2009
|
|
|
2,807,133
|
|
|
$
|
41.80
|
|
|
|
4.16
|
|
|
$
|
36,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised during fiscal
years 2009, 2008 and 2007 was $26.6 million,
$16.5 million and $11.6 million, respectively.
As of March 28, 2009 and March 29, 2008, there was
$11.8 million and $14.2 million, respectively, of
total unrecognized compensation cost related to non vested stock
options. These costs are expected to be recognized over a
weighted average period of 2.2 years and 2.1 years,
respectively. The total fair value of shares fully vested during
the year ended March 28, 2009 and March 29, 2008 was
$30.3 million and $34.2 million, respectively.
The fair value was estimated using the Black-Scholes
option-pricing model based on the weighted average of the high
and low stock prices at the grant date and the weighted average
assumptions specific to the underlying options. Expected
volatility assumptions are based on the historical volatility of
our common stock. The risk-free interest rate was selected based
upon yields of US Treasury issues with a term equal to the
expected life of the option being valued. The expected life of
the option was estimated with reference to historical exercise
patterns, the contractual term of the option and the vesting
period. The assumptions utilized for option grants during the
periods presented are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Volatility
|
|
|
29.8
|
%
|
|
|
29.6
|
%
|
|
|
31.2
|
%
|
Risk-Free Interest Rate
|
|
|
2.7
|
%
|
|
|
4.0
|
%
|
|
|
5.0
|
%
|
Expected Life of Options
|
|
|
5 yrs.
|
|
|
|
5 yrs.
|
|
|
|
5 yrs.
|
|
The weighted average grant date fair value of options granted
during 2009, 2008 and 2007 was approximately $16.73, $17.19, and
$18.93 respectively.
We have applied, based on an analysis of our historical
forfeitures, an annual forfeiture rate of 8% to all unvested
stock options as of both March 28, 2009 and March 29,
2008, which represents the portion that we expect will be
forfeited each year over the vesting period.
75
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The fair values of shares purchased under the Employee Stock
Purchase Plan are estimated using the Black-Scholes single
option-pricing model with the following weighted average
assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Volatility
|
|
|
32.8
|
%
|
|
|
21.3
|
%
|
|
|
27.9
|
%
|
Risk-Free Interest Rate
|
|
|
1.4
|
%
|
|
|
4.6
|
%
|
|
|
5.0
|
%
|
Expected Life of Options
|
|
|
6 mos.
|
|
|
|
6 mos.
|
|
|
|
6 mos.
|
|
The weighted average grant date fair value of the six-month
option inherent in the Purchase Plan was $13.71, $10.81, and
$12.00 in fiscal year 2009, 2008, and 2007, respectively.
Restricted
Stock Awards
As of March 28, 2009, there was $0.3 million of total
unrecognized compensation cost related to non vested stock
awards. That cost is expected to be recognized over a weighted
average period of 1.7 years. The total fair value of shares
fully vested during the year ended March 28, 2009 was
$0.1 million.
A summary of restricted stock awards activity for the year ended
March 28, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average Grant
|
|
|
|
Shares
|
|
|
Date Fair Value
|
|
|
Outstanding at March 29, 2008
|
|
|
10,000
|
|
|
$
|
48.09
|
|
Granted
|
|
|
3,456
|
|
|
$
|
57.22
|
|
Released
|
|
|
(2,500
|
)
|
|
$
|
48.09
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 28,2009
|
|
|
10,956
|
|
|
$
|
50.97
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Units
As of March 28, 2009, there was $3.9 million of total
unrecognized compensation cost related to non vested restricted
stock units. That cost is expected to be recognized over a
weighted average period of 3.1 years. The total fair value
of shares fully vested during the year ended March 28, 2009
was $0.8 million.
A summary of restricted stock units activity for the year ended
March 28, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Market Value
|
|
|
|
Shares
|
|
|
at Grant Date
|
|
|
Outstanding at March 29, 2008
|
|
|
58,332
|
|
|
$
|
51.52
|
|
Awarded
|
|
|
64,105
|
|
|
$
|
54.59
|
|
Released
|
|
|
(15,050
|
)
|
|
$
|
51.30
|
|
Forfeited
|
|
|
(5,085
|
)
|
|
$
|
51.17
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 28, 2009
|
|
|
102,302
|
|
|
$
|
53.48
|
|
|
|
|
|
|
|
|
|
|
76
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
12.
|
EARNINGS
PER SHARE (EPS)
|
The following table provides a reconciliation of the numerators
and denominators reflected in the basic and diluted earnings per
share computations, as required by SFAS No. 128,
Earnings Per Share, (EPS).
Basic EPS is computed by dividing reported earnings available to
stockholders by the weighted average shares outstanding. Diluted
EPS also includes the effect of dilutive potential common shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars and shares in thousands
|
|
|
|
except per share amounts)
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59,304
|
|
|
$
|
51,980
|
|
|
$
|
49,109
|
|
Weighted average shares
|
|
|
25,389
|
|
|
|
25,824
|
|
|
|
26,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share
|
|
$
|
2.34
|
|
|
$
|
2.01
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59,304
|
|
|
$
|
51,980
|
|
|
$
|
49,109
|
|
Basic weighted average shares
|
|
|
25,389
|
|
|
|
25,824
|
|
|
|
26,746
|
|
Dilutive effect of stock options
|
|
|
784
|
|
|
|
922
|
|
|
|
903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
|
|
|
26,173
|
|
|
|
26,746
|
|
|
|
27,649
|
|
Diluted income per share
|
|
$
|
2.27
|
|
|
$
|
1.94
|
|
|
$
|
1.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2009, 2008 and 2007 approximately 0.5 million,
1.0 million and 1.6 million potentially dilutive
common shares, respectively, were not included in the
computation of diluted earnings per share because exercise
prices were greater than the average market price of the common
shares.
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; actuarial gains and losses and prior service costs,
on our defined benefit plans, that arise during the period and
are not recognized as components of net periodic benefit cost of
the period; and the changes in fair value of the effective
portion of our outstanding cash flow hedge contracts.
