Gerard Gould - VP, IR Brian Concannon - President and CEO Chris Lindop - CFO, EVP Business Development

Matt Tiampo - Craig-Hallum Lawrence Solow - CJS Securities James Francescone - Morgan Stanley Jim Sidoti - Sidoti & Co. Larry Keusch - Raymond James David Roman - Goldman Sachs Matt Larew - William Blair Anthony Petrone - Jefferies & Company Jan Wald - The Benchmark Company

Thank you. Good morning.

Thank you for joining Haemonetics' fourth quarter fiscal '14 conference call and webcast. I'm joined by Brian Concannon, President and CEO; and Chris Lindop, CFO and Executive Vice President of Business Development.

Please note that our remarks today will include forward-looking statements. Our actual results may differ materially from anticipated results.

Additional information concerning factors that could cause actual results to differ materially is available in the Form 8-K we filed this morning, as well as in our recent 10-K and 10-Qs. On today's call, Brian will review the highlights of fiscal ’14 and the outlook for the key elements of our strategy which will influence our performance going forward.

Chris will review operating performance in more detail and will provide guidance for fiscal '15 as well as our preliminary outlook for fiscal ’16. Then Brian will close with summary comments.

Before I turn the call over to Brian, I would like to 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 costs from the adjusted financial results we'll talk about today.

In both fiscal ’13 and fiscal ’14, we have excluded pre-tax transformation, integration and restructuring costs associated with our previously announced Value Creation and Capture program and other productivity initiatives. Additionally, the earnings information discussed for all periods excludes deal-related amortization expense.

Further details of excluded amounts, including comparison with fiscal '13, are provided in our Form 8-K and have been posted to our Investor Relations website. Our press release and website also include a complete P&L and balance sheet, as well as reconciliation of our GAAP and adjusted results.

With that, I will turn the call over to Brian.

Thank you, Gerry and good morning everyone. This morning I want to start by covering two topics.

First, I will review the secular market headwinds impacting half of our business, providing you with clear detail about what happened in fiscal ’14 and what you can expect in fiscal ’15 and beyond. And second, I want to cover our growth drivers, representing the other half of our business, why these grew double-digits in fiscal ’14 and why we expect that growth to continue.

So starting with the secular headwinds. About 20% of our business supports U.S.

blood collections. U.S.

hospitals are increasingly implementing blood management techniques to decrease the frequency of transfusions. As a result, blood center revenue in the U.S.

continues to be under pressure from rapid declines in the demand for blood products and the prices hospital pay for blood components. This is driving increased competition among blood centers, leading to changes our U.S.

blood center customers had not contemplated as little as one year ago. Red cell transfusions in the U.S.

continue to decline from approximately 40 for 1,000 of population at the beginning of fiscal ‘14, to what was consistent with best practice nations levels in the low 30s by the end of fiscal ’15. The most significant change driving this decline is a reduction in transfusion triggers following the release by the American Association of Blood Banks of new guidelines that mirror best demonstrated practices elsewhere around the world.

The decline in U.S. demand has the greatest effect in our whole blood and double red cell businesses which derive 65% and 85% of revenues from U.S.

customers respectively. We expect these trends to moderate in fiscal ‘16 as protocol changes are fully implemented.

So changes we thought would occur over a five to eight year period of time are now occurring over to a two to three-year period, much more rapidly than anyone expected. While this is a near-term challenge, it is good for patients in the practice of transfusion medicine, and we expect it to be substantially behind us in fiscal ’16.

Let me now turn to our growth drivers: plasma, TEG and emerging markets. Over a year ago, we announced that we would invest in these parts of our business because we felt we could drive more rapid growth.

We were right. In fiscal ’14, these three parts of our business represented 53% of our disposables revenue and combined, grew 13% in constant currency.

That growth breaks down to 11% in plasma, 21% for TEG and 20% in the emerging markets. We will continue to invest in these growth drivers.

These investments are paying off as a substantial portion of our business portfolio is delivering solid growth, and we remain encouraged with the prospects for continued growth there. Now you’ve heard us refer to fiscal ‘15 as a year of transition.

Chris will provide more detail in a moment but in summary this means that fiscal ‘15 will be a year in which our results will continue to be muted by several factors that we've highlighted in the past. The secular headwinds in the U.S.

market will continue and these will be further affected by the net loss of volume as a result of recent tender decisions, the pricing declines associated with the HemeXcel contract win and yen currency headwinds. In fiscal ’15, these challenges will more than offset the growth from our growth drivers, but we expect these challenges to moderate and that continued success with our growth drivers combined with a more stable U.S.

market should allow us to return to our historical growth rates in fiscal ‘16. Growth rates with revenue in the mid-single digits and operating income and earnings per share in the mid to high teens.

Important in all of this is that our strategy has not changed. We continue to make great progress and that will become more evident over the next 12 to 24 months as we bring new products to market that complement our market-leading suite of blood management solutions.

Fiscal ‘15 will be a year in which we plan to bring four new products to market, positioning our company for accelerated growth in subsequent years. Our plans will include a next-generation software product for commercial plasma collection, a major upgrade of our BloodTrack software offering, a next-generation TEG device with enhanced features and in the important whole blood space, a comprehensive software product for donor recruitment and retention that will complement the Donor Doc phlebotomy product already in the market.

Additionally, we continue to work with the FDA toward approval of the SOLX red cell storage solution with our own filtration. In fiscal ‘15 we will focus squarely on gathering the data needed to prove the capabilities of both our existing and new products and of equal importance, their ability to bring measurable and meaningful process improvement and cost savings to our customers.

