UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 5, 2014
STERIS Corporation
(Exact Name of Registrant as Specified in Charter)
Ohio | 1-14643 | 34-1482024 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
5960 Heisley Road, Mentor, Ohio | 44060-1834 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code: (440) 354-2600
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02. | Results of Operations and Financial Condition. |
On February 5, 2014, STERIS Corporation issued a press release announcing financial results for its fiscal 2014 third quarter ended December 31, 2013. A copy of this press release is attached hereto as Exhibit 99.1.
The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, is being furnished to the Securities and Exchange Commission and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. Furthermore, the information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit |
Description | |
99.1 | Press Release issued by STERIS Corporation on February 5, 2014 announcing financial results for its fiscal 2014 third quarter ended December 31, 2013. |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
STERIS CORPORATION | ||
By | /s/ J. Adam Zangerle | |
J. Adam Zangerle | ||
Vice President, General Counsel, and Secretary |
Date: February 5, 2014
3
EXHIBIT INDEX
Exhibit |
Description | |
99.1 | Press Release issued by STERIS Corporation on February 5, 2014 announcing financial results for its fiscal 2014 third quarter ended December 31, 2013. |
4
Exhibit 99.1
STERIS CORPORATION
NEWS ANNOUNCEMENT
FOR IMMEDIATE RELEASE
STERIS CORPORATION ANNOUNCES FISCAL 2014 THIRD QUARTER RESULTS
Revenue growth of 7% driven by solid organic performance
Strong revenue growth of 12% in the U.S.
International results and investments in the U.S. impact profits in the quarter
Mentor, Ohio (February 5, 2014) - STERIS Corporation (NYSE: STE) today announced financial results for its fiscal 2014 third quarter ended December 31, 2013. Fiscal 2014 third quarter revenue increased 7% to $405.6 million compared with $380.4 million in the third quarter of fiscal 2013. As reported, net income was $28.5 million, or $0.48 per diluted share, compared with net income of $48.1 million, or $0.82 per diluted share in the third quarter of fiscal 2013. Included in the financial results for the third quarter of fiscal 2013 was a favorable $15.8 million pre-tax adjustment attributable to the SYSTEM 1 class action settlement liability and an $8.1 million tax benefit associated with our prior European restructuring effort, as well as certain other items.
Adjusted net income for the third quarter of fiscal 2014 was $34.9 million, or $0.59 per diluted share compared with adjusted net income of $34.3 million, or $0.58 per diluted share in the prior year period. Please refer to the attached schedules for additional information, including reconciliations of adjusted non-GAAP financial measures to reported results.
The third quarter was another good quarter for us with solid organic revenue growth, and record backlog in the Healthcare segment, said Walt Rosebrough, President and Chief Executive Officer of STERIS Corporation. Our strong performance in the U.S. was somewhat offset by a decline in international revenue and profitability. We continue to anticipate a very strong fourth quarter and a record year, but are trimming our earnings outlook for the full year to reflect our third quarter results.
Segment Results
Healthcare revenue in the quarter increased 8% to $291.8 million compared with $271.1 million in the same period last year. Healthcare revenue grew across the business, with 4% growth in capital equipment, 6% increase in consumables and 15% growth in service revenues.
STERIS Corporation
News Announcement
Page 2
As reported, Healthcare segment operating income was $31.2 million compared with $45.5 million in last years third quarter. Included in the financial results for the third quarter of fiscal 2013 was the favorable impact of the SYSTEM 1 class action settlement liability described above. Adjusted segment operating income was $37.5 million in the third quarter of fiscal 2014 compared with adjusted segment operating income of $35.7 million in the same period last year.
Life Sciences third quarter revenue declined slightly to $64.1 million compared with $65.0 million in the third quarter of fiscal 2013. Consumable revenue grew 8% and service revenue increased 2%. Capital equipment revenue, which tends to vary by quarter, declined 10%. Life Sciences operating income was $12.1 million compared with $12.8 million in the same period last year, reflecting the decline in volume.
Fiscal 2014 third quarter revenue for Isomedix Services was $49.2 million compared with $43.4 million in the same period last year, an increase of 13%. Expanded capacity contributed to revenue growth in the quarter. In addition, the prior year includes the business disruption from hurricane Sandy, making the comparison versus the prior year somewhat easier. Operating income in the quarter increased to $14.1 million compared with $11.1 million last year, reflecting the increase in volume.
