- STERIS plc (NYSE: STE) (“STERIS” or the “Company”) today
announced financial results for its fiscal 2019 fourth quarter
ended March 31, 2019. Revenue as reported for the quarter
increased 7% to $768.2 million compared with $716.0 million in the
fourth quarter of fiscal 2018, with growth across all segments.
Constant currency organic revenue (see Non-GAAP Financial Measures)
growth was 9% for the fourth quarter of fiscal 2019.
“We finished fiscal 2019 stronger than anticipated, with
meaningful contributions from improved Customer demand, new
products and services, as well as some Brexit-related inventory
build-up by our Customers,” said Walt Rosebrough, President and
Chief Executive Officer of STERIS. “We anticipate that fiscal
2020 will be another record year resulting from underlying demand
and new products and services.”
Fourth Quarter and Full Year 2019 Operating
ResultsAs reported, net income for the fourth quarter was
$108.7 million, or $1.27 per diluted share, compared with net
income of $73.6 million, or $0.86 per diluted share in the fourth
quarter of fiscal 2018. Adjusted net income (see Non-GAAP
Financial Measures) for the fourth quarter of fiscal 2019 was
$131.1 million, or $1.53 per diluted share, compared with adjusted
net income for the previous year’s fourth quarter of $105.8 million
or $1.24 per diluted share. As reported, full year net income
was $304.1 million, or $3.56 per diluted share, compared with
$290.9 million, or $3.39 per diluted share. Adjusted net
income increased 17% to $417.5 million, or $4.89 per diluted share,
compared with adjusted net income of $355.6 million, or $4.15 per
diluted share in fiscal 2018.
Fourth Quarter Segment
ResultsHealthcare Products revenue as
reported grew 7% in the quarter to $386.6 million compared with
$360.0 million in the fourth quarter of fiscal 2018, driven by 10%
growth in capital equipment revenue, 7% growth in service revenue
and 4% growth in consumable revenue in the fourth quarter.
Constant currency organic revenue growth for Healthcare
Products was 8% during the quarter. Healthcare Products
operating income was $106.7 million compared with $86.4 million in
last year’s fourth quarter. The increase in profitability was
primarily due to the increased volume, favorable mix and operating
efficiencies.
Fiscal 2019 fourth quarter revenue for Applied
Sterilization Technologies increased 7% as reported to
$143.1 million compared with $133.5 million in the same period last
year. Constant currency organic revenue increased 10%,
primarily driven by increased volume from the segment’s core
medical device Customers. Segment operating income increased
to $57.4 million in the fourth quarter of fiscal 2019 compared with
operating income of $51.6 million in the same period last year, due
primarily to the revenue growth.
Healthcare Specialty Services as reported
revenue grew 11% in the quarter to $135.5 million compared with
$122.1 million in the fourth quarter of fiscal 2018. Constant
currency organic revenue growth was 13%. Healthcare Specialty
Services operating income was $19.8 million compared with $14.4
million in last year’s fourth quarter, benefitting from the
additional volume and improved productivity.
Life Sciences fourth quarter revenue as
reported grew 3% to $103.0 million compared with $100.3 million in
the fourth quarter of fiscal 2018, driven by 14% growth in
consumables and 2% growth in service revenue. Capital
equipment revenue declined 9% in the fourth quarter compared with a
strong quarter in the prior year. Constant currency organic
revenue grew 4% in the quarter. Operating income was $35.9 million
compared with $34.5 million in the prior year’s fourth quarter,
primarily driven by volume and disciplined expense management.
Cash Flow Net cash provided by operations for
fiscal 2019 was $539.5 million, compared with $457.6 million in
fiscal 2018. Free cash flow (see Non-GAAP Financial Measures)
for fiscal 2019 was $355.4 million compared with $294.3 million in
the prior year period. The improvement in free cash flow is
primarily due to the improved cash from operations partially offset
by higher capital expenditures which fund future organic
growth.
Fiscal 2020 OutlookSTERIS expects constant
currency organic revenue growth to be in the range of 5-6% for
fiscal 2020. Reflecting March 29, 2019 forward rates,
currency movements are anticipated to be neutral for fiscal
2020. Adjusted earnings per diluted share are anticipated to
be in the range of $5.28 - $5.43, which assumes an adjusted
effective tax rate in the range of 19-20%.
Free cash flow for fiscal 2020 is expected to be approximately
$300 million, and capital spending is anticipated to be
approximately $280 million. Growth in cash from operations in
fiscal 2020 will be more than offset by significantly higher
capital spending, limiting free cash flow for the year. In
particular, growth capital of more than $110 million will be
invested to expand global capacity in the Applied Sterilization
Technologies segment. In addition, investments will continue
to be made to expand outsourced instrument reprocessing within the
Healthcare Specialty Services segment.
Dividend AnnouncementSTERIS’s Board of
Directors has authorized a quarterly interim dividend of $0.34 per
share. The dividend is payable June 28, 2019 to shareholders
of record at the close of business on June 12, 2019.
Conference Call
As previously announced, STERIS management will host a
conference call tomorrow, May 14, 2019 at 10:00 a.m. Eastern
time. The conference call can be heard live over the Internet
at www.steris-ir.com or via phone by dialing 1-833-535-2199 in the
United States or 1-412-902-6776 internationally, then asking to
join the conference call for STERIS plc.
For those unable to listen to the conference call live, a replay
will be available beginning at 12:00 p.m. Eastern Time on May 14,
2019, either over the Internet at www.steris-ir.com or via
phone. To access the replay of the call, please use the
access code 10129994 and dial 1-877-344-7529 in the United States
or 1-412-317-0088 internationally.