The reconciliation of the components of accumulated other
comprehensive loss is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Impact of
|
|
|
|
|
|
|
Foreign
|
|
|
(Loss) Gain on
|
|
|
Defined Benefit
|
|
|
|
|
|
|
Currency
|
|
|
Derivatives,
|
|
|
Plans,
|
|
|
|
|
|
|
Translation
|
|
|
Net of Tax
|
|
|
Net of Tax
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Balance as of March 31, 2007
|
|
$
|
969
|
|
|
$
|
(1,078
|
)
|
|
$
|
(90
|
)
|
|
$
|
(199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes during the year
|
|
$
|
11,748
|
|
|
$
|
(7,022
|
)
|
|
$
|
276
|
|
|
$
|
5,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 29, 2008
|
|
$
|
12,717
|
|
|
$
|
(8,100
|
)
|
|
$
|
186
|
|
|
$
|
4,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes during the year
|
|
$
|
(10,045
|
)
|
|
$
|
9,222
|
|
|
$
|
(697
|
)
|
|
$
|
(1,520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 28, 2009
|
|
$
|
2,672
|
|
|
$
|
1,122
|
|
|
$
|
(511
|
)
|
|
$
|
3,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the components of other comprehensive income is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net income
|
|
$
|
59,304
|
|
|
$
|
51,980
|
|
|
$
|
49,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(10,045
|
)
|
|
|
11,748
|
|
|
|
6,096
|
|
Unrealized gain / (loss) / gain on cash flow hedges, net of tax
|
|
|
4,858
|
|
|
|
(10,055
|
)
|
|
|
(3,300
|
)
|
Reclassifications into earnings of cash flow hedge (gains) /
losses, net of tax
|
|
|
4,364
|
|
|
|
3,033
|
|
|
|
(71
|
)
|
Impact of defined benefit plans, net of tax
|
|
|
(697
|
)
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
57,784
|
|
|
$
|
56,982
|
|
|
$
|
51,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
Contribution Plans
We have a Savings Plus Plan that is a 401(k) plan that allows
our U.S. employees to accumulate savings on a pre-tax
basis. In addition, matching contributions are made to the Plan
based upon pre-established rates. Our matching contributions
amounted to approximately $2.9 million in 2009,
$2.4 million in 2008 and $2.2 million in 2007. Upon
Board approval, additional discretionary contributions can also
be made. No discretionary contributions were made for the
Savings Plan in fiscal year 2009, 2008 or 2007.
One of our subsidiaries also has a defined contribution plan.
Both the employee and the employer make contributions to the
plan. The employer contributions to this plan were
$1.2 million, $0.9 million and $0.4 million in
fiscal year 2009, 2008 and 2007, respectively.
Defined
Benefit Plans
In September 2006, the FASB issued FASB Statement No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans an amendment of FASB
Statements No. 87, 88, 106, and 132(R),
(FAS 158), which requires an employer to:
(a) recognize in its statement of financial position an
asset for a plans over-funded status or a liability for a
plans under-funded status; (b) measure a plans
assets and its obligations that determine its funded status as
of the end of the employers fiscal year (with limited
exceptions); and (c) recognize changes in the funded status
of a defined benefit postretirement plan in the year in which
the changes occur. The Company adopted FAS 158 as of
March 31, 2007 and accordingly is required to report
changes in its funded status in comprehensive income on its
Statement of Stockholders Equity. The adoption of
FAS 158 did not have a material effect on the
Companys financial position at March 28, 2009 or
March 29, 2008.
Benefits under these plans are generally based on either career
average or final average salaries and creditable years of
service as defined in the plans. The annual cost for these plans
is determined using the projected unit credit actuarial cost
method that includes actuarial assumptions and estimates which
are subject to change. The measurement date for the plans is
March 31, 2009.
78
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Some of the Companys foreign subsidiaries have defined
benefit pension plans covering substantially all full time
employees at those subsidiaries. Net periodic benefit costs for
the plans in the aggregate include the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Service cost
|
|
$
|
539
|
|
|
$
|
594
|
|
|
$
|
654
|
|
Interest cost on benefit obligation
|
|
|
242
|
|
|
|
217
|
|
|
|
195
|
|
Expected return on plan assets
|
|
|
946
|
|
|
|
(74
|
)
|
|
|
(179
|
)
|
Amortization of unrecognized prior service cost
|
|
|
(41
|
)
|
|
|
(35
|
)
|
|
|
(34
|
)
|
Amortization of unrecognized gain
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Amortization of unrecognized initial obligation
|
|
|
26
|
|
|
|
22
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
1,712
|
|
|
$
|
724
|
|
|
$
|
676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The activity under those defined benefit plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit Obligation, beginning of year
|
|
$
|
(6,932
|
)
|
|
$
|
(6,690
|
)
|
|
$
|
(6,664
|
)
|
Service cost
|
|
|
(539
|
)
|
|
|
(594
|
)
|
|
|
(654
|
)
|
Interest cost
|
|
|
(242
|
)
|
|
|
(217
|
)
|
|
|
(196
|
)
|
Benefits paid
|
|
|
488
|
|
|
|
203
|
|
|
|
948
|
|
Actuarial gain/(loss)
|
|
|
389
|
|
|
|
829
|
|
|
|
257
|
|
Currency translation
|
|
|
115
|
|
|
|
(463
|
)
|
|
|
(381
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
$
|
(6,721
|
)
|
|
$
|
(6,932
|
)
|
|
$
|
(6,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
|
$
|
3,851
|
|
|
$
|
3,669
|
|
|
$
|
3,994
|
|
Company contributions
|
|
|
403
|
|
|
|
373
|
|
|
|
391
|
|
Benefits paid
|
|
|
(460
|
)
|
|
|
(175
|
)
|
|
|
(924
|
)
|
(Loss)/Gain on plan assets
|
|
|
(946
|
)
|
|
|
(454
|
)
|
|
|
179
|
|
Currency translation
|
|
|
249
|
|
|
|
438
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of Plan Assets, end of year
|
|
$
|
3,097
|
|
|
$
|
3,851
|
|
|
$
|
3,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded Status
|
|
$
|
(3,624
|
)
|
|
$
|
(3,141
|
)
|
|
$
|
(3,020
|
)
|
Unrecognized net actuarial (gain) loss
|
|
|
433
|
|
|
|
(235
|
)
|
|
|
71
|
|
Unrecognized initial obligation
|
|
|
(152
|
)
|
|
|
209
|
|
|
|
207
|
|
Unrecognized prior service cost
|
|
|
197
|
|
|
|
(182
|
)
|
|
|
(196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(3,146
|
)
|
|
$
|
(3,349
|
)
|
|
$
|
(2,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One of the benefit plans is funded through assets of the
Company. Accordingly that plan has no assets included in the
information presented above. The assets of the other plan were
greater than the accumulated benefit obligation in fiscal years
2009, 2008 and 2007, respectively.