Cash Flow
Net cash provided by operations for the first nine months of fiscal 2014 was $142.2 million, compared with $180.9 million last year. Free cash flow (see note 1) for the first nine months of fiscal 2014 was $82.1 million, compared with $117.1 million in the prior year. The decline in free cash flow is primarily due to payments for the Companys annual incentive compensation program which did not occur in fiscal 2013, as well as the impact of strong working capital improvements in the prior year.
Dividend Announcement
The Company also announced today that STERISs Board of Directors has authorized a quarterly dividend of $0.21 per common share. The dividend is payable March 26, 2014 to shareholders of record at the close of business on February 26, 2014.
STERIS Corporation
News Announcement
Page 3
Outlook
Based upon current trends and performance year-to-date, the Company anticipates full year revenue growth, within its prior range, of approximately 9% for fiscal 2014. Earnings per diluted share are now anticipated to be in the range of $2.42 to $2.49, compared with the previously provided range of $2.47 to $2.60 for the full fiscal year. The change in outlook for earnings per share reflects the Companys third quarter performance; in particular a higher effective tax rate, a decline in international results and investments in the U.S. This outlook reflects other key assumptions, some of which are listed below:
| Healthcare segment revenue is expected to grow low-double digits. |
| Life Sciences segment revenue is expected to grow low-single digits. |
| Isomedix segment revenue is expected to grow high-single digits. |
| The Company has assumed the average forward exchange rates for the U.S. dollar and key international currencies as of December 31, 2013. |
| Adjusted EBIT as a percent of revenue is anticipated to be approximately 15%. |
| The adjusted effective tax rate is anticipated to be approximately 36%. |
For the full fiscal year 2014, the Companys expectations for free cash flow (see note 1) are unchanged at approximately $130 million, which include capital expenditures of approximately $90 million.
Conference Call
In conjunction with this release, STERIS Corporation management will host a conference call today at 10:00 a.m. Eastern time. The conference call can be heard live over the Internet at www.steris-ir.com or via phone by dialing 1- 800-369-8428 in the United States and Canada, and 1-773-799-3378 internationally, then referencing the password STERIS.
For those unable to listen to the conference call live, a replay will be available beginning at 12:00 p.m. Eastern time today, either over the Internet at www.steris-ir.com or via phone by calling 1-888-296-6941 in the United States and Canada, or 1-203-369-3026 internationally.
STERIS Corporation
News Announcement
Page 4
About STERIS
The mission of STERIS Corporation is to help our Customers create a healthier and safer world by providing innovative healthcare and life science product and service solutions around the globe. The Company is listed on the New York Stock Exchange under the symbol STE. For more information, visit www.steris.com.
(1) Free cash flow is a non-GAAP number used by the Company as a measure to gauge its ability to fund future principal debt repayments and growth outside of core operations, repurchase common shares, and pay cash dividends. STERIS defines free cash flow as net cash flows from operating activities less purchases of property, plant, equipment and intangibles plus proceeds from the sale of property, plant, equipment and intangibles. STERISs calculation of free cash flow may vary from other companies. Please see the attached financial tables for a complete reconciliation of these non-GAAP numbers to the nearest GAAP information.
# # #
This press release and the referenced conference call may contain statements concerning certain trends, expectations, forecasts, estimates, or other forward-looking information affecting or relating to the Company or its industry, products or activities that are intended to qualify for the protections afforded "forward-looking statements" under the Private Securities Litigation Reform Act of 1995 and other laws and regulations. Forward-looking statements speak only as to the date of this press release and the referenced conference call, and may be identified by the use of forward-looking terms such as "may," "will," "expects," "believes," "anticipates," "plans," "estimates," "projects," "targets," "forecasts," "outlook," "impact," "potential," "confidence," "improve," "optimistic," "deliver," "comfortable," "trend", and "seeks," or the negative of such terms or other variations on such terms or comparable terminology. Many important factors could cause actual results to differ materially from those in the forward-looking statements including, without limitation, disruption of production or supplies, changes in market conditions, political events, pending or future claims or litigation, competitive factors, technology advances, actions of regulatory agencies, and changes in laws, government regulations, labeling or product approvals or the application or interpretation thereof. Other risk factors are described herein and in the Company's Form 10-K and other securities filings. Many of these important factors are outside STERIS's control. No assurances can be provided as to any result or the timing of any outcome regarding matters described in this press release, the referenced conference call or otherwise with respect to any regulatory action, administrative proceedings, government investigations, litigation, warning