Press Release Details

BRAINTREE, Mass., May 1, 2013 /PRNewswire/ -- Haemonetics Corporation (NYSE: HAE) today reported fourth quarter fiscal 2013 net revenue of $249.9 million, up 34%, GAAP net income of $12.6 million, down 29%, and diluted earnings per share of $0.24, down 31%.  Adjusted net income, exclusive of restructuring, integration and other costs detailed below, was $25.1million, up 21%, and adjusted earnings per share were $0.48, up 19%.  Excluding currency impact, net revenue was up 38% in the quarter.¹  Organic revenue growth in the quarter was 4% as reported and 6% on a constant currency basis.

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For the full fiscal year ended March 31, 2013, Haemonetics reported net revenue of $892.0 million, up 23%, GAAP net income of $38.8 million, down 42%, and diluted earnings per share of $0.74, down 43%.  Adjusted net income, exclusive of restructuring, integration and other costs detailed below, was $89.4 million, up 14%, and adjusted earnings per share were $1.71, up 13%.  Excluding currency impact, net revenue was up 24% for the fiscal year.¹  Organic revenue growth in the full year was 4% on both a reported and constant currency basis.

Brian Concannon, Haemonetics' President and CEO, commented: "Continued growth in our three product categories - commercial plasma, blood centers, and hospitals - was the highlight of our fourth quarter and fiscal 2013.  I'm particularly pleased that such growth came while integrating the largest acquisition in our history without interruption to our business.  Customers are increasingly recognizing the value of our Blood Management Solutions offering."

STRATEGIC AND PRODUCT GROWTH HIGHLIGHTS

Haemonetics continues to expand its business, reporting the following highlights in the quarter:

• 34% total and 4% organic revenue growth.
• 10% growth in plasma disposables revenue.
• 17% growth in diagnostics disposables revenue.
• 36% organic revenue growth in China.
• $55 million of revenue from the acquired whole blood business.
• Completion of $50 million fiscal 2013 share repurchase program.

In addition, in April, the Company completed the acquisition of Hemerus Medical, LLC and its Board of Directors approved a set of Value Creation and Capture ("VCC") initiatives, including a manufacturing transformation plan.

A revenue breakdown follows:

Plasma

Plasma disposables revenue was $68.2 million for the quarter, up 10% with particular strength in North America collections, and $268.9 million for fiscal 2013, up 4%.  

Blood Center

Platelet disposables revenue was $44.0 million, flat with the prior year quarter, and $169.6 million in fiscal 2013, up 1%, with continued benefit from strong sales in emerging markets.  The quarterly platelet growth also reflects a challenging year over year comparison due to the Japanese Red Cross increasing inventories of platelet disposables in advance of their system conversion.  

Red cell disposables revenue was $14.0 million for the quarter, up 13%, and $49.7 million for the full year, up 4% in a declining market.  While the Company is successfully leveraging its IMPACT^® selling approach to advance Blood Management Solutions, fourth quarter growth was attributable primarily to the timing of orders at the end of the quarter in North America. 

Whole blood revenue was $54.9 million for the quarter and $138.4 million since closing the acquisition August 1, in line with expectations.   

Hospital

Surgical disposables revenue was $17.5 million for the quarter, up 1%, and $73.5 million for the full year, up 10%.  This was the second consecutive annual increase in Cell Saver^® Elite^® disposables revenue.  Recent strong equipment sales, including a 73% increase in fiscal 2013 in China, are expected to drive market share gains and near term surgical disposables growth. 

Disposables revenue from the OrthoPAT^® orthopedic perioperative autotransfusion system was $8.0 million for the quarter, down 5%, and $30.2 million in fiscal 2013, down 3%.  The Company anticipates that the first half fiscal 2014 introduction of the new OrthoPAT Advance^™ system, which has received 510(k) approval, together with realignment of certain sales efforts, will return OrthoPAT disposables to growth in fiscal 2014.  

Diagnostics revenue was $7.2 million for the quarter, up 17%, and $27.4 million in the full year, up 18%, 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 the quarter and full fiscal year, with 36% growth in fiscal 2013 and an installed base that is up 25% from a year ago.  This is a key indicator for near term future disposables revenue growth.  Fiscal 2013 TEG disposables sales grew 66% in China.  

In fiscal 2013, Hospital revenue was up 8% and the Company expects its hospital business to benefit in fiscal 2014 from continued strength in surgical and diagnostics disposables, particularly in emerging markets, and a return to growth in OrthoPAT.

Software and Equipment

Software Solutions revenue was $18.6 million for the quarter, down 4%, and $70.0 million in fiscal 2013, down 1% for the full fiscal year.  The Company expects its software business to return to growth in fiscal 2014, with some continued declines in plasma software, more than offset by accelerating growth in BloodTrack^® and other hospital based solutions.  Hospital sales are expected to be bolstered by the implementation of SafeTrace Tx^® transfusion management software at numerous locations following the signing of an agreement with a major U.S. hospital system.