79
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amounts recognized as a component of other accrued liabilities
on the balance sheet as of March 28, 2009, under
SFAS No. 158 totaled $3.1 million.
The component details of the impact of our defined benefit
plans, net of tax, are as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Balance as of March 29, 2008
|
|
$
|
186
|
|
Obligation at transition
|
|
|
27
|
|
Actuarial loss
|
|
|
(680
|
)
|
Prior service cost
|
|
|
(44
|
)
|
|
|
|
|
|
Balance as of March 28, 2009
|
|
$
|
(511
|
)
|
|
|
|
|
|
The weighted average rates used to determine the net periodic
benefit costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Discount rate
|
|
|
4.5
|
%
|
|
|
3.7
|
%
|
|
|
3.5
|
%
|
Rate of increased salary levels
|
|
|
2.3
|
%
|
|
|
2.0
|
%
|
|
|
1.3
|
%
|
Expected long-term rate of return on assets
|
|
|
1.9
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
We have no other material obligation for post-retirement or
post-employment benefits.
The Companys investment policy for its pension plans is to
balance risk and return through a diversified portfolio to
reduce interest rate and market risk. Maturities are managed so
that sufficient liquidity exists to meet immediate and future
benefit payment requirements.
For the Companys plan with assets, the asset allocation at
the end of March 28, 2009 and March 29, 2008 year
end by asset category are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
Plan Assets
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
|
58.6
|
%
|
|
|
59.0
|
%
|
Debt Securities
|
|
|
41.4
|
%
|
|
|
38.5
|
%
|
Real Estate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Other Assets
|
|
|
0.0
|
%
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Expected benefit payments for both plans are estimated using the
same assumptions used in determining the companys benefit
obligation at March 28, 2009. Benefit payments will depend
on future employment and compensation levels, average years
employed and average life spans, among other factors, and
changes in any of these factors could significantly affect these
estimated future benefit payments. Estimated future benefit
payments during the next five years and in the aggregate for the
five fiscal years thereafter, are as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Expected Benefit Payments
|
|
|
|
|
Fiscal Year 2010
|
|
$
|
353
|
|
Fiscal Year 2011
|
|
$
|
355
|
|
Fiscal Year 2012
|
|
$
|
356
|
|
Fiscal Year 2013
|
|
$
|
357
|
|
Fiscal Year 2014
|
|
$
|
358
|
|
Fiscal Year 2015 - 2019
|
|
$
|
2,154
|
|
80
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company contributions for fiscal year 2010 are expected to
be consistent with our recent historical experience.
|
|
15.
|
TRANSACTIONS
WITH RELATED PARTIES
|
During fiscal year 2007, we made the fourth and final
$1.0 million earn-out payment to 6 Encore Inc. (formerly
Fifth Dimension Information Systems, Inc.), in accordance with
the Asset Purchase Agreement, dated December 12, 2001, as
amended, in which Haemonetics Enterprises, Inc. and Haemonetics
Canada Ltd. purchased the assets of Fifth Dimension Information
Systems, Inc. The President and principal shareholder of 6
Encore Inc. is Brad Lazaruik, former Haemonetics Vice President,
(President, 5D division). The payments were made during fiscal
year 2007, 2006, 2005 and 2004 respectively. The final earn-out
payment was made to Mr. Lazaruik in February 2007. There
are no additional payments to be made to Mr. Lazaruik by
Haemonetics Corporation.
|
|
16.
|
SEGMENT,
GEOGRAPHIC AND CUSTOMER INFORMATION
|
Segment
Definition Criteria
We manage our business on the basis of one operating segment:
the design, manufacture and marketing of automated blood typing
and screening 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.
Enterprise
Wide Disclosures About Product and Services
We have three families of products: (1) those that serve
the blood donor, (2) those that serve the patient and
(3) our software solutions and services products which are
used in connections with our donor and patient products. Under
the Donor family of products we have included platelet, red cell
and plasma collection systems as well as red cell processing
systems. Our Donor systems include devices and single-use
related consumables and intravenous solutions. The Patient
products include autologous blood salvage systems targeting
surgical patients who lose blood before or after surgery as well
as a blood loss diagnostic product. Our Patient systems include
devices and single-use related consumables. Software Solutions
and Services include information technology platforms and
business services, like consulting and six sigma training, that
assist blood centers and hospitals more effectively manage blood
supply and demand.
Donor
With our automated blood collection systems, a blood donation
can be targeted to the specific blood component needed by a
blood collector. More of that blood component can be collected
during any one donation event because the blood components not
targeted are returned to the donor through a sterile,
closed-circuit disposable set used for the blood donation
procedure. (See Plasma, Blood Bank and
Red Cell product lines referred to in General
History of the Business.)
With our automated blood typing and screening systems, blood
collectors and hospitals can freeze and thaw red cells so that
they can maintain a frozen blood reserve. Blood reserves are
often maintained to enable the blood provider to respond
adequately to large-scale emergencies where many people require
blood transfusions or to treat patients who require transfusions
of very rare blood types. Our blood typing and screening systems
can also remove plasma from red cells for patients who need
specially treated blood. (See ACP product referred
to in General History of the Business.)
81
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Patient
Our surgical blood salvage systems can collect blood lost by a
surgical patient during or after the surgery, clean it, and make
it available for transfusion back to the patient. These systems
ensure that elective surgery will not be cancelled due to lack
of available blood, and that a patient receives the safest blood
possible his or her own. (See Cell
Saver, OrthoPAT, and cardioPAT
product lines referred to in General History of the
Business.)
Our surgical suction systems can clear the surgical field of
blood and debris to support a safe and effective operating
environment. (See SmartSuction product referred to
in General History of the Business.)
Our TEG Thrombelastograph Hemostasis Analyzer helps surgeons
assess the hemostasis of the patient intra-operatively and
post-operatively. Armed with this knowledge, surgeons can plan a
patients treatment to support the best possible clinical
outcome, which can lead to lower hospital costs through reduced
adverse transfusion reactions, shorter ICU and hospital stays,
and fewer needs for exploratory surgery.