letters, consent decree, rebate program, transition, cost reductions, business strategies, earnings or revenue trends or future financial results. References to products, the consent decree, the transition or rebate program, or the class action settlement, are summaries only and should not be considered the specific terms of the decree, settlement, program or product clearance or literature. Unless legally required, the Company does not undertake to update or revise any forward-looking statements even if events make clear that any projected results, express or implied, will not be realized. Other potential risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, (a) the potential for increased pressure on pricing or costs that leads to erosion of profit margins, (b) the possibility that market demand will not develop for new technologies, products or applications or business initiatives will take longer, cost more or produce lower benefits than anticipated, (c) the possibility that application of or compliance with laws, court rulings, certifications, regulations, regulatory actions, including without limitation those relating to FDA warning notices or letters, government investigations, the outcome of any pending FDA requests, inspections or submissions, or other requirements or standards may delay, limit or prevent new product introductions, affect the production and marketing of existing products or services or otherwise affect Company performance, results, prospects or value, (d) the potential of international unrest, economic downturn or effects of currencies, tax assessments, adjustments, or anticipated rates, raw material costs or availability, benefit or retirement plan costs, or other regulatory compliance costs, (e) the possibility of reduced demand, or reductions in the rate of growth in demand, for the Company's products and services, (f) the possibility that anticipated growth, cost savings, new
STERIS Corporation
News Announcement
Page 5
product acceptance, performance or approvals, or other results may not be achieved, or that transition, labor, competition, timing, execution, regulatory, governmental, or other issues or risks associated with our business, industry or initiatives including, without limitation, the consent decree, the transition from the SYSTEM 1 processing system and adjustments to related reserves, or those matters described in our Form 10-K for the year ended March 31, 2013 and other securities filings, may adversely impact Company performance, results, prospects or value, (g) the possibility that anticipated financial results or benefits of recent acquisitions will not be realized or will be other than anticipated, (h) the effect of the contraction in credit availability, as well as the ability of our Customers and suppliers to adequately access the credit markets when needed, and (i) those risks described in our securities filings including our Annual Report on Form 10-K for the year ended March 31, 2013, and other securities filings.
Contact: Julie Winter, Director, Investor Relations at 440-392-7245.
STERIS Corporation
Consolidated Condensed Statements of Operations
(In thousands, except per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenues |
$ | 405,551 | $ | 380,405 | $ | 1,156,965 | $ | 1,053,286 | ||||||||
SYSTEM 1 Rebate Program |
| | | 20,400 | ||||||||||||
|
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|
|
|
|
|
|
|||||||||
Revenues, net |
405,551 | 380,405 | 1,156,965 | 1,073,686 | ||||||||||||
Cost of revenues |
241,776 | 227,283 | 691,838 | 631,291 | ||||||||||||
Cost of revenues - SYSTEM 1 Rebate Program |
| | | (1,100 | ) | |||||||||||
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|
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|
|||||||||
Gross profit |
163,775 | 153,122 | 465,127 | 443,495 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling, general, and administrative |
95,497 | 91,753 | 280,087 | 252,567 | ||||||||||||
Class action settlement |
| (15,800 | ) | | (15,800 | ) | ||||||||||
Research and development |
11,580 | 10,415 | 36,960 | 29,579 | ||||||||||||
Restructuring expense |
808 | (386 | ) | 878 | (570 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
107,885 | 85,982 | 317,925 | 265,776 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from operations |
55,890 | 67,140 | 147,202 | 177,719 | ||||||||||||
Non-operating expense, net |
4,431 | 3,869 | 13,812 | 9,957 | ||||||||||||
Income tax expense |
22,953 | 15,174 | 42,824 | 49,166 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 28,506 | $ | 48,097 | $ | 90,566 | $ | 118,596 | ||||||||
|
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|
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|
|
|
|
|||||||||
Earnings per common share (EPS) data: |
||||||||||||||||
Basic |
$ | 0.48 | $ | 0.82 | $ | 1.54 | $ | 2.04 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
$ | 0.48 | $ | 0.82 | $ | 1.52 | $ | 2.02 | ||||||||
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|
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|
|
|||||||||
Cash dividends declared per common share outstanding |
$ | 0.21 | $ | 0.19 | $ | 0.61 | $ | 0.55 | ||||||||
Weighted average number of common shares outstanding used in EPS computation: |
||||||||||||||||
Basic number of common shares outstanding |
58,885 | 58,425 | 58,972 | 58,200 | ||||||||||||
Diluted number of common shares outstanding |
59,685 | 58,972 | 59,746 | 58,692 |
STERIS Corporation
Consolidated Condensed Balance Sheets
(In thousands)
December 31, | March 31, | |||||||
2013 | 2013 | |||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 157,337 | $ | 142,008 | ||||
