Haemonetics second quarter 2013 net revenue increases 22% to $218.2 million

Haemonetics Corporation (NYSE: HAE) today reported second quarter 2013 net revenue of $218.2 million, up 22%, GAAP net income of $6.5 million, down 53%, and diluted earnings per share of $0.25, down 53%.  Excluding restructuring, transformation, integration and transaction costs, adjusted net income was $23.5 million, up 26%, and adjusted earnings per share were $0.90, up 25%.  Organic net revenue, exclusive of the recently acquired whole blood business, was $189.6 million, up 6%. Excluding currency impacts, net revenue was up 22% in total and 6% on an organic basis.

 Brian Concannon, Haemonetics' President and CEO, commented: "The highlights of our second quarter were the successful acquisition of the whole blood business and continued organic revenue growth in disposables across our entire product portfolio, especially in our Hospital business where 14% second quarter growth followed 11% growth in the first quarter.  Strong demand for the Cell Saver® Elite® and TEG® disposables, and growth in our OrthoPAT® business, provide strong evidence that our Hospital customers continue to embrace our Blood Management Solutions recognizing the inherent value proposition offered."   


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

  • 22% revenue growth including 6% organic revenue growth.
  • 7% revenue growth in plasma disposables.
  • 16% revenue growth in surgical disposables.
  • 23% revenue growth in diagnostic disposables.
  • 5% revenue growth in OrthoPAT disposables, a return to growth as expected.
  • 21% organic revenue growth in China.
  • $29 million of revenue from whole blood with uninterrupted customer service.
  • Announced two-for-one stock split.

A revenue breakdown follows:


Plasma disposables revenue was $68.7 million, up 7% and growth in North America was up 10%.  On a year-to-date basis, global plasma revenue is up 4%.  The Company continues to expect its plasma business to grow 4-6% in fiscal 2013 consistent with end market growth rates for plasma derived biopharmaceuticals.

Blood Center

Platelet disposables revenue was $43.2 million, up 2% over the prior year's second fiscal quarter, with continued benefit from strong sales in emerging markets.  Red cell disposables revenue was $11.9 million, up 2%.  Though the clinical demand for blood remained flat, red cell revenue grew on increased collections as the Company leveraged its IMPACT® selling approach to advance Blood Management Solutions.

On a year-to-date basis, blood center revenue is up 1% organically and the Company continues to expect its blood center business to grow 0-2% organically in fiscal 2013, with continued growth in both platelet and red cell disposables as the year progresses.  Whole blood revenue of $29 million was in line with expectations considering buy-ins by customers in advance of the ownership transfer.  The Company is affirming its previous guidance for whole blood revenue of $135-$145 million.     


Surgical disposables revenue was $18.8 million in the quarter, up 16%.  Notably this was the fifth consecutive quarterly increase, as the product launch of the Cell Saver Elite device continues to accelerate.  Recent strong Cell Saver Elite equipment sales drove near term disposables growth. 

Disposables revenue from the OrthoPAT orthopedic perioperative autotransfusion system was $7.6 million in the quarter, up 5% following a prior quarter decline of 3% and a full fiscal 2012 decline of 12%.  The impact of the fiscal 2012 voluntary recall of pre-2002 devices upon disposables usage has ended and the expected return to growth has begun.  

Diagnostics revenue was $6.9 million in the quarter, up 23%, 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, a key indicator for near term future disposables revenue growth. TEG disposables sales also increased 23% in China.  

On a year-to-date basis, Hospital revenue is up 13% and the Company continues to expect its hospital business to grow 12-15% in fiscal 2013 with continued strength in surgical and diagnostics disposables, and continued OrthoPAT disposables revenue growth.

Software and Equipment

Software Solutions revenue was $18.0 million, up 5%.  The enhanced offering of software products for Blood Center and Hospital customers drove revenue growth of 10% in North America.  On a year-to-date basis, software revenue is flat with prior year levels and trending upward, thus the Company continues to expect its software business to grow 5-7% in fiscal 2013.  

Equipment and other revenue was $14.3 million, down 3% following several quarters with strong double-digit percentage growth.  Equipment revenue is influenced by the timing of tenders and capital budgets and on a year-to-date basis, Equipment revenue is up 7%.  Sales of Cell Saver Elite and TEG devices in emerging markets continue to be particularly strong.

Haemonetics reported second quarter fiscal 2013 organic revenue growth of 8% in North America and 10% in Asia, along with a 2% decline in Europe.  Organic revenue growth in Japan was 6%.