We fully expect to enter fiscal ‘16 positioned to help our blood center customers provide meaningful value to our hospital customers as our blood management strategy delivers the expected value. Our strategic focus does not stop with us bringing blood management products to market.

We will improve profitability by bringing value engineering to our whole blood kits, reducing the cost of these kits thereby allowing us to better compete in markets throughout the world, markets that are embracing leukoreduced technology and markets that are three times larger than the U.S. market.

And our Value Creation and Capture initiatives continue. We’re expanding our focus with new initiatives that will streamline our manufacturing footprint, improve quality and further expand our savings to greater than $60 million by fiscal ’18.

We’re working hard to position Haemonetics for even greater success in the future but some of this progress is masked by the headwinds we've identified. Many of these headwinds will abate by the end of fiscal ‘15 and the real earnings power of this business will emerge, earnings that we expect to return to double-digit growth in fiscal ’16.

I’ll now turn the call over to Chris Lindop to review the financial highlights of the quarter and our current thoughts on guidance and then I will provide some closing comments. Chris?

Thank you, Brian. In the fourth quarter, total revenue was $241 million, down 4% while our base business revenue aside from whole blood increased 2% on a constant currency basis.

The weakness of the yen resulted in 140 basis points of headwinds to our reported revenue growth rate in the quarter. The major shift in the yen is expected to continue to impact growth rates in fiscal ’15.

Plasma disposables revenue was $74 million in the quarter, an increase of $6 million or 9% as reported and 10% in constant currency. North America plasma disposables grew $4 million or 9% and our customers continue to be optimistic about end market demand.

Our guidance range for plasma growth in fiscal ‘15 is 7% to 9%. Given the contract extensions we recently reported, we are well-positioned with contracts covering approximately 80% of our commercial plasma business for nearly 5 years through Q3 of fiscal ’19.

Blood center disposables revenue, not including whole blood, declined 12% to $51 million with red cells down 12% and platelets also down 12% in reported currency and 9% in constant currency. The red cell disposables revenue decline was driven primarily by the U.S.

market decline. Currency and timing of orders on the part of distributors in emerging markets led to the decline in platelet revenue in the quarter.

Whole blood revenue declined 18% to $45 million with $30 million in North America, $10 million in Europe and European distribution markets and $5 million in Asia, Pacific and Japan markets. North American whole blood revenue declined by $8 million reflecting the trends and demand for red cells and the impact of a transitional OEM supply contract with Pall Corporation that recently expired as expected.

Whole blood revenue declined in Europe by $2 million due to the previously noted loss of the low-margin tender at the beginning of last year, and whole blood revenue grew by 10% in the emerging markets. We expect our blood center business to be down between 10% to 12% in fiscal ’15.

Hospital revenue grew 1% to $33 million in the quarter. Surgical disposables revenue was $18 million in the quarter, flat as reported and up 3% in constant currency driven by strength in the emerging markets.

In diagnostics, TEG disposables revenue was $9 million, up 28% in the fourth quarter driven by increases in North America and emerging markets. We installed nearly 1,800 TEG devices in the last three fiscal years and we fully expect strong disposables growth to continue.

Taking into account the current surgical trends and ongoing OrthoPAT market headwinds along with continued strong growth in TEG, we are expecting revenue growth of 4% to 6% in our hospitals disposables business for fiscal ’15. Software solutions revenue was $19 million, up 2%.

We previously referenced a steady pipeline of software opportunities as hospital customers increasingly recognized software’s importance in identifying and implementing blood management solutions. That remains the case and we expect 2% to 4% growth in software in fiscal ’15.

Equipment revenue was $19 million in the quarter, up $2 million or 10%. This reflects certain recurring orders received in the third quarter of fiscal ‘13 that occurred instead in the fourth quarter of fiscal ’14.

Our installed base of equipment, which is the combination of purchased and placed devices, increased 7% in fiscal ‘14 and this bodes well for future growth in our disposables revenue. Fourth quarter fiscal ‘14 adjusted gross profit was $118 million, down $7 million from the prior year quarter.

Adjusted gross margin was 48.8%, down 90 basis points year-over-year and two-thirds of this decline related to currency trends discussed already. Adjusted operating expenses were $83 million, unchanged from the prior year's fourth quarter.

One factor which impacted operating expenses in the quarter was the decision by our Board of Directors to exercise discretion to approve partial bonus payments to eligible employees, not including Brian at his request. Offsetting this were certain SG&A cost reductions in response to revenue pressures.

Importantly our commitment to funding planned growth and infrastructure investments in emerging markets as well as in R&D to support the development and introduction of new products were unchanged in the quarter. Adjusted operating income was $34.2 million in the quarter, down $6.6 million.

Operating margin of 14.2% was down 210 basis points. In addition to planned spending and variable compensation, the weak yen contributed to impact profitability.

Our operating income reflects currency headwinds of $3 million in the fourth quarter related to the devaluation of yen denominated revenues. Interest expense associated with our loans was $2.4 million in the quarter.

Our tax rate was approximately 24% compared with 23% in the fourth quarter a year ago. We continue to benefit from the ongoing implementation of our global tax strategy.

For fiscal ’15, we expect our tax rate to return to around 26% reflecting our relative profitability in certain tax efficient jurisdictions in the near-term. Adjusted earnings-per-share were $0.46, down 18% attributed primarily to the timing of the variable compensation accrual I mentioned earlier.

