Form 8-K Steris plc For: Nov 02

 

 

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 2, 2016

 

 

STERIS plc

(Exact Name of Registrant as Specified in Charter)

 

 

 

England and Wales		1-37614		98-1203539
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

Chancery House, 190 Waterside Road

Hamilton Industrial Park, Leicester LE5 1QZ

United Kingdom

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: +44 0 116 276 8636

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))

 

 

 

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ITEM 2.02.

Results of Operations and Financial Condition.

On November 2, 2016, STERIS plc (“STERIS”) issued a press release announcing financial results for its fiscal 2017 second quarter ended September 30, 2016, as well as 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		Press Release issued by STERIS plc on November 2, 2016 announcing financial results for its fiscal 2017 second quarter ended September 30, 2016.

 

2

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

STERIS plc
By:		/s/ J. Adam Zangerle
		J. Adam Zangerle
		Company Secretary

Date: November 2, 2016

 

3

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EXHIBIT INDEX

 

Exhibit
No.		Description
99.1		Press Release issued by STERIS plc on November 2, 2016 announcing financial results for its fiscal 2017 second quarter ended September 30, 2016.

 

4

Exhibit 99.1

STERIS plc Announces Financial Results for Fiscal 2017 Second Quarter

• Second quarter revenue growth of 32%

• Synergy Health integration and cost synergies ahead of plan

• Full year outlook for total revenue growth of 19-20%

• Full year organic revenue growth rate and earnings outlook maintained

LEICESTER, U.K. – (November 2, 2016) – STERIS plc (NYSE: STE) (“STERIS” or the “Company”) today announced financial results for its fiscal 2017 second quarter ended September 30, 2016. Fiscal 2017 second quarter revenue increased 32% to $646.4 million compared with $489.9 million for STERIS Corporation (“Old STERIS”) in the second quarter of fiscal 2016, driven by growth in all four segments. Constant currency organic revenue (see Non-GAAP Financial Measures) growth was 3% for the second quarter of fiscal 2017.

“We are very pleased to be delivering on our strategic initiatives: continue tuck-in acquisitions, divest non-core assets and integrate Synergy Health,” said Walt Rosebrough, President and Chief Executive Officer of STERIS. “Although orders and backlog remain strong, our revenue in the second quarter was somewhat softer than anticipated. Operating margins continue to improve in line with our expectations, and we have confidence in our ability to deliver a strong second half.”

As reported, net income for the second quarter was $40.4 million, or $0.47 per diluted share, compared with net income of $8.7 million, or $0.14 per diluted share in the second quarter of fiscal 2016. Adjusted net income (see Non-GAAP Financial Measures) for the second quarter of fiscal 2017 was $76.4 million, or $0.89 per diluted share, compared with adjusted net income for the previous year’s second quarter of $50.1 million or $0.83 per diluted share.

Second Quarter Segment Results

Healthcare Products revenue grew 5% in the quarter to $304.8 million compared with $291.7 million in the second quarter of fiscal 2016. Consumable revenue grew 15% and service revenue increased 3% during the quarter. Capital equipment revenue declined 1% in the quarter, with record levels of backlog at the end of the quarter.

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Healthcare Products operating income was $50.1 million compared with $40.4 million in last year’s second quarter. The increase in profitability was primarily due to operational efficiencies, favorable foreign currency exchange rates and the suspension of the Medical Device Excise Tax.

Healthcare Specialty Services revenue in the quarter was $142.8 million compared with $70.6 million in the second quarter of fiscal 2016, reflecting the addition of Synergy Health and organic volume growth. Healthcare Specialty Services operating income was $2.2 million compared with $5.1 million in last year’s second quarter, primarily due to lower than anticipated revenue and continued investments in Instrument Management Services (IMS).

Fiscal 2017 second quarter revenue for Applied Sterilization Technologies increased to $115.6 million compared with $55.8 million in the same period last year. Revenue benefited from the addition of Synergy Health and increased volume from the segment’s core medical device Customers. Segment operating income increased to $40.8 million in the second quarter of fiscal 2017 compared with operating income of $17.5 million in the same period last year, due primarily to the aforementioned revenue growth.

Life Sciences second quarter revenue grew 15% to $81.5 million compared with $71.0 million in the second quarter of fiscal 2016. Contributing to this growth, consumable revenue grew 16%, service revenue increased 21% and capital equipment revenue grew 6%. Life Sciences operating income was $22.8 million compared with $20.9 million in the prior year’s second quarter, driven by 6% organic revenue growth and recent acquisitions.

