Document
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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): November 4, 2019
STERIS plc
(Exact Name of Registrant as Specified in Charter)

Ireland
 
001-38848
 
98-1455064
(State or other jurisdiction of
incorporation or organization)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
 
70 Sir John Rogerson's Quay,
Dublin 2,
Ireland
D02 R296
(Address of principal executive offices)
Registrant’s telephone number, including area code: + 353 1 232 2000
(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))
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Ordinary Shares
 
STE
 
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  






Item 2.02
Results of Operations and Financial Condition.

On November 4, 2019, STERIS plc (the “Company”) issued a press release announcing financial results for its fiscal 2020 second quarter ending September 30, 2019 and an interim dividend. A copy of this press release is attached hereto as Exhibit 99.1.
The information contained in this 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 this Item 2.02 of this Current Report on Form 8-K 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
  
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document)






SIGNATURE
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 plc
 
 
 
 
By
 
/s/ J. Adam Zangerle
 
Name:
 
J. Adam Zangerle
 
Title:
 
Senior Vice President, General Counsel & Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dated: November 4, 2019



Exhibit


 
 
 
 
Exhibit 99.1
                                                
STERIS Announces Financial Results for Fiscal 2020 Second Quarter

Second quarter revenue grows 9% as reported, 10% constant currency organic
EPS as reported increases to $1.11, adjusted EPS increases to $1.32
Outlook updated to reflect stronger than anticipated performance

DUBLIN, IRELAND - (November 4, 2019) - STERIS plc (NYSE: STE) (“STERIS” or the “Company”) today announced financial results for its fiscal 2020 second quarter ended September 30, 2019. Revenue as reported for the quarter increased 9% to $736.8 million compared with $679.0 million in the second quarter of fiscal 2019, with growth across all segments. Constant currency organic revenue (see Non-GAAP Financial Measures) growth was 10% for the second quarter of fiscal 2020.
      
“Fiscal 2020 is shaping up to be a great year,” said Walt Rosebrough, President and Chief Executive Officer of STERIS. “Underlying Customer demand for our products and services remains strong and is enhanced by new products and several tuck-in acquisitions. Based on our outperformance in the first half and our future expectations, we are increasing our guidance for revenue, earnings and cash flow for the full fiscal year.”

As reported, net income for the second quarter was $94.8 million, or $1.11 per diluted share, compared with net income of $77.5 million, or $0.91 per diluted share in the second quarter of fiscal 2019. Adjusted net income (see Non-GAAP Financial Measures) for the second quarter of fiscal 2020 was $113.1 million, or $1.32 per diluted share, compared with adjusted net income for the previous year’s second quarter of $93.6 million or $1.10 per diluted share.

Second Quarter Segment Results

Healthcare Products revenue as reported grew 9% in the quarter to $350.3 million compared with $321.5 million in the second quarter of fiscal 2019, driven by 10% growth in capital equipment revenue, 10% growth in service revenue and 7% growth in consumable revenue. Constant currency organic revenue growth for Healthcare Products was 9% during the quarter. Healthcare Products operating income was $87.0 million compared with $72.5 million in last year’s second quarter. The increase in profitability was primarily due to the increase in volume and favorable mix.

Fiscal 2020 second quarter revenue for Applied Sterilization Technologies increased 13% as reported to $152.9 million compared with $135.7 million in the same period last year. Constant currency organic revenue increased 14%, primarily driven by increased volume from the segment’s core medical device Customers. Segment operating income increased to $65.4 million in the second quarter of fiscal 2020 compared with operating income of $53.5 million in the same period last year, due primarily to revenue growth.

Healthcare Specialty Services as reported revenue grew 8% in the quarter to $135.0 million compared with $124.6 million in the second quarter of fiscal 2019. Constant currency organic revenue growth was 11%. Healthcare Specialty Services operating income was $16.1 million compared with $15.5 million in last year’s second quarter, benefiting from the increase in revenue, somewhat offset by investments being made to add capacity in anticipation of continuing demand.

