Haemonetics Reports 2nd Quarter Fiscal 2016 Revenue of $220 Million and Adjusted EPS of $0.44, Affirms Recent Full Fiscal Year Guidance

BRAINTREE, Mass., Nov. 4, 2015 /PRNewswire/ --

Product Growth Highlights

8% constant currency revenue increases in growth drivers in the second quarter, including:

• 11% growth in North America plasma disposables revenue
• 25% growth in TEG^® diagnostics disposables revenue
• 6% growth in Emerging Markets disposables revenue, ex-Russia

Haemonetics Corporation (NYSE: HAE) reported second quarter fiscal 2016 revenue of $219.7 million, down 3%.  Revenue was flat with the second quarter of fiscal 2015 in constant currency. 

The Company reported GAAP net income of $12.9 million and GAAP net earnings per share of $0.25 in the second quarter of fiscal 2016.  Exclusive of transformation, restructuring and deal amortization expenses detailed below, adjusted net income was $22.5 million, down 7%, and adjusted earnings per share were $0.44, down 6%.¹   

First half fiscal 2016 revenue was $433.1 million, down 4%, and down 1% in constant currency.  The Company reported first half GAAP net income of $12.6 million and GAAP net income per share of $0.24.  Exclusive of transformation, first half fiscal 2016 restructuring and deal amortization expenses detailed below, adjusted net income was $40.5 million, down 8%, and adjusted earnings per share were $0.78, down 7%.¹  

GROWTH DRIVERS UPDATE

The Company's growth drivers of Plasma, TEG and Emerging Markets represented 63% of disposables revenue in both the second quarter and first half of fiscal 2016.  In the quarter, growth driver revenue was up 8% on a constant currency basis.

Plasma disposables revenue grew 11% in North America, as strong demand for collection volumes continued. Softness in Russia negatively impacted global plasma disposables revenue which was up 7% in constant currency.

Following receipt of regulatory clearances of its next generation diagnostics device, the TEG 6s, and disposable cartridges for use in cardiovascular and cardiology procedures, the Company continued its limited market release.  Together, the TEG family of hemostasis management products – TEG 5000, TEG 6s and TEG Manager™ software – is well positioned for continued strong revenue growth.

Ronald Gelbman, Haemonetics' Interim CEO, stated:  "Our team delivered first half revenue and earnings performance that was in line with our expectations.  It is encouraging that our Plasma and TEG hemostasis management businesses continued to have solid revenue growth in the first half of fiscal 2016. 

"Sustaining profitable growth is a key enabler of solid overall financial performance and there are ample opportunities for Haemonetics to continue to realize differentiated growth in its growth drivers over the medium and long terms.  By channeling the necessary resources and investments into our Plasma and TEG hemostasis management franchises, as well as the key China market, we are creating the necessary focus to deliver and sustain real organic growth." 

SECOND QUARTER 2016 REVENUE ELEMENTS

Plasma

Plasma disposables revenue was $83.9 million in the second quarter, up $3.6 million, or 4% on a reported basis and up 7% in constant currency.  Revenue was impacted in part by economic conditions in Russia.  North America Plasma disposables revenue was up 11% versus the prior year's second quarter.  Collection volumes continued to reflect a robust end user market for plasma-derived biopharmaceuticals.

Blood Center

Platelet disposables revenue was $34.1 million in the second quarter, down 13% on a reported basis and down 7% on a constant currency basis. The impact of currency on reported growth rates reflects the concentration of the Company's platelet business outside of the United States.  The constant currency revenue decline was attributable principally to a market shift in Japan toward double dose collection techniques, not yet offset by the expected market share gains and accelerated use of Haemonetics' technology.     

Red cell disposables revenue was $9.3 million in the second quarter, down $0.9 million or 9% as reported and 8% on a constant currency basis in part due to lower pricing associated with a recently signed U.S. contract.

The Company announced that it has completed a long-term agreement with the America Red Cross to achieve 100% share of its double red cell apheresis collection business.  The resulting volume gain is expected to be offset by pricing concessions in that contract and, over time, by volume losses with two U.S. purchasing groups that have recommended competitive products to their members.

Whole blood disposables revenue was $30.4 million in the second quarter, down $3.3 million or 10% as reported and down 7% on a constant currency basis.  This change was attributable principally to the U.S. whole blood collection market which continued to decline but at a moderated rate compared with the two immediately previous fiscal years.

