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): July 28, 2020
(Exact Name of Registrant as Specified in Charter)
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: | ||
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)) | |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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 Conditions. |
On August 3, 2020, STERIS plc (the “Company”) issued a press release announcing financial results for the three month period ended June 30, 2020. 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 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
The Company’s Board of Directors increased the number of Directors currently serving from eight to nine members on July 28, 2020, and appointed Christopher Holland to serve as Director effective as of that date.
Mr. Holland most recently served as Senior Vice President and Chief Financial Officer at C.R. Bard prior to its 2017 acquisition by Becton, Dickinson and Company. Previously Mr. Holland served as Senior Vice President of Finance and Treasurer at Aramark, and spent fifteen years at JPMorgan Chase & Co., ultimately in the role of Vice President and Medical Device Sector Head, Investment Banking. Mr. Holland also serves on the Board of Jabil Inc. and is a member of its Audit and Cybersecurity Committees.
Mr. Holland will serve on the Audit and the Compensation and Organization Development Committees of the Company’s Board.
Mr. Holland will receive the $290,000 annual retainer fee payable to all Company Directors (other than the Chairman) later in August. This fee will be payable partially in cash and partially in career restricted stock units.
Item 5.07 | Submission of Matters to a Vote of Security Holders. |
At the Company’s 2020 Annual General Meeting of Shareholders (“Meeting”) held on July 28, 2020, shareholders voted on the matters specified below, with the final voting results as specified. According to the certified list of shareholders, there were 84,951,399 Ordinary Shares of the Company outstanding and entitled to vote at the Meeting. There were present at the Meeting, in person or by proxy, the holders of 77,000,235 Ordinary Shares or 90.64% of the outstanding Ordinary Shares of the Company, constituting a quorum.
1. | The nominees named below were re-elected to the Board of Directors, each for a one-year term, and the results of the vote were as follows: | |||
Nominee | Votes for | Votes against | Abstentions | Broker non-votes | |||||||
Richard C. Breeden | 71,608,671 | 2,671,457 | 91,835 | 2,628,272 | |||||||
Cynthia L. Feldmann | 71,572,080 | 2,623,058 | 176,825 | 2,628,272 | |||||||
Dr. Jacqueline B. Kosecoff | 70,065,987 | 4,204,647 | 101,329 | 2,628,272 | |||||||
David B. Lewis | 72,829,020 | 1,379,813 | 163,130 | 2,628,272 | |||||||
Walter M Rosebrough, Jr. | 73,358,621 | 810,340 | 203,002 | 2,628,272 | |||||||
Dr. Nirav R. Shah | 74,075,199 | 125,741 | 171,023 | 2,628,272 | |||||||
Dr. Mohsen M. Sohi | 71,188,170 | 3,077,866 | 105,927 | 2,628,272 | |||||||
Dr. Richard M. Steeves | 71,928,068 | 2,252,492 | 191,403 | 2,628,272 | |||||||
2. | The results of a proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending March 31, 2021 were as follows: | |||
Votes for | 73,609,583 | |
Votes against | 3,324,252 | |
Abstentions | 66,400 | |
3. | The results of a proposal to appoint Ernst & Young Chartered Accountants as the Company’s statutory auditor under Irish law to hold office until the conclusion of the Company’s next Annual General Meeting were as follows: | |||
Votes for | 73,961,863 | |
Votes against | 2,977,159 | |
Abstentions | 61,213 | |
4. | The results of a proposal to authorize the Directors of the Company or the Audit Committee to determine the remuneration of Ernst & Young Chartered Accountants as the Company’s statutory auditor under Irish law were as follows: | |||
Votes for | 76,765,742 | |
Votes against | 179,776 | |
Abstentions | 54,717 | |
5. | The results of a proposal to approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers as disclosed pursuant to the disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis and the tabular and narrative disclosure contained in the Company’s proxy statement dated June 12, 2020, were as follows: | |||
Votes for | 71,550,687 | |
Votes against | 2,713,406 | |
Abstentions | 107,870 | |
Broker non-votes | 2,628,272 | |
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 & Company Secretary | |
Dated: August 3, 2020
Exhibit 99.1
STERIS Announces Financial Results for Fiscal 2021 First Quarter
• | First quarter revenue declines low-single digits due to reduction in deferrable procedures |
• | First quarter net income grows low-single digits driven by margin expansion |
• | Board increases dividend for 15th consecutive year |
DUBLIN, IRELAND - (August 3, 2020) - STERIS plc (NYSE: STE) (“STERIS” or the “Company”) today announced financial results for its fiscal 2021 first quarter ended June 30, 2020. Revenue as reported for the quarter decreased 4% to $668.9 million compared with $696.8 million in the first quarter of fiscal 2020, with growth in Life Sciences offset by declines in Healthcare and Applied Sterilization Technologies. Constant currency organic revenue (see Non-GAAP Financial Measures) declined 3% for the first quarter of fiscal 2021.