Life Sciences second quarter revenue as reported grew 2% to $98.7 million compared with $97.2 million in the second quarter of fiscal 2019, driven by 11% growth in consumable revenue and 3% growth in service revenue, partially offset by an 11% decline in capital equipment revenue due to difficult comparisons versus strong growth in the prior year quarter. Constant currency organic revenue grew 2% in the quarter. Operating income was $32.3 million compared with $33.3 million in the prior year’s second quarter, primarily driven by unfavorable product mix.







Cash Flow
Net cash provided by operations for the first six months of fiscal 2020 was $260.0 million, compared with $226.7 million in fiscal 2019. Free cash flow (see Non-GAAP Financial Measures) for the first six months of fiscal 2020 was $162.0 million compared with $169.7 million in the prior year period. The decline, as anticipated, in free cash flow is due to increased capital spending.

Fiscal 2020 Outlook
Based on current performance and expectations for the full fiscal year, the Company is updating its prior outlook for revenue and adjusted earnings per diluted share. Constant currency organic revenue growth is now expected to be in the range of 7.5-8.5%, compared with 6-7% previously. The increase in constant currency organic revenue growth is due to outperformance of the underlying business as well as approximately one percentage point benefit from a number of tuck-in acquisitions completed in the first half of the year. Reflecting September 30, 2019 forward rates, the Company now expects that currency movements will negatively impact as reported revenue by approximately $25 million in fiscal 2020. Adjusted earnings per diluted share are now anticipated to be in the range of $5.50 - $5.65, compared with $5.38 - $5.53 previously.

Capital spending is anticipated to be approximately $260 million and free cash flow is expected to be approximately $320 million, both updated to reflect first half actual results.

Dividend Announcement
STERIS’s Board of Directors has approved the quarterly interim dividend of $0.37 per share. The dividend is payable December 20, 2019 to shareholders of record at the close of business on November 26, 2019.

Conference Call
As previously announced, STERIS management will host a conference call tomorrow, November 5, 2019 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 1-833-535-2199 in the United States or 1-412-902-6776 internationally, then asking to join the conference call for STERIS plc.

For those unable to listen to the conference call live, a replay will be available beginning at 12:00 p.m. Eastern Time on November 5, 2019, either over the Internet at www.steris-ir.com or via phone. To access the replay of the call, please use the access code 10136019 and dial 1-877-344-7529 in the United States or 1-412-317-0088 internationally.

About STERIS
STERIS’s MISSION 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. For more information, visit www.steris.com.

Investor Contact:
Julie Winter, Senior Director, Investor Relations and Corporate Communications
Julie_Winter@steris.com
+1 440 392 7245

Media Contact:
Stephen Norton, Senior Director, Corporate Communications
Stephen_Norton@steris.com
+1 440 392 7482

Non-GAAP Financial Measures





Adjusted net income, free cash flow and constant currency organic revenue are non-GAAP measures that may be used from time to time and should not be considered replacements for GAAP results.  Non-GAAP financial measures are presented in this release 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.  The Company believes that the presentation of these non-GAAP financial measures, when considered along with our GAAP financial measures, provides a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure.

Adjusted net income excludes the amortization of intangible assets acquired in business combinations, acquisition-related transaction costs, integration costs related to acquisitions, the re-measurement of deferred taxes and taxation of prior unremitted earnings impacts of the TCJA, and certain other unusual or non-recurring items. STERIS believes this measure is useful because it excludes items that may not be indicative of or are unrelated to our core operating results and provides a baseline for analyzing trends in our underlying businesses.

The Company defines free cash flow as 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 believes that free cash flow is a useful measure of the Company’s ability to fund future principal debt repayments and growth outside of core operations, pay cash dividends, and repurchase ordinary shares.

