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8-K - FORM 8-K - STERIS CORPd51961d8k.htm

Exhibit 99.1

STERIS CORPORATION ANNOUNCES FISCAL 2016 SECOND QUARTER

FINANCIAL RESULTS

• 6% top-line growth, including currency headwind of 2%

• U.S. GAAP earnings of $0.14 per diluted share

• Adjusted earnings per diluted share increased 22% to $0.83

• Synergy Health acquisition expected to close on November 2, 2015

Mentor, Ohio (October 30, 2015) - STERIS Corporation (NYSE: STE) today announced financial results for its fiscal 2016 second quarter ended September 30, 2015. Fiscal 2016 second quarter revenue increased 6% to $489.9 million compared with $462.7 million in the second quarter of fiscal 2015, with growth in all three segments. As reported, net income was $8.7 million, or $0.14 per diluted share, compared with net income of $31.0 million, or $0.52 per diluted share in the second quarter of fiscal 2015.

Adjusted Results

Adjusted net income for the second quarter of fiscal 2016 was $50.1 million, or $0.83 per diluted share, compared with adjusted net income for the second quarter of the previous year of $40.6 million, or $0.68 per diluted share.

“STERIS is in a good position heading into our second half, with solid top and bottom-line growth,” said Walt Rosebrough, President and Chief Executive Officer of STERIS. “We are very pleased to be days away from closing the Synergy Health acquisition. We are excited about the future, as the combined Company will bring together the many strengths of both businesses, which will allow us to accomplish more than either one of us could separately.”

Segment Results

Healthcare revenue grew 3% in the quarter to $362.3 million compared with $351.2 million in the second quarter of fiscal 2015. Contributing to the quarter, service revenue increased 4%, consumable revenue grew 2% and capital equipment revenue increased 3%. Solid performance in the United States continues to be offset by weakness internationally.

As reported, Healthcare operating income was $20.3 million compared with $29.9 million in last year’s second quarter. Adjusted segment operating income was $45.5 million compared with adjusted operating income of $45.2 million in the second quarter of fiscal 2015. The increase in profitability was primarily due to increased volume and favorable foreign currency exchange rates.


STERIS Corporation

News Announcement

Page 2

 

Life Sciences second quarter revenue increased 20% to $71.0 million compared with $59.1 million in the second quarter of fiscal 2015. Consumable revenue grew 32%, reflecting the recent acquisition of GEPCO, capital equipment revenue increased 25% and service revenue grew 3%. Life Sciences operating income as reported was $18.1 million compared with $13.0 million in the prior year’s second quarter. Adjusted segment operating income was $20.9 million compared with adjusted segment operating income of $13.2 million in the prior year quarter. The increase in profitability was primarily due to the increased volume, including GEPCO, and favorable foreign currency exchange rates.

Fiscal 2016 second quarter revenue for Isomedix Services increased 8% to $55.8 million compared with $51.9 million in the same period last year. Revenue benefited from increased volume from the segment’s core medical device Customers. As reported, operating income was $14.8 million in the quarter compared with $14.4 million in the second quarter of last year. Adjusted segment operating income increased to $17.5 million in the second quarter of fiscal 2016 compared with adjusted segment operating income of $14.5 million last year, due primarily to the increase in volume.

Cash Flow

Net cash provided by operations for the first half of fiscal 2016 was $79.5 million, compared with $104.9 million in fiscal 2015. Free cash flow (see note 1) for the first half of fiscal 2016 was $39.6 million compared with $69.2 million in the prior year. The decline in free cash flow is primarily due to an increased payout level in regards to the Company’s prior year annual compensation program, a pension contribution made in connection with the settlement of a legacy pension obligation, and additional expenses related to the proposed Combination with Synergy Health.

Outlook

On a stand-alone basis, STERIS is confirming its previous outlook of revenue growth of 6-7% for fiscal 2016. Expectations for adjusted earnings per diluted share are unchanged in the range of $3.15 to $3.30 for the full fiscal year. The Synergy Health acquisition is anticipated to close on Monday, November 2, 2015. STERIS plans to provide an outlook inclusive of Synergy Health as soon as practical.