Now turning to guidance. Brian mentioned that we’ve described fiscal ‘15 as a year of transition, with continued profitable growth in plasma, TEG and emerging markets being offset by previously disclosed trends in three areas: The U.S.

blood collection market, currency and fiscal ‘14 bonus funding. While we’ve discussed these elements in the past, let me explain in more detail how they come together to influence our expectations for fiscal ’15.

Our revenue plan includes $40 million to $50 million of growth in plasma, TEG and emerging markets. Growth drivers that represent approximately 50% of our business; that's roughly 10% year-over-year growth from these businesses in the aggregate, and we feel confident about our ability to deliver this growth based upon the momentum we have in each of these areas of the business.

However revenue headwinds exist in the U.S. blood center business and these fall into two previously disclosed categories.

First is the American Red Cross business, impacted by the tender loss of 1.4 million whole blood collection disposables representing roughly $25 million of revenue. Not all of this impacts our outlook for fiscal ‘15 because of the schedule transition plan in the early part of the year.

Second, revenues in our U.S. donor business impacted by trends in red cell utilization was approximately $155 million in fiscal ’14.

As we previously indicated, this market is expected to decline approximately 10% in fiscal ’15, so we are planning for roughly $15 million of incremental headwind related to the overall U.S. market decline.

A 25% decline in the yen will present roughly another $15 million of revenue headwinds in fiscal ‘15 and much of this devaluation of Japanese revenue will also impact operating income. So net, net roughly $50 million to $55 million of revenue adversity which we expect to anniversary by fiscal ‘16 will more than offset $40 million to $50 million of growth in our plasma, TEG and emerging markets franchises.

These headwinds will obviously also impact earnings. First, the devaluation of our yen denominated revenues will impact operating income in fiscal ‘15 by approximately $11 million.

Second, our fiscal ‘14 performance did not provide for full payout of variable compensation and our fiscal ‘15 guidance accounts for roughly $9 million headwind resulted from paying a full bonus. Lastly, the U.S.

revenue trends that I just discussed exacerbated by the impact of lower volumes and our fixed manufacturing costs will combine with price concessions provided to HemeXcel. In the aggregate, the combination of U.S.

volume loss and pricing, currency and full bonus funding will drive $45 million to $50 million of operating income adversity in fiscal ’15. Now faced with these challenges, we took prudent steps to focus our priorities and our resources.

While increased investments in key initiatives will be funded by the contribution from our growth drivers, net cost savings of approximately $13 million are also planned. Recapping our fiscal ‘15 guidance.

On a reported basis we expect plasma disposables to grow approximately 7% to 9%; blood center disposables, including whole blood, to decline 10% to 12%; hospital disposables to grow 4% to 6% and software grow 2% to 4%. Overall we expect revenues to decline 0% to 2% in a reported basis and grow 0% to 2% in constant currency.

On an adjusted basis, our gross margin is expected to approximate 50% and operating margin roughly 16%, each down 100 basis points versus fiscal ’14. We're guiding to an adjusted EPS range of between $1.85 and $1.95.

In addition to providing this full year guidance, I want to point out that the first quarter of fiscal ‘15 is expected to deliver less than its proportionate share of full-year earnings. Considerations include the relative impact of currency in the early part of the year and cost reduction initiatives that are expected to generate benefits beginning later in the first quarter.

Additionally the earnings contribution from emerging markets is expected to accelerate as fiscal ‘15 progresses. As in the past, our website includes revenue and income statement scenarios which are based on the elements of guidance provided in my comments for the full-year.

We ended fiscal ‘14 with $192 million of cash, up $13 million this year. This reflects an investment of $23 million for the acquisition of the assets of Hemerus Medical and $42 million of debt repayment.

In fiscal ’14, we generated $123 million of free cash flow before funding $57 million of restructuring and capital investments related to our Value Creation and Capture initiatives. In fiscal ‘15 we expect free cash flow generation of approximately $125 million before funding $80 million of restructuring and capital investments also related to our VCC activities.

As detailed in a schedule on our website we previously planned to utilize $100 million of free cash to fund expenditures associated with our manufacturing transformation and other VCC initiatives in fiscal ’14. We spent less cash in fiscal ‘14 than we had planned and as a result that spending is now expected to occur in fiscal ’15.

As part of our ongoing program for Volume Creation and Capture, today we announced plans to begin consultation with employee representatives regarding ceasing operations and closure of our Bothwell, Scotland plant. By fiscal ‘18 incremental annual VCC savings over and above the $30 million planned to be realized and reflected in our guidance for fiscal ‘15 are now expected to be approximately $30 million to $35 million for a total of $60 million to $65 million in annual savings.

Turning to fiscal ’16, as Brian noted we expect to return to mid-single digit revenue growth and mid to high teens adjusted earnings-per-share growth. The VCC and restructuring investment should be coming to a conclusion in fiscal ‘16 helping to drive margin expansion and a more competitive cost position for our products around the world.

All this will occur as the call in our free cash flow investment in these programs declines to approximately $10 million to $15 million in fiscal ’16. So while the current market trends in the U.S.

have been challenging, we believe that we have responded to them responsibly without endangering the elements which will drive our strategy and that we are well-positioned for a return to growth in fiscal ‘16 and beyond. With that, I'll turn the call back over to Brian.

Thanks, Chris. We’re seeing dramatic changes in the U.S.

blood collection market, including consolidation and affiliations as well as increased focus on operational efficiency and direct supplier costs. This represents the short-term headwind but a longer-term opportunity for us.

The American Red Cross and HemeXcel representing approximately 60% of all U.S. collections opted to pursue competitive single source supply tenders for whole blood collection sets.