To measure the percentage organic revenue growth, the Company removes the impact of significant acquisitions and divestitures that affect the comparability and trends in revenue. To measure the percentage constant currency organic revenue growth, the impact of changes in currency exchange rates and acquisitions and divestitures that affect the comparability and trends in revenue are removed. The impact of changes in currency exchange rates is calculated by translating current year results at prior year average currency exchange rates.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported sales, gross profit, operating income, net earnings and net earnings per diluted share, the most directly comparable GAAP financial measures. These non-GAAP financial measures are an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures below, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review its financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Forward-Looking Statements
This release and the referenced conference call may contain statements concerning certain trends, expectations, forecasts, estimates, or other forward-looking information affecting or relating to STERIS 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 the statement is made 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,” “orders,” “backlog,” “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 in STERIS’s other securities filings, including Item 1A of our Annual Report on Form 10-K for the year ended March 31, 2019. Many of these important factors are outside of STERIS’s control.





No assurances can be provided as to any result or the timing of any outcome regarding matters described in STERIS’s securities filings or otherwise with respect to any regulatory action, administrative proceedings, government investigations, litigation, warning letters, cost reductions, business strategies, earnings or revenue trends or future financial results. References to products are summaries only and should not be considered the specific terms of the product clearance or literature. Unless legally required, STERIS 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) STERIS's ability to achieve the expected benefits regarding the accounting and tax treatments of the Redomiciliation transaction, (b) operating costs, Customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, Customers, clients or suppliers) being greater than expected following the Redomiciliation, (c) STERIS’s ability to meet expectations regarding the accounting and tax treatment of the Tax Cuts and Jobs Act (“TCJA”) or the possibility that anticipated benefits resulting from the TCJA will be less than estimated, (d) changes in tax laws or interpretations that could increase our consolidated tax liabilities, including changes in tax laws that would result in STERIS being treated as a domestic corporation for United States federal tax purposes, (e) the potential for increased pressure on pricing or costs that leads to erosion of profit margins, (f) the possibility that market demand will not develop for new technologies, products or applications or services, or business initiatives will take longer, cost more or produce lower benefits than anticipated, (g) the possibility that application of or compliance with laws, court rulings, certifications, regulations, regulatory actions, including without limitation any of the same relating to FDA, EPA or other regulatory authorities, government investigations, the outcome of any pending or threatened FDA, EPA or other regulatory warning notices, actions, requests, inspections or submissions, or other requirements or standards may delay, limit or prevent new product or service introductions, affect the production, supply and/or marketing of existing products or services or otherwise affect STERIS’s performance, results, prospects or value, (h) the potential of international unrest, economic downturn or effects of currencies, tax assessments, tariffs and/or other trade barriers, adjustments or anticipated rates, raw material costs or availability, benefit or retirement plan costs, or other regulatory compliance costs, (i) the possibility of reduced demand, or reductions in the rate of growth in demand, for STERIS’s products and services, (j) the possibility of delays in receipt of orders, order cancellations, or delays in the manufacture or shipment of ordered products or in the provision of services, (k) the possibility that anticipated growth, cost savings, new 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 STERIS’s businesses, industry or initiatives including, without limitation, those matters described in our Annual Report on Form 10-K for the year ended March 31, 2019, and other securities filings, may adversely impact STERIS’s performance, results, prospects or value, (l) the impact on STERIS and its operations, or tax liabilities, of Brexit or the exit of other member countries from the EU, and the Company’s ability to respond to such impacts, (m) the impact on STERIS and its operations of any legislation, regulations or orders, including but not limited to any new trade or tax legislation, regulations or orders, that may be implemented by the U.S. administration or Congress, or of any responses thereto, (n) the possibility that anticipated financial results or benefits of recent acquisitions, or of STERIS’s restructuring efforts, or of recent divestitures, or of the targeted restructuring plan will not be realized or will be other than anticipated, and (o) the effects of contractions in credit availability, as well as the ability of STERIS’s Customers and suppliers to adequately access the credit markets when needed.
 






