Haemonetics Corp (HAE) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter fiscal 2011 Haemonetics Corporation earnings conference call. My name is Jasmine and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, to Ms. Lisa Lopez, Vice President, Corporate Affairs. You may proceed.

Good morning. Thank you for joining Haemonetics' first-quarter fiscal '11 earnings webcast. Today I am joined by Brian Concannon, President and CEO, and Chris Lindop, CFO and Vice President of Business Development.

Please note that our remarks today include statements that could be characterized as forward-looking. Our actual results may differ materially from the anticipated results. Additional information concerning factors that could cause actual results to differ materially is available in our 10-K and 10-Qs.

On today's call, Brian Concannon will review the highlights of the quarter, and Chris Lindop will review our operating performance, and then Brian will close with summary comments.

Before I turn the call over to Brian, let me mention the treatment in our adjusted results of certain items which by their nature and size affect the comparability of our financial results. Consistent with our past practice, we have excluded certain charges from the adjusted financial results we will talk about today.

In fiscal '11, our first-quarter adjusted results exclude $1.7 million in pretax costs related to certain transformation and integration activities associated with our Global Med acquisition, which were outlined in our fourth-quarter conference call in May of this year. As is our normal practice, our press release and website include a complete P&L and balance sheet, as well as reconciliations between our GAAP results and our adjusted results.

With that, let me turn the call over to Brian.

Thanks, Lisa, and good morning, everyone. For those of you who have read our press release this morning, you saw that this quarter we provided visibility to both reported and constant currency results. We have done this because to simply view reported results would mask the true growth of this business and its potential for the future.

Let me explain. In reported terms, revenue grew 6%; gross profit grew 4%; operating income declined 2%; and earnings per share grew 7%. However, in constant currency terms, revenue grew 8%; gross profit grew 11%; operating income grew 22%; and earnings per share grew 32%.

To say that currency had an adverse impact on our results would be an understatement. When we provided guidance for fiscal '11 last May we told you that currency headwinds would impact the bottom line and that plasma revenue growth would be skewed to the back half of the year. These currency headwinds were disproportionately weighted to Q1.

To be clear, our hedging strategy allows us to effectively plan the impact of currency on operating income; and this was incorporated into our annual guidance. Based on the hedges we placed last year, we know that currency headwinds will moderate throughout the remainder of fiscal '11. In fact, currency will represent a small tailwind during the final three quarters. Chris will provide an update on the expected currency impact for the rest of the year in a few moments.

As expected, our plasma business did not grow during the first quarter. In fact, it declined by 5%. So with plasma declining and Q1 reported revenue growth of 6%, you might ask -- do we remain confident about achieving the revenue growth goal of 9% to 12% for the full fiscal year? The answer is yes, and let me explain.

We told you that we expected plasma sales to be flat to slightly down in Q1, but returning to an accelerating growth trajectory in Q2 through Q4. We still expect this. Industry data showed double-digit growth in IVIG shipments in the June quarter, a key leading indicator of demand for raw plasma.

We expect to see plasma collections, and therefore our plasma revenues, continue to grow throughout fiscal '11, finishing at 6% to 8% growth for the year.

Now to demonstrate the impact this will have on our business, it is worth noting that had our plasma business grown in the first quarter at the 6% to 8% rate we anticipate for the full year, our overall revenue growth rate in Q1 would have been over 10%. So with plasma rebounding and currency moderating, we remain very confident in the growth potential of this business. This will translate to 9% to 12% revenue growth and double-digit operating income and earnings per share growth for the full-year.

Now let me briefly describe some of the other highlights of the quarter. We continue to see success in our IMPACT selling. In the quarter, 24 new accounts entered the program, taking advantage of our blood management solutions. This brings our total number of IMPACT accounts to 90 against our full-year target of 175. So I am very encouraged by our progress.

Not included in these numbers is a recently signed agreement to provide IMPACT Online to Consorta. Consorta is a Group Purchasing Organization which represents integrated delivery network shareholders, or IDNs, which all together own 260 acute care hospitals. This is a major new agreement, and we are very pleased that Consorta has selected Haemonetics to help these hospitals address their blood management needs.