With demand down dramatically, pricing naturally became a key driver. Unfortunately with the American Red Cross, it was the dominant driver and we did not win.

It would not be appropriate for us comment on pricing, but trust that we were extremely aggressive. We have more to offer than just price, it will be up to us to prove the value of blood management solution, and this is exactly what we plan to do.

Price was also an important consideration in winning the HemeXcel tender. But this customer also recognized the growing importance of working with hospital customers to improve logistics and enhance patient blood management.

And by winning the HemeXcel business, we have a willing customer anxious to become more relevant in affecting the total cost of the transfusion for hospital customers versus the smaller cost of collection. With HemeXcel, we will be able to rapidly test the validity and value propositions of our key new products.

I am pleased to report that the transition of HemeXcel sites to our whole blood collection product is well underway and ahead of schedule. With 80% transition to date we expect the full transition to be completed by mid-May, less than a month from now.

I said it before, it bears saying again. There is no change to our strategy.

Our vision that patient blood management would dive economics that in turn create an intense demand for automation and innovation in collecting, processing and supplying blood, has been reinforced by the market developments of fiscal ’14. That vision is being played out at a much more rapid pace but quite similar to what we saw in our commercial plasma business a number of years ago.

Our growth drivers will offset a significant portion of the headwinds we've identified. We will continue to deliver strong growth in fiscal ‘15.

This is an important fact and sometimes lost in the challenges we are facing. Our VCC initiatives position us to compete in this new environment and planned value engineering initiatives will allow us to further reduce manufacturing costs over the next two years.

Our new product development is on track to deliver four new products, further enhancing our market-leading blood management offering. We're doing the right things and by doing what is right, we expect to return to mid-single digit revenue growth and mid to high teens operating income and earnings-per-share growth in fiscal ’16.

With confidence in our strategy, our Board of Directors recently authorized the repurchase of up to $100 million of Haemonetics shares. We have scheduled our annual investor day event for Tuesday, May 20 here in Boston.

At that time we will provide detail into the operational and financial aspects of fiscal ‘15 as a transitional year and fiscal ‘16 as a year when we expect to return to the more traditional growth profiles you’ve seen from us in the past. We will also highlight important new products such as our donor flow automation with Donor Doc Phlebotomy, our paperless phlebotomy product that’s received 510(k) clearance and the complementary blood donor recruitment and retention software upgrade.

Additionally we will highlight our new BloodTrack offering, next-generation TEG device and next-generation plasma software all of which we expect to have available later in fiscal ’50. Finally, we will update you on our continued work with the FDA toward approval of the SOLX red cell storage solution with our own filtration.

We will provide opportunities to learn more about our VCC initiatives, new product pipeline, plasma business and blood management solutions in separate breakout sessions and our management team will be present to answer any questions that you may have. Like last year, we will have an expanded product fair designed to show the power of blood management, to give you self-sufficient time to spend with our team to witness the broadest array of devices, disposables and software available on our industry.

We look forward to spending the day with you and I am confident you will share our enthusiasm for the future. Looking at our the prospect beyond fiscal ’15, our business fundamentals remains strong.

We are bringing new solutions to market to reduce costs and improve patient care. We have a strong and expanding global footprint, differentiating new products in the R&D pipeline and increasingly advantageous cost structure and the broadest array of products and services in the blood industry.

We are well-positioned to meet the needs of our customers in this rapidly changing market, capture global market share and drive sustainable profitable growth. The steps we've taken over the past several years have put us in a good position to react to the current market dynamics.

Again, I want to thank our employees, especially for staying focused during this past year as our industry embraced changes far greater than those contemplated only 12 months ago, ensuring that we continue to take care of our customers’ needs. The action taken by our Board of Directors to approve incremental variable compensation for our employees is recognition of these efforts and very appropriate considering market conditions in fiscal ’14.

I am proud of all that our employees have achieved in light of the challenges we face. With that, we’re happy to take your questions.

Hey Chris, in the past I think you guys have provided us, and I heard your commentary around Q1 and operating income contribution, but just wondering if -- I think in the past operating expenses for the first half of the year have been, maybe a little bit less than the full 50% of the year. Do you expect operating expenses to be skewed to the back half again this year as they have been in previous years?

Hey, Matt, this is Brian. Before I let Chris answer that question, just a quick note from us here at Haemonetics and for those on the phone you may not be aware, the Steve Crowley who was the analyst at Craig Hallum, Matt has replaced Steve a few months ago.

And Steve moved on. Unfortunately Steve was killed in a car accident on April 11.

So Matt, from all of us here at Haemonetics, we send our condolences to you and to all the people there at Craig Hallum.

Thanks, Brian. We really appreciate that.

Yes. With regard to the spending as we implement some of the VCC changes and other transformation activities in the early part of year, we should see the spending, not following the same pattern as in prior year.

Just one more for me. Is the share repurchase that was announced, is there an impact to that contemplated in the guidance on the share count?

Yes.

Brian, you briefly discussed obviously the whole blood outlook and all. Maybe you could -- with the U.S.

market appearing to be at least a little bit on hold in terms of milestones that we may see, maybe you could talk about your plans or your strategies for the international market, which obviously is a much greater opportunity and size. I realize it is diversified and split up and fractionated, so maybe not all in one lump sum, but maybe you can discuss your outlook there, your strategy and how you can maybe get some better penetration on that side?

Yeah, Larry, as you know, part of our strategy was to win here in the U.S. We won HemeXcel, we are working with that customer and working independently to reduce the costs of those products.

