Haemonetics Corporation Q4 2011 Earnings Conference Call Transcript - Thomson StreetEvents

Haemonetics Corporation Q4 2011 Earnings Conference Call Transcript

Haemonetics Corporation Q4 2011 Earnings Conference Call Transcript - Thomson StreetEvents
Haemonetics Corporation Q4 2011 Earnings Conference Call Transcript
Published May 02, 2011
Published May 02, 2011
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Abstract:

Final Transcript of HAE earnings conference call or presentation, 2-May-11 10:00am ET

  
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The following is excerpted from the question-and-answer section of the transcript.

(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)

Question: Larry Solow - CJS Securities - Analyst: Hi, good morning guys.

Answer By: Brian Concannon - Haemonetics - President and CEO

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: Larry Solow - CJS Securities - Analyst: I'm going to leave the plasma alone, because you guys gave some good color there and I'm sure some others will ask. But just on the gross margins, they've been sort of flat, slightly up the last couple of years and I know we've been looking at some increases. Why all of a sudden do you see this nice acceleration expected of 200 basis points, is it just a lot of things coming together at once? Any more color on that, or what's the real main driver behind it?

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: Larry Solow - CJS Securities - Analyst: Okay, and then just the quick follow up. I think this year you -- normally I know you guys target spending about two-thirds of your increase in gross profit, your incremental gross profit increase, and this year it looks like you spent less than 50% of that. I know normally you sort of create like a discretionary pool. Was there anything this year that was vital that you cut or what did you not spend on? And do you sort of have a little bit of that excess pool carried over for this year?

Answer By: Brian Concannon - Haemonetics - President and CEO

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: Larry Keusch - Morgan Keegan & Co., Inc. - Analyst: Hi, good morning, guys.

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Larry Keusch - Morgan Keegan & Co., Inc. - Analyst: Just-- so 2 questions for you. First, Brian, I want to make sure I caught this, could you run through again on auto whole blood? You made a distinction between something that you were going to launch and the end of fiscal 2013, and then the time line associated with the, I guess full blown auto whole blood system that you're developing?

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Larry Keusch - Morgan Keegan & Co., Inc. - Analyst: Okay, got you. And then the second question is, if you could help us understand sort of Management's thought process as well as the Board's thought process in the following. When you look at the balance sheet for the Company, you've got $200 million in cash, virtually no debt, as Chris indicated, you're going to generate roughly $85 million in free cash flow. And I'm not understating the importance of the $50 million in share repurchase, but I'm just really trying to understand why this Company continues to want to run with what I would consider a very underlevered balance sheet with very good cash flow generation and obviously mechanisms, if you're going to do acquisitions. Which is, you clearly indicated, outside of just your cash position. So if you could walk us through, again philosophically, why the focus on maintaining so much cash? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Steven Crowley - Craig-Hallum Capital Group - Analyst: Good morning. Thanks for taking my questions.

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Steven Crowley - Craig-Hallum Capital Group - Analyst: In terms of the fourth-quarter performance, I was looking at the performance of the segments versus what you had guided coming out of Q3. I think you largely tackled the $5 million to $9 million negative variance in plasma versus those thoughts by largely calling that a Japan issue. But in software, there was about a $3 million negative variance from the $70 million that you had guided to coming out of Q3 versus what you actually delivered last year. Now, I'm trying to understand what transpired there and what our level of comfort about that business growing, as rapidly as you think, should be?

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Steven Crowley - Craig-Hallum Capital Group - Analyst: That's helpful. My follow up is historically you've talked about some aspirational goals for the growth of the business being kind of 10% to 12% on the top line and 12% to 15% on the operating income and EPS line. Should we view those as under review or what are your-- have they changed at all? What kind of color can you give us there? And thanks again for taking the questions.

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: James Sidoti - Sidoti & Company - Analyst: Good morning, Brian, good morning, Chris. Can you hear me?

Answer By: Brian Concannon - Haemonetics - President and CEO

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: James Sidoti - Sidoti & Company - Analyst: First question, you talked a little bit about an OrthoPAT recall, but I think you said units shipped prior to 2002. Now that's pretty early in the lifecycle of the product, is that less than 10% of the fleet that's out there?

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: James Sidoti - Sidoti & Company - Analyst: Alright. My follow up to Chris, can you tell us what the impact of currency was in fiscal 2011 and what you would expect it to be in 2012?

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: David Lewis - Morgan Stanley - Analyst: Good morning.

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: David Lewis - Morgan Stanley - Analyst: Brian, first a strategic question. You mentioned [some room] on your prepared results. Just given your experience with the Japanese government, or JRC specifically, and with the Terumo/Caridian deal and the government's preference for sometimes hometown competitors, would you expect any share disruption in the next 2 years based on the integration of Terumo and Caridian?

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: David Lewis - Morgan Stanley - Analyst: Okay, and just a quick follow up maybe for Chris. Chris, I'm still confused on gross margin outlook. If your 200 basis point expansions, the biggest GM year in 3 or 4 years-- I appreciate last year was pressured, because of the lack of organic growth, but can you just point to a specific product line that may be driving the performance of which you're guiding to? Because it doesn't sound like it is currency necessarily, but I imagine there's at least 1 or 2 primary drivers of that? That would be helpful, thank you.

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: David Turkaly - Susquehanna Financial Group / SIG - Analyst: Thanks. Just quickly back to the, what you mentioned in the quarter on the SG&A spend, can you quantify what impact that bonus accrual actually had because the number for SG&A was a little bit under what we were expecting? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: David Turkaly - Susquehanna Financial Group / SIG - Analyst: Thanks, and then given the large impact, do you expect the new accounts to have in the year, can you -- do you have any goals in terms of the number of total accounts for impact? And did I hear you right, did you say $9 million of that incremental disposable business will come from those accounts? Thanks.