STERIS plc
 
 
 
 
 
 
 
 
Consolidated Condensed Statements of Operations
 
 
 
 
 
 
 
 
(In thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
Revenues
 
$
736,840

 
$
678,961

 
$
1,433,643

 
$
1,317,719

Cost of revenues
 
417,263

 
394,297

 
807,305

 
764,005

Total cost of revenues - restructuring
 
910

 

 
1,828

 

Total cost of revenues, net
 
418,173

 
394,297

 
809,133

 
764,005

Gross profit
 
318,667

 
284,664

 
624,510

 
553,714

Operating expenses:
 
 
 
 
 
 
 
 
Selling, general, and administrative
 
175,959

 
162,312

 
354,740

 
320,718

Research and development
 
16,249

 
15,773

 
31,834

 
31,993

Restructuring expenses
 
(274
)
 

 
1,115

 

Total operating expenses
 
191,934

 
178,085

 
387,689

 
352,711

 
 
 
 
 
 
 
 
 
Income from operations
 
126,733

 
106,579

 
236,821

 
201,003

Non-operating expenses, net
 
9,426

 
11,320

 
20,104

 
22,693

Income tax expense
 
22,165

 
17,764

 
36,798

 
30,537

Net income
 
$
95,142

 
$
77,495

 
$
179,919

 
$
147,773

Less: Net income attributable to noncontrolling interests
 
373

 
38

 
560

 
325

Net income attributable to shareholders
 
$
94,769

 
$
77,457

 
$
179,359

 
$
147,448

 
 
 
 
 
 
 
 
 
Earnings per ordinary share (EPS) data:
 
 
 
 
 
 
 
 
Basic
 
$
1.12

 
$
0.92

 
$
2.12

 
$
1.74

Diluted
 
$
1.11

 
$
0.91

 
$
2.09

 
$
1.72

 
 
 
 
 
 
 
 
 
Cash dividends declared per share ordinary outstanding
 
$
0.37

 
$
0.34

 
$
0.71

 
$
0.65

 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding used in EPS computation:
 
 
 
 
 
 
 
 
  Basic number of shares outstanding
 
84,795

 
84,537

 
84,716

 
84,611

  Diluted number of shares outstanding
 
85,695

 
85,477

 
85,630

 
85,493

STERIS plc
 
 
 
 
Consolidated Condensed Balance Sheets
 
 
 
 
(in thousands)
 
 
 
 
 
 
September 30,
 
March 31,
 
 
2019
 
2019
 
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
225,536

 
$
220,633

Accounts receivable, net
 
513,353

 
564,830

Inventories, net
 
236,837

 
208,243

Prepaid expenses and other current assets
 
56,228

 
60,029

Total current assets
 
1,031,954

 
1,053,735

 
 
 
 
 
Property, plant, and equipment, net
 
1,066,223

 
1,031,582

Lease right-of-use assets, net
 
115,925

 

Goodwill
 
2,319,062

 
2,322,928

Intangibles, net
 
576,379

 
604,614

Other assets
 
76,174

 
60,212

Total assets
 
$
5,185,717

 
$
5,073,071

Liabilities and equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
133,802

 
$
152,913

Other current liabilities
 
294,221

 
312,283

Total current liabilities
 
428,023

 
465,196

Long-term indebtedness
 
1,187,195

 
1,183,227

Other liabilities
 
332,854

 
238,850

Total equity
 
3,237,645

 
3,185,798

Total liabilities and equity
 
$
5,185,717

 
$
5,073,071






STERIS plc
 
 
 
 
Segment Data
 
 
 
 
 
 
 
 
 
Financial information for each of the segments is presented in the following table. We disclose a measure of segment income that is consistent with the way management operates and views the business. The accounting policies for reportable segments are the same as those for the consolidated Company. Segment income is calculated as the segment’s gross profit less direct costs and indirect costs if the resources are dedicated to a single segment. Corporate costs include corporate and administrative functions, public company costs, legacy post-retirement benefits, and certain services and facilities related to distribution and research and development that are shared by multiple segments.