When we acquired the Pall transfusion medicine business we knew that it had a cost position that was a bit challenged outside the United States and we saw the impact of that, with that tender we lost at the beginning – the European tender we lost at the beginning of last fiscal year. The margin of that was single-digit.

So we began an initiative this past year to really focus on doing that. The benefit of doing that with existing customer is you can move more rapidly through the form, fit, function analysis where we’ve begun that process, we fully expect that to play out in fiscal ‘15 and beyond.

It's part of what we're doing in our manufacturing as well, looking at certain things that will take over responsibility for manufacturing that are components being manufactured by others today. So there is an entire process that’s involved here.

We will give more visibility to that exactly at our May investor conference but that's absolutely our focus. Now these are tenders that are determined basically by country.

There's not a lot of these coming up in fiscal ’15. So while we have fiscal ‘15 to really work through this process, we don't expect that we’re going to see a number of opportunities play out there but we’re beginning to work now with customers in key countries around the world, where we do expect us to be in a much better position in fiscal ‘16 and beyond to take a lower cost product and some new blood management solutions, many of those being launched this year to bring to bear on those markets.

Just switching gears real quick, just your outlook on the hospital outlook for next year, if I'm doing my math correctly it looks like surgical, OrthoPAT, that mixture is about, set to be about flat, is that correct?

Yes.

Any color on that? I mean I guess is that --

It's a return to growth in the much larger surgical business offset by continuing -- unfortunate continuing declines or erosion in the OrthoPAT business.

Brian, you continue to reiterate that you are committed to executing on your existing strategy in whole blood and blood management. That said, the investment spending in M&A that you've done over the past several years have all been directed at a market that now looks like it is materially smaller and less profitable than you thought at first.

At what point do you think you need to reevaluate your strategy?

James, it won't surprise you to hear me say that we have been reevaluating that. And that's why we remain committed to it.

Look, there is no question that, had we known that this market was going to see some of the declines but it was going to go through, that we may have paused before we had done the acquisition of the Pall transfusion medicine business. But there's also no question that to be a blood management company we needed to be in whole blood.

It was the largest part of blood collection that we were not in around the globe, it's 97% of what our customers do in terms of blood collection. So we needed to be in that space.

Timing arguably wasn't the best but it is also a part of what has enabled us to really come after the VCC initiatives, driving some very significant savings and some returns for our shareholders, much of that still yet to come. So I can appreciate the question and you can appreciate as well that that's something we have evaluated ourselves.

We still believe strongly that what we're doing there, bringing automation to this very manual process, much like we did in plasma is going to pay off. It's going to be a bit more challenging and that it’s a country by country specific implementation but we remain committed to that for all the reasons why we were successful in plasma.

And then Chris, can you help us at all think through the key drivers of earnings for 2014 to 2015? Obviously you've got several headwinds in terms of the ARC contract loss, some other whole blood pricing, incremental variable comp.

On a positive side you've got a tailwind for manufacturing. Is there anything else that I'm missing there and can you help us quantify what the relative impact of those items are?

Sure. Let me recap some of the elements from the script.

So in the category of headwinds we have about $11 million from currency yen pricing or yen - devaluation of yen revenues. We have about $9 million of incremental bonus year-over-year, so just comparison of one year to the next has that as a funding requirement and we have between $25 million and $30 million of headwinds from the North American business which is a combination of pricing provided in advance of VCC initiatives to win the HemeXcel business.

It's some volume loss which in effect impacts the absorption of our fixed manufacturing costs and it’s just the flat out loss of the ARC business and the profitability of that. So those are the combination of headwinds, in the aggregate we’ve sized for you in the $50 million to $55 million range.

We had ongoing VCC initiatives; we accelerated some of those items and also implemented other transformational restructuring activities in response to the market conditions and generated about $30 million of savings. But obviously you can only -- there's a practical limit on what you can do in those circumstances without impacting the real growth drivers of the business.

And it’s a question of that the muscle of the business if you will. And so those are the sort of net headwinds and tailwinds from a profitability perspective.

We reinvested the contribution from the growth drivers which I said were $40 million to $50 million of revenue in the growth initiatives that we have in emerging markets and plasma so that we’re keeping them moving forward. Does that help or have I confused you?

Can you just give us a little more color on the timeline for SOLX and the approval there and if there is any possibility of regaining some of the Red Cross business over the next three or four years?

Well, the clinical trial is kicking off I think this week or next as expected. We are hopeful that we will have obviously the trial done and a response from the FDA by the end of this year, fiscal year and that will be in the market in ’16.

And I think when we’re in the market with that product, we will have a clear understanding of how much leverage it gives us in terms of innovation.

And part of what we’re going to be doing this year, Jim, is really proving out the economic value of SOLX as well. We will be going in and doing a value mapping – value stream mapping process to really understand the economics of how blood centers are processing blood today and what the impact of this product will mean for that.

In terms of your question relative to the American Red Cross, virtually every contract in this space has the opportunity to opt out if new technology is brought and I certainly expect that their contract has that. I don't know the length of that contract but you can appreciate that as we bring new science to market, we will be bringing that to our existing customers first with an obligation to those who have committed themselves to these initiatives and then taking it beyond that.

So what that means for the future will be determined upon how rapidly we can implement those solutions.

And then can you just give us guidance on what you expect for the donor business outside the U.S. for fiscal 15?

Specifically the platelet business?

Yes. The platelet business will grow next year.

We don't guide purposely, Jim, to individual product categories but the groups. The growth driver there will be first of all associated with the emerging markets, in fact, primarily associated with emerging markets.

And you think overall platelets will be up next year or just outside the U.S.?