Hospital

Diagnostics disposables revenue was $12.5 million for the quarter, up $2.4 million or 24% on a reported basis and up 25% in constant currency, with particular strength in China and in the U.S. 

The TEG Thromboelastograph^® Hemostasis Analyzer installed base continued to increase in the second quarter, as TEG 5000 growth continued.  The TEG family of devices, disposables and software is well positioned for acceleration of its revenue growth trend, consistent with the Company's multi-year growth outlook.

Surgical disposables revenue was $14.7 million in the second quarter, down 6% as reported and flat on a constant currency basis.  Strength in the emerging markets was offset by declines in developed markets. 

Software and Equipment

Software Solutions revenue was $17.7 million in the second quarter, down $0.4 million or 2% on a reported basis and flat in constant currency.  BloodTrack® HaemoBank™, a key enabler of CBMS™, the Company's Comprehensive Blood Management Solutions growth strategy, was recently launched in numerous global markets, together with transfusion service software, and is expected to play an important role in growing and developing the Company's software business.

Equipment and other revenue was $13.4 million, down $1.8 million or 12% as reported and down 7% on a constant currency basis, with weakness in Russia.  Equipment revenue is influenced by timing of tenders and capital budgets. The installed base of equipment, including devices sold and placed for use with customers, increased 4% in the first half of fiscal 2016.

Geographic

Haemonetics reported second quarter fiscal 2016 revenue growth of 3% in the Americas and 1% in Asia Pacific, with declines of 17% in Europe and 18% in Japan.  On a constant currency basis, the Company had revenue growth of 7% in Asia Pacific and 3% in the Americas, with declines of 9% in Europe and 6% in Japan.  Constant currency disposables revenue growth was 11% in China in the first half of fiscal 2016.

In the Americas, strength in Plasma and TEG hemostasis management businesses was offset by declines in the Blood Center business.  Weakness in Russia contributed to declines in Europe.  Japan revenue was impacted by the Yen exchange rate and a shift in the platelet market toward alternative collection techniques.    

OPERATING RESULTS

Adjusted gross profit was $106.5 million, down $4.6 million from the prior year second quarter and included a $3.8 million unfavorable currency impact.  Adjusted gross margin was 48.5%, down 30 basis points.  Adjusted gross margin improvement, driven by productivity programs including Value Creation & Capture ("VCC") initiatives, was more than offset by unfavorable product mix and pricing.

Incremental savings from VCC programs and other identified cost reductions were $2 million in the second quarter and are expected to approximate $10 million, in fiscal 2016.

Adjusted operating expenses were $73.4 million in the second quarter, down $2.5 million or 3% from the prior year second quarter.  R&D expense expanded to 5.2% of revenue, as compared with 4.4% in the second quarter of the prior year, and investments in growth drivers continued.  Increased R&D expenses were more than offset by organizational and corporate administrative cost reductions.       

In the second quarter, adjusted operating income was $33.1 million, down $2.0 million, or 5.8%, including $0.7 million attributed to currency headwinds. Adjusted operating margin in the quarter was 15.1%, down 30 basis points.    

Adjusted interest expense on loans was $2.0 million. The adjusted income tax rate was 26.5% compared with 25.7% in the prior year second quarter.   

Balance Sheet and Cash Flow

Cash on hand was $100 million, a decrease of $60 million during the first half of fiscal 2016, as the Company utilized $24 million of cash net of $6 million of cash tax benefits, to fund VCC and other restructuring initiatives and $61 million to repurchase shares in the open market.  The Company reported free cash flow, before transformation and restructuring costs, of $11 million in the first half of fiscal 2016.

FISCAL 2015-2016 SHARE REPURCHASE PROGRAM

In the second quarter of fiscal 2016, the Company repurchased 503,100 shares in the open market.  Together with earlier fiscal 2015 and 2016 activity, the Company repurchased 2,661,900 shares at an average price of $37.57, for a total of $100 million, completing the 2015-2016 share repurchase program.

Value Creation & Capture Activities

The Company's planned VCC programs, designed to transform its manufacturing and distribution operations and to support its productivity initiatives, continues to progress according to schedule.

These VCC programs are expected to be completed in fiscal 2016 with approximately $27 million of after-tax cash flow and cumulative program spending of roughly $175 million. The planned investments and expected benefits are summarized in a schedule posted to the Company's Investor Relations website at http://phx.corporate-ir.net/phoenix.zhtml?c=72118&p=irol-guidance.