Cash Flow

Net cash provided by operations for the first six months of fiscal 2017 was $182.5 million, compared with $79.5 million in fiscal 2016. Free cash flow (see Non-GAAP Financial Measures) for the first six months of fiscal 2017 was $108.9 million compared with $39.6 million in the prior year. The increase in cash flow is primarily due to higher net income and a reduction in acquisition related expenses.

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Dividend Announcement

STERIS’s Board of Directors has authorized a quarterly interim dividend of $0.28 per share. The dividend is payable December 21, 2016 to shareholders of record at the close of business on November 23, 2016.

Outlook

The Company is maintaining its outlook of approximately 6% constant currency organic revenue growth for fiscal 2017. Primarily reflecting divestitures, the Company is reducing its total revenue growth expectations to approximately 19-20% for fiscal 2017, compared to prior expectations of 22-23% revenue growth. Despite the decline in total revenue, the Company is maintaining its original outlook for adjusted earnings per diluted share in the range of $3.85 - $4.00 for fiscal 2017. Included in this outlook is the net impact of acquisitions and divestitures as well as the assumption of $20 million in cost savings related to the Synergy combination.

The Company has based its outlook on six-month forward rates as of September 30, 2016, and continues to anticipate an adjusted effective tax rate of approximately 25% in fiscal 2017. Free cash flow is expected to be approximately $250 million.

Conference Call

As previously announced, STERIS 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 1-800-308-4030 in the United States and Canada, and 1-203-369-3241 internationally.

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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, Director, Investor Relations

[email protected]

+1 440 392 7245

Media Contact:

Stephen Norton, Senior Director, Corporate Communications

[email protected]

+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, 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, net capital expenditures, plus proceeds from the sale or 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 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 foreign currency exchange rates and acquisitions and divestitures that affect the comparability and trends in revenue are removed. The impact of changes in foreign currency exchange rates is calculated by translating current year results at prior year average foreign currency exchange rates.

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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 encourage 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 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,” “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 securities filings, including Item 1A of STERIS’s Annual Report on Form 10-K for the year ended March 31, 2016. 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 meet expectations regarding the accounting and tax treatments of the Combination (the “Combination”) with STERIS Corporation and Synergy Health plc (“Synergy”), (b) the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in connection with the Combination within the expected time-frames or at all and to successfully integrate the operations of the companies, (c) the integration of the operations of the companies 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

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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, changes in tax laws that would result in 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 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 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’s businesses, industry or initiatives including, without limitation, those matters described in STERIS’s 10-K for the year ended March 31, 2016 and other securities filings, may adversely impact STERIS’s performance, results, prospects or value, (m) the impact on STERIS and its operations of the “Brexit vote,” (n) the possibility that anticipated financial results or benefits of recent acquisitions, including the Combination, or of STERIS’s restructuring efforts, or of recent divestitures will not be realized or will be other than anticipated and (o) the effects of the contractions in credit availability, as well as the ability of STERIS’s Customers and suppliers to adequately access the credit markets when needed.

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STERIS plc    

Consolidated Condensed Statements of Operations    

(In thousands, except per share data)    

 

		Three Months Ended								Six Months Ended
		September 30,								September 30,
		2016				2015				2016				2015
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues		$	646,415			$	489,897			$	1,284,793			$	929,799
Cost of revenues			398,507				280,535				796,895				536,070
Cost of revenues—Restructuring			—				41				—				318
Cost of revenues, net			398,507				280,576				796,895				536,388
Gross profit			247,908				209,321				487,898				393,411
Operating expenses:
Selling, general, and administrative			163,680				172,459				315,566				299,294
Research and development			14,617				14,255				29,045				28,020
Restructuring expense			48				(56	)			202				(782	)
Total operating expenses			178,345				186,658				344,813				326,532
Income from operations			69,563				22,663				143,085				66,879
Non-operating expense, net			10,640				7,258				21,217				12,896
Income tax expense			18,721				7,154				32,955				21,421
Net income		$	40,202			$	8,251			$	88,913			$	32,562
Net income attributable to noncontrolling interest			(214	)			(436	)			95				(416	)
Net income attributable to shareholders		$	40,416			$	8,687			$	88,818			$	32,978
Earnings per common share (EPS) data:
Basic		$	0.47			$	0.15			$	1.03			$	0.55
Diluted		$	0.47			$	0.14			$	1.03			$	0.55
Cash dividends declared per share outstanding		$	0.28			$	0.25			$	0.53			$	0.48
Weighted average number of shares outstanding used in EPS computation:
Basic number of shares outstanding			85,851				59,897				85,944				59,832
Diluted number of shares outstanding			86,333				60,370				86,426				60,328

STERIS plc    

Consolidated Condensed Balance Sheets    

(In thousands)    

