01—Abstract
Summary
Summary of the 10-K filed May 29, 2020. Cited figures are marked; the original filing is the authoritative source.
STERIS plc (STE) reported fiscal 2020 (year ended March 31, 2020) revenues of $3,030.9 milliona, up $248.7 million, or 8.9%, from $2,782.2 million in fiscal 2019, driven by organic growth in all business segments and favorable pricing, partly offset by currency fluctuations.
Operating income rose to $537.0 millionb from $411.5 million, and net income attributable to shareholders was $407.6 million, or $4.76 per diluted share, versus $304.1 million, or $3.56, a year earlier. Gross margin improved to 43.5% from 42.2%, and the Fiscal 2019 Restructuring Plan (closing two manufacturing facilities) contributed to lower restructuring expense in fiscal 2020. Cash generation was solid: net cash provided by operating activities was $590.6 million and free cash flow was $380.2 million, versus $355.4 million in fiscal 2019.
The company repurchased 273,259 shares for $40.0 millionc, paid $123.0 million in dividends ($1.45 per share), and reported a debt-to-total capital ratio of 25.3%. Total debt outstanding was $1,153.9 million at year-end, with $717.8 million of unused credit under the Credit Agreement. The filing flags the COVID-19 pandemic as a material forward-looking risk.
It began affecting the business late in fiscal 2020, with deferral of elective procedures expected to pressure demand in fiscal 2021, though management stated it could not estimate the full impact. Effective April 1, 2020, Healthcare Products and Healthcare Specialty Services will be combined into a single Healthcare segment.
02—Key points
Key Highlights
- Revenues rose 8.9% to $3,030.9 million, with organic growth in all business segments and favorable pricing.
- Operating income increased 30.5% to $537.0 million; gross margin rose to 43.5% from 42.2%.
- Diluted EPS was $4.76 versus $3.56 in fiscal 2019; net income attributable to shareholders was $407.6 million.
- Net cash from operations was $590.6 million and free cash flow was $380.2 million, both up from fiscal 2019.
- Applied Sterilization Technologies was the fastest-growing segment, with revenue up 13.0% and operating margin of 43.2%.
- COVID-19 is expected to pressure fiscal 2021 demand as elective procedures are deferred; management could not estimate the full impact.
- Effective April 1, 2020, Healthcare Products and Healthcare Specialty Services will be reported as one Healthcare segment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Steris kept $0.13.
- Revenue$3.03B100.0%
- Cost of revenue−$1.71B56.4%
- Gross profit$1.32B43.6%
- Operating costs−$783.0M25.8%
- Operating income$537.0M17.7%
- Interest, other & tax−$129.4M4.3%
- Net income$407.7M13.5%
Where FY2020 revenue went
$3.03B- Cost of revenue: $1.71B, 56% of revenue
- SG&A: $716.7M, 24% of revenue
- Net income: $407.7M, 13% of revenue
- R&D: $65.5M, 2.2% of revenue
- Interest, other & tax: $129.4M, 4.3% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed May 29, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $3.03B$2.78B | +8.9% |
| Cost of Revenue | $1.71B$1.61B | +6.5% |
| Gross Profit | $1.32B$1.17B | +12.3% |
| R&D Expenses | $65.55M$63.04M | +4.0% |
| SG&A Expenses | $716.73M$669.94M | +7.0% |
| Operating Expenses | $782.95M$763.96M | +2.5% |
| Operating Income | $537.05M$411.02M | +30.7% |
| Interest Expense | $40.28M$45.02M | −10.5% |
| Net Income | $407.66M$303.72M | +34.2% |
| EPS (Basic) | $4.81$3.59 | +34.0% |
| EPS (Diluted) | $4.76$3.55 | +34.1% |
| Shares Outstanding (Basic) | 84.78M84.58M | +0.2% |
| Shares Outstanding (Diluted) | 85.64M85.47M | +0.2% |
05—Questions
Frequently Asked Questions
How did STERIS perform financially in fiscal 2020?
Revenues grew 8.9% to $3,030.9 million, operating income rose to $537.0 million from $411.5 million, and diluted EPS was $4.76 versus $3.56. Gross profit percentage improved to 43.5% from 42.2%.
How much cash did STERIS return to shareholders?
The company paid cash dividends of $123.0 million, or $1.45 per share, and repurchased 273,259 shares for $40.0 million. Authorization of approximately $339.0 million remained available as of March 31, 2020.
What is the impact of COVID-19 on STERIS according to the filing?
The pandemic began affecting the business late in fiscal 2020 and did not have a material impact on fiscal 2020 results. It is expected to negatively affect some operations and demand in fiscal 2021, but management stated it is unable to estimate the ultimate impact.
How leveraged is STERIS and what credit is available?
The debt-to-total capital ratio was 25.3% at March 31, 2020. Total debt outstanding was $1,153.9 million, and $717.8 million was unused under the $1.0 billion Credit Agreement, which matures March 23, 2023.
Are there any significant tax or regulatory matters to watch?
The IRS issued notices of proposed tax adjustments regarding the deductibility of intercompany interest for fiscal 2016 to 2018, which would result in a cumulative tax liability of approximately $40 million. The company is contesting the assertions and has not established reserves. The filing also notes the company's position that it is currently compliant in all material respects with applicable regulatory requirements.
06—Continue