Haemonetics Reports Strong Results

Haemonetics Corporation (HAE) reported strong results for the second quarter of fiscal 2010. Earnings per share were 69 cents, beating the Zacks Consensus Estimate of 65 cents and the year-ago earnings of 58 cents.

Sales

Total revenues in the reported quarter were $157 million, increasing 8% year over year. Excluding a favorable foreign currency translation (FX), revenues increased 6% year over year. On a geographic basis, U.S. sales represented roughly 48% of total sales and increased 12.5% year over year. International sales increased 3.5% year over year.

Plasma disposables revenues increased 19% year over year to $59 million. Growth can be attributed to higher global demand for plasma collections, higher pricing and implementation of several long-term contracts with customers in the reported quarter. Platelet disposables revenues increased 3% year over year to $37 million due to the company’s strong distribution network in different key markets.

Red Cell disposables revenues declined 2% year over year to $11 million. The decline was primarily due to lower demand for red cells from hospitals as a result of a reduction in elective surgeries owing to the global recession. Hospital disposables revenues increased 2% year over year to roughly $30 million.

Margins

Haemonetics reported an expansion in margins. Gross margin increased 30 basis points (bps) year over year to 51.5%. Research and development (R&D) expenses as a percentage of sales increased 50 bps year over year to 4.1%. Selling, general and administrative (SG&A) expenses as a percentage of sales declined 120 bps year over year to 30.2%.

Higher gross margin coupled with lower SG&A expenses as a percentage of sales increased the operating margin 100 bps year over year to 17.2%.

Balance Sheet & Cash Flow

Haemonetics ended the quarter with cash and cash equivalents of approximately $178 million. The company’s outstanding debt stood at $20 million at the end of the quarter. Free cash flow was $24 million for the quarter.

Guidance

Haemonetics affirmed its full fiscal 2010 guidance. For the year, sales growth is expected in the range of 8% to 11% year over year. Operating income should grow in the range of 12% to 15% year over year. Earnings per share should be between $2.75 and $2.85.

Haemonetics Corporation is the market leader in developing and manufacturing blood collection and processing technology. Haemonetics operates in a very competitive environment, both for manual and automated systems, which includes big players like Baxter International Inc. (BAX), Abbott Laboratories (ABT) and Medtronic Inc. (MDT).

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