 

		September 30,				March 31,
		2016				2016
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	254,351			$	248,841
Accounts receivable, net			441,294				471,523
Inventories, net			209,935				192,792
Other current assets			50,616				59,369
Total Current Assets			956,196				972,525
Property, plant, and equipment, net			1,039,783				1,064,319
Goodwill and intangible assets, net			3,181,463				3,279,942
Other assets			33,183				29,630
Total Assets		$	5,210,625			$	5,346,416
Liabilities and Equity
Current liabilities:
Accounts payable		$	116,350			$	139,572
Other current liabilities			253,996				261,034
Total Current Liabilities			370,346				400,606
Long-term debt			1,504,192				1,567,796
Other liabilities			326,524				339,122
Equity			3,009,563				3,038,892
Total Liabilities and Equity		$	5,210,625			$	5,346,416

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STERIS plc

Segment Data

Financial information for each of the segments is presented in the following table. The accounting policies for reportable segments are the same as those for the consolidated Company. Operating income (loss) for each segment is calculated as the segment’s gross profit less direct expenses and indirect cost allocations, which results in the full allocation of all distribution and research and development expenses, and the partial allocation of corporate costs. These allocations are based upon variables such as segment headcount and revenues. In addition, the Healthcare Products segment is responsible for the management of all but two manufacturing facilities and uses standard cost to sell products to the other segments. Corporate and other includes the gross profit and direct expenses of the Defense and Industrial business unit, as well as certain unallocated corporate costs related to being a publicly traded company and legacy pension and post-retirement benefits. Adjustments include acquisition related costs, amortization of acquired intangibles, restructuring costs and other charges that management believes may or may not recur with similar materiality or impact on operating income in future periods. Management believes that by adjusting for these items they gain better insight and greater transparency of the operating performance of the segments, thus aiding them in more meaningful financial trend analysis and operational decision making.

 

		Three Months Ended								Six Months Ended
		September 30,								September 30,
(In thousands)		2016				2015				2016				2015
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Segment Revenues:
Healthcare Products		$	304,797			$	291,724			$	586,095			$	552,809
Healthcare Specialty Services			142,775				70,565				300,663				138,807
Life Sciences			81,485				71,040				162,674				127,812
Applied Sterilization Technologies			115,601				55,839				232,174				109,528
Total Reportable Segments			644,658				489,168				1,281,606				928,956
Corporate and Other			1,757				729				3,187				843
Total Segment Revenues		$	646,415			$	489,897			$	1,284,793			$	929,799
Segment Operating Income:
Healthcare Products		$	50,098			$	40,414			$	84,737			$	69,764
Healthcare Specialty Services			2,175				5,092				5,493				8,992
Life Sciences			22,772				20,883				47,234				34,333
Applied Sterilization Technologies			40,761				17,493				80,364				34,036
Total Reportable Segments			115,806				83,882				217,828				147,125
Corporate and Other			(4,741	)			(4,034	)			(5,237	)			(5,932	)
Total Segment Operating Income		$	111,065			$	79,848			$	212,591			$	141,193
Less: Adjustments
Amortization of inventory and property “step up” to fair value			1,385				21				4,471				32
Amortization and impairment of acquired intangible assets			17,779				6,682				37,308				12,703
Acquisition and integration related charges			6,638				23,982				11,873				35,528
Loss (gain) on fair value adjustment of acquisition related contingent consideration			1,850				—				1,850				—
Net loss on divestiture of businesses			13,802				—				13,802				—
Settlement of pension obligation			—				26,515				—				26,515
Restructuring charges			48				(15	)			202				(464	)
Total operating income		$	69,563			$	22,663			$	143,085			$	66,879

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STERIS plc    

Consolidated Condensed Statements of Cash Flows    

(In thousands)    

 