 
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
(Unaudited)
 
Unaudited)
 
(Unaudited)
 
(Unaudited)
Healthcare Products
 
$
350,281

 
$
321,505

 
$
660,068

 
$
613,515

Healthcare Specialty Services
 
135,002

 
124,554

 
270,947

 
246,803

Life Sciences
 
98,650

 
97,165

 
195,435

 
182,120

Applied Sterilization Technologies
 
152,907

 
135,737

 
307,193

 
275,281

Total revenues
 
$
736,840

 
$
678,961

 
$
1,433,643

 
$
1,317,719

Operating income (loss):
 
 
 
 
 
 
 
 
Healthcare Products
 
$
86,963

 
$
72,468

 
$
160,661

 
$
134,190

Healthcare Specialty Services
 
16,072

 
15,461

 
32,889

 
28,415

Life Sciences
 
32,315

 
33,266

 
65,354

 
63,131

Applied Sterilization Technologies
 
65,386

 
53,468

 
133,421

 
109,619

Corporate
 
(50,956
)
 
(46,985
)
 
(106,353
)
 
(93,027
)
Total operating income before adjustments
 
$
149,780

 
$
127,678

 
$
285,972

 
$
242,328

Less: Adjustments
 
 
 
 
 
 
 
 
Amortization of acquired intangible assets
 
$
18,952

 
$
16,956

 
$
35,901

 
$
35,013

Acquisition and integration related charges
 
1,947

 
2,707

 
3,864

 
4,378

Redomiciliation and tax restructuring costs
 
1,016

 
600

 
2,786

 
887

(Gain) on fair value adjustment of acquisition related contingent consideration
 

 

 

 
(842
)
 Net loss on divestiture of businesses
 
50

 
221

 
2,476

 
663

Amortization of property "step up" to fair value
 
446

 
615

 
1,181

 
1,226

Restructuring charges 
 
636

 

 
2,943

 

Total operating income
 
$
126,733

 
$
106,579

 
$
236,821

 
$
201,003










STERIS plc
 
 
 
 
Consolidated Condensed Statements of Cash Flows
 
 
 
 
(in thousands)
 
 
 
 
 
 
Six Months Ended September 30,
 
 
2019
 
2018
Operating activities:
 
(Unaudited)
 
(Unaudited)
Net income
 
$
179,919

 
$
147,773

Non-cash items
 
112,706

 
92,100

Changes in operating assets and liabilities
 
(32,625
)
 
(13,171
)
Net cash provided by operating activities
 
260,000

 
226,702

Investing activities:
 
 
 
 
Purchases of property, plant, equipment, and intangibles, net
 
(98,168
)
 
(62,549
)
Proceeds from the sale of property, plant, equipment, and intangibles
 
206

 
5,547

Proceeds from the sale of businesses
 
439

 
(196
)
Purchase of investments
 

 
(4,955
)
Acquisition of businesses, net of cash acquired
 
(87,935
)
 

Other
 

 
(6,003
)
Net cash used in investing activities
 
(185,458
)
 
(68,156
)
Financing activities:
 
 
 
 
Payments on long-term obligations
 

 
(85,000
)
Proceeds (payments) under credit facilities, net
 
13,240

 
52,093

Deferred financing fees and debt issuance costs
 
(1,206
)
 
(298
)
Acquisition related deferred or contingent consideration
 
(452
)
 
(685
)
Repurchases of ordinary shares
 
(37,866
)
 
(55,902
)
Cash dividends paid to ordinary shareholders
 
(60,220
)
 
(55,005
)
Stock option and other equity transactions, net
 
22,975

 
4,936

Net cash used in financing activities
 
(63,529
)
 
(139,861
)
Effect of exchange rate changes on cash and cash equivalents
 
(6,110
)
 
(10,298
)
Increase in cash and cash equivalents
 
4,903

 
8,387

Cash and cash equivalents at beginning of period
 
220,633

 
201,534

Cash and cash equivalents at end of period
 
$
225,536

 
$
209,921

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 (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 pay cash dividends, fund growth outside of core operations, fund future debt principal repayments, and repurchase shares. STERIS's calculation of free cash flows may vary from other companies.
 