 


STERIS Corporation

News Announcement

Page 3

 

Fiscal 2016 free cash flow (see note 1) is now anticipated to be approximately $130.0 million, reflecting approximately $30 million in cash expenses related to the Synergy Health acquisition. Capital expenditures are anticipated to be approximately $105.0 million, reflecting the impact of acquisitions, continued expansion within Isomedix, new product development and general maintenance and repair for existing facilities.

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 1-888-566-0592 in the United States and Canada, and 1-203-369-3069 internationally.

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 debt principal repayments, growth outside of core operations, repurchase common shares, and pay cash dividends. Free cash flow is defined as cash flows from operating activities less purchases of property, plant, equipment and intangibles, net, plus proceeds from the sale of property, plant, equipment and intangibles. STERIS’s calculation of free cash flow may vary from other companies.

 


STERIS Corporation

News Announcement

Page 4

 

U.K. Takeover Code Directors’ Confirmation

Under Rule 28.1 of the U.K.’s City Code on Takeovers and Mergers (the “Takeover Code”) which applies in light of our proposed acquisition of Synergy Health, our directors must provide a so-called “directors’ confirmation” in respect of our net income for the quarter ended September 30, 2015 (the “Net Income Statements”) and the outlook guidance (the “Outlook”) contained in this announcement since they constitute unaudited profit estimates and a profit forecast respectively for the purposes of the Takeover Code. Accordingly, our directors confirm that:

 

  1. the Net Income Statements and the Outlook have been properly compiled on the basis of the assumptions contained or referred in our annual report on Form 10-K for the year ended March 31, 2015 and, in the case of the Outlook, on the basis of the assumption contained in this announcement under the section captioned “Outlook”; and

 

  2. the basis of accounting used for preparing Net Income Statements and the Outlook is consistent with our accounting policies.

Enquiries:

STERIS

Investor Contact: Julie Winter, Director, Investor Relations   Tel: +1 440 392 7245
Media Contact:  
Stephen Norton, Senior Director, Corporate Communications   Tel: +1 440 392 7482
Lazard & Co., Limited (Financial Adviser to STERIS and New STERIS)
Stephen Sands   Tel: +44 20 7187 2000
Nicholas Shott  
Al Garner   Tel: +1 212 632 6000
Andrew Dickinson   Tel: +1 415 623 5000

Lazard & Co., Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to STERIS and New STERIS and no one else in connection with the proposed transaction pursuant to which New STERIS plc (“New STERIS”) will become the ultimate parent company of Synergy Health plc pursuant to an English scheme of arrangement transaction and of STERIS Corporation pursuant to the merger of STERIS Corporation with and into a subsidiary of New STERIS (the “Combination”) and will not be responsible to anyone other than STERIS and New STERIS for providing the protections afforded to clients of Lazard & Co., Limited nor for providing advice in relation to the Combination or any other matters referred to in this Announcement. Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with this Announcement, any statement contained herein, the Combination or otherwise.

 


STERIS Corporation

News Announcement

Page 5

 

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person’s interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel’s website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel’s Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Forward-Looking Statements

This press release may contain statements concerning certain trends, expectations, forecasts, estimates, or other forward-looking information affecting or relating to Synergy or 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.

 


STERIS Corporation

News Announcement

Page 6

 

Forward-looking statements speak only as to the date of this press release 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 STERIS and Synergy’s other securities filings, including Item 1A of STERIS’s Annual Report on Form 10-K for the year ended March 31, 2015 and in Synergy’s annual report and accounts for the year ended 29 March 2015 (section headed “principal risks and uncertainties”). Many of these important factors are outside of STERIS’s or Synergy’s control. No assurances can be provided as to any result or the timing of any outcome regarding matters described in the press release 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 and Synergy do 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 parties’ ability to meet expectations regarding the timing, completion and accounting and tax treatments of the combination with Synergy (the “transaction”), (b) the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in connection with the transaction within the expected time-frames or at all and to successfully integrate Synergy’s operations into those of STERIS, (c) the integration of Synergy’s operations into those of STERIS being more difficult, time-consuming or costly than expected, (d) 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 transaction, (e) the retention of certain key employees of Synergy being difficult, (f) changes in tax laws or interpretations that could increase our consolidated tax liabilities, including, if the transaction is consummated, changes in tax laws that would result in New STERIS being treated as a domestic corporation for United States federal tax purposes, (g) the potential for increased pressure on pricing or costs that leads to erosion of profit margins, (h) 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, (i) 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 STERIS’s or Synergy’s performance, results, prospects or value, (j) 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, (k) the possibility of reduced demand, or reductions in the rate of growth in demand, for STERIS’s or Synergy’s products and 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 and