Software
Solutions and Services
Our Haemonetics Software Solutions division (HSS)
offers a range of software products that enable blood banks and
plasma collection centers to automate their operations and
comply with regulatory requirements. Its principal products
include
eQuetm
Automated Interview and Assessment, a donor registration and
assessment tool to assist blood banks and plasma centers in
determining a persons eligibility to donate blood;
LOGICtm
and
DMStm
software for managing inventories of collected blood product
inventories; and
Symphonytm
software which automates blood bank operations. In March 2009,
we acquired Altivation Software and its primary product,
Hemasphere. Hemasphere is a software system focused on mobile
blood drive management. About 70% of blood in the U.S. is
collected on mobile blood drives.
Revenues from External Customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
March 28,
|
|
|
March 29,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Disposables Revenues by Product Family
|
|
|
|
|
|
|
|
|
|
|
|
|
Donor:
|
|
|
|
|
|
|
|
|
|
|
|
|
Plasma
|
|
$
|
202,176
|
|
|
$
|
155,219
|
|
|
$
|
126,971
|
|
Blood Bank
|
|
|
143,420
|
|
|
|
136,148
|
|
|
|
126,216
|
|
Red Cell
|
|
|
49,508
|
|
|
|
46,377
|
|
|
|
43,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
395,104
|
|
|
|
337,744
|
|
|
|
296,593
|
|
Patient:
|
|
|
|
|
|
|
|
|
|
|
|
|
Surgical &Diagnostic
|
|
|
87,578
|
|
|
|
72,085
|
|
|
|
66,552
|
|
OrthoPAT
|
|
|
35,419
|
|
|
|
34,301
|
|
|
|
30,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,997
|
|
|
|
106,386
|
|
|
|
97,067
|
|
Disposables Revenue
|
|
|
518,101
|
|
|
|
444,130
|
|
|
|
393,660
|
|
Equipment
|
|
|
35,515
|
|
|
|
32,812
|
|
|
|
22,229
|
|
Software Solutions and Services
|
|
|
44,263
|
|
|
|
39,498
|
|
|
|
33,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues from external customers
|
|
$
|
597,879
|
|
|
$
|
516,440
|
|
|
$
|
449,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Enterprise
Wide Disclosures about Product and Services
Year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
North
|
|
|
North
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
|
States
|
|
|
America
|
|
|
America
|
|
|
Japan
|
|
|
Asia
|
|
|
Asia
|
|
|
Europe
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
March 28, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
279,029
|
|
|
$
|
|
|
|
$
|
279,029
|
|
|
$
|
97,215
|
|
|
$
|
45,460
|
|
|
$
|
142,675
|
|
|
$
|
176,175
|
|
|
$
|
597,879
|
|
Total Assets
|
|
$
|
461,226
|
|
|
$
|
6,756
|
|
|
$
|
467,982
|
|
|
$
|
47,723
|
|
|
$
|
18,557
|
|
|
$
|
66,280
|
|
|
$
|
115,431
|
|
|
$
|
649,693
|
|
Long-Lived Assets
|
|
$
|
220,531
|
|
|
$
|
5,607
|
|
|
$
|
226,138
|
|
|
$
|
11,121
|
|
|
$
|
3,912
|
|
|
$
|
15,033
|
|
|
$
|
18,323
|
|
|
$
|
259,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
North
|
|
|
North
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
|
States
|
|
|
America
|
|
|
America
|
|
|
Japan
|
|
|
Asia
|
|
|
Asia
|
|
|
Europe
|
|
|
Consolidated
|
|
|
March 29, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
232,812
|
|
|
$
|
53
|
|
|
$
|
232,865
|
|
|
$
|
88,759
|
|
|
$
|
39,323
|
|
|
$
|
128,082
|
|
|
$
|
155,493
|
|
|
$
|
516,440
|
|
Total Assets
|
|
$
|
342,006
|
|
|
$
|
6,559
|
|
|
$
|
348,565
|
|
|
$
|
51,016
|
|
|
$
|
24,513
|
|
|
$
|
75,529
|
|
|
$
|
184,856
|
|
|
$
|
608,950
|
|
Long-Lived Assets
|
|
$
|
192,203
|
|
|
$
|
5,743
|
|
|
$
|
197,946
|
|
|
$
|
11,355
|
|
|
$
|
3,119
|
|
|
$
|
14,474
|
|
|
$
|
22,619
|
|
|
$
|
235,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
North
|
|
|
North
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
|
States
|
|
|
America
|
|
|
America
|
|
|
Japan
|
|
|
Asia
|
|
|
Asia
|
|
|
Europe
|
|
|
Consolidated
|
|
|
March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
211,044
|
|
|
$
|
146
|
|
|
$
|
211,190
|
|
|
$
|
88,206
|
|
|
$
|
16,444
|
|
|
$
|
104,650
|
|
|
$
|
133,767
|
|
|
$
|
449,607
|
|
Total Assets
|
|
$
|
420,333
|
|
|
$
|
4,755
|
|
|
$
|
425,088
|
|
|
$
|
39,757
|
|
|
$
|
10,003
|
|
|
$
|
49,760
|
|
|
$
|
97,887
|
|
|
$
|
572,735
|
|
Long-Lived Assets
|
|
$
|
123,484
|
|
|
$
|
4,278
|
|
|
$
|
127,762
|
|
|
$
|
9,840
|
|
|
$
|
1,938
|
|
|
$
|
11,778
|
|
|
$
|
20,050
|
|
|
$
|
159,590
|
|
During the last three years, the Company has transformed aspects
of its international, and more recently, its U.S. domestic
Technical Operations organization.
During fiscal year 2008 and 2007, the Company embarked on a
business transformation with the primary focus on our
international businesses. The goal of the transformation was to
position these businesses to complement the growth of our
U.S. business.
On May 1, 2008, management announced a plan to transform
our Technical Operations organization, which includes research,
development and engineering, quality systems and manufacturing.
Our goal is to better align our Technical Operations resources
with our strategy to be the global leader in blood management
solutions for our customers. This transformation will include:
optimizing the products manufactured in our plants to best
support our global customer base and concentrating our research,
development and engineering resources on one platform project at
a time.
Over the course of fiscal year 2009, we finalized and
implemented the Technical Operations organization transformation
plan. In accordance with the Companys revised guidance, we
incurred restructuring and other transformation costs of
$7.0 million.