		Six Months Ended
		September 30,
		2016				2015
		(Unaudited)				(Unaudited)
Operating Activities:
Net income		$	88,913			$	32,562
Non-cash items			123,507				65,007
Changes in operating assets and liabilities			(29,909	)			(18,097	)
Net cash provided by operating activities			182,511				79,472
Investing Activities:
Purchases of property, plant, equipment, and intangibles, net			(73,866	)			(39,928	)
Proceeds from sale of property, plant, equipment and intangibles			240				38
Proceeds from the sale of businesses			131,586				—
Purchases of investments			(6,356	)			—
Acquisition of businesses, net of cash acquired			(64,872	)			(220,840	)
Net cash used in investing activities			(13,268	)			(260,730	)
Financing Activities:
Proceeds from issuance of long-term obligations			—				350,000
Payments on long-term obligations			(10,000	)			—
(Payments) proceeds under credit facilities, net			(47,646	)			(139,750	)
Acquisition related contingent consideration			(6,000	)			—
Deferred financing fees and debt issuance costs			—				(2,426	)
Repurchases of shares			(59,895	)			(12,974	)
Cash dividends paid to shareholders			(45,585	)			(28,740	)
Stock option and other equity transactions, net			13,007				8,111
Proceeds from issuance of equity to minority shareholders			5,022				—
Excess tax benefit from share-based compensation			—				4,676
Net cash provided by financing activities			(151,097	)			178,897
Effect of exchange rate changes on cash and cash equivalents			(12,636	)			(3,141	)
Increase (decrease) in cash and cash equivalents			5,510				(5,502	)
Cash and cash equivalents at beginning of period			248,841				167,689
Cash and cash equivalents at end of period		$	254,351			$	162,187

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 debt principal repayments, growth outside of core operations, repurchase shares, and pay cash dividends. STERIS’s calculation of free cash flow may vary from other companies.

 

		Six Months Ended
		September 30,
		2016				2015
		(Unaudited)				(Unaudited)
Calculation of Free Cash Flow:
Cash flows from operating activities		$	182,511			$	79,472
Purchases of property, plant, equipment, and intangibles, net			(73,866	)			(39,928	)
Proceeds from the sale of property, plant, equipment, and intangibles			240				38
Free Cash Flow		$	108,885			$	39,582

 

		Twelve Months Ended
		March 31,
		2017
		(Outlook)*
Calculation of free cash flow for outlook:
Cash flows from operating activities		$	440,000
Purchases of property, plant, equipment, and intangibles, net			(190,000	)
Free Cash Flow		$	250,000

 

*	All amounts are estimates.

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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, 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 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
		2016				2015				2016				2015				2016				2016				2016				2016
Segment Revenues:
Healthcare Products		$	304,797			$	291,724			$	12,917			$	(2,666	)							4.5	%			1.0	%
Healthcare Specialty Services			142,775				70,565				69,570				—								102.3	%			3.7	%
Life Sciences			81,485				71,040				6,135				—								14.7	%			6.1	%
Applied Sterilization Technologies			115,601				55,839				58,015				—								107.0	%			3.1	%
Corporate and Other			1,757				729				—				—								141.0	%			141.0	%
Total		$	646,415			$	489,897			$	146,637			$	(2,666	)		$	(3,187	)			31.9	%			2.6	%			3.2	%
		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
		2016				2015				2016				2015				2016				2016				2016				2016
Segment Revenues:
Healthcare Products		$	586,095			$	552,809			$	24,586			$	(2,666	)							6.0	%			2.1	%
Healthcare Specialty Services			300,663				138,807				156,123				—								116.6	%			4.1	%
Life Sciences			162,674				127,812				20,255				—								27.3	%			11.4	%
Applied Sterilization Technologies			232,174				109,528				117,108				—								112.0	%			5.1	%
Corporate and Other			3,187				843				1,220				—								278.1	%			133.4	%
Total		$	1,284,793			$	929,799			$	319,292			$	(2,666	)		$	(4,954	)			38.2	%			4.1	%			4.7	%

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 foreign currency exchange rates and acquisitions and divestitures that affect the comparability and trends in revenue are removed. The impact of changes in foreign currency exchange rates is calculated by translating current year results at prior year average foreign currency exchange rates.

 

		Three months ended September 30, (unaudited)
		Gross Profit								Income from Operations								Net income attributable to shareholders*								Diluted EPS
		2016				2015				2016				2015				2016				2015				2016				2015
GAAP		$	247,908			$	209,321			$	69,563			$	22,663			$	40,416			$	8,687			$	0.47			$	0.14
Adjustments:
Amortization of inventory and property “step up” to fair value			1,385				—				1,385				21
Amortization and impairment of purchased intangible assets			—				—				17,779				6,682
Acquisition and integration related charges			—				—				6,638				23,982
Loss (gain) on fair value adjustment of acquisition related contingent consideration			—				—				1,850				—
Net loss on divestiture of businesses			—				—				13,802				—
Settlement of pension obligation			—				—				—				26,515
Restructuring charges			—				41				48				(15	)
Net impact of adjustments after tax																			36,029				41,444
Net EPS impact																											0.42				0.69
Adjusted		$	249,293			$	209,362			$	111,065			$	79,848			$	76,445			$	50,131			$	0.89			$	0.83
		Six months ended September 30, (unaudited)
		Gross Profit								Income from Operations								Net income attributable to shareholders*								Diluted EPS
		2016				2015				2016				2015				2016				2015				2016				2015
GAAP		$	487,898			$	393,411			$	143,085			$	66,879			$	88,818			$	32,978			$	1.03			$	0.55
Adjustments:
Amortization of inventory and property “step up” to fair value			4,471				—				4,471				32
Amortization and impairment of purchased intangible assets			—				—				37,308				12,703
Acquisition and integration related charges			745				—				11,873				35,528
Loss (gain) on fair value adjustment of acquisition related contingent consideration			—				—				1,850				—
Net loss on divestiture of businesses			—				—				13,802
Settlement of pension obligation			—				—				—				26,515
Restructuring charges			—				318				202				(464	)
Net impact of adjustments after tax																			56,018				54,396
Net EPS impact																											0.65				0.90
Adjusted		$	493,114			$	393,729			$	212,591			$	141,193			$	144,836			$	87,374			$	1.68			$	1.45