Adjusted gross profit was $111.6 million up $20.2 million or 22.1%.  Adjusted gross margin was 51.0%, up 10 basis points, as benefits in the core business were more than sufficient to offset the impact of revenue mix toward lower margin whole blood disposables.

Adjusted operating expenses were $78.0 million, up $12.2 million or 18.5%.  Operating expense increases included $8.0 million in the new whole blood business and planned investments in global growth initiatives, emerging markets and infrastructure to support anticipated organic and acquisitive revenue growth; these expenses are expected to accelerate in the second half of the fiscal year.  Additionally, a full accrual of performance based compensation was provided in the second quarter of fiscal 2013.

Adjusted operating margin of 15.4% was up 120 basis points and reflected the inclusion of only seven weeks' profits of the newly acquired whole blood business.  Operating margin benefited from a managed 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 second quarter adjusted earnings was $5.7 million in fiscal 2013 and $2.5 million in fiscal 2012, or $0.14 and $0.06 per share respectively.  Year-to-date adjusted earnings included $8.3 million in fiscal 2013 and $5.0 million in fiscal 2012, or $0.22 and $0.12 per share respectively, of acquisition-related amortization expense.

Balance Sheet and Cash Flow

Cash on hand was $187 million, a decrease of $49 million during the quarter, as the Company utilized $60 million of cash toward the whole blood business acquisition.  The Company reported first half free cash flow before restructuring, transformation, integration and transaction costs of $22 million, a reduced level from the prior year due to an anticipated buildup of certain required elements of working capital not acquired.

Fiscal 2013 Guidance and Fiscal 2014 Outlook

The Company reaffirmed its previous fiscal 2013 organic revenue growth expectation of approximately 4-6%, with plasma expected to grow 4-6%, Blood Center 0-2%, Hospital products 12-15%, and Software Solutions 5-7%.  Whole blood revenue expectations are also reaffirmed at approximately $135-$145 million for fiscal 2013. Thus, total revenue is estimated in the range of $890-$915 million, up 23-26%.

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 is expected to be between $127-$130 million, and free cash flow will approximate $85 million before funding restructuring, transformation and transaction costs.  The paced ramp-up of expenses is expected to accelerate in the second half of the year.  Accordingly, the previously indicated adjusted earnings per share range of $3.30-$3.40, up 9%-12% over fiscal 2012, is also 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.

The Company 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 assumes the exclusion of approximately $3 million of transaction related costs and approximately $13 million of adjustments to cost of goods sold on the sale of acquired whole blood and other filter inventories.  The Company also expects to incur restructuring and transformation costs within the base business of $3-$4 million which are excluded from adjusted earnings guidance.  

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.

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 revenues are expected to surpass $1 billion.  The Company's previously provided preliminary outlook for fiscal 2014 adjusted earnings per share of $3.90-$4.10, approximately 20% above fiscal 2013 expected earnings per share, is affirmed.  Included in these amounts are approximately $29 million or $0.75 per share of acquisition related amortization expense.

Mr. Concannon added: "While completing the largest acquisition in our company's history, our team remained customer focused and delivered excellent second quarter results.  This included solid organic revenue growth of 6%, $29 million of whole blood revenue realized through seamless customer ordering, and effective cost management.  We remain confident in our business fundamentals and are able to reaffirm the fiscal 2013 revenue and earnings guidance, and the fiscal 2014 preliminary outlook that we previously provided."

Stock Split

The Company announced today that its Board of Directors approved a two-for-one split of the Company's common stock, which will be effected in the form of a 100 percent stock dividend.  The stock dividend will be distributed November 30 to stockholders of record as of November 9.  Haemonetics' common stock will begin trading on a post-split basis on the New York Stock Exchange on December 3, 2012. 

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, will be represented by two shares of the Company's post-split common stock.  The split will affect all stockholders uniformly and will not affect any stockholder's ownership percentage.

The Company expects that this split will make its shares more accessible, increase its shareholder base and improve its market liquidity.  With the Company's recent growth, long term shareholder value creation and its most significant acquisition recently completed, the stock split also reflects confidence in the Company's strength and ability to continue to generate long term growth and financial performance.

Fiscal 2013 Share Repurchase Program

The Company repurchased 74,300 shares in the open market at an average cost of $71.91, returning $5.3 million to shareholders during the second quarter.  The Board of Directors previously approved the repurchase of up to $50 million of shares in the open market during the remainder of fiscal 2013.


Haemonetics Corporation

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