We expect this transformation will align our resources with our
vision of being the global leader in blood management solutions.
We have finalized the consolidation of our customer support
functions in Europe into our European Headquarters in Signy,
Switzerland. The consolidated center in Signy now includes
finance, legal, human resources, customer and sales support, and
logistics, supply chain management and procurement. The majority
of the consolidation of these functions occurred during fiscal
year 2008.
83
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the years ended March 28, 2009 and March 29, 2008,
we recorded pre-tax restructuring costs of $6.1 million and
$4.5 million, respectively, as selling, general, and
administrative costs. Additionally, we incurred other
transformation costs relating to the hiring of personnel in our
new shared services center in Signy, Switzerland of
$0.9 million and $1.8 million for the years ended
March 28, 2009 and March 29, 2008, respectively. The
other transformation costs related to the hiring of personnel
are not included in the table below.
Included in fiscal year 2008 restructuring costs were costs
associated with exiting our OEM solutions business in South
Carolina. We cancelled a contract to produce solutions for a
pharmaceutical company and wrote down the associated assets.
These costs totaled approximately $0.6 million.
The following summarizes the restructuring activity for fiscal
years 2009, 2008 and 2007, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
|
|
|
|
Balance at
|
|
|
Cost
|
|
|
|
|
|
Asset
|
|
|
Balance at
|
|
|
|
March 29, 2008
|
|
|
Incurred
|
|
|
Payments
|
|
|
Write Down
|
|
|
March 28, 2009
|
|
|
|
(In thousands)
|
|
|
Employee-related costs
|
|
$
|
521
|
|
|
$
|
6,076
|
|
|
$
|
3,868
|
|
|
$
|
|
|
|
$
|
2,729
|
|
Facility related costs
|
|
|
42
|
|
|
|
72
|
|
|
|
72
|
|
|
|
|
|
|
|
42
|
|
Other transformation costs
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
641
|
|
|
$
|
6,148
|
|
|
$
|
3,940
|
|
|
$
|
|
|
|
$
|
2,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
|
|
|
|
Balance at
|
|
|
Cost
|
|
|
|
|
|
Asset
|
|
|
Balance at
|
|
|
|
March 31, 2007
|
|
|
Incurred
|
|
|
Payments
|
|
|
Write Down
|
|
|
March 29, 2008
|
|
|
|
(In thousands)
|
|
|
Employee-related costs
|
|
$
|
|
|
|
$
|
2,800
|
|
|
$
|
2,279
|
|
|
$
|
|
|
|
$
|
521
|
|
Facility related costs
|
|
|
|
|
|
|
1,073
|
|
|
|
727
|
|
|
|
304
|
|
|
|
42
|
|
Other transformation costs
|
|
|
|
|
|
|
663
|
|
|
|
188
|
|
|
|
397
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
4,536
|
|
|
$
|
3,194
|
|
|
$
|
701
|
|
|
$
|
641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
|
|
|
|
Balance at
|
|
|
Cost
|
|
|
|
|
|
Asset
|
|
|
Balance at
|
|
|
|
April 1, 2006
|
|
|
Incurred
|
|
|
Payments
|
|
|
Write Down
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Employee-related costs
|
|
$
|
|
|
|
$
|
2,640
|
|
|
$
|
2,640
|
|
|
$
|
|
|
|
$
|
|
|
Facility related costs
|
|
|
|
|
|
|
878
|
|
|
|
572
|
|
|
|
306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
3,518
|
|
|
$
|
3,212
|
|
|
$
|
306
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.
|
CAPITALIZATION
OF SOFTWARE DEVELOPMENT COSTS
|
The Company is implementing an Enterprise Resource Planning
(ERP) system. In fiscal year 2007, we began our plan to
implement the system in three phases over three years.
The cost of software that is developed for internal use is
accounted for pursuant to AICPA Statement of Position
98-1,
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use
(SOP 98-1).
Pursuant to
SOP 98-1,
the Company capitalizes costs incurred during the application
development stage of software developed for internal use, and
expenses costs incurred during the preliminary project and the
post-implementation operation stages of development. The Company
capitalized $6.8 million and $7.5 million in costs
incurred for acquisition of the software license and related
software development costs for new internal software development
that was in the application stage during fiscal year 2009 and
2008,
84
HAEMONETICS
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
respectively. The total capitalized costs incurred to date
include $1.8 million for the cost of the software license
and $19.7 million in third party development costs and
internal personnel. The Company incurred depreciation expense of
$1.7 million, $1.4 million, and zero during fiscal
year 2009, 2008, and 2007, respectively relating to the above
capitalized costs.
In connection with the development of our next generation Donor
apheresis platform, the Company capitalized $0.9 million
and $5.1 million software development costs in fiscal year
2009 and fiscal year 2008, respectively, in accordance with
SFAS No. 86, Accounting for the Cost of Computer
Software to be Sold, Leased or Otherwise Marketed. Since
the start of the project, a total of $12.0 million in total
software development costs has been capitalized in connection
with the next generation Donor apheresis platform. All costs
capitalized were incurred after a detailed design of the
software was developed and research and development activities
on the underlying device were completed. Work on the Donor
apheresis platform has been temporarily suspended while the
Company focuses on completing another project, which is expected
to be completed by early to mid fiscal year 2010. Work on the
Donor apheresis platform is expected to resume during fiscal
year 2010. We will begin to amortize these costs when the device
is released for sale.
Additionally, the Company has capitalized $3.3 million in
other software development costs during fiscal year 2009
for other ongoing initiatives. We will begin to amortize these
costs when the products are released for sale.