Our TEG product continues to attract the attention of our customers as well. This is especially true with IMPACT selling, as TEG is used in over one-third of all IMPACT accounts today.

In the quarter, TEG disposables grew 24%. Clearly we are gaining traction here.

OrthoPAT is also attracting increased attention, with evaluations ongoing in 18 IMPACT accounts. OrthoPAT sales grew 4% in the quarter. Momentum continues to build, and we are encouraged by the increased activity.

The Puget Sound Blood Center and Overlake Hospital Medical Center announced their partnership to launch a new blood distribution system which is enabled by Haemonetics' BloodTrack HeamoSafe. This is a unique collaboration between a blood center and a hospital designed to improve the availability and access to all blood components.

We continue to work on the key development milestones of our Automated Whole Blood project. This is a major R&D program where the critical paths will be more clinical and regulatory than technical. We remain very excited about the opportunity to bring all the improvements made possible by automation and information management to our blood collection customers.

And finally, during Q1, we were able to capitalize on weakness in the markets and completed our planned $50 million share repurchase, acquiring approximately 900,000 shares.

So we are off to a solid start and continue to feel very positive about achieving our guidance for the year. We have much work to do as we implement our blood management vision, but we are making progress and we are very bullish about the opportunity we have to transform the way blood is collected and used.

With that, let me turn the call over to Chris Lindop, our CFO. Chris will cover the underlying trends at each of our product lines within the quarter and for the remainder of the year, and he will review in more detail the results of the first quarter.

Thanks, Brian. As Brian commented, in Q1 we are off to a solid start to achieving our goals for fiscal '11 with 6% top-line growth. This was achieved in spite of the expected temporary decline in our plasma business.

We knew that quarterly trends in plasma would create some volatility in our quarterly growth rates over the course of the year. Plasma will rebound over the rest of the year.

We also knew we faced currency headwinds in the beginning of the year, which will stabilize over the rest of the year. Despite both challenges, we drove 7% earnings per share growth.

Let me start by reviewing the revenue results, and then I will walk down the income statement, providing some color on the quarter.

Plasma, with $56 million in revenue for the quarter, performed a little below our expectations, with a mid-single-digit decline against a very strong comparable in fiscal '10. We guided plasma growth to flat to slightly down in Q1, returning to growth in Q2, and to low double-digit growth in the second half of the year.

Q1 was a little behind these expectations in part because two of our largest customers are behind their internal collection forecasts. In the quarter, same-store sales declined 7%; price contributed growth of 2%; and share was stable.

Recent PPTA data on IVIG distribution reflect a return to double-digit year-over-year growth in the June quarter, after two quarters of 5% decline in each of the March and December quarters. We anticipate this trend will work its way back through the supply chain, driving demand for plasma as the year progresses. And we remain very confident in our guidance for the plasma business at approximately 6% to 8% growth for the year.

The software solutions business had a good quarter. Sales were up 95% to $16.5 million in the quarter. Our Global Med acquisition contributed more than $7 million to software growth in the quarter, and the organic growth of our legacy software business was 9%.

We remain confident about the outlook for our software business and are confirming our previous guidance of between $72 million to $73 million for the full year.

Our platelet business, with revenues of $36 million, increased 6% in the quarter, continuing a trend of recovery in our distribution markets that we saw in the second half of last year. We are confirming the annual guidance for our platelet business of low single-digit revenue growth for the year, reflecting tougher comparables in the latter part of the year. And this is consistent with our long-term expectations for this product line.

Red cells delivered $11 million in the quarter, down about 4% year-over-year. As we said in May, we expect this market to be stable to modestly declining for the next four to five quarters, and there are no developments in the market which cause us to revisit this outlook. While we anticipate an improving trend in growth rates from this point on, we are confirming red cell growth guidance for the year of between a 2% decline and 1% growth over last year.

Moving to the hospital side of the business, our TEG and OrthoPAT product lines grew in the first quarter. As we have noted before, these products reflect underpenetrated blood management technologies with very attractive margins. We expect accelerated growth as a result of our IMPACT selling to hospital customers.

TEG disposables revenue was $5 million, growing 24% in the first quarter, a little better than the high end of our annual guidance of 18% to 22%.