Fiscal 2016 Guidance

The Company affirms its fiscal 2016 guidance as updated on October 5, 2015, for revenue within the range of $910 – $920 million, representing growth of 0-1% on a reported basis and approximately 4% in constant currency.

Continued strong revenue growth is expected from growth drivers – Plasma, TEG and Emerging Markets – along with the benefit of a 53^rd week in the fourth quarter of fiscal 2016.  U.S. blood center market declines will moderate, but continued foreign currency weakness is also expected.

Revenue guidance anticipates the following elements:

The Company affirms its fiscal 2016 adjusted earnings per share guidance, also as updated October 5, 2015, in the range of $1.65 to $1.75, which includes constant currency earnings growth of approximately 4%. 

Acquisition related amortization is expected to approximate $30 million, or $0.40 per share, and is excluded from adjusted operating income and adjusted earnings per share. 

Free cash flow guidance for fiscal 2016 is estimated in the range of $70-$75 million before funding approximately $27 million of capital expenditures and cash transformation expenditures to complete the VCC initiatives.

More information on fiscal 2016 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

Adjustments To Reported Earnings

In the second quarter of fiscal 2016, $7 million of pre-tax charges for VCC transformation and other restructuring activities were excluded from adjusted earnings.  In the second quarter of fiscal 2015, $15 million of pre-tax integration, restructuring, transformation and transaction costs were excluded from adjusted earnings.

In the first half of fiscal 2016, $21 million of pre-tax charges for VCC transformation and other restructuring activities were excluded from adjusted earnings.  In the first half of fiscal 2015, $38 million of pre-tax integration, restructuring, transformation and transaction costs were excluded from adjusted earnings.

The Company also excludes acquisition related amortization expenses from its adjusted operating income and earnings per share.  Excluded from second quarter adjusted earnings was acquisition related amortization of $7.4 million in fiscal 2016 and $7.6 million in fiscal 2015, or $0.10 per share in both second quarters. 

Deal amortization excluded from adjusted earnings was $14.8 million and $15.3 million, respectively, in the first halves of fiscal 2016 and 2015, or $0.20 per share in each year's first half. For fiscal year 2016, acquisition related amortization is expected to approximate $30 million or $0.40 per share.

Conference Call

Haemonetics will host a webcast to discuss second quarter results on Wednesday, November 4, 2015 at 8:00 am Eastern. Interested parties may participate at:
http://www.media-server.com/m/acs/e58732b94af2a8968146003700d7c56c.

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 patient care 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 manufacturing transformation making it more difficult to maintain relationships with employees and timely deliver high quality products, unexpected expenses incurred during our Value Creation and Capture program, asset revaluations to reflect current business conditions, 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 whole blood and blood components, product quality, market acceptance, regulatory uncertainties, including in the receipt or timing of regulatory approvals, 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 including single-source tenders, the effect of industry consolidation as seen in the plasma and blood center markets, 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.     

CONTACT:
Gerry Gould, VP-Investor Relations
Tel. (781) 356-9402
[email protected]

Haemonetics Corporation Financial Summary
Reconciliation of Non-GAAP Measures

Haemonetics has presented supplemental non-GAAP financial measures as part of this earnings release. A reconciliation is provided below that reconciles each non-GAAP financial measure with the most comparable GAAP measure.  The presentation of non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the most directly comparable GAAP measures. There are material limitations to the usefulness of non-GAAP measures on a standalone basis, including the lack of comparability to the GAAP financial results of other companies.

These measures are used by management to monitor the financial performance of the business, make informed business decisions, establish budgets and forecast future results. Performance targets for management are established based upon these non-GAAP measures. In the reconciliations below we have removed restructuring, transformation and other costs from our GAAP expenses. Our restructuring and transformation costs for the periods reported are principally related to:

• Value Creation & Capture (VCC): employee severance and retention, product line transfer costs, accelerated depreciation and other costs associated with these initiatives, principally our manufacturing network optimization, but also including commercial excellence, productivity and other operating initiatives.
• In Process Research and Development: charges relate to the acquisition of certain technology and manufacturing rights to be used in a next generation device and related costs.
• Contingent consideration income or expense described in Note 7 to our consolidated financial statements in our Form 10-Q.

We are reporting adjusted earnings before deal amortization, in addition to restructuring and transformation costs.

We believe this information is useful to investors because it allows for an evaluation of the Company with a focus on the performance of our core operations.

SOURCE Haemonetics Corporation

Related Links

http://www.haemonetics.com