 


STERIS Corporation

News Announcement

Page 7

 

Synergy’s businesses, industry or initiatives including, without limitation, those matters described in STERIS’s Form 10-K for the year ended March 31, 2015 and other securities filings, may adversely impact STERIS’s or Synergy’s performance, results, prospects or value, (m) the possibility that anticipated financial results or benefits of recent acquisitions, or of STERIS’s restructuring efforts will not be realized or will be other than anticipated, (n) the effects of the contractions in credit availability, as well as the ability of STERIS’s and Synergy’s customers and suppliers to adequately access the credit markets when needed, and (o) those risks described in STERIS’s Annual Report on Form 10-K for the year ended March 31, 2015, and other securities filings.

 


STERIS Corporation

Consolidated Condensed Statements of Operations

(In thousands, except per share data)

 

     Three Months Ended
September 30,
    Six Months Ended
September 30,
 
     2015     2014     2015     2014  
     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Revenues

   $ 489,897      $ 462,729      $ 929,799      $ 875,372   

Cost of revenues

     280,535        269,073        536,070        511,737   

Cost of revenues—Restructuring

     41        (336     318        (450
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues, net

     280,576        268,737        536,388        511,287   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     209,321        193,992        393,411        364,085   

Operating expenses:

        

Selling, general, and administrative

     172,459        126,292        299,294        239,980   

Research and development

     14,255        13,006        28,020        25,415   

Restructuring expense

     (56     1,271        (782     1,099   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     186,658        140,569        326,532        266,494   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     22,663        53,423        66,879        97,591   

Non-operating expense, net

     6,822        4,912        12,480        9,374   

Income tax expense

     7,154        17,507        21,421        32,676   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 8,687      $ 31,004      $ 32,978      $ 55,541   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share (EPS) data:

        

Basic

   $ 0.15      $ 0.52      $ 0.55      $ 0.94   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.14      $ 0.52      $ 0.55      $ 0.93   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash dividends declared per common share outstanding

   $ 0.25      $ 0.23      $ 0.48      $ 0.44   

Weighted average number of common shares outstanding used in EPS computation:

        

Basic number of common shares outstanding

     59,897        59,375        59,832        59,272   

Diluted number of common shares outstanding

     60,370        60,020        60,328        59,917   

STERIS Corporation

Consolidated Condensed Balance Sheets

(In thousands)

 

     September 30,      March 31,  
     2015      2015  
     (Unaudited)         

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 162,187       $ 167,689   

Accounts receivable, net

     301,390         325,289   

Inventories, net

     183,951         160,818   

Other current assets

     65,480         66,636   
  

 

 

    

 

 

 

Total Current Assets

     713,008         720,432   

Property, plant, and equipment, net

     505,355         493,053   

Goodwill and intangible assets, net

     1,075,028         860,645   

Other assets

     15,687         23,161   
  

 

 

    

 

 

 

Total Assets

   $ 2,309,078       $ 2,097,291   
  

 

 

    

 

 

 

Liabilities and Equity

     

Current liabilities:

     

Accounts payable

   $ 84,083       $ 99,340   

Other current liabilities

     173,404         183,991   
  

 

 

    

 

 

 

Total Current Liabilities

     257,487         283,331   

Long-term debt

     829,818         621,075   

Other liabilities

     129,982         119,239   

Equity

     1,091,791         1,073,646   
  

 

 

    

 

 

 

Total Liabilities and Equity

   $ 2,309,078       $ 2,097,291   
  

 

 

    

 

 

 


STERIS Corporation

Segment Data

(In thousands)

 

     Three Months Ended
September 30,
    Six Months Ended
September 30,
 
     2015     2014     2015     2014  
     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Segment Revenues:

        

Healthcare

   $ 362,289      $ 351,169      $ 691,616      $ 653,979   

Life Sciences

     71,040        59,148        127,812        117,762   

STERIS Isomedix Services

     55,839        51,850        109,528        103,043   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Reportable Segments