“We are pleased with our overall performance during such a challenging time,” said Walt Rosebrough, President and Chief Executive Officer of STERIS. “Our results this quarter reflect the benefits of STERIS’s balanced and diversified business model as well as certain non-recurring items. As anticipated, our Healthcare segment was the most impacted by the reduction of deferrable procedures. Our Life Sciences segment continued its strong performance due to increased demand from pharma Customers focused on vaccines and biologics. Due to the continuing uncertainty we are not providing guidance for fiscal 2021.”
As reported, net income for the first quarter was $88.2 million or $1.03 per diluted share, compared with net income of $84.6 million, or $0.99 per diluted share in the first quarter of fiscal 2020. Adjusted net income (see Non-GAAP Financial Measures) for the first quarter of fiscal 2021 was $111.8 million, or $1.31 per diluted share, compared with adjusted net income for the previous year’s first quarter of $105.0 million or $1.23 per diluted share.
First Quarter Segment Results
Healthcare revenue as reported declined 10% in the quarter to $399.7 million compared with $445.7 million in the first quarter of fiscal 2020, with a 28% decline in consumable revenue and 10% decline in service revenue partially offset by 6% growth in capital equipment revenue. Capital equipment revenue reflects a one-time benefit from the timing of revenue recognition for operating room integration (ORI) products which added approximately $15 million to revenue. Excluding that benefit, capital equipment revenue would have declined 6%. Constant currency organic revenue also declined 10% during the quarter. Healthcare operating income was $82.4 million compared with $90.5 million in last year’s first quarter. The decrease in profitability was primarily due to the decline in revenue, which was somewhat offset by lower operating expenses and approximately $5 million one-time benefit from the timing of ORI revenue recognition previously noted.
Fiscal 2021 first quarter revenue for Applied Sterilization Technologies decreased 1% as reported to $152.4 million compared with $154.3 million in the same period last year. Constant currency organic revenue was flat, as increased demand for personal protective equipment offset the impact of reduced volumes from the segment’s core medical device Customers. Segment operating income was $64.0 million in the first quarter of fiscal 2021 compared with operating income of $68.0 million in the same period last year primarily due to Customer product mix.
Life Sciences first quarter revenue as reported grew 21% to $116.9 million compared with $96.8 million in the first quarter of fiscal 2020, driven by 34% growth in consumable revenue, 14% growth in capital equipment revenue and 6% growth in service revenue. Constant currency organic revenue grew 21% in the quarter. Operating income was $48.5 million compared with $33.0 million in the prior year’s first quarter, primarily driven by increased volume.
Cash Flow
Net cash provided by operations for the first three months of fiscal 2021 was $134.1 million, compared with $109.3 million in fiscal 2020. Free cash flow (see Non-GAAP Financial Measures) for the first three months of fiscal 2021 was $67.4 million compared with $59.6 million in the prior year period. The increase in free cash flow is primarily due to working capital improvements during the quarter.
Board Announcements
STERIS’s Board of Directors has approved a $0.03 increase in the quarterly interim dividend to $0.40 per share, representing the 15th consecutive year of dividend increases. The dividend is payable September 24, 2020 to shareholders of record at the close of business on August 27, 2020.
Effective July 28, 2020, the Company has expanded its Board to nine members with the appointment of Christopher Holland. Mr. Holland brings over 30 years of experience to STERIS's Board, most recently serving as Senior Vice President and Chief Financial Officer at C.R. Bard prior to the 2017 acquisition by Becton, Dickinson and Company (NYSE:BDX). Previously Mr. Holland served as Senior Vice President Finance and Treasurer at Aramark, and spent fifteen years at JPMorgan Chase & Co., ultimately in the role of Vice President and Medical Device Sector Head, Investment Banking. Mr. Holland also serves on the Board of Jabil Inc. (NYSE: JBL) and is a member of its Audit and Cybersecurity Committees.