The TEG disposables revenue growth came from a particularly strong equipment sales in the second half of last year. We have leveraged the Haemonetics brand and our global sales organization for this acquired product. We are confirming our growth goals for the year for our TEG business of between 18% and 22%.

OrthoPAT disposables revenue was $9 million in the quarter, growing 4%. We anticipate increasing momentum from the OrthoPAT, driven by the new IMPACT accounts that Brian described in his introduction. And we are confirming our growth goals for the year for our OrthoPAT business of between 9% and 14%.

Surgical disposables revenue was $16 million in the quarter, a 6% decline year-over-year. In the current quarter, surgical disposables growth was impacted by currency spot rates. Our current expectations for surgical disposables for the year is for flat to 4% growth.

With respect to our new products, sales grew 18% to $1.6 million in the quarter, led by the Cymbal system.

Equipment revenues were $13 million in the quarter, up 20%. While equipment growth primarily relates to revenues from our SEBRA acquisition, the organic growth of equipment revenues in the quarter was 5%. We continue to expect 6% to 11% revenue growth for equipment for the full year.

So in summary, we are off to a solid start against our plans for the full year. We are confirming our revenue growth target of 9% to 12% for the year, which we expect to achieve through improving plasma growth rates, which are planned at 6% to 8% for the full year based on near-term collection goals of our principal plasma customers, and by improving hospital disposable sales driven by IMPACT selling.

Now let me spend a few moments on currency and hedging before providing more details on the rest of the P&L.

As many of you know, we systematically use forward contracts to minimize variability in our reported operating results as a result of currency fluctuations. Because we have natural expense hedges in our cost structure, we only hedge a portion of our euro and yen denominated revenues. As a result, while we have highly predictable currency impacts on operating income looking out over the next 12 months, year-over-year volatility in spot rates can impact reported revenues.

In the first quarter, greater than 10% devaluation in the euro impacted the value of our unhedged European sales, as compared to our plan, by approximately $3 million. As a result, our revenue growth in constant currency was actually 2 points higher than our reported revenue growth in the quarter.

Now as I noted, hedges give us good visibility to the impact of currency on our operating earnings. And while the overall currency trend for the full year reflected in our guidance scenarios is for modest headwinds to operating income growth, the quarterly trends in our hedge rates reflected significant headwinds in the first quarter. This represented a $4.4 million headwind to operating income growth in Q1, which will moderate over the last three quarters to a $2.1 million headwind in operating income growth for the full year.

Now let me review the rest of the P&L results. And again, these numbers are as-adjusted, as Lisa said.

First-quarter fiscal '11 gross profits were $86.5 million, up $3.5 million or 4%. Gross margin was 53%, up 70 basis points over our fiscal '10 finish.

Remember that for the full year, we are guiding to gross margin in excess of 53.4%, which was based on a combination of leveraging our growth and structural cost savings. Cost-savings programs have been identified and resourced, and we anticipate the benefits accelerating as the year progresses. So in the quarter, we are off to a very good start against our goal of more than 100 basis points of gross margin improvement.

Operating expenses were $60.5 million in the quarter, up $3.9 million or 6.9%. Incremental expenses from the SEBRA and Global Med acquisitions were approximately $3 million out of the $3.9 million increase.

R&D expense was up over $1.1 million, funding development of our Automated Whole Blood Collection system and our Arryx blood diagnostics system. We managed operating expenses well in the quarter and remain focused on investing in the business.

While reported expense growth was more than gross profit growth in the quarter, as I mentioned earlier known currency trends inherent in our hedging strategy led to challenging comparisons and expense to gross profit dollar growth. Now there are two important points to note here.

First, in constant currency the ratio of expenses to gross profit dollar growth was less than 50%. Second, this trend in our reported results will reverse during the next three quarters. We currently anticipate that reported spending will increase at approximately 65% of reported gross profit dollar growth for the full year.

Remember, we build our plan and provide guidance on an annual basis. And we remain confident in our ability to meet these annual goals.

Operating income was $25.9 million in the quarter, down $400,000. Operating margin was 15.9% in the quarter. For the year we guided to operating margin of approximately 17%, and our current outlook is unchanged.