In connection with these development activities we capitalized
interest of $0.7 million in fiscal year 2009 and
$0.5 million in fiscal year 2008, respectively.
|
|
19.
|
SUMMARY
OF QUARTERLY DATA (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Fiscal year ended March 28, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
144,116
|
|
|
$
|
145,919
|
|
|
$
|
155,447
|
|
|
$
|
152,397
|
|
Gross profit
|
|
$
|
73,038
|
|
|
$
|
74,689
|
|
|
$
|
78,296
|
|
|
$
|
82,147
|
|
Operating income
|
|
$
|
19,334
|
|
|
$
|
23,609
|
|
|
$
|
24,491
|
|
|
$
|
18,133
|
|
Net income
|
|
$
|
14,292
|
|
|
$
|
14,807
|
|
|
$
|
16,216
|
|
|
$
|
13,989
|
|
Share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.56
|
|
|
$
|
0.59
|
|
|
$
|
0.64
|
|
|
$
|
0.55
|
|
Diluted
|
|
$
|
0.54
|
|
|
$
|
0.57
|
|
|
$
|
0.62
|
|
|
$
|
0.53
|
|
Fiscal year ended March 29, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
121,936
|
|
|
$
|
121,179
|
|
|
$
|
134,587
|
|
|
$
|
138,739
|
|
Gross profit
|
|
$
|
61,494
|
|
|
$
|
59,889
|
|
|
$
|
66,201
|
|
|
$
|
70,141
|
|
Operating income
|
|
$
|
15,779
|
|
|
$
|
14,616
|
|
|
$
|
19,583
|
|
|
$
|
20,309
|
|
Net income
|
|
$
|
12,677
|
|
|
$
|
11,167
|
|
|
$
|
14,343
|
|
|
$
|
13,793
|
|
Share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.48
|
|
|
$
|
0.44
|
|
|
$
|
0.56
|
|
|
$
|
0.54
|
|
Diluted
|
|
$
|
0.46
|
|
|
$
|
0.42
|
|
|
$
|
0.54
|
|
|
$
|
0.52
|
|
|
|
20.
|
SUBSEQUENT
EVENTS (UNAUDITED)
|
On April 20, 2009, the Company acquired the stock of
LAttitude Medical Systems Inc. (also known as
Neoteric) for approximately $6.5 million in
cash plus contingent consideration based upon future operating
performance
As discussed in our Earning Release on May 4, 2009, the
Company announced that its Board of Directors approved a
$40 million share repurchase.
85
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Haemonetics
Corporation:
We have audited the accompanying consolidated balance sheets of
Haemonetics Corporation and subsidiaries as of March 28,
2009 and March 29, 2008 and the related consolidated
statements of income, stockholders equity, and cash flows
for each of the three years in the period ended March 28,
2009. Our audits also included the financial statement schedule
listed in the Index at Item 15(a). These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Haemonetics Corporation and subsidiaries
at March 28, 2009 and March 29, 2008, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended March 28,
2009, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Haemonetics Corporations internal control over financial
reporting as of March 28, 2009, based on criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated May 20, 2009
expressed an unqualified opinion thereon.
Boston, Massachusetts
May 20, 2009
86
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
|
|
A)
|
Evaluation
of Disclosure Controls and Procedures
|
As of the end of the period covered by this report, we conducted
an evaluation 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 as of the end
of the period covered by this report, our disclosure controls
and procedures are effective.
|
|
B)
|
Reports
on Internal Control
|
Managements
Annual Report on Internal Control over Financial
Reporting
The management of the Company is responsible for establishing
and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act
Rule 13a-15(f).
The Companys internal control system was designed to
provide reasonable assurance to the Companys management
and Board of Directors regarding the preparation and fair
presentation of published financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
The Companys management assessed the effectiveness of the
Companys internal control over financial reporting as of
March 28, 2009. In making this assessment, the management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Based on our assessment we believe
that, as of March 28, 2009, the Companys internal
control over financial reporting is effective based on those
criteria.
87
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Haemonetics
Corporation
We have audited Haemonetics Corporations internal control
over financial reporting as of March 28, 2009, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Haemonetics
Corporations management is responsible for maintaining
effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion
on the Companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Haemonetics Corporation maintained, in all
material respects, effective internal control over financial
reporting as of March 28, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Haemonetics Corporation and
subsidiaries as of March 28, 2009 and March 29, 2008,
and the related consolidated statements of income,
stockholders equity, and cash flows for each of the three
years in the period ended March 28, 2009 of Haemonetics
Corporation and our report dated May 20, 2009 expressed an
unqualified opinion thereon.
Boston, Massachusetts
May 20, 2009
88
|
|
C)
|
Changes
in Internal Controls
|
There were no changes in the Companys internal control
over financial reporting that occurred during the fourth quarter
of the Companys most recently completed fiscal year that
materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial
reporting.
|
|
Item 9B.
|
Other
Information
|
None.
PART III
|
|
Item 10.
|
Directors
and Executive Officers of the Registrant and Corporate
Governance
|
1. The information called for by Item 401 of
Regulations S-K concerning our directors and the information
called for by Item 405 of
Regulation S-K
concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934 required by this Item is incorporated by
reference to our Proxy Statement for the Annual Meeting to be
held July 30, 2009.
2. The information concerning our Executive Officers is set
forth at the end of Part I hereof.
3. The balance of the information required by this item
including information concerning our Audit Committee and the
Audit Committee Financial Expert and compliance with
Item 407(c)(3) of S-K is incorporated by reference to the
Companys Proxy Statement for the Annual Meeting to be held
July 30, 2009. We have adopted a Code of Ethics that
applies to our chief executive officer, chief financial officer
and senior financial officers. The Code of Ethics is
incorporated into the Companys Code of Business Conduct
located on the Companys internet web site at
http://www.haemonetics.com/site/content/investor/investor.asp
and it is available in print to any shareholder who requests
it. Such requests should be directed to our Companys
Secretary.
We intend to disclose any amendment to, or waiver from, a
provision of the Code of Ethics that applies to our chief
executive officer, chief financial officer or senior financial
officers and that relates to any element of the Code of Ethics
definition enumerated in Item 406 of
Regulation S-K
by posting such information on our website.
|
|
Item 11.
|
Executive
Compensation
|
The information required by this Item is incorporated by
reference to our Proxy Statement for the Annual Meeting to be
held July 30, 2009. Notwithstanding the foregoing, the
Compensation Committee Report included within the Proxy
Statement is only being furnished hereunder and
shall not be deemed filed for purposes of
Section 18 of the Securities and Exchange Act of 1934.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this Item concerning security
ownership of certain beneficial owners and management is
incorporated by reference to the Companys Proxy Statement
for the Annual Meeting to be held July 30, 2009.