 
Six Months Ended September 30,
 
 
2019
 
2018
 
 
(Unaudited)
 
(Unaudited)
Calculation of Free Cash Flow:
 
 
 
 
Cash flows from operating activities
 
$
260,000

 
$
226,702

Purchases of property, plant, equipment, and intangibles, net
 
(98,168
)
 
(62,549
)
Proceeds from the sale of property, plant, equipment, and intangibles
 
206

 
5,547

Free Cash Flow
 
$
162,038

 
$
169,700

 
 
Twelve Months Ended
 
 
March 31, 2020
 
 
(Outlook*)
Calculation of Free Cash Flow for Outlook
 
 
Cash flows from operating activities
 
$
580,000

Purchases of property, plant, equipment, and intangibles, net
 
(260,000
)
Free Cash Flow
 
$
320,000

 
 
 
* All amounts are estimates.
 
 





STERIS plc
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.
Management and the Board of Directors 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, provides 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.
To measure the percentage organic revenue growth, the Company removes the impact of acquisitions and divestitures that affect the comparability and trends in revenue. To measure the percentage constant currency organic revenue growth, the impact of changes in currency exchange rates and acquisitions and divestitures that affect the comparability and trends in revenue are removed. The impact of changes in currency exchange rates is calculated by translating current year results at prior year average currency exchange rates.
 
 
Three months ended September 30, (unaudited)
 
 
As reported, GAAP
 
Impact of Acquisitions
 
Impact of Divestitures
 
Impact of Foreign Currency Movements
 
GAAP Growth
 
Organic Growth
 
Constant Currency Organic Growth
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2019
 
2019
 
2019
Segment revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Healthcare Products
 
$
350,281

 
$
321,505

 
$

 
$

 
$
(1,213
)
 
9.0
%
 
9.0
%
 
9.3
%
Healthcare Specialty Services
 
135,002

 
124,554

 

 
(1,328
)
 
(1,496
)
 
8.4
%
 
9.6
%
 
10.8
%
Life Sciences
 
98,650

 
97,165

 

 

 
(811
)
 
1.5
%
 
1.5
%
 
2.4
%
Applied Sterilization Technologies
 
152,907

 
135,737

 

 

 
(2,320
)
 
12.6
%
 
12.6
%
 
14.4
%
Total
 
$
736,840

 
$
678,961

 
$

 
$
(1,328
)
 
$
(5,840
)
 
8.5
%
 
8.7
%
 
9.6
%
 
 
Six months ended September 30, (unaudited)
 
 
As reported, GAAP
 
Impact of Acquisitions
 
Impact of Divestitures
 
Impact of Foreign Currency Movements
 
GAAP Growth
 
Organic Growth
 
Constant Currency Organic Growth
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2019
 
2019
 
2019
Segment revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Healthcare Products
 
$
660,068

 
$
613,515

 
$

 
$

 
$
(3,078
)
 
7.6
%
 
7.6
%
 
8.1
%
Healthcare Specialty Services
 
270,947

 
246,803

 

 
(1,920
)
 
(3,270
)
 
9.8
%
 
10.6
%
 
12.0
%
Life Sciences
 
195,435

 
182,120

 

 

 
(2,003
)
 
7.3
%
 
7.3
%
 
8.4
%
Applied Sterilization Technologies
 
307,193

 
275,281

 

 

 
(5,883
)
 