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Joshua Zable - Natixis Securities (Natixis Bleichroeder) - Analyst: Thanks for taking my questions. The first one just goes back to Q4, 2 items. First on the plasma, I know you guys did a good job explaining and I appreciate it. I guess I'm just still trying to understand, from a timing perspective, in middle of the quarter, you guys had said sort of there's a 17% increase in average weekly shipments, 5% increase, so obviously with the business being effectively flat, I'm just wondering sort of intra-quarter, what changed? Because I know now this quarter you're seeing things up and I'm just kind of wondering timing wise. And then also on Q4, just the TEG business, obviously a key growth driver here was flat, just what's going on there? And then I have a follow up on the outlook. Thanks.

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Joshua Zable - Natixis Securities (Natixis Bleichroeder) - Analyst: That's very helpful, guys. And then just on the outlook, sort of 2 clarity questions. First, Chris, on the operating margin sort of guidance, you said Q1 should be down. I'm just trying to get clarity, down sort of sequentially from Q4 or from the year sort of average? And then question two, on the growth on the hospital side of the business, 7% to 10%. I know you have a new cell saver, you're having some obviously recall on OrthoPAT. I guess I'm just trying to understand sort of how we should think about the business going forward, because when you guys give color next time, sort of how you're doing relative to your expectations? Thank you.

Answer By: Brian Concannon - Haemonetics - President and CEO

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: Charley Jones - Barrington Research Associates, Inc. - Analyst: Good morning. Thanks for taking my questions.

Answer By: Brian Concannon - Haemonetics - President and CEO

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: Charley Jones - Barrington Research Associates, Inc. - Analyst: This first question is on gross margin. I was just hoping you could go a little bit further and be a little bit more specific on the impact to expect, price mix and manufacturing efficiencies, to have on the 200 basis point improvement?

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Charley Jones - Barrington Research Associates, Inc. - Analyst: I mean maybe qualitatively, which one is the biggest impact? How much -- or I guess the major question is around, I guess the one I'm most curious about is manufacturing efficiencies. Can we assume that 50 basis points of that is from there?

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Charley Jones - Barrington Research Associates, Inc. - Analyst: So as maybe a quick follow on to that, if we put ourselves out 12 months and, assuming all the businesses are growing at the same rate, which they obviously won't, do you still see gross margin improvement possibilities out into the future from there? And then my second question is on capital allocation, if I'm hearing you correctly, the Company wants to grow double digits and you want to plan for that. So, you've got $85 million in cash flow and $50 million already spoken for. Can we assume the Company is willing to go to a net debt position over the next couple of years to achieve that or do you need to do that and I guess maybe even more importantly, would that even be a consideration that you would contemplate?

Answer By: Brian Concannon - Haemonetics - President and CEO

Answer By: Chris Lindop - Haemonetics - CFO, VP- Business Development


Question: Scott Gleason - Stephens Inc. - Analyst: Hello, Brian and Chris, thanks for taking my questions.

Answer By: Brian Concannon - Haemonetics - President and CEO


Question: Scott Gleason - Stephens Inc. - Analyst: Brain, I guess first to start off with just in terms of the guidance, if we can dig into it a little bit more. Can you give us a sense of first on the plasma side, does your guidance incorporate any potential share gains from Baxter as that contract comes up? And then secondly, I guess when we look at the hospital business, the 7% to 10% growth that's implied there, can you give us a sense for how much you guys are kind of factoring in, in terms of kind of elective procedure rebounds or just kind of the overall market conditions? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by

Answer By: Brian Concannon - Haemonetics - President and CEO

Answer By: Brian Concannon - Haemonetics - President and CEO

Table Of Contents

Haemonetics Corp Q2 2012 Earnings Conference Call Summary – 2011-10-31 – $54.00 – Final Brief of HAE earnings conference call or presentation 31-Oct-11 2:00pm GMT

Haemonetics Corp at UBS Global Life Sciences Conference Transcript – 2011-09-19 – $54.00 – Final Transcript of HAE presentation 19-Sep-11 1:00pm GMT

Haemonetics Corp Q1 2012 Earnings Conference Call Summary – 2011-08-01 – $54.00 – Final Brief of HAE earnings conference call or presentation 1-Aug-11 2:00pm GMT

Haemonetics Corp Q1 2012 Earnings Conference Call Transcript – 2011-08-01 – $54.00 – Final Transcript of HAE earnings conference call or presentation 1-Aug-11 2:00pm GMT

Haemonetics Corporation Q4 2011 Earnings Conference Call Summary – 2011-05-02 – $54.00 – Edited Brief of HAE earnings conference call or presentation, 2-May-11 10:00am ET

Haemonetics Corporation Q3 2011 Earnings Conference Call Summary – 2011-01-31 – $54.00 – Edited Brief of HAE earnings conference call or presentation, 31-Jan-11 10:00am ET

Haemonetics Corporation Q3 2011 Earnings Conference Call Transcript – 2011-01-31 – $54.00 – Final Transcript of HAE earnings conference call or presentation, 31-Jan-11 10:00am ET

Haemonetics Corporation Q2 2011 Earnings Conference Call Summary – 2010-11-01 – $54.00 – Edited Brief of HAE earnings conference call or presentation, 1-Nov-10 10:00am ET

Haemonetics Corporation Q2 2011 Earnings Conference Call Transcript – 2010-11-01 – $54.00 – Final Transcript of HAE earnings conference call or presentation, 1-Nov-10 10:00am ET

Haemonetics Corporation Q1 2011 Earnings Conference Call Summary – 2010-08-02 – $54.00 – Edited Brief of HAE earnings conference call or presentation, 2-Aug-10 10:00am ET

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