Haemonetics Corporation (HAE) Business, 2009

(A) General History of the Business

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:

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 donor’s 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.)

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 patient’s 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.)

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.

(B) Financial Information about Industry Segments

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.

(C) Narrative Description of the Business

(i) Products and Services

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 patient’s hemostasis. Armed with this knowledge, surgeons can plan a patient’s 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.

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.

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.

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.

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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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 patient’s exposure to multiple donors and possible blood-borne diseases.

During an automated blood donation, intravenous solutions and other solutions are used. We manufacture solutions in our facility in Union, South Carolina.

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.

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.

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.

Surgical blood salvage, also known as autotransfusion, involves the collection of a patient’s 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 patient’s recovery, and (3) risk of transfusion of blood with a blood-borne disease or infectious agent.

As a result of numerous blood safety initiatives, today’s 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 patient’s 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.

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 patient’s 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.

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 patient’s 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 patient’s need.

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 patient’s 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 patient’s 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.

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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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 person’s 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.

(ii) Revenue Detail

We discuss our revenues using the following categories:

• 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); • Equipment (the sale of devices); • Software Solutions and Services (including HSS software systems and equipment service contracts).

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 customer’s 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.

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(iv) United States

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.

(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.

(vii) Manufacturing

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.

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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.

(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.

(ix) Competition

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).

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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 BCT’s 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 manufacturer’s 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.

(x) Seasonality

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.

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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 FDA’s agreement with an applicant’s 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.

(xiii) Employees

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 Company’s 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.

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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 Company’s compliance with the NYSE’s 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.

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.