     489,168        462,167        928,956        874,784   

Corporate and Other

     729        562        843        588   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Segment Revenues

   $ 489,897      $ 462,729      $ 929,799      $ 875,372   
  

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended
September 30,
    Six Months Ended
September 30,
 
     2015     2014     2015     2014  
     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Segment Operating Income:

        

Healthcare

   $ 20,336      $ 29,943      $ 38,011      $ 47,909   

Life Sciences

     18,092        13,048        31,325        24,993   

STERIS Isomedix Services

     14,784        14,399        30,034        30,590   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Reportable Segments

     53,212        57,390        99,370        103,492   

Corporate and Other

     (30,549     (3,967     (32,491     (5,901
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Income

   $ 22,663      $ 53,423      $ 66,879      $ 97,591   
  

 

 

   

 

 

   

 

 

   

 

 

 


STERIS Corporation

Consolidated Condensed Statements of Cash Flows

(In thousands)

 

     Six Months Ended  
     September 30,  
     2015     2014  
     (Unaudited)     (Unaudited)  

Operating Activities:

    

Net income

   $ 32,978      $ 55,541   

Pension settlement expense

     26,515        —     

Pension contributions

     (4,687     —     

Non-cash items

     43,027        44,573   

Changes in operating assets and liabilities

     (18,361     4,794   
  

 

 

   

 

 

 

Net cash provided by operating activities

     79,472        104,908   

Investing Activities:

    

Purchases of property, plant, equipment, and intangibles, net

     (39,928     (36,527

Proceeds from sale of property, plant, equipment and intangibles

     38        796   

Investments in businesses, net of cash acquired

     (220,840     (179,380
  

 

 

   

 

 

 

Net cash used in investing activities

     (260,730     (215,111

Financing Activities:

    

Proceeds from issuance of long-term obligations

     350,000        —     

(Payments) Proceeds under credit facilities, net

     (139,750     126,470   

Deferred financing fees and debt issuance costs

     (2,426     —     

Repurchases of common shares

     (12,974     (5,440

Cash dividends paid to common shareholders

     (28,740     (26,118

Stock option and other equity transactions, net

     8,111        8,686   

Excess tax benefit from share-based compensation

     4,676        4,505   
  

 

 

   

 

 

 

Net cash provided by financing activities

     178,897        108,103   

Effect of exchange rate changes on cash and cash equivalents

     (3,141     (3,289
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (5,502     (5,389

Cash and cash equivalents at beginning of period

     167,689        152,802   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 162,187      $ 147,413   
  

 

 

   

 

 

 

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.

 

     Six Months Ended  
     September 30,  
     2015      2014  
     (Unaudited)      (Unaudited)  

Calculation of Free Cash Flow:

     

Cash flows from operating activities

   $ 79,472       $ 104,908   

Purchases of property, plant, equipment, and intangibles, net

     (39,928      (36,527

Proceeds from the sale of property, plant, equipment, and intangibles

     38         796   
  

 

 

    

 

 

 

Free Cash Flow

   $ 39,582       $ 69,177   
  

 

 

    

 

 

 

 

     Twelve Months Ended
March 31,
2016
 
     (Outlook)*  

Calculation of free cash flow for outlook:

  

Cash flows from operating activities

   $ 235,000   

Purchases of property, plant, equipment, and intangibles, net

     (105,000
  

 

 

 

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      Six months ended  
     September 30,      September 30,  
     2015      2014      2015      2014  
     (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)  

Net Income per diluted share

   $ 0.14       $ 0.52       $ 0.55       $ 0.93   

Restructuring, net of tax

     —           0.01         —           0.01   

Inventory and property “step up” to fair value, net of tax

     —           —           —           0.02   

Amortization and impairment of purchased intangible assets, net of tax

     0.07         0.12         0.13         0.17   

Gain from fair value adjustment of acquisition related contingent consideration, net of tax

     —           —           —           0.02   

Settlement of Pension Obligation

     0.27         —           0.27         —     

Acquisition related transaction and integration expenses, net of tax

     0.35         0.03         0.50         0.07   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted net income per diluted share

   $ 0.83       $ 0.68       $ 1.45       $ 1.22   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Twelve months ended  
     March 31,  
     2016  
     (Outlook)*  