Equipment and other revenue was $17.5 million for the quarter, up 2%, and $64.3 million in the full fiscal year, up 3%.  Equipment revenue is influenced by the timing of tenders and capital budgets.  The installed base of Cell Saver Elite and TEG devices increased considerably in fiscal 2013, with activity in emerging markets continuing to be particularly strong.

Haemonetics reported fourth quarter organic revenue growth of 28% in Asia, 9% in North America, and 1% in Europe, partially offset by a decline of 13% in Japan.  For fiscal 2013, organic revenue increased 17% in Asia, 4% in North America, 2% in Europe and decreased 4% in Japan.  Prior year fourth quarter and fiscal 2012 revenue benefited from a $3.5 million buy-in of revenue from the first quarter of fiscal 2013 by the Japan Red Cross, representing 10 and 3 percentage points, respectively, of the current quarter and fiscal year declines in Japan revenue.  Recent weakness in the Yen exchange rate also contributed meaningfully to the decline in fourth quarter Japan revenue, which was down 8% in constant currency, but 13% as reported.

Adjusted gross profit was $124.2 million, up $29.4 million or 31% in the fourth quarter, and $450.5 million up $79.7 million or 21.5% for the fiscal year.  Adjusted gross margin was 49.7%, down 110 basis points in the fourth quarter, and 50.5%, down 40 basis points in fiscal 2013.  In both the fourth quarter and fiscal 2013, gross margin improvement in the core business partially offset the impact of revenue mix toward lower margin whole blood disposables.

Adjusted operating expenses were $89.3 million in the quarter, up $21.6 million or 31.8%, and $321.6 million, up $57.3 million or 21.7% in fiscal 2013.  Operating expense increases included $13 million in the quarter and $35 million in fiscal 2013 attributable to the new whole blood collection business.  The remainder of the increase was associated with the expected acceleration of planned investments in global growth initiatives, emerging markets, R&D and infrastructure to support anticipated organic and acquisition revenue growth.

Adjusted operating income was $35.0 million for the fourth quarter, up $7.9 million or 29.1%, and $128.9 million, up $22.4 million or 21.0% for the full fiscal year, and reflected the inclusion of the profits of the newly acquired whole blood business.  Adjusted operating margin was 14.0% in the fourth quarter, down 50 basis points, and 14.5% in fiscal 2013, down 10 basis points.  Leverage achieved through the whole blood acquisition and operating discipline enabled accelerated funding of investments in global growth initiatives and certain expenditures related to infrastructure build for the acquired whole blood business. 

The income tax rate was 21.6% in the fourth quarter, compared with 24.8% in the fourth quarter of fiscal 2012, reflecting a favorable geographic shift of income toward lower tax rate jurisdictions, a shift that is expected to continue throughout fiscal 2014.  For the full years 2013 and 2012, the tax rate was 26.9%.

Hemerus Medical, LLC Acquisition

In a separate press release, Haemonetics announced today that, on April 30, it completed the acquisition of the assets of Hemerus Medical, LLC ("Hemerus"), a Minnesota-based company that develops innovative technologies for the collection of whole blood and for the processing and storage of blood components.  Haemonetics paid $24 million to date, of the total $27 million cash purchase price.  Additionally, Haemonetics will pay $3 million upon receipt of an additional FDA approval and up to $14 million upon the future sale of SOLX^® products.   

Acquisition Related Amortization Expense

Acquisition related amortization expense included in fourth quarter adjusted earnings was $5.8 million in fiscal 2013 and $2.4 million in fiscal 2012, or $0.08 and $0.03 per share respectively.  Full fiscal year adjusted earnings included $20.6 million in fiscal 2013 and $9.8 million in fiscal 2012, or $0.28 and $0.12 per share respectively, of acquisition-related amortization expense.  The Company will exclude such expenses from its adjusted earnings and EPS beginning in fiscal 2014 and, for purposes of facilitating comparison, notes that fiscal 2013 and 2012 adjusted earnings per share were $1.99 and $1.64 respectively, exclusive of acquisition related amortization expenses.

Adjustments To Fiscal 2013 Reported Earnings

The Company included approximately $16 million of adjustments to the cost of goods sold upon the sale of acquired whole blood and other filter inventories, which were excluded from adjusted earnings.  The Company also incurred costs for integration activities of $34 million, which are excluded from adjusted earnings.  Also excluded from adjusted earnings were $3 million of transaction related costs, $8 million of other restructuring and transformation costs incurred within the base business, $7 million of inventory reserves related to the potential "Y connector" component leak previously disclosed, and $4 million of intangibles written off related to the cessation of development activities on the Arryx^® HOT technology.   