Our tax rate was 27% in the quarter, lower than the annual effective tax rate guidance of 30% to 31% that we shared at the beginning of the year.

As I have said before, our Swiss subsidiary is the principal party for most of our non-US business. And our corporate tax rate is positively impacted by a lower than average Swiss tax rate. We are happy to report a favorable ruling which further reduces the Swiss rate retroactive to fiscal '09, which has reduced our tax provision in the first quarter and which will benefit us going forward. Our outlook for the tax rate for the full year is now between 29% and 30%.

Adjusted earnings per share were $0.74, up 7%. We are affirming our original EPS guidance range of between $3.15 and $3.25, which is for growth of 11% to 14% for the full year. This will mark the eighth year of double-digit growth in adjusted earnings per share for your Company.

Moving to the balance sheet, in the quarter we generated $4.3 million in free cash flow before transformation costs and after paying annual bonuses for fiscal '10 and making net investments of $15 million in capital expenditures.

We have $83 million in cash on hand after completing a $50 million repurchase. We continue to have a strong cash generation model, and we are confirming our annual free cash flow guidance of greater than $85 million before funding $15 million of cash transformation costs.

So to close, we delivered solid revenue growth even as we faced challenging but temporary trends in our plasma business and currency headwinds. We also delivered good gross margin expansion and EPS growth in line with our expectations for the quarter and for the full year.

Our business fundamentals remain very strong, and we made excellent progress against our blood management solutions goals. With that, let me turn the call back to Brian.

Thanks Chris. With one quarter behind us, we are off to a solid start against our annual goals and remain confident about meeting our objectives.

At our investor conference last May, we told you that you should expect 5% to 6% growth from acquisitions; 6% to 8% growth from base business excluding plasma; 6% to 8% growth from plasma alone; and 2% headwinds due to the 53rd week in fiscal '10. Combined, this will provide us with revenue growth of 9% to 12% in fiscal '11.

In Q1, growth from acquisitions is on track, finishing up 6%. We expect that to continue throughout the rest of the fiscal year.

Our integration and synergy activities are going according to plan. And we continue to feel very positive about the contribution our recent acquisitions will make to delivering on our vision of blood management solutions from the donor's arm to the patient's arm.

Base business growth excluding plasma is up 4% in the quarter, led by TEG at 24% growth and OrthoPAT growing 4%. The OrthoPAT growth is worth mentioning as Q1 is typically our weakest OrthoPAT quarter and was down 2% in Q1 last year. So this is a good start, and we continue to see OrthoPAT sales accelerating in Q2.

IMPACT selling is gaining traction, with 24 new accounts in Q1. The activity around our blood and management solutions has never been higher. So we remain very confident in our ability to drive base business growth excluding plasma at 6% to 8% in fiscal '11.

Plasma sales in Q1 were modestly lower than we expected, declining by 5%. We expect plasma sales to grow low single digits in Q2 and low double digits in Q3 and Q4, finishing the year with growth of 6% to 8%.

This means that our total base business inclusive of plasma will grow 6% to 8% in fiscal '11. So with acquisitions contributing growth at 5% to 6%, base business inclusive of plasma growing 6% to 8%, and headwinds of 2% from the 53rd week in fiscal '10, you can see why reading remain very confident in hitting our revenue growth guidance of 9% to 12% in fiscal '11.

Acquisitions have and will likely continue to play an important role. To this point, I will remind you that we have $83 million in cash, plus solid free cash flow generation, to continue funding small, bolt-on acquisitions, acquisitions that allow us to build upon our growing blood management suite of products.

As I said earlier, IMPACT selling has never been stronger and the interest of our customers has never been higher. Our success is no longer limited to the US, as we now have three IMPACT accounts in Europe. Our full-year goal is to have 175 IMPACT accounts, and we feel really good about achieving this objective.

Hospitals and blood centers are working together to implement new and unique solutions to address their specific blood management needs. And Haemonetics' blood management solutions are enabling these efforts. In short, the activity is high and the numbers are starting to come.

Let me pause to thank all of our employees for their continued commitment. Our most challenging quarter of this fiscal year is now behind us. And despite these challenges, this team grew sales 6% and delivered 7% earnings per share growth, solid performance despite challenging trends in plasma growth and currency headwinds which we expected.

