01—Abstract
Summary
Summary of the 10-K filed May 26, 2023. Cited figures are marked; the original filing is the authoritative source.
STERIS plc's 10-K for fiscal year ended March 31, 2023 reports revenues of $4.96 billiona, up 8.1% from $4.59 billion in fiscal 2022, driven by growth in the Healthcare, Applied Sterilization Technologies, Life Sciences and Dental segments, partly offset by currency and divestiture effects.
Gross profit percentage slipped to 43.6% from 44.0%, as inflation (330 basis points) and productivity (50 basis points) headwinds outweighed pricing (150 basis points) and mix (130 basis points) benefits. Operating income fell 37.0% to $268.2 millionb, primarily because of a $490.6 million non-cash goodwill impairment charge on the Dental segment recognized in the second quarter of fiscal 2023. Net income attributable to shareholders was $107.0 million, or $1.07 per diluted share, compared with $243.9 million, or $2.48 per diluted share, a year earlier.
Excluding the impairment, the filing's segment operating income totaled $1.17 billionc before adjustments. Cash flow remained solid, with operating cash flow of $756.9 million and free cash flow of $409.6 million, versus $684.8 million and $399.0 million in fiscal 2022.
Total debt was about $3.1 billiond at March 31, 2023, with a debt-to-total capital ratio of 33.6%, and the quarterly dividend was raised to $0.47 per share for the seventeenth consecutive year. Backlog stood at $599.6 million, and management expects continued supply chain and inflation pressure in fiscal 2024.
02—Key points
Key Highlights
- Revenue of $4,957.8 million, up 8.1% year over year, with capital equipment revenues up 12.8% and service revenues up 7.1%
- Goodwill impairment loss of $490.6 million on the Dental segment, which drove operating income down 37.0% to $268.2 million
- Gross profit percentage of 43.6%, down from 44.0%, with inflation (330 basis points) a major headwind
- Net income attributable to shareholders of $107.0 million ($1.07 diluted EPS) versus $243.9 million ($2.48) in fiscal 2022
- Operating cash flow of $756.9 million and free cash flow of $409.6 million, both higher than fiscal 2022
- Total debt of about $3.1 billion; debt-to-total capital ratio of 33.6%; quarterly dividend increased to $0.47 per share
- Backlog of $599.6 million at March 31, 2023, with Healthcare at $494.7 million and Life Sciences at $104.9 million
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Steris kept $0.02.
- Revenue$4.54B100.0%
- Cost of revenue−$2.56B56.3%
- Gross profit$1.98B43.7%
- Operating costs−$1.19B26.2%
- Operating income$791.1M17.4%
- Interest, other & tax−$684.1M15.1%
- Net income$107.0M2.4%
Where FY2023 revenue went
$4.54B- Cost of revenue: $2.56B, 56% of revenue
- SG&A: $1.09B, 24% of revenue
- Interest, other & tax: $684.1M, 15% of revenue
- Net income: $107.0M, 2.4% of revenue
- R&D: $98.5M, 2.2% of revenue
Kept 2.4% as net incomeNet income $107.0M · 2.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed May 26, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $4.54B$4.22B | +7.4% |
| Cost of Revenue | $2.56B$2.34B | +9.2% |
| Gross Profit | $1.98B$1.88B | +5.2% |
| R&D Expenses | $98.48M$86.66M | +13.6% |
| SG&A Expenses | $1.09B$1.32B | −17.3% |
| Operating Expenses | $1.19B$1.41B | −15.3% |
| Operating Income | $791.10M$477.81M | +65.6% |
| Interest Expense | $107.96M$89.49M | +20.6% |
| Net Income | $107.00M$243.90M | −56.1% |
| EPS (Basic) | $1.07$2.50 | −57.2% |
| EPS (Diluted) | $1.07$2.48 | −56.9% |
| Shares Outstanding (Basic) | 99.71M97.53M | +2.2% |
| Shares Outstanding (Diluted) | 100.25M98.33M | +2.0% |
05—Questions
Frequently Asked Questions
Why did operating income decline so sharply in fiscal 2023?
Operating income fell 37.0% to $268.2 million, mainly because of a $490.6 million non-cash goodwill impairment charge on the Dental segment recorded in the second quarter of fiscal 2023. The filing attributes the charge to the estimated fair value of Dental falling below its carrying value, driven by rising interest rates, inflation and uncertainty about patient and customer behavior. Lower acquisition and integration expenses related to Cantel partly offset the impact.
How did the company's segments perform?
Healthcare was the largest segment, with revenues of $3,085.1 million (up 8.4%) and operating income of $706.0 million (up 8.7%). Applied Sterilization Technologies revenues rose 7.2% to $914.4 million, though its operating margin declined to 46.9% from 48.1%. Life Sciences revenues increased 2.2% to $536.7 million while operating income fell 2.8%. Dental revenues reached $421.6 million, up 16.6% on a GAAP basis, but Dental's operating income is what was impaired.
How is the company's balance sheet and liquidity position?
At March 31, 2023, the company had about $3.1 billion of indebtedness outstanding and cash and cash equivalents of $208.4 million. It had $938.4 million of unused funding available under its $1,250.0 million revolving credit agreement, and it stated it was in compliance with all financial covenants. Credit ratings were BBB from S&P, Baa2 from Moody's and BBB from Fitch, effective May 18, 2023.
What did the company say about capital returns and share repurchases?
During fiscal 2023 the company repurchased 1,563,983 ordinary shares for $295.0 million and paid cash dividends of $183.5 million, or $1.84 per share. On May 3, 2023, its board terminated the prior program and authorized a new program of up to $500.0 million, under which no repurchases had been made as of the filing date.
What key risks and regulatory issues does the filing highlight?
The filing highlights ethylene oxide (EO) sterilization exposure in the Applied Sterilization Technologies segment, including regulatory action and private plaintiff litigation over EO emissions. It also notes supply risks for cobalt-60 sourced from Russia, the impact of the Russia-Ukraine conflict, inflationary pressure, and the possibility of additional IRS challenges, including proposed adjustments of about $50 million tied to fiscal 2018 deemed dividend inclusions that the company is contesting.
06—Continue