Press Release Details

BRAINTREE, Mass., Jan. 30, 2013 /PRNewswire/ -- Haemonetics Corporation (NYSE: HAE) today reported third quarter 2013 net revenue of $247.4 million, up 29%, GAAP net income of $9.9 million, down 46%, and diluted earnings per share of $0.19, down 47%. Adjusted net income, exclusive of restructuring and other costs detailed below, was $26.4 million, up 20%, and adjusted earnings per share were $0.50, up 16%.¹

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Organic net revenue, exclusive of the recently acquired whole blood business, was $192.5 million, up 1% in the third quarter and $558.5 million, up 3% year-to-date.  Organic growth rates were not materially impacted by currency on a quarterly or year-to-date basis.  Excluding currency impacts, net revenue was up 31% in the third quarter and 19% year-to-date.

Brian Concannon, Haemonetics' President and CEO, commented: "The highlight of our third quarter was the earnings power that became more visible in our business.  Our profitability was driven by the ongoing contribution from our recent whole blood acquisition and continued solid organic revenue growth in our Hospital business on the strength of strong demand for the Cell Saver^® Elite^® and TEG^® disposables.  Our Hospital customers continue to embrace our Blood Management Solutions, recognizing the inherent value proposition offered."   

STRATEGIC AND PRODUCT GROWTH HIGHLIGHTS

Haemonetics continues to make progress expanding its business, reporting the following third quarter highlights:

• 29% revenue growth.
• 9% growth in surgical disposables revenue.
• 19% growth in diagnostic disposables revenue.
• 27% organic revenue growth in China.
• $55 million of revenue from the acquired whole blood business.
• $16 million of share repurchases; $21 million year-to-date.
• Completion of two-for-one stock split.

A revenue breakdown follows:

Plasma

Plasma disposables revenue was $68.1 million for the quarter, down 1%, and $200.7 million year-to-date, up 2%.  Fiscal 2012 third quarter plasma revenue was very strong representing a challenging comparable year over year.  On the strength of a high-single digit percentage growth forecast for the fourth quarter, the Company expects its plasma business growth to be at the lower end of the previously estimated range of 4-6% in fiscal 2013.

Blood Center

Platelet disposables revenue was $45.1 million for the quarter, up 2%, and $125.6 million year-to-date, up 1%, with continued benefit from strong sales in emerging markets.  Red cell disposables revenue was $11.8 million for the quarter, down 3%, and $35.8 million year-to-date, flat with the prior year period.  Red cell disposables revenue was flat with the prior year on a year-to-date basis in a soft market as the Company leveraged its IMPACT^® selling approach to advance Blood Management Solutions.  The Company expects its blood center revenue to be flat organically in fiscal 2013. 

Whole blood revenue was $54.9 million for the quarter and $83.5 million year-to-date, in line with expectations, and the Company is affirming its previous guidance for whole blood revenue of $135-$145 million for fiscal 2013.           

Hospital

Surgical disposables revenue was $18.9 million for the quarter, up 9%, and $56.0 million year-to-date, up 14%.  Notably, this was the sixth consecutive quarterly increase as the Cell Saver Elite device continues to capture market share.  Recent strong equipment sales, including a 77% year-to-date increase in China, drove near term disposables growth. 

Disposables revenue from the OrthoPAT^® orthopedic perioperative autotransfusion system was $7.1 million for the quarter, down 9%, and $22.3 million year-to-date, down 2%.  The Company anticipates that the first half fiscal 2014 introduction of the new OrthoPAT Advance system, which recently received 510(k) approval, together with realignment of certain sales efforts, will begin to drive growth in OrthoPAT in fiscal 2014.  

Diagnostics revenue was $6.8 million for the quarter and $20.2 million year-to-date, both up 19%, as the Company's IMPACT initiative continues to drive growth in disposables utilized in the TEG Thrombelastograph^® Hemostasis Analyzer.  TEG equipment sales were especially strong in recent quarters and its installed base is up 23% from a year ago, a key indicator for near term future disposables revenue growth.  TEG disposables sales have grown over 50% year-to-date in China.  

On a year-to-date basis, Hospital revenue is up 11% and the Company now expects its hospital business to grow approximately 11% in fiscal 2013 with continued strength in surgical and diagnostics disposables, particularly in emerging markets.

Software and Equipment

Software Solutions revenue was $16.0 million for the quarter, up 1%, and $51.4 million year-to-date, flat with the prior year.  With a mid-single digit percentage growth rate forecast for the fourth quarter, the Company now expects its software business to grow approximately 2% in fiscal 2013.  

Equipment and other revenue was $18.8 million for the quarter, down 1% compared with third quarter fiscal 2012, and $46.8 million year-to-date, up 4%.  Equipment revenue is influenced by the timing of tenders and capital budgets.  The installed base of Cell Saver Elite and TEG devices have increased over 50% and 17% year-to-date in fiscal 2013 respectively, with activity in emerging markets continuing to be particularly strong.