Finally, I want to take this opportunity to thank Brad Nutter for his contributions to Haemonetics. As you know, Brad has announced his intention to retire as Executive Chairman effective November 1. This marks the completion of a succession plan he put in motion when I was announced as the next CEO almost two years ago.

It is impossible to list Brad's accomplishments since joining our Company in April of 2003. His vision of becoming the leader in blood management solutions has guided us these past five years. And his commitment to our employees, our customers, and our shareholders is a legacy he leaves with this management team, a legacy we strongly embrace.

Brad's leadership will be missed, and we wish him and his wife Loren well in their retirement. And now, operator, we'd be happy to take questions.

(Operator Instructions) Larry Solow, CJS Securities.

Hi, good morning. Could you guys maybe just talk about just a little bit of color out there in the hospital environment on spending? It sounds like you are certainly gaining momentum on your IMPACT initiatives, with adding 24 new accounts.

But are you seeing this or do you feel this will add, help through -- with pull through of revenue? Or what's the color out there? Any improvement in hospital spending?

It's still a tough market out there with hospitals, Leary. But they are focused on really two things -- three, with a third being quality. But our focus being how we help them change their economics and improve clinical care.

That is exactly what our blood management solutions do for them, and we enable that through our IMPACT selling. These 24 accounts really speak to the traction we are gaining.

The agreement with Consorta, which is not included in these numbers because that was just a very recently signed agreement, is a major step forward and certainly an indicator of the desire for hospitals to change the way they manage blood today.

If you look simply at the 90 accounts we have through the end of the first quarter, and look at what has happened within those accounts, almost exclusively in the US minus three accounts as I said, those accounts from a total growth standpoint are up right around 25% over last year in terms of revenue growth.

Okay. Then just a follow-up on the Consorta deal. Obviously you're not going to have the IMPACT Online in 270 of the facilities.

But how does that work? Is there some sort of upfront number that will be installed? Or is it just you are closer to the customers now?

Yes, we have done a very good job working with Consorta to target the hospitals that we think could have the biggest impact. And no surprise, these are hospitals that are high in both cardiovascular and orthopedic surgeries.

So the other important thing to note here, Larry, is that Consorta is shareholder accounts. So their ability to influence the decision making here is high.

So this is really a significant agreement for us. We are targeting these types of GPOs where we believe they can influence their hospitals to rapidly move.

So you think about how we target the GPO; carry that down into the IDN or shareholders; and within those the real focus is on the cardiovascular and orthopedic heavy accounts.

Steven Crowley, Craig-Hallum Capital Group.

Good morning gentlemen. I should say and gentlewomen.

Thanks, Steve.

You brought a smile to her face.

In terms of OrthoPAT, you gave us some nice color there as to how Q1 is typically the seasonally weakest quarter. I'm trying to rationalize your enthusiasm about the momentum you are gathering there with that up 4% number, which was off the pace of the last couple of quarters and down about $1 million sequentially.

Can you help me understand what's going on there a little bit better?

Remember that orthopedic surgery is very seasonal. And our Q1 is typically our weakest season relative to orthopedic sales. So you are seeing that continue.

That's why I wanted to say let's look at what happened last year. Last year, OrthoPAT sales were down 2% in the first quarter, and we accelerated back throughout the year, growing at 5% for the full year.

We've come out of the blocks at 4% growth reported, 6% constant currency. So we are seeing the momentum build there.

We provided visibility with IMPACT because we are seeing TEG be a leading product; but obviously the OrthoPAT, the secondary product that is gaining high interest in these IMPACT accounts. So that's why we wanted to provide that color.

And that's why frankly, Steve, that's why I'm very confident in our ability to hit our OrthoPAT guidance for the full year.

And Steve, with respect to the sequential comp, remember we had an extra week in the fourth quarter.

Okay, that's a good reminder on that. On the topic of blood management and potential drivers, I'm hoping you can give us a little bit of a status update on the JCAHO process and their potential recommendations in terms of timing and how you are planning for that being a landscape item for your business.