Conference Call
As previously announced, STERIS management will host a conference call tomorrow, August 4, 2020 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 August 4, 2020, either over the Internet at www.steris-ir.com or via phone. To access the replay of the call, please use the access code 10145793 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, redomiciliation and tax restructuring costs, COVID-19 incremental costs, and certain other unusual or non-recurring items. COVID-19 incremental costs includes the additional costs attributable to COVID-19 such as enhanced cleaning protocols, personal protective equipment for our employees, event cancellation fees, and payroll costs associated with our response to COVID-19, net of any government subsidies available. 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, 2020. 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) the impact of the COVID-19 pandemic on STERIS’s operations, performance, results, prospects, or value, (b) STERIS's ability to achieve the expected benefits regarding the accounting and tax treatments of the redomiciliation to Ireland (“Redomiciliation”), (c) 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, (d) 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, (e) 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, (f) the potential for increased pressure on pricing or costs that leads to erosion of profit margins, (g) 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, (h) 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, (i) 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, (j) the possibility of reduced demand, or reductions in the rate of growth in demand, for STERIS’s products and services, (k) 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, (l) 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, 2020, and other securities filings, may adversely impact STERIS’s performance, results, prospects or value, (m) 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, (n) 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, (o) the possibility that anticipated financial results or benefits of recent acquisitions, or of STERIS’s restructuring efforts, or of recent divestitures, or of restructuring plans will not be realized or will be other than anticipated, and (p) 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 June 30, | ||||||||
2020 | 2019 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenues | $ | 668,932 | $ | 696,803 | ||||
Cost of revenues | 383,364 | 390,042 | ||||||
Total cost of revenues - restructuring | — | 918 | ||||||
Total cost of revenues, net | 383,364 | 390,960 | ||||||
Gross profit | 285,568 | 305,843 | ||||||
Operating expenses: | ||||||||
Selling, general, and administrative | 155,170 | 178,781 | ||||||
Research and development | 16,231 | 15,585 | ||||||
Restructuring expenses | 166 | 1,389 | ||||||
Total operating expenses | 171,567 | 195,755 | ||||||
Income from operations | 114,001 | 110,088 | ||||||
Non-operating expenses, net | 7,203 | 10,678 | ||||||
Income tax expense | 18,674 | 14,633 | ||||||
Net income | $ | 88,124 | $ | 84,777 | ||||
Less: Net (loss) income attributable to noncontrolling interests | (66 | ) | 187 | |||||
Net income attributable to shareholders | $ | 88,190 | $ | 84,590 | ||||
Earnings per ordinary share (EPS) data: | ||||||||
Basic | $ | 1.04 | $ | 1.00 | ||||
Diluted | $ | 1.03 | $ | 0.99 | ||||
Cash dividends declared per share ordinary outstanding | $ | 0.37 | $ | 0.34 | ||||
Weighted average number of shares outstanding used in EPS computation: | ||||||||
Basic number of shares outstanding | 84,959 | 84,638 | ||||||
Diluted number of shares outstanding | 85,676 | 85,566 | ||||||
STERIS plc | ||||||||
Consolidated Condensed Balance Sheets | ||||||||
(in thousands) | ||||||||
June 30, | March 31, | |||||||
2020 | 2020 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 255,627 | $ | 319,581 | ||||
Accounts receivable, net | 503,172 | 586,481 | ||||||
Inventories, net | 276,970 | 248,259 | ||||||
Prepaid expenses and other current assets | 61,359 | 54,430 | ||||||
Total current assets | 1,097,128 | 1,208,751 | ||||||
Property, plant, and equipment, net | 1,148,052 | 1,111,855 | ||||||
