Haemonetics Reports 8% Revenue Growth for Second Quarter of Fiscal 2012, Adjusted Earnings Per Share of $0.72 and Updates Previously Provided Full Year Earnings Guidance

$ million, except per share

Adjusted Operating Income

Adjusted EPS

Low

High

Low

High

Previous Guidance

$  124

$  125

$ 3.35

$ 3.45

Cost of quality - increase

$     (4)

$     (4)

$(0.12)

$(0.12)

Operations cost savings delays

$     (3)

$     (3)

$(0.08)

$(0.08)

Hospital product sales delays

$     (4)

$     (4)

$(0.10)

$(0.10)

Other, net

$     (2)

$     (2)

$(0.05)

$(0.05)

Current Guidance

$  110

$  112

$ 3.00

$ 3.10

Haemonetics Corporation Financial Summary

(Unaudited data in thousands, except per share data)

Consolidated Statements of Income for the Second Quarter of FY12 and FY11

10/1/2011
As Reported

10/2/2010
As Reported

% Inc/(Dec)
vs Prior Year

NET REVENUES

$ 179,445

$ 166,833

7.6%

Gross profit

89,949

87,755

2.5%

R&D

10,350

7,954

30.1%

S,G&A

62,613

52,790

18.6%

Contingent consideration income

(1,580)

(1,894)

(16.6%)

Operating expenses

71,383

58,850

21.3%

Operating income

18,566

28,905

(35.8%)

Interest expense

(17)

(23)

(26.1%)

Interest income

749

493

51.9%

Other (expense), net

(287)

(216)

32.9%

Income before taxes

19,011

29,159

(34.8%)

Tax expense

5,131

7,821

(34.4%)

NET INCOME

$ 13,880

$ 21,338

(35.0%)

Net income per common share

assuming dilution

$0.54

$0.85

(36.2%)

Weighted average number of shares

Basic

25,418

24,686

Diluted

25,843

25,228

Profit Margins:

Inc/(Dec) vs
prior year profit
margin %

Gross profit

50.1%

52.6%

(2.5%)

R&D

5.8%

4.8%

1%

S,G&A

34.9%

31.6%

3.3%

Operating income

10.3%

17.3%

(7.0%)

Income before taxes

10.6%

17.5%

(6.9%)

Net income

7.7%

12.8%

(5.1%)

Consolidated Statements of Income for Year-to-Date FY12 and FY11

10/1/2011
As Reported

10/2/2010
As Reported

% Inc/(Dec) vs
Prior Year

NET REVENUES

$ 350,014

$ 329,872

6.1%

Gross profit

178,698

174,217

2.6%

R&D

18,959

15,875

19.4%

S,G&A

118,844

107,144

10.9%

Contingent consideration income

(1,580)

(1,894)

(16.6%)

Operating expenses

136,223

121,125

12.5%

Operating income

42,475

53,092

(20.0%)

Interest expense

(35)

(40)

(12.5%)

Interest income

767

460

66.7%

Other (expense)/income, net

(502)

22

(2381.8%)

Income before taxes

42,705

53,534

(20.2%)

Tax expense

11,877

14,277

(16.8%)

NET INCOME

$ 30,828

$ 39,257

(21.5%)

Net income per common share

assuming dilution

$1.18

$1.54

(23.4%)

Weighted average number of shares

Basic

25,575

24,913

Diluted

26,029

25,459

Profit Margins:

Inc/(Dec) vs
prior year profit
margin %

Gross profit

51.1%

52.8%

(1.7%)

R&D

5.4%

4.8%

0.6%

S,G&A

34.0%

32.5%

1.5%

Operating income

12.1%

16.1%

(4.0%)

Income before taxes

12.2%

16.2%

(4.0%)

Net income

8.8%

11.9%

(3.1%)

Revenue Analysis for the Second Quarter and Year-To-Date FY12 and FY11

Three Months Ended

10/1/2011
As Reported

10/2/2010
As Reported

% Inc/(Dec) vs
Prior Year

Revenues by geography

United States

$ 86,339

$ 78,740

9.7%

International

93,106

88,093

5.7%

Net revenues

179,445

166,833

7.6%

Disposable revenues

Plasma disposables

64,408

56,514

14.0%

Blood bank disposables

Platelet

42,195

39,746

6.2%

Red cell

11,645

11,294

3.1%

53,840

51,040

5.5%

Hospital disposables

Surgical

16,206

16,011

1.2%

OrthoPAT

7,295

8,281

(11.9%)

Diagnostics

5,659

4,647

21.8%

29,160

28,939

0.8%

Subtotal

147,408

136,493

8.0%

Software solutions

17,199

16,125

6.7%

Equipment & other

14,838

14,215

4.4%

Net revenues

$ 179,445

$ 166,833

7.6%

Six Months Ended

10/1/2011
As Reported

10/2/2010
As Reported

% Inc/(Dec) vs
Prior Year

Revenues by geography

United States

$ 172,734

$ 158,049

9.3%

International

177,280

171,823

3.2%

Net revenues

350,014

329,872

6.1%

Disposable revenues

Plasma disposables

127,168

112,431

13.1%

Blood bank disposables

Platelet

79,504

76,063

4.5%

Red cell

23,514

22,608

4.0%

103,018

98,671

4.4%

Hospital disposables

Surgical

31,948

32,362

(1.3%)