Well we don't have a platelet business in the U.S. If you remember that, I think that past many years ago, so yes it will be outside the U.S.

growth.

Hey Brian, obviously the American Red Cross tender did not go in the direction that you guys were hoping. Obviously underscores the willingness of competitors out there to be extremely aggressive in price.

So I heard everything you said on your whole blood management value proposition but I guess the big question I have is, what concrete things are you guys doing to really prove the value of that, so when you go back to some of these organizations that you can really demonstrate cost savings again in the context of environment where your competitors are willing to be extremely aggressive? Obviously you just mentioned SOLX, but I'm just wondering exactly what you guys are going to do here?

It’s SOLX, but it is everything that we've talked about in terms of the solution. This will be a year where we will select a number of blood centers, we will bring our solutions offerings in total -- the new products we are bringing as well to prove out these solutions.

In other words, what does it take to not only collect a unit of blood today. But if you’ve got a transfusion that costs roughly a U.S.

hospital about $1,100 per unit, how can a blood center affect, not just the cost of collecting, the $200 collection component if you, roughly the $200 cost of collecting, but how can a blood center affect the overall $1,100 transfusion? And that's the real opportunity – how our blood centers become more relevant in that space, and we’ve got a willing customer who wants to work through that and understand how they can help their customers in that space and become more relevant in blood management.

And that’s what we will be doing in fiscal ‘15 for the select number of blood centers with these customers.

So as you think into ‘16, should we be thinking about that just so that we can calibrate expectations here, that again that will be a year of -- again assuming that your products are cleared by the FDA, of getting it to your customers, demonstrating the value and we really shouldn't for ‘16 think about a whole lot of incremental new business? Again, I'm really just trying to understand the timeline for how you are thinking about all of this starting to gain some traction.

Larry, this is Chris. Let me take a shot at that.

As we said, we believe that an achievable target for ‘16 is in that mid-single digit range. And if half of our business plasma, emerging markets and TEG are growing in the approximately 10% range it implies that across the rest of the business will be relatively flat.

So I think you should think about ‘16 from a whole blood perspective as being a year of positioning – a year of stability and a year of positioning for future growth.

Yes, so to put that in perspective, Larry, we've not dialled [ph] a tremendous amount of incremental revenue from our whole blood initiatives. We've given ourselves what I’d call some headroom as we bring these to market to ensure we don't get out ahead of ourselves.

But fiscal ‘15 will be a year that really helps us understand whether or not we’ve been conservative in fiscal ‘16 or not. We realize that fiscal ‘16 really speaks to stability in the whole blood market with growth coming from our growth drivers and not being eaten up by declines in those markets as they will be this year.

And then just two other quick ones. For you Chris, and I will just quickly ask them then you can answer.

For you Chris, just I want to make sure I understand the free cash flow generation that you are looking for ‘15 and ‘16 and then how much you will be offsetting by VCC spending. And really where I am going with this is I am trying to understand what your usable free cash flow or available free cash flow is for other activities over the next two years and your capital allocation sort of objectives what that is.

And then I don't know if I missed this but the whole blood revenues that you are actually expecting for fiscal ‘15 and how much share repurchase is actually incorporated into your guidance.

Well that was more than -- that was the longest follow-on question in the history of mankind. Okay, just in general, about $125 million of free cash flow before transformation in fiscal ‘15 which about $80 million after tax benefits will be committed to manufacturing network optimization and other transformation activities.

We’re not giving ‘16 guidance just now beyond the direction of guidance that we provided, so I can’t really give you a free cash flow number for ‘16 at the moment.

But as part of that, Larry, what would say is we’re committed to spending about $160 million in our VCC initiatives, so you can do the math in terms of what will be left after what we spent in fiscal ‘14 and ’15. So you will see that it’s reduced significantly, sorry Chris.

That’s all right. So in terms of the plan and the guidance we provided, we’ve made an assumption about how much of the share buyback we would get after this year.

Of course, we’re going to have pricing grid and we’re going to buy at some prices and not others. So you have to make a somewhat arbitrary assumption about that, for I think conservatively we said $50 million of share buyback.

Other than that, our capital allocation policy is pretty clear, acquisitions, service debt, buyback shares. And we’ve told you what we think we will commit to buying back shares and we will get after it at an appropriate rate as market conditions permit.

Thank you and good morning and I appreciate all the detail that you’ve provided this morning. I wanted just to start with the whole blood business.

I guess sort of implied, and Brian you have walked through this a couple of times in your fiscal ‘16 mid single-digit growth targets, sort of half the business growing at a double-digit rate which would say half the business flat. I guess I'm just trying to understand a couple of moving parts here on the whole blood side.

On the one hand, you have the adjustment of utilization rate in the U.S. But if I take a step back it seems like globally there is a continued trend to minimally invasive surgery conversion to laparoscopy in emerging markets, et cetera, that would seem to put sustained downward pressure on the business on a global basis.

Can you maybe just help me think through that first?

Sure. Well think about a global -- global whole blood or global blood collection market, because roughly 90 million collections worldwide, about 45 million of those are in the leukoreduced collection, and that's really the market that we look at, we target.

So if you think about the U.S. being 12 million of that, you can see where we look at the remaining part of this market being much bigger.

And leukoreduction is increasing, even in emerging markets our customers are looking at implementing leukoreduced technology because it produces a better red cell product at the end of the day. So we're seeing the leukoreduced market continue.

We’re going to see the overall 90 million contract as part of what we're seeing today but you’re going to see the leukoreduced grow as a part of that become a big piece of it, but then you’re going to see that 90 million start to grow again. I don't expect it's going to have growth like we see in the plasma market today.