Haemonetics reported third quarter fiscal 2013 organic revenue growth of 11% in Asia and 2% in Europe, partially offset by declines of 1% in North America and 2% in Japan.  On a year-to-date basis, organic revenue increased 3% in North America, 2% in Europe, 12% in Asia and was flat in Japan. 

Adjusted gross profit was $124.6 million up $28.7 million or 29.9% for the third quarter and $326.2 million up $50.3 million or 18.2% year-to-date.  Adjusted gross margin was 50.4% up 20 basis points in the third quarter and 50.8% down 20 basis points year-to-date.  In the quarter, margin improvement in the core business offset the impact of revenue mix toward lower margin whole blood disposables.

Adjusted operating expenses were $83.7 million for the third quarter, up $17.5 million or 26.4%, and $232.3 million up $35.8 million or 18.2% year-to-date.  Operating expense increases included $14 million in the quarter and $22 million year-to-date in the new whole blood collection business. The remainder of the increase was associated with planned investments in global growth initiatives, emerging markets and infrastructure to support anticipated organic and acquisition revenue growth.  As expected, these expenses accelerated in the third quarter and will continue to accelerate in the fourth quarter.  

Adjusted operating income was $40.8 million for the third quarter, up $11.2 million or 37.7%, and $93.9 million, up $14.5 million or 18.3% year-to-date and reflected the inclusion of the profits of the newly acquired whole blood business.  Adjusted operating margin of 16.5% was up 100 basis points in the third quarter and, on a year-to-date basis, adjusted operating margin of 14.6% was down 10 basis points.  Leverage achieved through operating discipline enabled the funding of a ramp-up of investments in global growth initiatives and certain expenditures related to infrastructure build for the acquired whole blood business. 

Acquisition related amortization expense included in third quarter adjusted earnings was $6.2 million in fiscal 2013 and $2.4 million in fiscal 2012, or $0.08 and $0.03 per share respectively.  Year-to-date adjusted earnings included $14.5 million in fiscal 2013 and $7.4 million in fiscal 2012, or $0.19 and $0.09 per share respectively, of acquisition-related amortization expense.

Adjustments To Reported Earnings

The Company included approximately $15 million of adjustments to the cost of goods sold in the second and third quarters upon the sale of acquired whole blood and other filter inventories, which were excluded from adjusted earnings.  The Company also continues to expect to incur costs in the current fiscal year for integration activities of $30-$35 million, which are excluded from adjusted earnings guidance.  Annual guidance also excludes approximately $3 million of transaction related costs and other restructuring and transformation costs of approximately $5 million expected to be incurred within the base business.  

During the third quarter, the Company issued a field action letter to blood center customers requesting visual inspection of a component of certain whole blood collection sets, due to the potential for a leak to occur at a very low frequency.  The component, referred to as a Y connector, was supplied by a contract manufacturer.  The Company subsequently recorded inventory reserves of $6.1 million for removal of affected whole blood collection sets from inventory for destruction or rework.  The Company will pursue all available means of financial recovery related to this inventory loss.  Accordingly, the costs incurred have been excluded from adjusted earnings in the third quarter and in fiscal 2013 guidance.  Any recovery of such costs will similarly be excluded from adjusted earnings and have been excluded from earnings estimates for the guidance periods.

Fiscal 2013 Guidance

The Company now expects its plasma business to grow approximately 4%, Blood Center 0%, Hospital products approximately 11%, and Software Solutions approximately 2%.  Overall fiscal 2013 organic revenue growth is expected to approximate 4%, at the low end of the previous guidance range of 4-6%.  Whole blood revenue expectations are reaffirmed at $135-$145 million for fiscal 2013.  Thus, total revenue is estimated in the range of $888-$898 million, up 22-23%.

Full year adjusted gross margin is expected to be in a range of 50-51% inclusive of the lower gross margin whole blood product line.  Adjusted operating income of $127-$130 million is expected.  Free cash flow is now expected to approximate $80 million before funding restructuring, transformation and transaction costs.  The paced ramp-up of expenses is expected to continue to accelerate in the fourth quarter.  Accordingly, the previously indicated adjusted earnings per share range of $1.65-$1.70, up 9%-12% over fiscal 2012, is reaffirmed.  Whole blood profits, IT and other costs of scaling the Company's infrastructure to meet the needs of the combined businesses, as well as amortization expenses, financing costs and income taxes are included in adjusted earnings projections.