11.6
%
 
11.6
%
 
13.7
%
Total
 
$
1,433,643

 
$
1,317,719

 
$

 
$
(1,920
)
 
$
(14,234
)
 
8.8
%
 
9.0
%
 
10.0
%
 
 
Three months ended September 30, (unaudited)
 
 
Gross Profit
 
Income from Operations
 
Net Income attributable to shareholders
 
Diluted EPS
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
GAAP
 
$
318,667

 
$
284,664

 
$
126,733

 
$
106,579

 
$
94,769

 
$
77,457

 
$
1.11

 
$
0.91

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of acquired intangible assets
 
759

 
71

 
18,952

 
16,956

 
 
 
 
 
 
 
 
Acquisition and integration related charges
 
313

 
425

 
1,947

 
2,707

 
 
 
 
 
 
 
 
Redomiciliation and tax restructuring costs
 

 

 
1,016

 
600

 
 
 
 
 
 
 
 
 Net loss on divestiture of businesses
 

 

 
50

 
221

 
 
 
 
 
 
 
 
Amortization of property "step up" to fair value
 
492

 
651

 
446

 
615

 
 
 
 
 
 
 
 
Restructuring charges 
 
910

 

 
636

 

 
 
 
 
 
 
 
 
Net impact of adjustments after tax*
 
 
 
 
 
 
 
 
 
18,363

 
16,173

 
 
 
 
Net EPS impact
 
 
 
 
 
 
 
 
 
 
 
 
 
0.21

 
0.19

Adjusted
 
$
321,141

 
$
285,811

 
$
149,780

 
$
127,678

 
$
113,132

 
$
93,630

 
$
1.32

 
$
1.10

* The tax expense includes both the current and deferred income tax impact of the adjustments.
STERIS plc
Non-GAAP Financial Measures (Continued)





(in thousands, except per share data)
 
 
Six months ended September 30, (unaudited)
 
 
Gross Profit
 
Income from Operations
 
Net Income attributable to shareholders
 
Diluted EPS
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
GAAP
 
$
624,510

 
$
553,714

 
$
236,821

 
$
201,003

 
$
179,359

 
$
147,448

 
$
2.09

 
$
1.72

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of acquired intangible assets
 
906

 
171

 
35,901

 
35,013

 
 
 
 
 
 
 
 
Acquisition and integration related charges
 
809

 
1,012

 
3,864

 
4,378

 
 
 
 
 
 
 
 
Redomiciliation and tax restructuring costs
 

 

 
2,786

 
887

 
 
 
 
 
 
 
 
(Gain) on fair value adjustment of acquisition related contingent consideration
 

 

 

 
(842
)
 
 
 
 
 
 
 
 
 Net loss on divestiture of businesses
 

 

 
2,476

 
663

 
 
 
 
 
 
 
 
Amortization of property "step up" to fair value
 
1,274

 
1,299

 
1,181

 
1,226

 
 
 
 
 
 
 
 
Restructuring charges 
 
1,828

 

 
2,943

 

 
 
 
 
 
 
 
 
Net impact of adjustments after tax*
 
 
 
 
 
 
 
 
 
38,783

 
31,828

 
 
 
 
Net EPS impact
 
 
 
 
 
 
 
 
 
 
 
 
 
0.46

 
0.38

Adjusted
 
$
629,327

 
$
556,196

 
$
285,972

 
$
242,328

 
$
218,142

 
$
179,276

 
$
2.55

 
$
2.10

* The tax expense includes both the current and deferred income tax impact of the adjustments.

FY 2020 Outlook
 
Twelve Months Ended
 
 
March 31, 2020
 
 
(Outlook*)
Net income per diluted share
 
$4.70- $4.85

Amortization of acquired intangible assets
 
0.65

Acquisition and integration related charges
 
0.05

Redomiciliation and tax restructuring costs
 
0.03

Net loss on divestiture of businesses
 
0.02

Amortization of property "step up" to fair value
 
0.02

Restructuring charges
 
0.03

Adjusted net income per diluted share
 
$5.50- $5.65

 
 
 
* All amounts are estimates.
 