 

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

FY 2017 Outlook

 

		Twelve months ended
		March 31, 2017
		(Outlook)**
Net Income per diluted share		$	2.57-2.72
Amortization of inventory and property “step up” to fair value			0.07
Amortization and impairment of purchased intangible assets			0.62
Acquisition and integration related charges			0.25
Loss (gain) on fair value adjustment of acquisition
related contingent consideration			0.02
Net loss on divestiture of businesses			0.32
Adjusted net income per diluted share		$	3.85-4.00

 

**	All amounts are estimates.

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STERIS plc    

Unaudited Supplemental Financial Data     

Second Quarter Fiscal 2017    

As of or for the periods ended September 30, 2016 and 2015    

 

		FY 2017				FY 2016				FY 2017				FY 2016
Total Company Revenues		Q2				Q2				YTD				YTD
Capital Equipment		$	152,640			$	152,038			$	278,725			$	270,258
Consumables		$	139,576			$	122,107			$	285,241			$	236,194
Service		$	354,199			$	215,752			$	720,827			$	423,347
Total Recurring			493,775				337,859				1,006,068				659,541
Total Revenues		$	646,415			$	489,897			$	1,284,793			$	929,799
United Kingdom Revenues		$	53,369			$	11,746			$	123,808			$	21,915
United Kingdom Revenues as a % of Total			8	%			2	%			10	%			2	%
United States Revenues		$	450,513			$	395,220			$	878,618			$	755,689
United States Revenues as a % of Total			70	%			81	%			68	%			81	%
International Revenues		$	142,533			$	82,931			$	282,367			$	152,196
International Revenues as a % of Total			22	%			17	%			22	%			16	%
Segment Data		Q2				Q2				YTD				YTD
Healthcare Products
Revenues
Capital Equipment		$	128,020			$	129,658			$	230,198			$	231,896
Consumables			101,492				88,593				206,490				175,807
Service			75,285				73,473				149,407				145,107
Total Recurring			176,777				162,066				355,897				320,914
Total Healthcare Products Revenues		$	304,797			$	291,724			$	586,095			$	552,809
Segment Operating Income			50,098				40,414				84,737				69,764
Healthcare Specialty Services
Healthcare Services Revenues		$	142,775			$	70,565			$	300,663			$	138,807
Segment Operating Income			2,175				5,092				5,493				8,992
Life Sciences
Revenues
Capital Equipment		$	21,475			$	20,318			$	42,158			$	34,820
Consumables			34,851				29,994				72,351				53,087
Service			25,159				20,728				48,165				39,905
Total Recurring			60,010				50,722				120,516				92,992
Total Life Sciences Revenues		$	81,485			$	71,040			$	162,674			$	127,812
Segment Operating Income			22,772				20,883				47,234				34,333
Applied Sterilization Technologies
Service Revenues		$	115,601			$	55,839			$	232,174			$	109,528
Segment Operating Income		$	40,761			$	17,493			$	80,364			$	34,036
Corporate and Other
Revenues		$	1,757			$	729			$	3,187			$	843
Operating Income (Loss)			(4,741	)			(4,034	)			(5,237	)			(5,932	)
Other Data		Q2				Q2				YTD				YTD
Healthcare Products Backlog		$	152,107			$	136,033				n/a				n/a
Life Sciences Backlog			40,996				47,325				n/a				n/a
Total Backlog		$	193,103			$	183,358				n/a				n/a
GAAP Income Tax Rate			31.8	%			46.4	%			27.0	%			39.7	%
Adjusted Income Tax Rate			24.1	%			31.5	%			24.3	%			32.2	%
Free Cash Flow		$	59,400			$	21,919			$	108,885			$	39,582
Net Debt		$	1,249,841			$	667,631				n/a				n/a

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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