Form 8-K

 

 

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)

Registrant’s 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
No.

  

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
No.

  

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

EX-99.1

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 year’s 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 Company’s 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 STERIS’s 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 Company’s 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 Company’s 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. STERIS’s 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   
  

 

 

    

 

 

   

 

 

    

 

 

 

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
  

 

 

    

 

 

   

 

 

    

 

 

 

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   
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings per common share (EPS) data:

          

Basic

   $ 0.48       $ 0.82      $ 1.54       $ 2.04   
  

 

 

    

 

 

   

 

 

    

 

 

 

Diluted

   $ 0.48       $ 0.82      $ 1.52       $ 2.02   
  

 

 

    

 

 

   

 

 

    

 

 

 

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   
  

 

 

    

 

 

 

Total Assets

   $ 1,777,806       $ 1,761,109   
  

 

 

    

 

 

 

Liabilities and Equity

     

Current liabilities:

     

Accounts payable

   $ 80,322       $ 79,374   

Other current liabilities

     121,063         139,463   
  

 

 

    

 

 

 

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   
  

 

 

    

 

 

 

Total Liabilities and Equity

   $ 1,777,806       $ 1,761,109   
  

 

 

    

 

 

 


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   
  

 

 

   

 

 

   

 

 

   

 

 

 

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Reportable Segments

     405,116        379,531        1,155,268        1,071,278   

Corporate and Other

     435        874        1,697        2,408   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Segment Revenues

   $ 405,551      $ 380,405      $ 1,156,965      $ 1,073,686   
  

 

 

   

 

 

   

 

 

   

 

 

 
     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   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Reportable Segments

     57,384        69,379        153,267        184,904   

Corporate and Other

     (1,494     (2,239     (6,065     (7,185
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Income

   $ 55,890      $ 67,140      $ 147,202      $ 177,719   
  

 

 

   

 

 

   

 

 

   

 

 

 


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   
  

 

 

   

 

 

 

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
  

 

 

   

 

 

 

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   
  

 

 

   

 

 

 

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   
  

 

 

   

 

 

 

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. STERIS’s 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   
  

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted net income per diluted share

   $ 0.59       $ 0.58      $ 1.57      $ 1.64   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

     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   
  

 

 

 
* 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
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted revenues

   $ 405,551      $ 380,405      $ 1,156,965      $ 1,053,286   
  

 

 

   

 

 

   

 

 

   

 

 

 

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted gross profit

   $ 163,775      $ 153,869      $ 465,127      $ 423,587   
  

 

 

   

 

 

   

 

 

   

 

 

 

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     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted selling, general and administrative expenses

   $ 89,665      $ 85,656      $ 264,564      $ 239,635   
  

 

 

   

 

 

   

 

 

   

 

 

 

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
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 62,530      $ 57,798      $ 163,603      $ 154,373   
  

 

 

   

 

 

   

 

 

   

 

 

 

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
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 34,934      $ 34,281      $ 93,704      $ 96,237   
  

 

 

   

 

 

   

 

 

   

 

 

 

Healthcare revenues, net

   $ 291,831      $ 271,096      $ 828,051      $ 757,430   

Impact of SYSTEM 1 Rebate Program

     —          —          —          (20,400
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Healthcare revenues

   $ 291,831      $ 271,096      $ 828,051      $ 737,030   
  

 

 

   

 

 

   

 

 

   

 

 

 

Healthcare capital revenues

   $ 124,777      $ 119,471      $ 342,782      $ 366,840   

Impact of SYSTEM 1 Rebate Program

     —          —          —          (20,400
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Healthcare capital revenues

   $ 124,777      $ 119,471      $ 342,782      $ 346,440   
  

 

 

   

 

 

   

 

 

   

 

 

 

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
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Healthcare operating income

   $ 37,535      $ 35,747      $ 87,487      $ 85,823   
  

 

 

   

 

 

   

 

 

   

 

 

 

Capital equipment revenues

   $ 149,578      $ 147,068      $ 408,775      $ 435,162   

Impact of SYSTEM 1 Rebate Program

     —          —          —          (20,400
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted capital equipment revenues

   $ 149,578      $ 147,068      $ 408,775      $ 414,762   
  

 

 

   

 

 

   

 

 

   

 

 

 

United States revenues

   $ 314,589      $ 281,411      $ 900,592      $ 815,604   

Impact of SYSTEM 1 Rebate Program

     —          —          —          (20,400
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted United States revenues

   $ 314,589      $ 281,411      $ 900,592      $ 795,204   
  

 

 

   

 

 

   

 

 

   

 

 

 


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   
  

 

 

   

 

 

   

 

 

   

 

 

 

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Recurring

     255,973        233,337        748,190        638,524   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues, net

   $ 405,551      $ 380,405      $ 1,156,965      $ 1,073,686   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted total revenues (1)

     na        na        na      $ 1,053,286   
  

 

 

   

 

 

   

 

 

   

 

 

 

United States Revenues

   $ 314,589      $ 281,411      $ 900,592      $ 815,604   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted United States Revenues (1)

     na        na        na        795,204   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Revenues

        

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Recurring

     167,054        151,625        485,269        390,590   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Healthcare Revenues, net

   $ 291,831      $ 271,096      $ 828,051      $ 757,430   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Total Healthcare Revenues (1)

     na        na        na      $ 737,030   

Operating Income

     31,238        45,478        72,111        110,355   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Income (1)

     37,535        35,747        87,487        85,823   

Life Sciences

        

Revenues

        

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Recurring

     39,327        37,446        116,432        111,794   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Life Sciences Revenues

   $ 64,128      $ 65,043      $ 182,425      $ 180,116   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     12,092        12,798        38,672        35,201   
  

 

 

   

 

 

   

 

 

   

 

 

 

Isomedix Services

        

Revenues

   $ 49,157      $ 43,392      $ 144,792      $ 133,732   

Operating Income

     14,054        11,103        42,484        39,348   
  

 

 

   

 

 

   

 

 

   

 

 

 

Corporate and Other

        

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

        

Total product revenues

     252,616        243,722        710,853        689,125   

SYSTEM 1 Rebate Program

     —          —          —          20,400   
  

 

 

   

 

 

   

 

 

   

 

 

 

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total product cost of revenues, adjusted (1)

     144,884        138,936        408,051        391,820   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total product gross profit, adjusted (1)

     107,732        104,786        302,802        276,905   
  

 

 

   

 

 

   

 

 

   

 

 

 

As a percentage, adjusted (1)

     42.6     43.0     42.6     41.4

Service

        

Total service revenues

     152,935        136,683        446,112        384,561   

Total service cost of revenues

     96,892        87,600        283,787        237,879   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total service gross profit

     56,043        49,083        162,325        146,682   
  

 

 

   

 

 

   

 

 

   

 

 

 

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

As a percentage, adjusted (1)

     40.4     40.4     40.2     40.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Healthcare Backlog

   $ 155,917      $ 141,306        n/a        n/a   

Life Sciences Backlog

     48,469        49,635        n/a        n/a   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Backlog

   $ 204,386      $ 190,941        n/a        n/a   

Free Cash Flow

   $ 49,191      $ 50,104      $ 82,134      $ 117,087   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Debt

   $ 317,403      $ 365,003        n/a        n/a   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 Company’s most recent 10-K for definitions (and reconciliation where appropriate) of adjusted measures, backlog, free cash flow and net debt.

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