Value Creation & Capture Activities, Including Manufacturing Network Transformation

Haemonetics also announced today that the integration of its whole blood business, which was acquired in August 2013, will be completed in the first half of fiscal 2014, ahead of its original schedule.  The Company also announced that its Board of Directors has approved a plan to pursue identified Value Creation & Capture ("VCC") opportunities.  These represent next steps beyond the integration: (I) investment in product line extensions, next generation products and growth platforms; (II) enhancement of commercial execution capabilities by implementing go-to-market and other strategies to enable global profitable revenue growth; and (III) transformation of the manufacturing network to best support these commercial strategies while optimizing expense levels.  Collectively these are opportunities to position the Company for optimal growth and competitiveness.

Transformation of the manufacturing network will take place over the next three fiscal years, and will involve changes to the current manufacturing footprint and supply chain.  Today the Company announced plans to discontinue manufacturing activities at its Braintree, Massachusetts location while creating a technology center of excellence for product development by adding scientists and engineers who will develop the next generation of new products.  The Company is currently assessing options for locating its corporate headquarters and technology center, which include the current location and other alternatives.

The Company will expand its current facility in Tijuana, Mexico and build a new manufacturing facility in Asia closer to its growing customer base in that region.  The Mexican facility expansion and the new Asian facility are foundational elements of a longer term strategy that is expected to provide a competitive cost structure and capacity that can be deployed as needs dictate going forward. 

The full implementation of that strategy is expected to generate substantial savings, beginning in fiscal 2015 and ramping up to approximately $35-$40 million of annual cost savings by fiscal 2018.  There is no net impact expected in fiscal 2014 as redundant capacity designed to mitigate the risk of the technology transfers will initially offset savings.

Mr. Concannon added: "Encouraged by our recent growth, strong profitability, and the substantial completion of the whole blood integration, we are able to pursue identified VCC opportunities sooner with the goal of not just meeting, but exceeding our customers' expectations in the years to come.  We remain confident in our business fundamentals, our fiscal 2014 earnings guidance, and our ability to realize planned returns on the investments we have committed to make."

Fiscal 2014 Guidance

The Company expects its plasma business to grow 4-6%, Blood Center to be flat on an organic basis, Hospital products to grow 6-9%, and Software Solutions to grow 5-7%.  Overall fiscal 2014 organic revenue growth is expected to approximate 5-7% in constant currency and 3-5% on a reported basis that includes the impact of recent Yen weakness upon expected Japanese revenue.  Whole blood revenue is expected to be approximately $210 million for fiscal 2014.  Thus, total revenue growth is estimated in the range of 9-12%, or approximately $1 billion at the high end of that range.

Full year adjusted gross margin is expected to approximate 51- 52% inclusive of a full year's lower gross margin contribution from the whole blood product line.  Acquisition related amortization is expected to approximate $26 million or $0.35 per share, and is excluded from adjusted operating income and adjusted earnings per share.  Adjusted operating income of $177-$183 million is expected in fiscal 2014, yielding an operating margin improvement of approximately 100 bps over fiscal 2013.Income taxes are expected to approximate 26-27% of pre-tax adjusted income.  Accordingly, adjusted earnings per share excluding acquisition related amortization are expected to be in the range of $2.30-$2.40, up approximately 15-20% over fiscal 2013 presented on a consistent basis, and in line with the preliminary outlook previous provided. 

Fiscal 2014 free cash flow is expected to approximate $125 million before funding restructuring and capital investments for transformation activities.  The Company anticipates investing approximately $88 million of such free cash flow to fund $36 million of additional capital expenditures and $52 million of cash transformation expenditures associated with its VCC initiatives in fiscal 2014.  Additionally, the Company anticipates that $27 million will be utilized for the scheduled repayment of outstanding debt.

In total $57 million, comprised of the $52 million of cash transformation expenditures plus $5 million of non-cash asset write-offs, will be excluded from adjusted earnings in fiscal 2014.  More information on fiscal year 2014 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

Balance Sheet and Cash Flow

Cash on hand was $179 million, a decrease of $14 million during the fourth quarter, as $32 million of cash was utilized to repurchase shares.  The Company reported fiscal 2013 free cash flow before restructuring, transformation, integration and transaction costs of $70 million, a reduced level from the prior year due to the buildup of certain required elements of working capital not acquired.

Fiscal 2013 Share Repurchase Program

Reported on a post-split basis, the Company repurchased 694,600 shares in the open market at an average cost of $41.52 during the fourth quarter.  In fiscal 2013, the Company repurchased 1,236,300 shares at an average price of $40.44, completing the $50 million repurchase authorized by the Board of Directors.

Conference Call

Haemonetics will host a webcast to discuss the fourth quarter results on Wednesday, May 1, 2013 at 8:00 am Eastern time.  Interested parties can participate at:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=72118&eventID=4933910.

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.    

¹ A 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 $17. 3 million of pre-tax integration, transaction, certain inventory costs and base business restructuring and transformation costs in the fourth quarter of fiscal 2013 and $6.1 million of pre-tax restructuring and transformation costs in the fourth quarter of fiscal 2012, which are excluded from adjusted results.  Full year GAAP results include $72.5 million of pre-tax integration, transaction, certain inventory costs and base business restructuring and transformation costs in fiscal 2013 and $19.3 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