 






STERIS plc
 
 
 
 
 
Unaudited Supplemental Financial Data
 
 
 
 
Second Quarter Fiscal 2020
 
 
 
For the Periods Ending September 30, 2019 and 2018
 
 
 
 
 
 
FY 2020
FY 2019
FY 2020
FY 2019
Total Company Revenues
Q2
Q2
YTD
YTD
Consumables
$
158,573

$
147,172

$
318,684

$
294,743

Service
399,174

364,302

788,242

724,270

Total Recurring
$
557,747

$
511,474

$
1,106,926

$
1,019,013

Capital Equipment
$
179,093

$
167,487

$
326,717

$
298,706

Total Revenues
$
736,840

$
678,961

$
1,433,643

$
1,317,719

Ireland Revenues
$
15,171

$
14,098

$
30,279

$
26,658

Ireland Revenues as a % of Total
2
%
2
%
2
%
2
%
United States Revenues
$
538,101

$
481,233

$
1,049,253

$
928,773

United States Revenues as a % of Total
73
%
71
%
73
%
71
%
International Revenues
$
183,568

$
183,630

$
354,111

$
362,288

International Revenues as a % of Total
25
%
27
%
25
%
27
%
 
 
 
 
 
 
Segment Data
 
FY 2020
FY 2019
FY 2020
FY 2019
Healthcare Products
 
Q2
Q2
YTD
YTD
Revenues
 
 
 
 
Consumables
 
$
108,392

$
101,680

$
217,174

$
202,094

Service
 
94,852

86,415

180,661

170,515

Total Recurring
$
203,244

$
188,095

$
397,835

$
372,609

Capital Equipment
 
147,037

133,410

262,233

240,906

Total Healthcare Products Revenues
$
350,281

$
321,505

$
660,068

$
613,515

Segment Operating Income
$
86,963

$
72,468

$
160,661

$
134,190

 
 
 
 
 
 
Healthcare Specialty Services
 
 
 
 
Healthcare Services Revenues
$
135,002

$
124,554

$
270,947

$
246,803

Segment Operating Income
$
16,072

$
15,461

$
32,889

$
28,415

 
 
 
 
 
 
Life Sciences
 
 
 
 
 
Revenues
 
 
 
 
Consumables
 
$
42,540

$
38,466

$
86,569

$
78,687

Service
 
29,648

28,887

55,635

54,507

Total Recurring
$
72,188

$
67,353

$
142,204

$
133,194

Capital Equipment
 
26,462

29,812

53,231

48,926

Total Life Sciences Revenues
 
$
98,650

$
97,165

$
195,435

$
182,120

Segment Operating Income
$
32,315

$
33,266

$
65,354

$
63,131

 
 
 
 
 
 
Applied Sterilization Technologies
 
 
 
 
Applied Sterilization Technologies Revenues
$
152,907

$
135,737

$
307,193

$
275,281

Segment Operating Income
$
65,386

$
53,468

$
133,421

$
109,619

 
 
 
 
 
 
Corporate
 
 
 
 
 
Operating loss
 
$
(50,956
)
$
(46,985
)
$
(106,353
)
$
(93,027
)
 
 
 
 
 
 
Other Data
 
FY 2020
FY 2019
 
 
 
 
Q2
Q2
 
 
Healthcare Products Backlog
 
199,264

203,229

 
 
Life Sciences Backlog
 
69,728

61,472

 
 
Total Backlog
 
268,992

264,701

 
 
 
 
 
 
 
 
GAAP Income Tax Rate
18.9
%
18.6
%
17.0
%
17.1
%
Adjusted Income Tax Rate
19.1
%
19.5
%
17.7
%
18.2
%
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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