Accounts receivable, net |
267,721 | 275,937 | ||||||
Inventories, net |
159,899 | 144,443 | ||||||
Other current assets |
35,956 | 51,552 | ||||||
|
|
|
|
|||||
Total Current Assets |
620,913 | 613,940 | ||||||
Property, plant, and equipment, net |
444,946 | 431,952 | ||||||
Goodwill and intangible assets, net |
700,487 | 704,424 | ||||||
Other assets |
11,460 | 10,793 | ||||||
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|
|
|||||
Total Assets |
$ | 1,777,806 | $ | 1,761,109 | ||||
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|
|||||
Liabilities and Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 80,322 | $ | 79,374 | ||||
Other current liabilities |
121,063 | 139,463 | ||||||
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|
|||||
Total Current Liabilities |
201,385 | 218,837 | ||||||
Long-term debt |
474,740 | 492,290 | ||||||
Other liabilities |
91,936 | 103,002 | ||||||
Equity |
1,009,745 | 946,980 | ||||||
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|
|||||
Total Liabilities and Equity |
$ | 1,777,806 | $ | 1,761,109 | ||||
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STERIS Corporation
Segment Data
(In thousands)
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Segment Revenues: |
||||||||||||||||
Healthcare |
$ | 291,831 | $ | 271,096 | $ | 828,051 | $ | 737,030 | ||||||||
SYSTEM 1 Rebate Program |
| | | 20,400 | ||||||||||||
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Healthcare, net |
291,831 | 271,096 | 828,051 | 757,430 | ||||||||||||
Life Sciences |
64,128 | 65,043 | 182,425 | 180,116 | ||||||||||||
STERIS Isomedix Services |
49,157 | 43,392 | 144,792 | 133,732 | ||||||||||||
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Total Reportable Segments |
405,116 | 379,531 | 1,155,268 | 1,071,278 | ||||||||||||
Corporate and Other |
435 | 874 | 1,697 | 2,408 | ||||||||||||
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Total Segment Revenues |
$ | 405,551 | $ | 380,405 | $ | 1,156,965 | $ | 1,073,686 | ||||||||
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Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Segment Operating Income: |
||||||||||||||||
Healthcare |
$ | 31,238 | $ | 45,478 | $ | 72,111 | $ | 110,355 | ||||||||
Life Sciences |
12,092 | 12,798 | 38,672 | 35,201 | ||||||||||||
STERIS Isomedix Services |
14,054 | 11,103 | 42,484 | 39,348 | ||||||||||||
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Total Reportable Segments |
57,384 | 69,379 | 153,267 | 184,904 | ||||||||||||
Corporate and Other |
(1,494 | ) | (2,239 | ) | (6,065 | ) | (7,185 | ) | ||||||||
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Total Operating Income |
$ | 55,890 | $ | 67,140 | $ | 147,202 | $ | 177,719 | ||||||||
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STERIS Corporation
Consolidated Condensed Statements of Cash Flows
(In thousands)
Nine Months Ended | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
(Unaudited) | (Unaudited) | |||||||
Operating Activities: |
||||||||
Net income |
$ | 90,566 | $ | 118,596 | ||||
Non-cash items |
71,764 | 77,006 | ||||||
Change in Accrued SYSTEM 1 Rebate Program and class action settlement |
(247 | ) | (63,516 | ) | ||||
Changes in operating assets and liabilities |
(19,910 | ) | 48,850 | |||||
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|
|
|
|||||
Net cash provided by operating activities |
142,173 | 180,936 | ||||||
Investing Activities: |
||||||||
Purchases of property, plant, equipment, and intangibles, net |
(64,778 | ) | (63,878 | ) | ||||
Proceeds from sale of property, plant, equipment and intangibles |
4,739 | 29 | ||||||
Investments in businesses, net of cash acquired |
(8,443 | ) | (399,415 | ) | ||||
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|
|
|
|||||
Net cash used in investing activities |
(68,482 | ) | (463,264 | ) | ||||
Financing Activities: |
||||||||
Payments on long-term obligations, net |
(70,000 | ) | | |||||
Proceeds under credit facilities, net |
52,450 | 210,890 | ||||||
Proceeds from Private Placement |
| 100,000 | ||||||
Deferred financing fees and debt issuance costs |
(43 | ) | (1,581 | ) | ||||
Repurchases of common shares |
(23,236 | ) | (7,893 | ) | ||||
Cash dividends paid to common shareholders |
(36,009 | ) | (32,045 | ) | ||||
Stock option and other equity transactions, net |
11,877 | 14,517 | ||||||
Tax benefit from stock options exercised |
1,864 | 2,161 | ||||||
|
|
|
|
|||||
Net cash used in and provided by financing activities |
(63,097 | ) | 286,049 | |||||
Effect of exchange rate changes on cash and cash equivalents |
4,735 | 1,345 | ||||||
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|
|
|
|||||
Decrease in cash and cash equivalents |
15,329 | 5,066 | ||||||
Cash and cash equivalents at beginning of period |
142,008 | 150,821 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 157,337 | $ | 155,887 | ||||
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|
|
The following table presents a financial measure which is considered to be non-GAAP financial measures under Securities Exchange Commission rules. Free cash flow is defined by the Company as cash flows from operating activities less purchases of property, plant, equipment and intangibles, net (capital expenditures) plus proceeds from the sale of property, plant, equipment and intangibles. The Company uses free cash flow as a measure to gauge its ability to fund future principal debt repayments and growth outside of core operations, repurchase common shares, and pay cash dividends. STERISs calculation of free cash flow may vary from other companies.
