Haemonetics Corporation — FY2021 Form 10-K
Business context and reporting period. Haemonetics supplies blood and plasma collection products and hospital technologies, reporting through Plasma, Blood Center and Hospital segments. Fiscal 2021 ended April 3, 2021, included 53 weeks, and is compared with 52-week fiscal 2020. The filing also reports fourth-quarter results for the three months ended April 3, 2021.
Financial results and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $870.5 million | $988.5 million | Down 11.9% reported; down 12.9% constant currency |
| Gross profit / margin | $397.8 million / 45.7% | $484.5 million / 49.0% | Margin down 3.3 percentage points |
| Operating income / margin | $89.7 million / 10.3% | $103.4 million / 10.5% | Income down 13.2% |
| Net income / diluted EPS | $79.5 million / $1.55 | $76.5 million / $1.48 | Net income up 3.8% |
| Operating cash flow | $108.8 million | $158.2 million | Down $49.4 million |
| Capital expenditures | $37.0 million | $48.8 million | Down $11.7 million |
- FY2021 effective tax rate was negative 9.0%, versus 12.2% in FY2020. The $6.6 million tax benefit reflected, among other items, tax effects of an intellectual-property transfer and Cardiva-related valuation allowance releases; this helped lift net income despite lower operating income.
- Revenue by business unit: Plasma $332.2 million, down 27.6%; Blood Center $307.5 million, down 3.2%; Hospital $210.6 million, up 8.9%. Hospital growth included acquisition contributions and higher TEG disposable sales.
- Cash and equivalents were $192.3 million; working capital $440.1 million; current ratio 2.7. Operating cash flow less capital expenditures was approximately $71.8 million.
- Balance-sheet debt was approximately $707.6 million carrying value, including $301.9 million under the term loan and $406.5 million net carrying value for the $500 million face-value, zero-coupon convertible notes due 2026. Net debt was $515.3 million. No revolving-credit borrowings were outstanding; the company reported covenant compliance.
Material changes and unusual items
- In April 2021, CSL advised it would not renew its U.S. PCS2 and disposable-kit supply agreement after its June 2022 expiration. FY2021 revenue under the agreement was $88.6 million, or 10.2% of total revenue. The company recorded a $20.9 million impairment and $5.0 million of additional expenses in Q4, and expected another $3.4 million of accelerated depreciation in FY2022 Q1.
- Q4 revenue was $225.0 million; gross profit was $81.8 million; operating loss was $21.2 million; net loss was $11.0 million. The impairment and other charges contributed to the quarterly loss.
- Cardiva was acquired in March 2021 for total consideration of $489.8 million, including contingent consideration. It added vascular-closure products to Hospital. Its preliminary purchase accounting included $251.6 million of goodwill; Cardiva contributed $7.7 million of post-acquisition revenue and a $7.6 million net loss. The valuation remained preliminary at year-end.
- Divestitures generated $32.8 million of gains in FY2021, including sales of U.S. blood donor software and Inlog Holdings France. These gains partly offset operating pressures. The company also recorded $15.7 million of restructuring and turnaround costs.
Outlook, management commentary and risks
- Management said COVID-19 reduced U.S. plasma collections and hospital procedures, while creating volatility in Blood Center demand. Manufacturing and supply chains remained operational without significant disruption. Management expected plasma collection volumes to recover by the end of FY2022, while acknowledging timing uncertainty.
- Management expects Blood Center revenue to continue declining at a low-to-mid-single-digit rate, citing lower transfusion rates, competition and pricing pressure. It expects hospital procedure volumes to improve as conditions normalize. No formal consolidated revenue or earnings guidance is provided in the supplied filing text.
- The CSL non-renewal adds customer-concentration and manufacturing-capacity risks. The ten largest customers generated about 49% of FY2021 revenue; CSL and Grifols together represented about 23%.
- Other disclosed risks include competition and price pressure, product quality and regulatory compliance, supply-chain and single-source dependencies, foreign exchange, cybersecurity and privacy, acquisition integration, and debt and convertible-note obligations. EU medical-device rules became fully applicable in May 2021, with compliance potentially requiring additional expenditure.
- The company disclosed a subpoena from the U.S. Attorney’s Office for the District of Massachusetts seeking documents related to apheresis and autotransfusion devices and disposables, including complaints, adverse-event reporting, regulatory clearances and design changes. Haemonetics said it was cooperating; the filing does not provide a clear estimate of any potential loss.
- The auditor issued unqualified opinions on the financial statements and internal controls. Management and the auditor excluded Cardiva and enicor from the internal-control assessment because of their recent acquisitions; the auditor noted these acquired entities represented 32% of assets and 71% of net assets, respectively.
Most important facts for investors to verify
- CSL’s expected June 2022 exit: revenue, margin and capacity impacts, and the pace and cost of any transition.
- Whether plasma collections recover as management expected and whether customer conversions to NexSys generate adequate disposable sales and returns.
- Cardiva integration, sales growth, contingent payments and final purchase-price allocation, including goodwill and acquired-technology valuations.
- Cash generation, debt maturities and covenant headroom, including the terms and potential dilution or cash-settlement effects of the 2026 convertible notes.
- Developments in the U.S. Attorney inquiry and any resulting regulatory, litigation or financial exposure; the filing does not state a clear potential-loss amount.