But it’s going to grow because when you think about it, about half the world's population, when you look at emerging markets, sits in those markets and they can't meet demand today for their populations. Now that demand isn’t there but it's increasing, if you think about the U.S.

market alone, 12 million collections for 300 people, China today has about 25 million collections for a 1.2 billion plus. So you can see that today they're not meeting the demand for their blood.

So we expect that to continue to grow and we expect importantly leukoreduced portion of that to continue to grow. And that’s why we stay so committed to this and focused on this and believe our strategy is the right strategy.

Maybe just a follow-up on the earnings issues [ph] here. I know, Chris, you've been through this a couple of times.

It sounds like the Japanese yen and the compensation accrual are sort of one time-ish in nature. Obviously currency moves are hard to predict.

But part of the mid to high teens earnings growth targets for fiscal ‘16 do contemplate sort of a normalization of those two factors. Is that a fair way to think about it?

Absolutely yes, and for that, in that assumption, we hold currencies steady and we assume a full bonus payout which is the same – essentially the same as in ’15.

I just wondered if you could discuss the merger here last month between Blood Centers of America and GSABC Cooperative, which now makes it the largest collection consortium in the U.S. Could you characterize the nature of your relationship with those customers and if you see this as a new single-source opportunity for you?

Yes, Matt, ABC, if remember when we talked about the HemeXcel win, we had an offsetting loss against that and that was the ABC business. That had recently completed their tender.

The combination of ABC and GSABC, these are really a GPO type focus. They have a new CEO who came in there last year, very focused, very aggressive in his approach to that market.

The independent blood centers that they represent certainly know and understand what's taking place in that market. They are working aggressively to respond, we will continue to work with the three biggest customers in the U.S.

to address that. HemeXcel has selected us.

We continue to hold a fair amount of business with ABC, to a lesser extent GSABC as well. They are going to continue on with those contracts, so our ability to prove out our blood management remains an opportunity there as well.

And then of course we understand what took place with the American Red Cross. So the opportunity still exists there for us, and as those play out we will continue to keep you posted throughout the fiscal year.

Okay. Thanks for that, Brian.

And then just switching gears here. Several last calls and various conferences you have discussed your work in China and the progress you are making there and certainly what a large opportunity that is.

Just wondering if we could get an update there?

Yes, China is part of the emerging market investment that we’ve made. We went from 50 employees in fiscal ’11 to 70 in fiscal ’12, to 125 in fiscal ’13.

And there is no question those investments are paying off for us. We continue to see stabilization in growth in our platelet business as we win share in that market.

We may not have the best technology, we are addressing that, we will give more visibility to that in May and beyond. But the beauty of that is it's the least expensive and the easiest used platelet technology out there, and hence we’re driving growth in the emerging markets.

We’re seeing growth in cell salvage as you see a population emerging with the demand for healthcare and the lack of the supply of blood in China, so therefore we’re seeing growth in our cell salvage products. And we’re continuing to see growth in our TEG thromboelastograph product both in terms of our cardiovascular surgery but as well as interventional cardiology in that market.

So growth across all three of those big product lines. We've implemented important measures around government relations, we're working with the local governments to understand their five-year plan and how we play a more involved role in that as they continue to evolve their healthcare system and how they support their population.

So we continue to be bullish about that opportunity as we go forward.

Maybe to begin with Brian, just a little bit more comments around as you look into ‘16 and your comments around some of the pressures in the U.S. market for transfusions.

I mean is anything out there that gives you confidence that that's -- when you will see the turnaround? How do you get around the calculus of getting into ‘16 and some of these pressures you have been seeing overall as it relates to transfusions in the U.S., sort of abating in that timeframe?

And then a couple of follow-ups.

What gives me confidence there, Anthony, is that we’ve moved to protocols that are consistent with protocols practiced around transfusion triggers elsewhere around the globe. And that's what's driving these changes dramatic as it’s driving down into the low 30s per 1000 of population.

So what gives me confidence, here the math works from 40, 10% decline last year, 10% decline this year, down into the low 30s, the math works. Do I expect that there’d be potentially some bouncing around in fiscal ’16?

Yes, I do. We’ve contemplated that in the initial outlook that we've given to you.

But I think we'll see more stabilization than not. Blood centers and hospitals are going to continue to remain focused on blood, it is still a very expensive and significant portion of their healthcare -- of their supply budget.

But importantly it's also a cost driver, how they bring care to patients. We know clinically that the more halogenated blood you give a patient the higher the infection rates, the higher the length of stay.

And so the question becomes, how the blood centers become more relevant in helping their blood center customers, not just buy a bag of blood for less price. So in other words, focusing on the cost of collection, but how do they help customers focus on the cost of transfusion, that’s $1100 of that versus a $200 of that and that involves collection, that involves the logistics of blood between the blood center and the hospitals and the logistics internally within the hospitals.

And then it involves the practice of blood and there is significant opportunity there and that's what blood centers have begun to engage us in, really focused around how to take that cost out and that's where the opportunity lies, that’s the definition of blood management, that’s why we continue to stay very focused.

And then the follow-up would be on whole blood specifically, the collection kits. Can you give us an idea, you mentioned in your prepared comments, Brian, about cost structure in that business specifically.

I mean is there an idea you can give us, what percentage do you expect the cost of manufacturing to go down over time and maybe the timing on that as you look out into the next two or three years?

I won’t speak, Anthony, to the decline in costing for obvious competitive reasons. But what you're looking at a market that has declined from a price standpoint rather dramatically.

