Haemonetics Corporation 10-Q Summary
Business Context and Reporting Period
Company: Haemonetics Corporation
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and nine months ended December 26, 2009 (Fiscal Year 2010)
Business Overview: Haemonetics designs, manufactures, and markets automated blood processing systems, including plasma and blood bank systems, surgical blood recovery systems, and diagnostics. The company also provides software solutions for blood management. Approximately 53% to 55% of revenues are generated outside the U.S.
Key Financial Metrics
| Financial Metric (in thousands) | 3 Months Ended Dec 26, 2009 |
3 Months Ended Dec 27, 2008 |
9 Months Ended Dec 26, 2009 |
9 Months Ended Dec 27, 2008 |
|---|---|---|---|---|
| Net Revenues | $165,169 | $155,447 | $476,326 | $445,482 |
| Gross Profit | $85,447 | $78,296 | $249,357 | $226,022 |
| Gross Margin | 51.7% | 50.4% | 52.4% | 50.7% |
| Operating Income | $25,835 | $24,491 | $79,184 | $67,434 |
| Net Income | $18,286 | $16,216 | $54,409 | $45,365 |
| Diluted EPS | $0.71 | $0.62 | $2.08 | $1.73 |
| Cash & Equivalents | $168,993 (as of Dec 26, 2009) | |||
| Working Capital | $286,962 (as of Dec 26, 2009) | |||
| Net Cash Position | $149,083 (as of Dec 26, 2009) |
Material Changes vs. Prior Period
- Revenue Growth: Net revenues increased 6.3% for the quarter and 6.9% for the nine months. Growth was driven by a 3.0% to 3.3% favorable foreign exchange impact and organic growth in Plasma and OrthoPAT disposables. Recent acquisitions contributed 1.6% to quarterly revenue growth.
- Profitability: Gross profit margins improved by 130 basis points (quarter) and 170 basis points (nine months) due to manufacturing efficiencies and favorable currency effects, partially offset by a shift toward lower-margin plasma products.
- Operating Expenses: Increased 10.8% (quarter) and 7.3% (nine months). Drivers included higher R&D spending, costs from recent acquisitions (SEBRA and Neoteric), and ERP Phase II implementation expenses. Restructuring costs were lower than the prior year.
- Product Mix: Plasma disposables revenue grew 10.4% (quarter) and 18.0% (nine months). Conversely, Red cell disposables declined 7.9% (quarter) due to fewer surgeries and a shift toward whole blood collection.
Guidance, Outlook, and Risks
- Acquisitions: The company completed acquisitions of SEBRA ($12.8M) and Neoteric ($6.6M plus contingent consideration) during the period. On January 31, 2010, Haemonetics announced a definitive agreement to acquire Global Med Technologies for approximately $60 million in cash.
- Capital Allocation: The company completed a $40.0 million share repurchase program in the first nine months of fiscal 2010, purchasing 735,497 shares.
- Foreign Exchange: Approximately 53-55% of sales are in foreign currencies (primarily Euro and Yen). A strengthening U.S. dollar negatively impacts results, while a weakening dollar provides a tailwind. The company uses forward contracts to hedge anticipated cash flows.
- Legal Contingency: A patent infringement lawsuit against Fenwal/Baxter resulted in an $18.0 million award (damages and royalties). Fenwal has appealed, and the damages remain unpaid and escrowed pending the appeal outcome. A new suit was filed regarding a modified Fenwal product.
- Market Risks: Risks include price volatility in petroleum products (plastics), regulatory uncertainties, and the impact of economic conditions on hospital capital spending.
Investor Verification Checklist
- Acquisition Integration: Verify the financial contribution and integration progress of SEBRA, Neoteric, and the pending Global Med acquisition.
- Legal Resolution: Monitor the status of the Fenwal/Baxter patent appeal and the potential collection of the $18.0 million award.
- Foreign Exchange Sensitivity: Assess the impact of current Euro and Yen exchange rates on future revenue and earnings, given the high percentage of international sales.
- Product Demand Trends: Confirm the sustainability of Plasma growth versus the decline in Red cell disposables due to market shifts toward whole blood collection.
- Capital Expenditures: Review ongoing ERP implementation costs and capital spending related to the next-generation Blood Bank apheresis platform.