Lease right-of-use assets, net | 143,463 | 131,837 | ||||||
Goodwill | 2,371,789 | 2,356,085 | ||||||
Intangibles, net | 551,526 | 565,473 | ||||||
Other assets | 51,969 | 51,581 | ||||||
Total assets | $ | 5,363,927 | $ | 5,425,582 | ||||
Liabilities and equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 133,532 | $ | 149,341 | ||||
Other current liabilities | 346,017 | 354,266 | ||||||
Total current liabilities | 479,549 | 503,607 | ||||||
Long-term indebtedness | 1,022,156 | 1,150,521 | ||||||
Other liabilities | 372,509 | 364,730 | ||||||
Total equity | 3,489,713 | 3,406,724 | ||||||
Total liabilities and equity | $ | 5,363,927 | $ | 5,425,582 | ||||
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 June 30, | ||||||||
2020 | 2019 | |||||||
(in thousands) | (Unaudited) | (Unaudited) | ||||||
Revenues: | ||||||||
Healthcare | $ | 399,658 | $ | 445,732 | ||||
Applied Sterilization Technologies | 152,362 | 154,286 | ||||||
Life Sciences | 116,912 | 96,785 | ||||||
Total revenues | $ | 668,932 | $ | 696,803 | ||||
Operating income (loss): | ||||||||
Healthcare | $ | 82,357 | $ | 90,515 | ||||
Applied Sterilization Technologies | 63,955 | 68,035 | ||||||
Life Sciences | 48,461 | 33,039 | ||||||
Corporate | (52,367 | ) | (55,397 | ) | ||||
Total operating income before adjustments | $ | 142,406 | $ | 136,192 | ||||
Less: Adjustments | ||||||||
Amortization of acquired intangible assets | $ | 17,500 | $ | 16,949 | ||||
Acquisition and integration related charges | 1,286 | 1,917 | ||||||
Redomiciliation and tax restructuring costs | 170 | 1,770 | ||||||
Net loss on divestiture of businesses | 10 | 2,426 | ||||||
Amortization of property "step up" to fair value | 603 | 735 | ||||||
COVID-19 incremental costs | 8,670 | — | ||||||
Restructuring charges | 166 | 2,307 | ||||||
Total operating income | $ | 114,001 | $ | 110,088 | ||||
STERIS plc
Consolidated Condensed Statements of Cash Flows
(in thousands)
Three Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
(Unaudited) | (Unaudited) | |||||||
Operating activities: | ||||||||
Net income | $ | 88,124 | $ | 84,777 | ||||
Non-cash items | 61,816 | 55,110 | ||||||
Changes in operating assets and liabilities | (15,818 | ) | (30,550 | ) | ||||
Net cash provided by operating activities | 134,122 | 109,337 | ||||||
Investing activities: | ||||||||
Purchases of property, plant, equipment, and intangibles, net | (66,861 | ) | (49,794 | ) | ||||
Proceeds from the sale of property, plant, and equipment | 137 | 18 | ||||||
Proceeds from the sale of businesses | — | 439 | ||||||
Acquisition of businesses, net of cash acquired | — | (34,970 | ) | |||||
Net cash used in investing activities | (66,724 | ) | (84,307 | ) | ||||
Financing activities: | ||||||||
Proceeds (payments) under credit facilities, net | (95,837 | ) | 27,861 | |||||
Deferred financing fees and debt issuance costs | — | (1,206 | ) | |||||
Acquisition related deferred or contingent consideration | (21 | ) | (452 | ) | ||||
Repurchases of ordinary shares | (14,296 | ) | (14,886 | ) | ||||
Cash dividends paid to ordinary shareholders | (31,471 | ) | (28,823 | ) | ||||
Contributions from non-controlling interest | 2,258 | — | ||||||
Stock option and other equity transactions, net | 5,367 | 9,899 | ||||||
Net cash used in financing activities | (134,000 | ) | (7,607 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,648 | 11 | ||||||
Increase in cash and cash equivalents | (63,954 | ) | 17,434 | |||||
Cash and cash equivalents at beginning of period | 319,581 | 220,633 | ||||||
Cash and cash equivalents at end of period | $ | 255,627 | $ | 238,067 | ||||
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. | ||||
Three Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
(Unaudited) | (Unaudited) | |||||||
Calculation of Free Cash Flow: | ||||||||
Cash flows from operating activities | $ | 134,122 | $ | 109,337 | ||||
Purchases of property, plant, equipment, and intangibles, net | (66,861 | ) | (49,794 | ) | ||||
Proceeds from the sale of property, plant, equipment, and intangibles | 137 | 18 | ||||||
Free Cash Flow | $ | 67,398 | $ | 59,561 | ||||
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 June 30, (unaudited) | |||||||||||||||||||||||||||||