89
Stock
Plans
The following table below sets forth information as of
March 28, 2009 with respect to compensation plans under
which equity securities of the Company are authorized for
issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Available for Future
|
|
|
|
Number of Securities to be
|
|
|
Weighted Average
|
|
|
Issuance Under Equity
|
|
|
|
Issued upon Exercise
|
|
|
Exercise Price of
|
|
|
Compensation Plans
|
|
|
|
of Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
(Excluding Securities
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Columns (a)*
|
|
|
Equity Compensation Plans approved by security holders
|
|
|
3,293,930
|
|
|
$
|
43.34
|
|
|
|
2,566,470
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,293,930
|
|
|
$
|
43.34
|
|
|
|
2,566,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes 640,737 shares available for purchase under the
Employee Stock Purchase Plan in future purchase periods. |
|
|
Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
The information required by this Item is incorporated by
reference to our Proxy Statement for the Annual Meeting to be
held July 30, 2009.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this Item is incorporated by
reference to our Proxy Statement for the Annual Meeting to be
held July 30, 2009.
90
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules.
|
The following documents are filed as a part of this report:
|
|
A)
|
Financial
Statements are included in Part II of this report
|
|
|
|
|
|
Financial Statements required by Item 8 of this Form
|
|
|
|
|
|
|
|
45
|
|
|
|
|
46
|
|
|
|
|
47
|
|
|
|
|
48
|
|
|
|
|
49
|
|
|
|
|
86
|
|
Schedules required by Article 12 of
Regulation S-X
|
|
|
|
|
|
|
|
95
|
|
All other schedules have been omitted because they are not
applicable or not required.
B) Exhibits
required by Item 601 of
Regulation S-K
are listed in the Exhibit Index at page 93, which is
incorporated herein by reference.
91
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Brian Concannon,
President and Chief Executive Officer
Date: May 22, 2009
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Brian
Concannon
Brian
Concannon
|
|
President and Chief Executive Officer, (Principal Executive
Officer)
|
|
May 22, 2009
|
|
|
|
|
|
/s/ Christopher
Lindop
Christopher
Lindop
|
|
Chief Financial Officer and Vice President Business
Development,
(Principal Financial Officer)
|
|
May 22, 2009
|
|
|
|
|
|
/s/ Susan
Hanlon
Susan
Hanlon
|
|
Vice President Finance,
(Principal Accounting Officer)
|
|
May 22, 2009
|
|
|
|
|
|
/s/ Brad
Nutter
Brad
Nutter
|
|
Executive Chairman of the Board
|
|
May 22,2009
|
|
|
|
|
|
/s/ Lawrence
Best
Lawrence
Best
|
|
Director
|
|
May 22, 2009
|
|
|
|
|
|
/s/ Susan
Bartlett Foote
Susan
Bartlett Foote
|
|
Director
|
|
May 22, 2009
|
|
|
|
|
|
/s/ Ronald
Gelbman
Ronald
Gelbman
|
|
Director
|
|
May 22, 2009
|
|
|
|
|
|
/s/ Pedro
Granadillo
Pedro
Granadillo
|
|
Director
|
|
May 22, 2009
|
|
|
|
|
|
/s/ Mark
Kroll, PH. D.
Mark
Kroll
|
|
Director
|
|
May 22, 2009
|
|
|
|
|
|
/s/ Ronald
Merriman
Ronald
Merriman
|
|
Director
|
|
May 22, 2009
|
92
EXHIBITS FILED
WITH SECURITIES AND EXCHANGE COMMISSION
Number
and Description of Exhibit
|
|
|
1. Articles of Organization
|
3A*
|
|
Articles of Organization of the Company effective August 29,
1985, as amended December 12, 1985 and May 21, 1987 (filed as
Exhibit 3A to the Companys Form S-1 No. 33-39490 and
incorporated herein by reference).
|
3B*
|
|
Form of Restated Articles of Organization of the Company (filed
as Exhibit 3B to the Companys Form S-1 No. 33-39490 and
incorporated herein by reference).
|
3C*
|
|
Articles of Amendment to the Articles of Organization of the
Company filed May 8, 1991 with the Secretary of the Commonwealth
of Massachusetts (filed as Exhibit 3E to the Companys
Amendment No. 1 to Form S-1 No. 33-39490 and incorporated herein
by reference).
|
3D*
|
|
Articles of Amendment to the Articles of Organization of the
Company filed August 21, 2006 with the Secretary of the
Commonwealth of Massachusetts
|
3E*
|
|
By-Laws of the Company, as amended January 23, 2008 (filed as
Exhibit 99.1 to the Companys Form 8-K No. 1-14041 dated
January 23, 2008 and incorporated herein by reference).
|
2. Instruments defining the rights of security
holders
|
4A*
|
|
Specimen certificate for shares of common stock (filed as
Exhibit 4B to the Companys Amendment No. 1 to Form S-1 No.
33-39490 and incorporated herein by reference).
|
3. Material Contracts
|
10A*
|
|
Lease dated July 17, 1990 between the Buncher Company and the
Company of property in Pittsburgh, Pennsylvania (filed as
Exhibit 10K to the Companys Form S-1 No. 33-39490 and
incorporated herein by reference).
|
10B*
|
|
First Amendment to lease dated July 17, 1990 between Buncher
Company and the Company of property in Pittsburgh, Pennsylvania
(filed as Exhibit 10AI to the Companys Form 10-Q No.
1-10730 for the quarter ended December 28, 1996 and incorporated
herein by reference).
|
10C*
|
|
Second Amendment to lease dated July 17, 1990 between Buncher
Company and the Company for the property in Pittsburgh,
Pennsylvania.(filed as Exhibit 10AG to the Companys Form
10-K
No. 1-10730
for the year ended March 29, 2003 and incorporated herein by
reference).
|
10D*
|
|
Lease dated July 3, 1991 between Wood Road Associates II
Limited Partnership and the Company for the property adjacent to
the main facility in Braintree, Massachusetts (filed as Exhibit
10M to the Companys Form 10-K No. 1-10730 for the year
ended March 28, 1992 and incorporated herein by reference).
|
10E*
|
|
Amendment No. 1 to Lease dated July 3, 1991 between Wood Road
Associates II Limited Partnership and the Company for the
child care facility (filed as Exhibit 10N to the Companys
Form 10-K
No. 1-10730
for the year ended March 28, 1992 and incorporated herein by
reference).
|
10F*
|
|
Amendment No. 2 to Lease dated July 3, 1991 between Wood Road
Associates II Limited Partnership and the Company (filed as
Exhibit 10S to the Companys Form 10-K No. 1-10730 for the
year ended April 3, 1993 and incorporated herein by reference).