Net Income per diluted share

   $ 2.03 - $2.18   

Settlement of pension obligation

     0.27   

Amortization and impairment of purchased intangible assets, net of tax

     0.29   

Acquisition related transaction and integration expenses, net of tax

     0.56   
  

 

 

 

Adjusted net income per diluted share

   $ 3.15 - $3.30   
  

 

 

 

 

* 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      Six months ended  
     September 30,      September 30,  
     2015      2014      2015      2014  
     (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)  

Gross Profit

   $ 209,321       $ 193,992       $ 393,411       $ 364,085   

Restructuring

     41         (336      318         (450

Amortization of inventory “step up” to fair value

     —           —           —           1,234   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted gross profit

   $ 209,362       $ 193,656       $ 393,729       $ 364,869   
  

 

 

    

 

 

    

 

 

    

 

 

 

Selling, general and administrative expenses

   $ 172,459       $ 126,292       $ 299,294       $ 239,980   

Amortization and impairment of purchased intangible assets

     (6,682      (11,518      (12,703      (16,718

Amortization of property “step up” to fair value

     (21      (31      (42      (54

Acquisition related transaction and integration costs

     (23,982      (3,062      (35,526      (6,696

Settlement of Pension Obligation

     (26,515      —           (26,515      —     

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

     —           —           —           (1,998
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted selling, general and administrative expenses

   $ 115,259       $ 111,681       $ 224,508       $ 214,514   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

   $ 22,663       $ 53,423       $ 66,879       $ 97,591   

Amortization of inventory and property “step up” to fair value

     21         31         42         1,288   

Amortization and impairment of purchased intangible assets

     6,682         11,518         12,703         16,718   

Acquisition related transaction and integration costs

     23,982         3,062         35,526         6,696   

Loss (gain) on fair value adjustment of acquisition related contingent consideration

     —           —           —           1,998   

Settlement of Pension Obligation

     26,515         —           26,515         —     

Restructuring

     (15      935         (464      649   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted operating income

   $ 79,848       $ 68,969       $ 141,201       $ 124,940   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 8,687       $ 31,004       $ 32,978       $ 55,541   

Amortization of inventory and property “step up” to fair value, net of tax

     17         25         34         1,030   

Amortization and impairment of purchased intangible assets, net of tax

     4,143         7,098         7,881         10,342   

Acquisition related transaction and integration costs, net of tax

     20,928         1,868         30,399         4,085   

Loss (gain) on fair value adjustment of acquisition related contingent consideration, net of tax

     —           —           —           1,219   

Settlement of Pension Obligation

     16,365         —           16,365         —     

Restructuring, net of tax

     (9      570         (283      396   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted net income

   $ 50,131       $ 40,565       $ 87,374       $ 72,613   
  

 

 

    

 

 

    

 

 

    

 

 

 

Healthcare operating income

   $ 20,336       $ 29,943       $ 38,011       $ 47,909   

Amortization of inventory and property “step up” to fair value

     21         31         42         1,288   

Amortization and impairment of purchased intangible assets

     5,990         11,418         11,870         16,516   

Acquisition related transaction and integration costs

     19,154         2,970         29,234         6,604   

Loss (gain) from fair value adjustment of acquisition related contingent consideration

     —           —           —           1,998   

Restructuring

     5         808         (444      561   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Healthcare operating income

   $ 45,506       $ 45,170       $ 78,713       $ 74,876   
  

 

 

    

 

 

    

 

 

    

 

 

 

Life Sciences operating income

   $ 18,092       $ 13,048       $ 31,325       $ 24,993   

Amortization and impairment of purchased intangible assets

     608         16         665         34   

Acquisition related transaction and integration costs

     2,183         50         2,443         50   

Restructuring

     —           124         —           110   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Life Sciences operating income

   $ 20,883       $ 13,238       $ 34,433       $ 25,187   
  

 

 

    

 

 

    

 

 

    

 

 

 

Isomedix operating income

   $ 14,784       $ 14,399       $ 30,034       $ 30,590   

Amortization and impairment of purchased intangible assets

     84         84         168         168   

Acquisition related transaction and integration costs

     2,645         42         3,849         42   

Restructuring

     (20      3         (20      (22
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Isomedix operating income