OrthoPAT

15,049

17,238

(12.7%)

Diagnostics

11,273

9,355

20.5%

58,270

58,955

(1.2%)

Subtotal

288,456

270,057

6.8%

Software solutions

35,359

32,585

8.5%

Equipment & other

26,199

27,230

(3.8%)

Net revenues

$ 350,014

$ 329,872

6.1%

Consolidated Balance Sheets

Period ending

10/1/2011

4/2/2011

Assets

Cash and cash equivalents

$183,421

$196,707

Accounts receivable, net

129,242

127,166

Inventories, net

101,444

84,387

Other current assets

26,993

40,571

Total current assets

441,100

448,831

Net PP&E

156,866

155,528

Other assets

225,756

228,905

  Total assets

$823,722

$833,264

Period ending

10/1/11

4/2/11

Liabilities & Stockholders' Equity

Short term debt & current maturities

$3,080

$   913

Other current liabilities

107,726

107,758

Total current liabilities

110,806

108,671

Long-term debt

3,332

3,966

Other long-term liabilities

31,307

34,491

Stockholders' equity

678,277

686,136

  Total liabilities & stockholders' equity

$823,722

$833,264

Free Cash Flow Reconciliation

Three Months Ended

10/1/2011

10/2/2010

GAAP cash flow from operations

$25,408

$30,730

Capital expenditures

(12,042)

(8,864)

Proceeds from sale of property, plant and equipment

111

151

Net investment in property, plant and equipment

(11,931)

(8,713)

Free cash flow after transformation and deal costs

13,477

22,017

Transformation and deal costs

2,807

2,325

2,807

2,325

Free cash flow before transformation and deal costs

$16,284

$24,342

Six Months Ended

10/1/2011

10/2/2010

GAAP cash flow from operations

$52,539

$44,286

Capital expenditures

(23,843)

(24,088)

Proceeds from sale of property, plant and equipment

130

262

Net investment in property, plant and equipment

(23,713)

(23,826)

Free cash flow

28,826

20,460

Transformation and deal costs

4,585

6,383

Global Med employment contracts

-

2,122

4,585

8,505

Free cash flow before transformation and deal costs

$33,411

$28,965

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, inform business decision making, and forecast future results.  Performance targets for management are established based upon these non-GAAP measures.  In the reconciliations below, we have removed restructuring and transformation costs from our GAAP expenses.  Our restructuring and transformation costs are principally related to HS Core customer related expenses, restructuring of certain departments and the disposal of a product line.   We believe this information is useful for investors because it allows for an evaluation of the Company with a focus on the performance of our core operations.

Non-GAAP Gross Profit
The use of these non-GAAP measures allows management to monitor the level of total gross profits without the costs of our business transformation.  We establish our budgets, forecasts, and performance targets on this basis.

Non-GAAP S,G&A and Non-GAAP Operating Expenses
The use of this non-GAAP measure allows management to monitor the ongoing level of spend that is necessary to support the business in a period when we are not transforming our business or completing an acquisition of in-process research and development.  We establish our budgets, forecasts, and performance targets excluding these costs.

Non-GAAP Operating Income and Non-GAAP Income before Income Taxes
The use of these non-GAAP measures allows management to monitor the level of operating and total pre-tax profits without the costs of our business transformation.  We establish our budgets, forecasts, and performance targets on this basis.

Non-GAAP Net Income and Earnings per Share
The use of these non-GAAP measures allows management to monitor the level of net income and earnings per share excluding both the costs of our business transformation, as well as any related tax effects. We establish our budgets, forecasts, and performance targets on this basis.

Reconciliation of Non-GAAP Measures for the Second Quarter of FY12 and FY11

Three Months Ended

10/1/2011

10/2/2010

Non-GAAP gross profit

GAAP gross profit

$89,949

$87,755

Restructuring and transformation costs

1,381

-

Non-GAAP gross profit

$91,330

$87,755

Non-GAAP R&D

GAAP R&D

$10,350

$7,954

Restructuring and transformation costs

(1,356)

-

Non-GAAP R&D

$8,994

$7,954

Non-GAAP S,G&A

GAAP S,G&A

$62,613

$52,790

Restructuring and transformation costs

(5,792)

(1,120)

Non-GAAP S,G&A

$56,821

$51,670

Non-GAAP operating expenses

GAAP operating expenses

$71,383

$58,850

Restructuring and transformation costs

(7,148)

(1,120)

Contingent consideration income

1,580

1,894

Non-GAAP operating expenses

$65,815

$59,624

Non-GAAP operating income

GAAP operating income

$18,566

$28,905

Restructuring and transformation costs

8,529

1,120

Contingent consideration income

(1,580)

(1,894)

Non-GAAP operating income

$25,515

$28,131

Non-GAAP income before taxes

GAAP income before taxes

$19,011

$29,159

Restructuring and transformation costs

8,529

1,120

Contingent consideration income

(1,580)

(1,894)