|
10G*
|
|
Amendment No. 3 to Lease dated July 3, 1991 between Wood Road
Associates II Limited Partnership and the Company, dated
April 1, 1997 (filed as Exhibit 10AA to the Companys Form
10-K
No. 1-10730
for the year ended March 30, 2002 and incorporated herein by
reference).
|
10H*
|
|
Amendment No. 4 to Lease dated July 3, 1991 between Wood Road
Associates II Limited Partnership, as assigned to Trinet
Essential Facilities XXIX, Inc., effective June 18, 1998, and
the Company, dated February 25, 2002. (filed as Exhibit 10AB to
the Companys Form 10-K No. 1-10730 for the year ended
March 30, 2002 and incorporated herein by reference).
|
10I*
|
|
Note and Mortgage dated December 12, 2000 between the Company
and General Electric Capital Business Asset Funding Corporation
relating to the Braintree facility (filed as Exhibit 10B to the
Companys Form 10-Q No. 1-10730 for the quarter ended
December 30, 2000 and incorporated herein by reference).
|
10J
|
|
1992 Long-Term Incentive Plan (filed as Exhibit 10V to the
Companys Form 10-K No. 1-10730 for the year ended April 3,
1993 and incorporated herein by reference).
|
10K
|
|
1998 Stock Option Plan for Non-Employee Directors. (filed as
Exhibit 10AA to the Companys Form 10-K No. 1-10730
for the year ended March 28, 1998 and incorporated herein by
reference).
|
93
|
|
|
10L
|
|
Haemonetics Corporation 2000 Long-term Incentive Plan (filed as
Exhibit 10A to the Companys Form 10-Q No. 1-10730 for the
quarter ended December 30, 2000 and incorporated herein by
reference).
|
10M
|
|
Form of Option Agreements for Non-Qualified stock options for
the 1998 Stock Option Plan for
Non-Employee
Directors. (filed as Exhibit 10AI to the Companys Form
10-K No. 1-10730 for the year ended March 29, 2003 and
incorporated herein by reference).
|
10N*
|
|
Form of Option Agreement for Non-Qualified stock options for the
2000 Long Term-Incentive Plan for Employees. (filed as Exhibit
10AJ to the Companys Form 10-K No. 1-10730 for the year
ended March 29, 2003 and incorporated herein by reference).
|
10O*
|
|
Form of Option Agreements for Non-Qualified stock options for
the 2000 Long- Term Incentive Plan for Non-Employee Directors.
(filed as Exhibit 10AK to the Companys Form 10-K No.
1-10730 for the year ended March 29, 2003 and incorporated
herein by reference).
|
10P*
|
|
2005 Long Term Incentive Compensation Plan (filed as Item 2 in
the Companys 2005 Definitive Proxy Statement)
|
10Q*
|
|
Amendment to the 2005 Long Term Incentive Compensation Plan
(filed as Item 2 in the Companys 2008 Definitive Proxy
Statement)
|
10R*
|
|
Form of Option Agreement for Non-Qualified stock options for the
2005 Long Term-Incentive Compensation Plan for Non-employee
Directors (filed as Exhibit 10.1 to the Companys Form 10-Q
No 1-10730 for the quarter ended October 1, 2005).
|
10S*
|
|
Form of Option Agreement for Non-Qualified stock options for the
2005 Long Term Incentive Compensation Plan for Employees (filed
as Exhibit 10.2 to the Companys Form 10-Q No 1-10730 for
the quarter ended October 1, 2005).
|
10T*
|
|
Form of Option Agreement for Non-Qualified stock options for the
2005 Long Term-Incentive Compensation Plan for the Chief
Executive Officer (filed as Exhibit 10.3 to the Companys
Form 10-Q
No 1-10730 for the quarter ended October 1, 2005).
|
10U*
|
|
Form of Restricted Stock Agreement with Employees under 2005
Long Term Incentive Compensation Plan (filed as Exhibit 10.1 to
the Companys Form 10-Q, Registration No. 1-14041 for
quarter ended September 29, 2007.)
|
10V*
|
|
Form of Change in Control Agreement dated January 19, 2006
between the Company and members of the Companys Operating
Committee. (filed as Exhibit 10AQ to the Companys Form
10-K
No 1-10730
for the year ended April 1, 2006 and incorporated herein by
reference).
|
10W*
|
|
Change in Control Agreement entered into between the Company and
Christopher Lindop on and January 2, 2007 (filed as Exhibit 10AR
to the Companys Form 10-K No 1-10730 for the year ended
March 31, 2007 and incorporated herein by reference).
|
10X*
|
|
2007 Employee Stock Purchase Plan (filed as Exhibit 10AS to the
Companys Form 10-K No 1-14041 for the year ended March 29,
2008 and incorporated herein by reference).
|
21
|
|
Subsidiaries of the Company
|
23.1
|
|
Consent of the Independent Registered Public Accounting Firm
|
31.1
|
|
Certification pursuant to Section 302 of Sarbanes-Oxley Act of
2002, of Brian Concannon, President and Chief Executive Officer
of the Company
|
31.2
|
|
Certification pursuant to Section 302 of Sarbanes-Oxley of 2002,
of Christopher Lindop, Vice President and Chief Financial
Officer of the Company
|
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 Brian Concannon, 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 Christopher Lindop, Vice President and Chief Financial
Officer of the Company
|
|
|
|
* |
|
Incorporated by reference |
(All other exhibits are inapplicable.)
94
SCHEDULE II
HAEMONETICS
CORPORATION
VALUATION
AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
|
|
|
|
|
|
|
Beginning of
|
|
|
Costs and
|
|
|
Write-Offs
|
|
|
Balance at End
|
|
|
|
Period
|
|
|
Expenses
|
|
|
(Net of Recoveries)
|
|
|
of Period
|
|
|
|
(In thousands)
|
|
|
For Year Ended March 28, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
$
|
2,365
|
|
|
$
|
838
|
|
|
$
|
(891
|
)
|
|
$
|
2,312
|
|
For Year Ended March 29, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
$
|
1,440
|
|
|
$
|
1,295
|
|
|
$
|
(370
|
)
|
|
$
|
2,365
|
|
For Year Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Doubtful Accounts
|
|
$
|
1,086
|
|
|
$
|
567
|
|
|
$
|
(213
|
)
|
|
$
|
1,440
|
|
95