STERIS plc - 10-K filing on 2020-05-29

Business Segment Information

12 Months Ended

Mar. 31, 2020

Notes To Financial Statements [Abstract]

11. BUSINESS SEGMENT INFORMATION

We operate and report in four reportable business segments: Healthcare Products, Healthcare Specialty Services, Life Sciences, and Applied Sterilization Technologies. Corporate is presented separately and contains the costs that are associated with being a publicly traded company and certain other corporate costs.

Our Healthcare Products segment offers infection prevention and procedural solutions for healthcare providers worldwide, including consumable products, equipment maintenance and installation services, and capital equipment.

Our Healthcare Specialty Services segment provides a range of specialty services for healthcare providers including hospital sterilization services and instrument and scope repairs.

Our Life Sciences segment offers consumable products, equipment maintenance and specialty services for pharmaceutical manufacturers and research facilities, and capital equipment.

Our Applied Sterilization Technologies ("AST") segment provides contract sterilization and testing services for medical device and pharmaceutical manufacturers.

We disclose a measure of segment income that is consistent with the way management operates and views the business. The accounting policies for reportable segments are the same as those for the consolidated Company. In fiscal 2019, we ceased the allocation of certain corporate costs to our segments to align with internal management measures. The prior period operating income measures have been recast for comparability.

For the year ended March 31, 2020, revenues from a single Customer did not represent ten percent or more of any reportable segment’s revenues.



Years Ended March 31,	2020			2019			2018
Revenues:
Healthcare Products	$	1,423,198		$	1,338,428		$	1,276,054
Healthcare Specialty Services	563,611			510,057			469,065
Life Sciences	416,939			378,558			361,590
Applied Sterilization Technologies	627,147			555,127			513,287
Total revenues	$	3,030,895		$	2,782,170		$	2,619,996
Operating income (loss):
Healthcare Products	356,419			323,684			294,162
Healthcare Specialty Services	64,217			64,222			58,458
Life Sciences	144,088			132,129			123,889
Applied Sterilization Technologies	270,917			221,828			196,297
Total reportable segments	835,641			741,863			672,806
Corporate	(207,015		)	(184,900		)	(162,999		)
Total operating income before adjustments	$	628,626		$	556,963		$	509,807
Less: Adjustments
Amortization of acquired intangible assets ⁽¹⁾	71,675			86,878			67,793
Acquisition and integration related charges ⁽²⁾	8,225			8,901			16,211
Redomiciliation and tax restructuring costs ⁽³⁾	3,699			8,783			—
(Gain) on fair value adjustment of acquisition related contingent consideration ⁽¹⁾	—			(842		)	(593		)
Net loss (gain) on divestiture of businesses ⁽¹⁾	1,770			(1,370		)	14,547
Amortization of property "step up" to fair value ⁽¹⁾	2,392			2,440			1,599
Restructuring charges ⁽⁴⁾	3,143			40,708			103
Impact of the U.S. Tax Cuts and Jobs Act⁽⁵⁾	—			—			10,264
COVID-19 incremental costs⁽⁶⁾	749			—			—
Total operating income	$	536,973		$	411,465		$	399,883

⁽¹⁾For more information regarding our recent acquisitions and divestitures see Note 18 titled, "Business Acquisitions and Divestitures". Amortization of purchased intangible assets fiscal 2019 total includes an impairment charge of $16,249, see Note 3 titled, "Goodwill and Intangible Assets", for more information.

⁽²⁾ Acquisition and integration related charges include transaction costs and integration expenses associated with acquisitions.

⁽³⁾ Costs incurred in connection with the Redomiciliation and subsequent tax restructuring.

⁽⁴⁾ For more information regarding our restructuring activities see Note 2 titled, "Restructuring".

⁽⁵⁾Represents a one-time special employee bonus paid to most U.S. employees and associated professional fees.