Non-GAAP income before taxes

$25,960

$28,385

Non-GAAP net income

GAAP net income

$13,880

$21,338

Restructuring and transformation costs

8,529

1,120

Contingent consideration income

(1,580)

(1,894)

Tax benefit associated with non-GAAP items

(2,164)

(467)

Non-GAAP net income

$18,665

$20,097

Non-GAAP net income per common share assuming dilution

GAAP net income per common share assuming dilution

$0.54

$0.85

Non-GAAP items after tax per common share assuming dilution

$0.18

($0.05)

Non-GAAP net income per common share assuming dilution

$0.72

$0.80

Presented below are additional Constant Currency performance measures.  We measure different components of our business at constant currency.  We believe this information is useful for investors because it allows for an evaluation of the Company without the effect of changes in foreign exchange rates.  These results convert our local foreign currency operating results to the US Dollar at constant exchange rates of $1.20 per Euro, and 110 Yen to the $1.00.  They also exclude the results of our foreign currency hedging program described in Note 7 to our consolidated financial statements in our Form 10-K.  

Non-GAAP revenues

GAAP revenue

$179,445

$166,833

Foreign currency effects

(13,544)

(9,736)

Non-GAAP revenue - constant currency

$165,901

$157,097

Non-GAAP net income

Non-GAAP net income, adjusted for restructuring, transformation costs and contingent consideration income

$18,665

$20,097

Foreign currency effects, net of tax

(3,213)

(3,799)

Income tax associated with foreign currency effects

903

1,112

 Non-GAAP net income - constant currency

16,355

17,410

Non-GAAP net income per common share assuming dilution

Non-GAAP net income per common share assuming dilution, adjusted for restructuring, transformation costs and contingent consideration income

$0.72

$0.80

Foreign currency effects after tax per common share assuming dilution

($0.09)

($0.11)

Non-GAAP net income per common share assuming dilution - constant currency

$0.63

$0.69

Reconciliation of Non-GAAP Measures for FY12 and FY11

Six Months Ended

10/1/2011

10/2/2010

Non-GAAP gross profit

GAAP gross profit

$178,698

$174,217

Restructuring and transformation costs

1,381

-

Non-GAAP gross profit

$180,079

$174,217

Non-GAAP R&D

GAAP R&D

$18,959

$15,875

Restructuring and transformation costs

(1,356)

-

Non-GAAP R&D

$17,603

$15,875

Non-GAAP S,G&A

GAAP S,G&A

$118,844

$107,144

Restructuring and transformation costs

(6,129)

(2,863)

Non-GAAP S,G&A

$112,715

$104,281

Non-GAAP operating expenses

GAAP operating expenses

$136,223

$121,125

Restructuring and transformation costs

(7,485)

(2,863)

Contingent consideration income

1,580

1,894

Non-GAAP operating expenses

$130,318

$120,156

Non-GAAP operating income

GAAP operating income

$42,475

$53,092

Restructuring and transformation costs

8,865

2,863

Contingent consideration income

(1,580)

(1,894)

Non-GAAP operating income

$49,760

$54,061

Non-GAAP income before taxes

GAAP income before taxes

$42,705

$53,534

Restructuring and transformation costs

8,865

2,863

Contingent consideration income

(1,580)

(1,894)

Non-GAAP income before taxes

$49,990

$54,503

Non-GAAP net income

GAAP net income

$30,828

$39,257

Restructuring and transformation costs

8,865

2,863

Contingent consideration income

(1,580)

(1,894)

Tax benefit associated with non-GAAP items

(2,350)

(1,067)

Non-GAAP net income

$35,763

$39,159

Non-GAAP net income per common share assuming dilution

GAAP net income per common share assuming dilution

$1.18

$1.54

Non-GAAP items after tax per common share assuming dilution

$0.19

($0.00)

Non-GAAP net income per common share assuming dilution

$1.37

$1.54

Presented below are additional Constant Currency performance measures.  We measure different components of our business at constant currency.  We believe this information is useful for investors because it allows for an evaluation of the Company without the effect of changes in foreign exchange rates.  These results convert our local foreign currency operating results to the US Dollar at constant exchange rates of $1.20 per Euro, and 110 Yen to the $1.00.  They also exclude the results of our foreign currency hedging program described in Note 7 to our consolidated financial statements in our Form 10-K.  

Non-GAAP revenues

GAAP revenue

$350,014

$329,872

Foreign currency effects

(24,607)

(16,419)

Non-GAAP revenue - constant currency

$325,407

$313,453

Non-GAAP net income

Non-GAAP net income, adjusted for restructuring, transformation costs and contingent consideration income

$35,763

$39,159

Foreign currency effects

(6,416)

(7,087)

Income tax associated with foreign currency effects

1,827

1,999

Non-GAAP net income - constant currency

31,174

34,071

Non-GAAP net income per common share assuming dilution

Non-GAAP net income per common share assuming dilution, adjusted for restructuring, transformation costs and contingent consideration income

$1.37

$1.54

Foreign currency effects after tax per common share assuming dilution

($0.18)

($0.20)

Non-GAAP net income per common share assuming dilution - constant currency

$1.19

$1.34