More information on fiscal year 2013 guidance, including income statement scenarios underlying the lower and upper ends of the adjusted earnings per share guidance range, can be found in the Investor Relations section of our web site at http://www.haemonetics.com.¹

Fiscal 2014 Outlook

For fiscal 2014, previous indications are affirmed, as organic revenue growth is expected to approximate 5-7%.  Together with a full year of revenues from the acquired whole blood business, which is expected to contribute incremental revenue of $70 million related to the timing of the acquisition, fiscal 2014 revenue is expected to surpass $1 billion.  The Company's previously provided preliminary outlook for fiscal 2014 adjusted earnings per share of $1.95-$2.05, approximately 20% above fiscal 2013 expected earnings per share, is affirmed.  Included in these amounts are approximately $27 million or $0.35 per share of acquisition related amortization expense.

Mr. Concannon added: "Our growth and strong profitability are enabling us to fund key identified growth initiatives and new product offerings.  Using our enhanced process for new product introduction that has driven success of the Cell Saver Elite device, we will soon launch the paperless phlebotomy offering in a limited whole blood market release later in the fourth quarter.  The OrthoPAT Advance device will follow in the first half of fiscal 2014.  We remain confident in our business fundamentals, our fiscal 2013 earnings guidance and our fiscal 2014 preliminary outlook."

Balance Sheet and Cash Flow

Cash on hand was $193 million, an increase of $6 million during the quarter.  The Company reported year-to-date free cash flow before restructuring, transformation, integration and transaction costs of $46 million, a reduced level from the prior year due to the anticipated buildup of certain required elements of working capital not acquired.

Stock Split

The Company completed its previously announced two-for-one stock split during the third quarter and, accordingly, all references to earnings per share amounts have been adjusted to reflect that split.  Each share of the Company's pre-split common stock held by a shareholder, including shares subject to outstanding stock options and shares available for grant under the Company's equity incentive plans, were represented by two shares of the Company's post-split common stock.  The split affected all stockholders uniformly and did not affect any stockholder's ownership percentage.

Fiscal 2013 Share Repurchase Program

Reported on a post-split basis, the Company repurchased 393,100 shares in the open market at an average cost of $40.24 during the third quarter.  On a year-to-date basis, the Company has repurchased 541,700 shares at an average price of $39.07, returning $21.2 million to shareholders.  The Board of Directors previously approved the repurchase of up to $50 million of shares in the open market during fiscal 2013.

Conference Call

Haemonetics will host a webcast to discuss the first quarter results on Wednesday, January 30, 2013 at 8:00 am Eastern time.  Interested parties can participate at: http://phoenix.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=72118&eventID=4888434.

About Haemonetics

Haemonetics (NYSE: HAE) is a global healthcare company dedicated to providing innovative blood management solutions for our customers.  Together, our devices and consumables, information technology platforms, and consulting services deliver a suite of business solutions to help our customers improve clinical outcomes and reduce the cost of healthcare for blood collectors, hospitals, and patients around the world.  Our technologies address important medical markets: blood and plasma component collection, the surgical suite, and hospital transfusion services.  To learn more about Haemonetics, visit our web site at http://www.haemonetics.com.

Forward Looking Statements

This release contains forward-looking statements that involve risks and uncertainties, including the effects of disruption from the acquisition of the Pall Transfusion Medicine business making it more difficult to maintain relationships with employees, customers, vendors and other business partners, unexpected expenses incurred to integrate the Pall Transfusion Medicine business, technological advances in the medical field and standards for transfusion medicine and our ability to successfully implement products that incorporate such advances and standards, demand for blood components, product quality, market acceptance, regulatory uncertainties, the effect of economic and political conditions, the impact of competitive products and pricing, blood product reimbursement policies and practices, 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 and other risks detailed in the Company's filings with the Securities and Exchange Commission. The foregoing list should not be construed as exhaustive. 

Forward-looking statements are based on estimates and assumptions made by management of the Company and are believed to be reasonable, though inherently uncertain and difficult to predict.  Actual results and experience could differ materially from the forward-looking statements. Information set forth in this press release is current as of today and the Company undertakes no duty or obligation to update this information.    

¹A reconciliation of GAAP to adjusted financial results is included at the end of the financial sections of this press release as well as on the web at http://www.haemonetics.com.  GAAP results include $25 million of pre-tax integration, transaction, certain inventory costs and base business restructuring and transformation costs in the third quarter of fiscal 2013 and $4 million of pre-tax restructuring and transformation costs in the third quarter of fiscal 2012, which are excluded from adjusted results.  Year-to-date GAAP results include $55 million of pre-tax integration, transaction, certain inventory costs and base business restructuring and transformation costs in fiscal 2013 and $13.2 million of base business restructuring and transformation costs and $1.6 million contingent consideration income in fiscal 2012 which are excluded from adjusted results. 

CONTACT:
Gerry Gould, VP-Investor Relations
Tel. (781) 356-9402
gerry.gould@haemonetics.com
Alt. (781) 356-9613

SOURCE Haemonetics Corporation