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Haemonetics Reports Q3 Fiscal 2009 Results

Haemonetics Corporation (Haemonetics) has reported GAAP net revenues of $155.45 million for the third quarter of fiscal 2009, up 15.5%, compared with the GAAP net revenues of $134.59 million in the year ago quarter. It reported a net income of $16.22 million, or $0.62 per diluted share, for the third quarter of fiscal 2009, compared with the net income of $14.35 million, $0.54 per diluted share, in the year-ago quarter.

Excluding restructuring charges in both fiscal 2008 and 2009, third quarter fiscal 2009 adjusted operating income was $25 million, up 20%, and adjusted earnings per share were $0.63, up 10%. Year-to-date, adjusted operating income is $70 million, up 30%, and adjusted earnings per share are $1.80, up 18%.

Brad Nutter, Haemonetics’ chairman and chief executive officer, said, “Despite challenging global economic conditions, we are seeing strength across our diversified product lines. I’m particularly pleased to note that year-to-date reported revenue growth is double digits in all of our geographies. Haemonetics’ outlook for the future is strong.”

Q3FY09 And Year-To-Date Financial

As noted, Haemonetics’ third quarter fiscal 2009 net revenues were $155 million, up 16%. Excluding the effects of currency, third quarter net revenues grew 15%. Year-to-date net revenues are $445 million, up 18%. Excluding the effects of currency, year-to-date net revenues grew 14%. The company expects the impact of currency to be neutral to revenue growth in the fourth quarter.

Haemonetics also reported third quarter gross profit of $78 million, up 18%. Gross margin grew 90 basis points to 50.4%. Year-to-date adjusted gross profit is $226 million, up 20%. Year-to-date adjusted gross margin is 50.8%, up 100 basis points.

Adjusted operating expenses were $53 million in the quarter, up 17%. Year-to-date adjusted operating expenses are $156 million, up 16%. More than half of the year-to-date expense growth came from the impact of foreign exchange and from acquired businesses whose expenses were not included in fiscal 2008 results.

Third quarter adjusted operating income was $25 million, up 20%, and operating margin grew 50 basis points to 16.0%. Year-to-date adjusted operating income is $70 million, up 30%. Operating margin is 15.7%, up 140 basis points.

Third quarter and year-to-date interest and other income declined due to lower interest rates, exchange rate volatility in the quarter, and lower invested cash as Haemonetics spent $44 million to acquire Haemoscope in November 2007 and $60 million on a share repurchase in the first half of fiscal 2009. Third quarter tax rate was 31.0% as the company benefited from the $1 million favorable resolution of a tax contingency. Year-to-date tax rate is 32.0%.

Adjusted earnings per share were $0.63, up 10% in the quarter, and are $1.80, up 18% year-to-date.

Haemonetics ended the quarter with $125 million in cash, and $10 million of debt. During the quarter, the company generated $14 million of free cash flow.

Revenue growth highlights

Plasma disposables revenue was $54 million for the quarter, up 30%. Year-to-date plasma disposables revenue is $150 million, up 31%. Haemonetics’ plasma business continued to benefit from long-term contracts and from global growth in plasma collections as demand for IVIG increases. Haemonetics expects its plasma business will be an ongoing revenue growth driver for the company.

Blood bank disposables revenue was $36 million for the quarter, up 10%. Year-to-date blood bank disposables revenue is $108 million, up 8%. Haemonetics’ blood bank business benefited from the impact of exchange rates, unit growth in emerging markets, and a contract with Canadian Blood Services which made Haemonetics its preferred provider of platelet collection systems. Haemonetics converted the Canadian Blood Services’ blood banks to Haemonetics’ technology over the course of the first half of fiscal 2008, realizing the comparative benefit of the conversions in the first half of fiscal 2009.

Red cell disposables revenue was $13 million for the quarter, up 5%. Year-to-date red cell disposables revenue is $37 million, up 7%. Revenue growth in the quarter was driven by the U.S. business and by the MCS mobile collection system.

Software and services revenue was $10 million for the quarter, down 10%. Year-to-date software and services revenue is $30 million, up 1%. Excluding services, software revenue growth was 12% in the quarter and 27% year-to-date. Software growth was driven by implementation of contracts negotiated in fiscal 2008, a new contract with the US Department of Defense, and growth in the plasma industry.

Surgical/diagnostics disposables revenue was $23 million, up 21% for the quarter. Year-to-date surgical/diagnostics disposables revenue is $66 million, up 30%. Haemonetics acquired the TEG® Thrombelastograph Hemostasis Analyzer business in November 2007, and the Surgical/Diagnostics revenue benefited from sales of the TEG system in the quarter and year-to-date. The TEG business contributed $5 million in the quarter and $15 million year-to-date.

OrthoPAT orthopedic perioperative autotransfusion system disposables revenue was $9 million for the quarter, level with the third quarter of fiscal 2008. Year-to-date OrthoPAT disposables revenue is $26 million, up 5%.

Equipment revenue was $10 million for the quarter, up 21% and $27 million year-to-date, up 23%. Platelet collection equipment sales were particularly strong in the quarter.

Haemonetics reported balanced double digit revenue growth in all geographies year-to-date, with North American sales up 21%, European sales up 17%, Japanese sales up 11%, and Asian sales up 21%.

Fiscal 2009 guidance

The company raised its annual revenue guidance to 15-16% growth (from 12-14% growth) on stronger than planned sales of plasma disposables, blood bank disposables, and equipment sales, with strong contribution from each of the geographies. Adjusted operating income is expected to grow 23-25%, and adjusted earnings per share are expected to be between $2.40 to $2.44, up 14-16%. The company further expects gross margin improvement of 120 basis points, operating margin improvement of 120 basis points, and a tax rate of 32.5% in the year.

For the full year 2009, the company expects to generate $40 million of free cash flow.