Nine Months Ended | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
(Unaudited) | (Unaudited) | |||||||
Calculation of Free Cash Flow: |
||||||||
Cash flows from operating activities |
$ | 142,173 | $ | 180,936 | ||||
Purchases of property, plant, equipment, and intangibles, net |
(64,778 | ) | (63,878 | ) | ||||
Proceeds from the sale of property, plant, equipment, and intangibles |
4,739 | 29 | ||||||
|
|
|
|
|||||
Free Cash Flow |
$ | 82,134 | $ | 117,087 | ||||
|
|
|
|
Twelve Months Ended | ||||
March 31, | ||||
2014 | ||||
(Outlook)* | ||||
Calculation of free cash flow for outlook: |
||||
Cash flows from operating activities |
$ | 220,000 | ||
Purchases of property, plant, equipment, and intangibles, net |
(90,000 | ) | ||
|
|
|||
Free Cash Flow |
$ | 130,000 | ||
|
|
* | All amounts are estimates. |
STERIS Corporation
Non-GAAP Earnings Per Share and Outlook
Non-GAAP financial measures are presented with the intent of providing greater transparency to supplemental financial information used by management and the Board of Directors in their financial analysis and operational decision making. These amounts are disclosed so that the reader has the same financial data that management uses with the belief that it will assist investors and other readers in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented.
We believe that the presentation of these non-GAAP financial measures, when considered along with our GAAP financial measures and the reconciliation to the corresponding GAAP financial measures, provide the reader with a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. It is important for the reader to note that the non-GAAP financial measure used may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.
Three months ended December 31, |
Nine months ended December 31, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Net Income per diluted share |
$ | 0.48 | $ | 0.82 | $ | 1.52 | $ | 2.02 | ||||||||
Impact of SYSTEM 1 Rebate Program and class action settlement, net of tax |
| (0.16 | ) | | (0.39 | ) | ||||||||||
Tax benefit, European restructuring |
| (0.14 | ) | (0.15 | ) | (0.14 | ) | |||||||||
Tax expense, Canadian adjustment |
0.04 | | 0.04 | | ||||||||||||
Restructuring, net of tax |
0.01 | | 0.01 | (0.01 | ) | |||||||||||
Inventory step up to fair value, net of tax |
| 0.01 | | 0.02 | ||||||||||||
Amortization and impairment of purchased intangible assets, net of tax |
0.04 | 0.03 | 0.12 | 0.08 | ||||||||||||
Loss from fair value adjustment of acquisition related contingent consideration |
0.01 | | 0.01 | | ||||||||||||
Acquisition related transaction and integration expenses, net of tax |
0.01 | 0.02 | 0.02 | 0.06 | ||||||||||||
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Adjusted net income per diluted share |
$ | 0.59 | $ | 0.58 | $ | 1.57 | $ | 1.64 | ||||||||
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Twelve months ended March 31, 2014 |
||||
(Outlook)* | ||||
Net Income per diluted share |
$ | 2.31 - $2.38 | ||
Tax benefit, European restructuring |
(0.15 | ) | ||
Tax expense, Canadian adjustment |
0.04 | |||
Restructuring, net of tax |
0.01 | |||
Amortization and impairment of purchased intangible assets, net of tax |
0.18 | |||
Loss from fair value adjustment of acquisition related contingent consideration, net of tax |
0.01 | |||
Acquisition related transaction and integration expenses, net of tax |
0.02 | |||
|
|
|||
Adjusted net income per diluted share |
$ | 2.42- $2.49 | ||
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* | All amounts are estimates. |
STERIS Corporation
Non-GAAP Financial Measures
(In thousands, except per share data)
Non-GAAP financial measures are presented with the intent of providing greater transparency to supplemental financial information used by management and the Board of Directors in their financial analysis and operational decision making. These amounts are disclosed so that the reader has the same financial data that management uses with the belief that it will assist investors and other readers in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented.