⁽⁶⁾COVID-19 incremental costs includes the additional costs attributable to COVID-19 such as enhanced cleaning protocols, personal protective equipment for our employees, event cancellation fees, and payroll costs associated with our response to COVID-19, net of any government subsidies available.

Assets include the current and long-lived assets directly attributable to the segment based on the management of the location or on utilization. Certain corporate assets were allocated to the reportable segments based on revenues. Assets attributed to sales and distribution locations are only allocated to the Healthcare Products and Life Sciences segments.

Individual facilities, equipment, and intellectual properties are utilized for production by both the Healthcare Products and Life Sciences segments at varying levels over time. As a result, an allocation of total assets, capital expenditures, and depreciation and amortization is not meaningful to the individual performance of the Healthcare Products and Life Sciences segments. Therefore, their respective amounts are reported together.



March 31,	2020		2019
Assets:
Healthcare Products and Life Sciences	$	1,809,636	$	1,611,852
Healthcare Specialty Services	895,741		805,349
Applied Sterilization Technologies	2,720,205		2,655,870
Total assets	$	5,425,582	$	5,073,071



Years Ended March 31,	2020		2019		2018
Capital Expenditures
Healthcare Products and Life Sciences	$	44,029	$	49,688	$	52,767
Healthcare Specialty Services	40,619		39,950		16,497
Applied Sterilization Technologies	129,868		100,077		96,193
Total Capital Expenditures	$	214,516	$	189,715	$	165,457
Depreciation, Depletion, and Amortization
Healthcare Products and Life Sciences ^{(1) (2)}	$	59,150	$	81,264	$	52,025
Healthcare Specialty Services	33,043		33,392		29,269
Applied Sterilization Technologies ⁽¹⁾	105,042		111,265		97,038
Total Depreciation, Depletion, and Amortization	$	197,235	$	225,921	$	178,332

⁽¹⁾The fiscal 2020 and 2019 totals include the impact of Restructuring see Note 2 titled, "Restructuring" for additional information.

⁽²⁾The fiscal 2019 total includes an impairment charge see Note 3 titled, "Goodwill and Intangible Assets", for additional information.

Financial information for each of our United States and international geographic areas is presented in the following table. Revenues are based on the location of these operations and their Customers. Property, plant and equipment, net are those assets that are identified within the operations in each geographic area.



March 31,	2020		2019
Property, Plant, and Equipment, Net
Ireland	$	47,459	$	41,137
United States	632,333		577,113
Other locations	432,063		413,332
Property, Plant, and Equipment, Net	$	1,111,855	$	1,031,582



Years Ended March 31,	2020		2019		2018
Revenues:
Ireland	$	63,821	$	56,784	$	48,246
United States	2,211,722		1,976,814		1,836,414
Other locations	755,352		748,572		735,336
Total Revenues	$	3,030,895	$	2,782,170	$	2,619,996



Years Ended March 31,	2020		2019		2018
Healthcare Products:
Capital equipment	$	592,436	568,811		527,402
Consumables	454,518		414,969		412,495
Service	376,244		354,648		336,157
Total Healthcare Products Revenues	$	1,423,198	$	1,338,428	$	1,276,054
Total Healthcare Specialty Services Revenues	$	563,611	$	510,057	$	469,065
Life Sciences:
Capital equipment	$	112,747	102,714		100,555
Consumables	185,904		161,780		150,656
Service	118,288		114,064		110,379
Total Life Sciences Revenues	$	416,939	$	378,558	$	361,590
Applied Sterilization Technologies Service Revenues	$	627,147	$	555,127	$	513,287
Total Revenues	$	3,030,895	$	2,782,170	$	2,619,996

Effective April 1, 2020, and consistent with the way management will operate and view the business, the current Healthcare Products and Healthcare Specialty Services segments will be combined and reported as one segment, simply called Healthcare. Going forward we will operate and report in three business segments: Healthcare, Life Sciences and Applied Sterilization Technologies. Corporate will continue to be presented separately and contain the costs that are associated with being a publicly traded company and certain other corporate costs.