Yes, nothing more to report there. I think you know that they are in a pilot testing of the metrics they want to use to measure. They've narrowed that down to -- Lisa, I think it's seven -- seven specific metrics.

As we had talked about, our IMPACT Online will be able to take those seven metrics, whatever they may be -- because we know we can affect all of them -- take those metrics and we will create a report with our IMPACT Online product with the hit of a button, that will print off a report for an IMPACT Online customer that will provide the measurements of those metrics at the time that they need them for any JCAHO inspection.

Joshua Zable, Natixis.

Good morning, everyone. Thanks for taking my questions. I guess the elephant in the room here, at least in my room, is just related to plasma. Obviously plasma was weak. I know you guys did give us a heads-up coming into the year that plasma should be weak in Q1 and you expect it to accelerate over the course of the year.

I know you saw shipments in June up 10%. So I guess that's obviously something positive to point to. But the plasma collectors out there, a number of them have continued to say that they expect the second half of the year to be weak.

So I guess I'm just trying to reconcile what may be -- other than that shipment number, which could very well be minimum shipments that have to go out, maybe what gives you the confidence that you're going to see the market accelerate? Or your shipments accelerate I should say. Thanks.

Yes, Joshua, what I'd tell you is again it's no different than what we've told you before. With the four of the five major customers that we have agreements with, we continue to meet with them, we continue to forecast on a 12-month rolling basis.

With two of our customers, we expected flat to low single-digit decline in the quarter. It was a little more than that. It was actually 3% constant currency. But we had two customers that are not achieving their forecasts.

In other words, the demand is there. They still have been unable to ramp back up their collections sufficient enough to meet their demand.

That demand is not going to go away. So we continue to feel very good in terms of what we've told you and how we see this ramping throughout the fiscal year. Barring anything else that could happen out there.

But all the data, certainly from what we get from our customers and the industry data, continues to indicate this type of trend.

Okay, great. Then just as a follow-up here on TEG, can you just talk about the equipment placements? I know you guys last year had real strong equipment placements. You obviously pointed to the disposables number, but that tends to be a leading indicator.

So any color around that? Thanks, guys.

In Q1, we had 93 devices placed.

David Lewis, Morgan Stanley.

Good morning. Chris, just given all the currency rates moving around, I just want to confirm your view of constant currency top-line growth and EBIT growth last year, whether it's on an adjusted or constant currency basis. We have either down 17.5% constant currency EBIT, or an adjusted basis flat. Does that jive with your numbers?

Yes, about right. Yes, I don't have the numbers in front of me, David; but that was the effect last year.

Okay. Then in the press release you talk about a 120 euro rate and a 110 yen rate. Those numbers don't seem to correspond to where currency is now and they don't correspond to where the average rates were last year. So how were those rates assumed?

When you set up a system for constant currency reporting, David, you hold currencies at fixed. So the absolute dollar numbers in constant currency are not what is relevant; it's the comparisons in percentages. It's simply an assumption made in the system to hold currency frozen. And then you can see the effect on the underlying business without any currency fluctuations.

Scott Gleason, Stephens.

Hey, Brian; hey, Chris. Thanks for taking my question. Hey, just real quick, Brian. When we look at expense control in the quarter that was definitely one of the hallmarks I think, especially when you factor out the one-time integration and restructuring costs. Can you talk a little bit about where some of those savings are coming from?

Yes, there's a number of different programs that we look at every year with structural cost savings, and those numbers will fluctuate year to year, but you've heard us talk about those in terms of the individual projects.

We are also benefiting from some of the changes that we had made last year in our Pittsburgh facility, so that is carrying forward for us. So it's across the board, a number of different areas.

We've also benefited with changes that we made in R&D over the course of the last 18 months or so. You can see now that as R&D spending had declined for a period, we are now starting to accelerate that spending as we have more and more of an appetite for projects for our future. So that's at a very high level where the operating expenses have gone.

Great. Then Chris just real quick, when we look at the R&D spend in the quarter, $7.9 million, is that a good run rate when we start thinking throughout the year for it to grow off?

Yes, for this year, yes. Maybe trending up modestly, but yes.

Dave Turkaly, SFG.