We believe that the presentation of these non-GAAP financial measures, when considered along with our GAAP financial measures and the reconciliation to the corresponding GAAP financial measures, provide the reader with a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. It is important for the reader to note that the non-GAAP financial measure used may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.
Three months ended | Nine months ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenues, net |
$ | 405,551 | $ | 380,405 | $ | 1,156,965 | $ | 1,073,686 | ||||||||
Impact of SYSTEM 1 Rebate Program |
| | | (20,400 | ) | |||||||||||
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Adjusted revenues |
$ | 405,551 | $ | 380,405 | $ | 1,156,965 | $ | 1,053,286 | ||||||||
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Gross Profit |
$ | 163,775 | $ | 153,122 | $ | 465,127 | $ | 443,495 | ||||||||
Impact of SYSTEM 1 Rebate Program |
| | | (21,500 | ) | |||||||||||
Amortization of inventory step up to fair value |
| 747 | | 1,592 | ||||||||||||
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Adjusted gross profit |
$ | 163,775 | $ | 153,869 | $ | 465,127 | $ | 423,587 | ||||||||
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Selling, general and administrative expenses |
$ | 95,497 | $ | 91,753 | $ | 280,087 | $ | 252,567 | ||||||||
Amortization and impairment of purchased intangible assets |
(4,256 | ) | (3,984 | ) | (12,613 | ) | (7,265 | ) | ||||||||
Acquisition related transaction and integration costs |
(530 | ) | (2,113 | ) | (1,864 | ) | (5,667 | ) | ||||||||
Loss on fair value adjustment of acquisition related contingent consideration |
(1,046 | ) | | (1,046 | ) | | ||||||||||
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Adjusted selling, general and administrative expenses |
$ | 89,665 | $ | 85,656 | $ | 264,564 | $ | 239,635 | ||||||||
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Operating income |
$ | 55,890 | $ | 67,140 | $ | 147,202 | $ | 177,719 | ||||||||
Impact of SYSTEM 1 Rebate Program and class action |
| (15,800 | ) | | (37,300 | ) | ||||||||||
Amortization of inventory step up to fair value |
| 747 | | 1,592 | ||||||||||||
Amortization and impairment of purchased intangible assets |
4,256 | 3,984 | 12,613 | 7,265 | ||||||||||||
Acquisition related transaction and integration costs |
530 | 2,113 | 1,864 | 5,667 | ||||||||||||
Loss on fair value adjustment of acquisition related contingent consideration |
1,046 | | 1,046 | | ||||||||||||
Restructuring |
808 | (386 | ) | 878 | (570 | ) | ||||||||||
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Adjusted operating income |
$ | 62,530 | $ | 57,798 | $ | 163,603 | $ | 154,373 | ||||||||
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Net income |
$ | 28,506 | $ | 48,097 | $ | 90,566 | $ | 118,596 | ||||||||
Impact of SYSTEM 1 Rebate Program and class action, net of tax |
| (9,638 | ) | | (22,753 | ) | ||||||||||
Amortization of inventory step up to fair value, net of tax |
| 456 | | 971 | ||||||||||||
Amortization and impairment of purchased intangible assets, net of tax |
2,596 | 2,430 | 7,694 | 4,432 | ||||||||||||
Acquisition related transaction and integration costs |
323 | 1,289 | 1,137 | 3,457 | ||||||||||||
Loss on fair value adjustment of acquisition related contingent consideration, net of tax |
638 | | 638 | | ||||||||||||
Tax benefit, European restructuring |
| (8,118 | ) | (9,245 | ) | (8,118 | ) | |||||||||
Tax expense, Canadian adjustment |
2,378 | | 2,378 | | ||||||||||||
Restructuring, net of tax |
493 | (235 | ) | 536 | (348 | ) | ||||||||||
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Adjusted net income |
$ | 34,934 | $ | 34,281 | $ | 93,704 | $ | 96,237 | ||||||||
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Healthcare revenues, net |
$ | 291,831 | $ | 271,096 | $ | 828,051 | $ | 757,430 | ||||||||
Impact of SYSTEM 1 Rebate Program |
| | | (20,400 | ) | |||||||||||
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Adjusted Healthcare revenues |
$ | 291,831 | $ | 271,096 | $ | 828,051 | $ | 737,030 | ||||||||
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Healthcare capital revenues |
$ | 124,777 | $ | 119,471 | $ | 342,782 | $ | 366,840 | ||||||||
Impact of SYSTEM 1 Rebate Program |
| | | (20,400 | ) | |||||||||||
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Adjusted Healthcare capital revenues |
$ | 124,777 | $ | 119,471 | $ | 342,782 | $ | 346,440 | ||||||||
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Healthcare operating income |