   $ 17,493       $ 14,528       $ 34,031       $ 30,778   
  

 

 

    

 

 

    

 

 

    

 

 

 


STERIS Corporation

Unaudited Supplemental Financial Data

Second Quarter Fiscal 2016

As of September 30, 2015

 

     FY 2016     FY 2015     FY 2016     FY 2015  

Total Company Revenues

   Q2     Q2     YTD     YTD  

Capital Equipment

   $ 152,037      $ 143,488      $ 270,257      $ 263,883   

Consumables

     122,108        113,357        236,195        223,402   

Service

     215,752        205,884        423,347        388,087   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Recurring

     337,860        319,241        659,542        611,489   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues

   $ 489,897      $ 462,729      $ 929,799      $ 875,372   
  

 

 

   

 

 

   

 

 

   

 

 

 

United States Revenues

   $ 395,220      $ 365,482      $ 755,689      $ 682,833   

United States Revenues as a % of Total

     81     79     81     78

International Revenues

   $ 94,677      $ 97,247      $ 174,110      $ 192,539   

International Revenues as a % of Total

     19     21     19     22
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment Data

   Q2     Q2     YTD     YTD  

Healthcare

        

Revenues

        

Capital Equipment

   $ 131,151      $ 127,272      $ 234,868      $ 229,543   

Consumables

     92,114        90,558        183,108        178,828   

Service

     139,024        133,339        273,640        245,608   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Recurring

     231,138        223,897        456,748        424,436   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Healthcare Revenues, net

   $ 362,289      $ 351,169      $ 691,616      $ 653,979   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     20,336        29,943        38,011        47,909   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Income (1)

     45,506        45,170        78,713        74,876   

Life Sciences

        

Revenues

        

Capital Equipment

   $ 20,318      $ 16,216      $ 34,820      $ 34,340   

Consumables

     29,994        22,799        53,087        44,574   

Service

     20,728        20,133        39,905        38,848   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Recurring

     50,722        42,932        92,992        83,422   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Life Sciences Revenues

   $ 71,040      $ 59,148      $ 127,812      $ 117,762   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     18,092        13,048        31,325        24,993   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Income (1)

     20,883        13,238        34,433        25,187   

Isomedix Services

        

Revenues

   $ 55,839      $ 51,850      $ 109,528      $ 103,043   

Operating Income

     14,784        14,399        30,034        30,590   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Income (1)

     17,493        14,528        34,031        30,778   

Corporate and Other

        

Revenues

   $ 729      $ 562      $ 843      $ 588   

Operating Income (Loss)

     (30,549     (3,967     (32,491     (5,901
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Data

   Q2     Q2     YTD     YTD  

Product

        

Total product revenues

     274,145        256,845        506,452        487,285   

Total product cost of revenues

     148,088        142,991        277,944        272,966   

Restructuring expense

     41        (336     318        (450

Amortization of inventory “step up” to fair value

     —          —          —          1,234   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total product cost of revenues, adjusted (1)

     148,047        143,327        277,626        272,182   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total product gross profit, adjusted (1)

     126,098        113,518        228,826        215,103   
  

 

 

   

 

 

   

 

 

   

 

 

 

As a percentage, adjusted (1)

     46.0     44.2     45.2     44.1

Service

        

Total service revenues

     215,752        205,884        423,347        388,087   

Total service cost of revenues

     132,488        125,746        258,444        238,321   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total service gross profit

     83,264        80,138        164,903        149,766   
  

 

 

   

 

 

   

 

 

   

 

 

 

As a percentage

     38.6     38.9     39.0     38.6

Total Company gross profit margin, adjusted (1)

     209,362        193,656        393,729        364,869   
  

 

 

   

 

 

   

 

 

   

 

 

 

As a percentage, adjusted (1)

     42.7     41.9     42.3     41.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Healthcare Backlog

   $ 136,033      $ 117,178        n/a        n/a   

Life Sciences Backlog

     47,325        46,102        n/a        n/a   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Backlog

   $ 183,358      $ 163,280        n/a        n/a   

Free Cash Flow

   $ 21,919      $ 46,084      $ 39,582      $ 69,177   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Debt

   $ 667,631      $ 472,537        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.