As reported, GAAP | Impact of Acquisitions | Impact of Divestitures | Impact of Foreign Currency Movements | GAAP Growth | Organic Growth | Constant Currency Organic Growth | |||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||
Segment revenues: | |||||||||||||||||||||||||||||
Healthcare | $ | 399,658 | $ | 445,732 | $ | — | $ | — | $ | (2,199 | ) | (10.3 | )% | (10.3 | )% | (9.8 | )% | ||||||||||||
Applied Sterilization Technologies | 152,362 | 154,286 | — | — | (1,563 | ) | (1.2 | )% | (1.2 | )% | (0.2 | )% | |||||||||||||||||
Life Sciences | 116,912 | 96,785 | — | — | (652 | ) | 20.8 | % | 20.8 | % | 21.5 | % | |||||||||||||||||
Total | $ | 668,932 | $ | 696,803 | $ | — | $ | — | $ | (4,414 | ) | (4.0 | )% | (4.0 | )% | (3.4 | )% | ||||||||||||
Three months ended June 30, (unaudited) | ||||||||||||||||||||||||||||
Gross Profit | Income from Operations | Net Income attributable to shareholders | Diluted EPS | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||
GAAP | $ | 285,568 | $ | 305,843 | $ | 114,001 | $ | 110,088 | $ | 88,190 | $ | 84,590 | $ | 1.03 | $ | 0.99 | ||||||||||||
Adjustments: | ||||||||||||||||||||||||||||
Amortization of acquired intangible assets | 341 | 147 | 17,500 | 16,949 | ||||||||||||||||||||||||
Acquisition and integration related charges | 92 | 496 | 1,286 | 1,917 | ||||||||||||||||||||||||
Redomiciliation and tax restructuring costs | — | — | 170 | 1,770 | ||||||||||||||||||||||||
Net loss on divestiture of businesses | — | — | 10 | 2,426 | ||||||||||||||||||||||||
Amortization of property "step up" to fair value | 603 | 782 | 603 | 735 | ||||||||||||||||||||||||
COVID-19 incremental costs | 8,336 | — | 8,670 | — | ||||||||||||||||||||||||
Restructuring charges | — | 918 | 166 | 2,307 | ||||||||||||||||||||||||
Net impact of adjustments after tax* | 23,630 | 20,420 | ||||||||||||||||||||||||||
Net EPS impact | 0.28 | 0.24 | ||||||||||||||||||||||||||
Adjusted | $ | 294,940 | $ | 308,186 | $ | 142,406 | $ | 136,192 | $ | 111,820 | $ | 105,010 | $ | 1.31 | $ | 1.23 | ||||||||||||
* The tax expense includes both the current and deferred income tax impact of the adjustments.
STERIS plc | |||||||
Unaudited Supplemental Financial Data | |||||||
For the Periods Ending June 30, 2020 and 2019 | |||||||
FY 2021 | FY 2020 | ||||||
Total Company Revenues | Q1 | Q1 | |||||
Consumables | $ | 142,596 | $ | 160,111 | |||
Service | 367,824 | 389,068 | |||||
Total Recurring | $ | 510,420 | $ | 549,179 | |||
Capital Equipment | $ | 158,512 | $ | 147,624 | |||
Total Revenues | $ | 668,932 | $ | 696,803 | |||
Ireland Revenues | $ | 14,373 | $ | 15,108 | |||
Ireland Revenues as a % of Total | 2 | % | 2 | % | |||
United States Revenues | $ | 491,708 | $ | 511,152 | |||
United States Revenues as a % of Total | 74 | % | 73 | % | |||
International Revenues | $ | 162,851 | $ | 170,543 | |||
International Revenues as a % of Total | 24 | % | 25 | % | |||
Segment Data | Q1 | Q1 | |||||
Healthcare | |||||||
Revenues | |||||||
Consumables | $ | 83,754 | $ | 116,082 | |||
Service | 187,822 | 208,795 | |||||
Total Recurring | $ | 271,576 | $ | 324,877 | |||
Capital Equipment | 128,082 | 120,855 | |||||
Total Healthcare Revenues | $ | 399,658 | $ | 445,732 | |||
Segment Operating Income | $ | 82,357 | $ | 90,515 | |||
Applied Sterilization Technologies | |||||||
Applied Sterilization Technologies Revenues | $ | 152,362 | $ | 154,286 | |||
Segment Operating Income | $ | 63,955 | $ | 68,035 | |||
Life Sciences | |||||||
Revenues | |||||||
Consumables | $ | 58,842 | $ | 44,029 | |||
Service | 27,640 | 25,987 | |||||
Total Recurring | $ | 86,482 | $ | 70,016 | |||
Capital Equipment | 30,430 | 26,769 | |||||
Total Life Sciences Revenues | $ | 116,912 | $ | 96,785 | |||
Segment Operating Income | $ | 48,461 | $ | 33,039 | |||
Corporate | |||||||
Operating loss | $ | (52,367 | ) | $ | (55,397 | ) | |
Other Data | Q1 | Q1 | |||||
Healthcare Backlog | 164,201 | 187,195 | |||||
Life Sciences Backlog | 67,712 | 58,850 | |||||
Total Backlog | 231,913 | 246,045 | |||||
GAAP Income Tax Rate | 17.5 | % | 14.7 | % | |||
Adjusted Income Tax Rate | 17.3 | % | 16.2 | % | |||
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. | ||||