Thanks. Just comment quickly, was there any impacts on the M&A environment on the plasma side in terms of maybe the surprise to what you saw?

No, no, nothing that we noted that you could attribute to the Grifols-Talecris. It's more about people having internal collection targets and not achieving them as quickly as they had hoped.

Then a follow-up would be, can you update us where you stand on Express penetration today?

Yes, I will grab that one, Dave. Express penetration has not changed as demands have been for the most part where they are today. The collectors have no need to accelerate beyond the current trend.

But as we talked about, as that continues to grow throughout the year and as that continues to go with mid to high single-digit plasma growth over the next couple of years, we will see the pressure on Express -- the opportunity that Express represents -- continue to increase.

It doesn't mean that we are not in conversations with people today; we are. But the Express numbers have not changed from where we ended the fiscal year.

Larry Keusch, Morgan Keegan.

Hi, good morning. I guess, Brian, the first question that most people are just trying to work through is, again, the visibility that you have on the plasma business. I understand that you are taking a lot of data points here as you think about your forecasts.

But I guess the one question I want to come back to is, as you've indicated there were two customers that appear to be behind on their desires to get their collections up. So the question is really -- are they still communicating to you that that is their intention, that they want to drive those higher?

And I guess incorporated in that answer also is -- if you look back over time, how reliable has the PPTA data been in helping you forecast what the business is going to do?

Well, answering the first question, I feel very comfortable with what these customers are telling us. We have found that their information to be reliable, sometimes even a bit conservative. So I feel very comfortable with the information that our customers are providing to us and feel good about that as we go forward.

Relative to PPTA, I think we have all seen the information from PPTA. But I think that information has been -- once you get comfortable that they have their arms around these trends -- found that information to be pretty reliable. What I've found with that data, it's not a matter of if the data is right; it's if the timing the timing of the data and when it occurs is as accurate as it is sometimes said to be.

Okay. Then secondly, I'm just trying to make sure I understand this, coming back to Chris's comments around the Swiss tax rate down. If our math is correct, you can take a 1% reduction in your anticipated tax rate for the year. That could be as much as $0.05 to earnings.

So I'm just trying to understand. Would you spend against that, and that's why the guidance is remaining unchanged? Or are you again, given it's only the first quarter, just trying to be conservative? Because obviously there are a bunch of moving parts still in front of you for the remainder of the year.

Yes, I think the latter really, Larry. As you say, there are moving parts and it's an abundance of caution. We jumped on our guidance last year probably too quickly and probably regret that in retrospect.

James Sidoti, Sidoti & Company.

Good morning, Brian. Good morning, Chris. Good morning, Lisa. Just one more on plasma.

You said that the data shows a little bit of a rebound in demand for IVIG. Do you have any sense what is driving that?

What we have objectively, Jim, is the PPTA shipment data, which has it up I think 12%. And that was -- actually Morgan Stanley published that data recently.

Okay. Do you have any sense though why there was a rebound, what the indication was that was driving that demand?

Pure guess on my part, Jim; but I think you probably had the distributors of these products doing over-correction with their inventories is probably a piece of that there.

But I think it's the whole market correcting back and finding the real growth rate of the industry overall.

Okay. Then just a follow-up too on whole blood. I know you are still five or o six quarters away before that starts to contribute. But can you just give us an idea? What are the milestones that we should be looking for to make sure that you are on track with that project?

Well, we certainly have some of the developmental components that we need to resolve. We are working now with customers and in fact have engaged a consultant to help us work with customers to understand the areas that we will be able to impact their business with this product, and what that will mean. What it will mean financially, what it will mean clinically. So that will help us understand what commitments we can make to customers and help us as we go through the whole process to understand overall pricing of our products.

And then of course we have got the regulatory pathway that we need to complete. So those are the things and the areas that we are focused on right now.

Daniel Owczarski, Avondale Partners.

Yes, thanks, good morning. Brian, I think you mentioned -- just to go back to IMPACT -- that revenues at those accounts were up 25%. Are you able to see some of their data about on the cost side how they are able to reduce their blood costs, or what the true impact is of that program to their cost structure?

Yes, Dan, some customers share that with us, some don't. I would say that all engage and our business is up because it's having an impact. That's maybe stating the obvious.