Pricing in the high teens to pricing today somewhere in the range just north of our plasma pricing. And our plasma pricing as we’ve said is roughly about $10 a kit.

And our plasma kits, when you think about the components of a plasma kit is a more complex kit to manufacture with bowls and filtration, needles, bottles, tubing etc. etc.

And so our focus there is to learn much of what we need to apply, much of what we in plasma into whole blood. We knew that opportunity existed, we've accelerated those initiatives.

We feel good about being able to position ourselves to compete more aggressively on price but we're not interested in taking this market down to pricing levels that are frankly so dramatic that it destroys this market. We believe we have much more than just price.

We believe that what we're doing will take significant cost out of the transfusion and that’s the focus. You have different camps that exist out there today.

But the beauty of what we're doing here is really going to be tested in fiscal ‘15 into ‘16 and there's a number of tenders around the world that will start to come out in fiscal late ’16, really more into fiscal ‘17 and our focus will be on proving out that the benefit is not in the cost of the collection alone but in the cost of transfusion and the impact the collectors can have in affecting that through their hospital customers.

I guess a lot of the ones that I would've asked have already been asked. But let me try to follow up somewhat on what Larry was asking.

In the whole blood market I know you're trying to create a value proposition to take to hospitals. I guess the question is, do you see any pull from the hospitals in that direction at all or is that a demand you're going to have to create as you go along?

But we’re already seeing that happen today, Jan, albeit a small but it's going to be something that we're going to have to create. But the difference being is we’re working with our blood center customers to create that versus taking that on a missionary sale hospital by hospital.

You will think of very simplistic approach but 30 years ago every hospital ran their own kitchen, every hospital ran their own laundry, every hospital had sprawling pharmacies in the basements. Today that's changed.

Hospitals are focusing on what they do best and that’s bringing clinical care to the patients they serve. How do we set up our blood center customers to become more relevant in that process?

Initially taking over the logistics of blood such that hospitals don't touch blood until they are ready to give it clinically to a patient, then what does mean in terms of overall cost efficiencies, effectiveness, quality of care? And then ultimately how does that position them and us to advise hospitals in the clinical use of blood?

Think of it in those two frameworks if you will and what we’re bringing to those customers.

And maybe on a positive note for a change, the TEG opportunity, I guess the growth kind of surprised us. Could you talk a little bit about the opportunity you see there and where you see the opportunity going in the future?

Sure. And I am not sure why TEG surprises you.

It’s been a double-digit growth driver for us all along. It’s performed extremely well.

We've said that we continue to expect that to accelerate. We invested there, those investments are paying off.

But importantly and you will see at our May investor conference we’re going to be introducing our next generation TEG technology. The biggest complaints that we’ve had about the device even in the growth we recognized has been in its ease-of-use and our next generation device will absolutely address many of those factors that our customers have asked us to address.

It's a very different device focused on cartridge versus reagents, focused on drops of blood versus vials of blood. It's a device that has a much reduced need for calibration versus the existing technology today.

So there's a number of things there and we will highlight that device at the May investor conference. That's awful difficult for me to talk features and benefits on a phone call versus what you'll see at our investor conference when you get the opportunity to feel it, taste it, touch it, smell it, do all the things you want to do with that device.

Brian, first I want to follow up on something you said a moment ago. You said that you expected fiscal ‘16 and ‘17 tenders that you would target in the whole blood segment, can you give quantify what the value of those tenders could be?

At this point, I can’t Ray. There is – if you go outside the United States, these tenders are typically by country.

Some of them are sole sourced, many of them are dual sourced. We have a listing by country today of where those tenders are, what opportunities exist with those tenders.

There is some that we’re being a little more aggressive with. From a competitive standpoint, Ray, it would be inappropriate for us to speak publicly about that at this point in time, not only for that reason but also with confidentiality of those customers.

The point that we’ve made to this point is that please trust that we are not sitting idle. As we focused on the American Red business, we were aggressive there.

We expected to be successful in that sense. We were not, we were being prudent in our approach to that.

We are now being prudent as we go through fiscal ’15, what that means, our redirected focus to other customers around the world, the timing of those tenders, but we’ve begun working with those customers now, much more early, much more rapidly than we might have expected otherwise. And we’re going to start working with them, not only on the opportunity that exists in bringing our products in from a cost standpoint but how does blood management play in that and what are they doing to really try to address cost within their health systems.

That’s about all I can say in that at this point.

And maybe related to SOLX, can you give us a sense of when you think you can leverage SOLX internationally?

Well, Ray, it’s going to be the same story as the U.S. market that the U.S.

approval will give us access to the OUS market in ’16 and beyond. And – but it’s really dependent on getting the product approved with our own filter.

That’s the key, Ray, is that we have to get that approved with our filter. And that’s the gating factor.

Thank you, Shannon. Let me close by repeating something I said a couple of times this morning.

There is no change to our strategy. We are implementing value engineering to improve the quality and reduce the cost of our products to help us better compete around the world, particularly in whole blood.

We’re transforming and streamlining our manufacturing footprint to deliver significant returns for our shareholders. We’re launching four new products in fiscal ’15 that will further enhance the broadest suite of blood management products and services available in the industry today.

We’re bringing new science to our industry with the SOLX red cell storage solution and are working with key customers to gather the data necessary to prove the capabilities of both our new and existing products and their ability to bring measurable and meaningful process improvements in cost savings to our customers. It’s now about execution.

Please join us on May 28 at our annual investor day here in Boston and learn more about these existing developments and why we feel confident in our strategy and our future. Thank you for your attention this morning.