$ | 31,238 | $ | 45,478 | $ | 72,111 | $ | 110,355 | ||||||||
Impact of SYSTEM 1 Rebate Program and class action |
| (15,800 | ) | | (37,300 | ) | ||||||||||
Amortization of inventory step up to fair value |
| 747 | | 1,592 | ||||||||||||
Amortization and impairment of purchased intangible assets |
3,913 | 3,595 | 11,588 | 6,079 | ||||||||||||
Acquisition related transaction and integration costs |
530 | 2,113 | 1,864 | 5,667 | ||||||||||||
Loss on fair value adjustment of acquisition related contingent consideration |
1,046 | | 1,046 | | ||||||||||||
Restructuring |
808 | (386 | ) | 878 | (570 | ) | ||||||||||
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Adjusted Healthcare operating income |
$ | 37,535 | $ | 35,747 | $ | 87,487 | $ | 85,823 | ||||||||
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Capital equipment revenues |
$ | 149,578 | $ | 147,068 | $ | 408,775 | $ | 435,162 | ||||||||
Impact of SYSTEM 1 Rebate Program |
| | | (20,400 | ) | |||||||||||
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Adjusted capital equipment revenues |
$ | 149,578 | $ | 147,068 | $ | 408,775 | $ | 414,762 | ||||||||
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United States revenues |
$ | 314,589 | $ | 281,411 | $ | 900,592 | $ | 815,604 | ||||||||
Impact of SYSTEM 1 Rebate Program |
| | | (20,400 | ) | |||||||||||
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Adjusted United States revenues |
$ | 314,589 | $ | 281,411 | $ | 900,592 | $ | 795,204 | ||||||||
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STERIS Corporation
Unaudited Supplemental Financial Data
Third Quarter Fiscal 2014
As of December 31, 2013
FY 2014 | FY 2013 | FY 2014 | FY 2013 | |||||||||||||
Total Company Revenues |
Q3 | Q3 | YTD | YTD | ||||||||||||
Capital Equipment |
$ | 149,578 | $ | 147,068 | $ | 408,775 | $ | 435,162 | ||||||||
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Adjusted capital equipment revenues (1) |
na | na | na | $ | 414,762 | |||||||||||
Consumables |
103,038 | 96,654 | 302,078 | 253,963 | ||||||||||||
Service |
152,935 | 136,683 | 446,112 | 384,561 | ||||||||||||
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Total Recurring |
255,973 | 233,337 | 748,190 | 638,524 | ||||||||||||
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Total Revenues, net |
$ | 405,551 | $ | 380,405 | $ | 1,156,965 | $ | 1,073,686 | ||||||||
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Adjusted total revenues (1) |
na | na | na | $ | 1,053,286 | |||||||||||
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United States Revenues |
$ | 314,589 | $ | 281,411 | $ | 900,592 | $ | 815,604 | ||||||||
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Adjusted United States Revenues (1) |
na | na | na | 795,204 | ||||||||||||
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United States Revenues as a % of Total |
78 | % | 74 | % | 78 | % | 75 | % | ||||||||
International Revenues |
$ | 90,962 | $ | 98,994 | $ | 256,373 | $ | 258,082 | ||||||||
International Revenues as a % of Total |
22 | % | 26 | % | 22 | % | 25 | % | ||||||||
Segment Data |
Q3 | Q3 | YTD | YTD | ||||||||||||
Healthcare |
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Revenues |
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Capital Equipment |
$ | 124,777 | $ | 119,471 | $ | 342,782 | $ | 366,840 | ||||||||
Adjusted Capital Equipment (1) |
na | na | na | $ | 346,440 | |||||||||||
Consumables |
83,583 | 78,696 | 242,084 | 198,450 | ||||||||||||
Service |
83,471 | 72,929 | 243,185 | 192,140 | ||||||||||||
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Total Recurring |
167,054 | 151,625 | 485,269 | 390,590 | ||||||||||||
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Total Healthcare Revenues, net |
$ | 291,831 | $ | 271,096 | $ | 828,051 | $ | 757,430 | ||||||||
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Adjusted Total Healthcare Revenues (1) |
na | na | na | $ | 737,030 | |||||||||||
Operating Income |
31,238 | 45,478 | 72,111 | 110,355 | ||||||||||||
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Adjusted Operating Income (1) |
37,535 | 35,747 | 87,487 | 85,823 | ||||||||||||
Life Sciences |
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Revenues |
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Capital Equipment |
$ | 24,801 | $ | 27,597 | $ | 65,993 | $ | 68,322 | ||||||||
Consumables |
19,455 | 17,958 | 59,994 | 55,513 | ||||||||||||
Service |
19,872 | 19,488 | 56,438 | 56,281 | ||||||||||||