But it's different by customer just how much exposure they provide to us and give to us relative to their own business.

But we are getting more and more visibility there. I will tell you, Dan, the excitement with our customers around this is very high. There is a lot of activity taking place out there relative to IMPACT.

Okay. Then on platelets, I think you had the comment that you have seen recovery in Europe. Can you give any color on the platelet business in that comment?

The recovery was in our distribution markets versus Europe. And it goes it what we talked about last year, especially if you remember in Q1 and Q2 of last year, our distribution markets were down significantly. So this is a reflection of that recovery.

If you look, our Asia growth rates are around 30% and that is predominantly a platelet business. Not exclusively, but that's a big driver.

Our ELA, Eastern Europe and South American business, which again has a reasonable concentration of platelets, is also up around that -- actually more than that.

Actually closer to 50%.

(Operator Instructions) Steven Crowley, Craig-Hallum Capital Group.

Yes, two FX-related follow-ups. Given that you've given -- provided us a schedule for constant currency performance this quarter, are you going to be doing that on an ongoing basis? And can you give us a feel for what the constant currency performance using that methodology would have been like last fiscal year versus fiscal 2009?

Well, I think as I don't have those statistics in front of me, Steve, unfortunately -- I didn't expect to answer questions on last year. If you go to our 10-K, all of that data is in there.

Last year, we had currency headwinds. The operating income -- excuse me -- I misspoke. Currency tailwinds at the operating income line. So that data is in our 10-K We will continue to provide these tables going forward.

Okay. So we are going to see those big benefits that helped you last year; you are going to compare against that, so we will be able to cut through it.

Now on surgical, you mentioned there was a particular FX shift this quarter that dampened the reported performance of that business. Can you help us understand on a constant currency basis or how big that hit was? And thanks for taking my questions.

Sure. In constant currency, surgical was down about 3%. So there was an incremental 3% headwind from currency.

David Lewis, Morgan Stanley.

Thank you. Just, Chris, a follow-up on plasma here just on the margin front. You talked about initiatives to dramatically improve gross margins over time. I wonder if you could talk about the trends you have seen in gross margin improvement, perhaps quantify that over the last several quarters.

Then could you comment on the EBIT contribution of plasma relative to your other product lines? Thank you.

Yes. The EBIT contribution of plasma as we have said in the past, we have not quantified that for you; but we've said that it has a high contribution because the selling costs in that business are so light.

Just to give you sort of FY09 to FY10 gross margin comparisons, total gross margin was up 200 basis points in Q1 '11 compared to Q1 '10. Gross margin was up about 130 basis points in the plasma business. Of course on declining revenue.

Chris, that's very helpful. Is it safe to assume that plasma is the highest EBIT margin segment in the Company?

Yes. I guess I would say it's consistent. The highest I would say are the TEG and OrthoPAT products where the gross margins are so very high and we can leverage our patient salesforce. So I would say it's probably at or around an arithmetic average for the whole business in EBIT margin.

There are no further questions at this time. I would like to turn the call back to Mr. Brian Concannon for closing remarks. You may proceed.

Thank you, operator. I am pleased with our first-quarter performance. We are off to a solid start.

Blood management is gaining traction. We added 24 IMPACT accounts this quarter, which now brings the total number of IMPACT accounts to 90. This means that in the last 15 months 90 accounts have engaged Haemonetics in providing blood management solutions that bring both clinical and economic benefits to their business. And more importantly, the activity around IMPACT selling is really starting to gain momentum as our recently signed agreement with Consorta indicates.

Some have wondered aloud when blood management solutions is going to start to provide meaningful results, generating top-line growth and solid earnings power. While I am not ready to say we have arrived, I do think it's fair to say that it is not a matter of if but rather when. And I do not feel like the when is too far in our future.

We have targeted a total of 175 IMPACT accounts for fiscal '11, and we are clearly off to a good start in Q1. We will continue to give you more visibility to these results later this year.

So with plasma sales gaining momentum, currency headwinds moderating, and IMPACT selling gaining further traction, we remain very confident in our ability to achieve our guidance ranges for fiscal '11. Thank you for your time this morning.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.