About STERIS
STERIS’s mission is to help our Customers create a healthier and
safer world by providing innovative healthcare and life science
product and service solutions around the globe. For more
information, visit www.steris.com.
Investor Contact:
Julie Winter, Senior Director, Investor Relations and Corporate
Communications
Julie_Winter@steris.com
+1 440 392 7245
Media Contact:
Stephen Norton, Senior Director, Corporate Communications
Stephen_Norton@steris.com
+1 440 392 7482
Non-GAAP Financial Measures
Adjusted net income, free cash flow and constant currency
organic revenue are non-GAAP measures that may be used from time to
time and should not be considered replacements for GAAP
results. Non-GAAP financial measures are presented in this
release with the intent of providing greater transparency to
supplemental financial information used by management and the Board
of Directors in their financial analysis and operational decision
making. These amounts are disclosed so that the reader has the same
financial data that management uses with the belief that it will
assist investors and other readers in making comparisons to our
historical operating results and analyzing the underlying
performance of our operations for the periods presented. The
Company believes that the presentation of these non-GAAP financial
measures, when considered along with our GAAP financial measures,
provides a more complete understanding of the factors and trends
affecting our business than could be obtained absent this
disclosure.
Adjusted net income excludes the amortization of intangible
assets acquired in business combinations, acquisition-related
transaction costs, integration costs related to acquisitions, the
re-measurement of deferred taxes and taxation of prior unremitted
earnings impacts of the TCJA, and certain other unusual or
non-recurring items. STERIS believes this measure is useful
because it excludes items that may not be indicative of or are
unrelated to our core operating results and provides a baseline for
analyzing trends in our underlying businesses.
The Company defines free cash flow as cash flows from operating
activities less purchases of property, plant, equipment and
intangibles, plus proceeds from the sale of property, plant,
equipment, and intangibles. STERIS believes that free cash
flow is a useful measure of the Company’s ability to fund future
principal debt repayments and growth outside of core operations,
pay cash dividends, and repurchase ordinary shares.
To measure the percentage organic revenue growth, the Company
removes the impact of significant acquisitions and divestitures
that affect the comparability and trends in revenue. To measure the
percentage constant currency organic revenue growth, the impact of
changes in currency exchange rates and acquisitions and
divestitures that affect the comparability and trends in revenue
are removed. The impact of changes in currency exchange rates
is calculated by translating current year results at prior year
average currency exchange rates.
Because non-GAAP financial measures are not standardized, it may
not be possible to compare these financial measures with other
companies’ non-GAAP financial measures having the same or similar
names. These adjusted financial measures should not be considered
in isolation or as a substitute for reported sales, gross profit,
operating income, net earnings and net earnings per diluted share,
the most directly comparable GAAP financial measures. These
non-GAAP financial measures are an additional way of viewing
aspects of the Company’s operations that, when viewed with GAAP
results and the reconciliations to corresponding GAAP financial
measures below, provide a more complete understanding of the
business. The Company strongly 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 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 securities filings, including Item 1A of
STERIS’s Annual Report on Form 10-K for the year ended
March 31, 2018. 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 parties’ ability to meet
expectations regarding the accounting and tax treatments of the
redomiciliation transaction, (b) operating costs, Customer loss and
business disruption (including, without limitation, difficulties in
maintaining relationships with employees, Customers, clients or
suppliers) being greater than expected following the
redomiciliation transaction, (c) STERIS’s ability to meet
expectations regarding the accounting and tax treatment of the Tax
Cuts and Jobs Act (“TCJA”) or the possibility that anticipated
benefits resulting from the TCJA will be less than estimated,
(d) changes in tax laws or interpretations that could increase
our consolidated tax liabilities, including changes in tax laws
that would result in STERIS being treated as a domestic corporation
for United States federal tax purposes, (e) the potential for
increased pressure on pricing or costs that leads to erosion of
profit margins, (f) the possibility that market demand will
not develop for new technologies, products or applications or
services, or business initiatives will take longer, cost more or
produce lower benefits than anticipated, (g) the possibility
that application of or compliance with laws, court rulings,
certifications, regulations, regulatory actions, including without
limitation 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,
(h) the potential of international unrest, economic downturn
or effects of currencies, tax assessments, tariffs and/or other
trade barriers, adjustments or anticipated rates, raw material
costs or availability, benefit or retirement plan costs, or other
regulatory compliance costs, (i) the possibility of reduced
demand, or reductions in the rate of growth in demand, for STERIS’s
products and services, (j) the possibility of delays in
receipt of orders, order cancellations, or delays in the
manufacture or shipment of ordered products or in the provision of
services, (k) the possibility that anticipated growth, cost
savings, new product acceptance, performance or approvals, or other
results may not be achieved, or that transition, labor,
competition, timing, execution, regulatory, governmental, or other
issues or risks associated with STERIS’s businesses, industry or
initiatives including, without limitation, those matters described
in STERIS’s 10-K for the year ended March 31, 2018 and other
securities filings, may adversely impact STERIS’s performance,
results, prospects or value, (l) the impact on STERIS and its
operations, or tax liabilities, of Brexit or the exit of other
member countries from the EU, and the Company’s ability to respond
to such impacts, (m) the impact on STERIS and its operations
of any legislation, regulations or orders, including but not
limited to any new trade or tax legislation, regulations or orders,
that may be implemented by the U.S. administration or Congress, or
of any responses thereto, (n) the possibility that anticipated
financial results or benefits of recent acquisitions, or of
STERIS’s restructuring efforts, or of recent divestitures, or of
the targeted restructuring plan will not be realized or will be
other than anticipated, and (o) the effects of contractions in
credit availability, as well as the ability of STERIS’s Customers
and suppliers to adequately access the credit markets when
needed.
- STERIS 4Q19 Financial Tables 5.13.19
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