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Total Recurring |
39,327 | 37,446 | 116,432 | 111,794 | ||||||||||||
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Total Life Sciences Revenues |
$ | 64,128 | $ | 65,043 | $ | 182,425 | $ | 180,116 | ||||||||
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Operating Income |
12,092 | 12,798 | 38,672 | 35,201 | ||||||||||||
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Isomedix Services |
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Revenues |
$ | 49,157 | $ | 43,392 | $ | 144,792 | $ | 133,732 | ||||||||
Operating Income |
14,054 | 11,103 | 42,484 | 39,348 | ||||||||||||
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Corporate and Other |
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Revenues |
$ | 435 | $ | 874 | $ | 1,697 | $ | 2,408 | ||||||||
Operating Income (Loss) |
(1,494 | ) | (2,239 | ) | (6,065 | ) | (7,185 | ) | ||||||||
Other Data |
Q3 | Q3 | YTD | YTD | ||||||||||||
Product |
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Total product revenues |
252,616 | 243,722 | 710,853 | 689,125 | ||||||||||||
SYSTEM 1 Rebate Program |
| | | 20,400 | ||||||||||||
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Total product revenues, adjusted (1) |
252,616 | 243,722 | 710,853 | 668,725 | ||||||||||||
Total product cost of revenues |
144,884 | 139,683 | 408,051 | 392,312 | ||||||||||||
SYSTEM 1 Rebate Program |
| | | (1,100 | ) | |||||||||||
Amortization of inventory step up to fair value |
| 747 | | 1,592 | ||||||||||||
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Total product cost of revenues, adjusted (1) |
144,884 | 138,936 | 408,051 | 391,820 | ||||||||||||
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Total product gross profit, adjusted (1) |
107,732 | 104,786 | 302,802 | 276,905 | ||||||||||||
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As a percentage, adjusted (1) |
42.6 | % | 43.0 | % | 42.6 | % | 41.4 | % | ||||||||
Service |
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Total service revenues |
152,935 | 136,683 | 446,112 | 384,561 | ||||||||||||
Total service cost of revenues |
96,892 | 87,600 | 283,787 | 237,879 | ||||||||||||
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Total service gross profit |
56,043 | 49,083 | 162,325 | 146,682 | ||||||||||||
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As a percentage |
36.6 | % | 35.9 | % | 36.4 | % | 38.1 | % | ||||||||
Total Company gross profit margin, adjusted (1) |
163,775 | 153,869 | 465,127 | 423,587 | ||||||||||||
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As a percentage, adjusted (1) |
40.4 | % | 40.4 | % | 40.2 | % | 40.2 | % | ||||||||
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Healthcare Backlog |
$ | 155,917 | $ | 141,306 | n/a | n/a | ||||||||||
Life Sciences Backlog |
48,469 | 49,635 | n/a | n/a | ||||||||||||
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Total Backlog |
$ | 204,386 | $ | 190,941 | n/a | n/a | ||||||||||
Free Cash Flow |
$ | 49,191 | $ | 50,104 | $ | 82,134 | $ | 117,087 | ||||||||
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Net Debt |
$ | 317,403 | $ | 365,003 | n/a | n/a | ||||||||||
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(1) | Non-GAAP financial measures are presented with the intent of providing greater transparency to supplemental financial information used by management and the Board of Directors in their financial analysis and operational decision making. These amounts are disclosed so that the reader has the same financial data that management uses with the belief that it will assist investors and other readers in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. |
We believe that the presentation of these non-GAAP financial measures, when considered along with our GAAP financial measures and the reconciliation to the corresponding GAAP financial measures, provide the reader with a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. It is important for the reader to note that the non-GAAP financial measure used may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.
This supplemental data is consistent with publicly disclosed information provided in quarterly conference calls, earnings releases and SEC filings, and is subject to all definitions, precautions and limitations contained in those disclosures. Please see the Companys most recent 10-K for definitions (and reconciliation where appropriate) of adjusted measures, backlog, free cash flow and net debt.