Sotera Health Reports Second-Quarter and First-Half 2023 Results
- Q2 2023 net revenues of
$255 million decreased4% , compared to Q2 2022, primarily driven by expected Nordion Cobalt-60 harvest schedule timing - Q2 2023 net income of
$24 million or$0.08 per diluted share, compared to net income of$30 million or$0.11 per diluted share in Q2 2022 - Q2 2023 Adjusted EBITDA of
$128 million decreased6% , compared to Q2 2022, driven by expected Nordion Cobalt-60 harvest schedule timing - Q2 2023 Adjusted EPS of
$0.21 decreased$0.06 per diluted share, compared to Q2 2022 - Total debt of
$2.3 billion and net leverage ratio of 4.2x as of June 30, 2023 - Adjusting full-year 2023 net revenue outlook to
$1.03 5 billion to$1.05 5 billion and Adjusted EBITDA to$520 million to$535 million
CLEVELAND, Aug. 03, 2023 (GLOBE NEWSWIRE) -- Sotera Health Company (“Sotera Health” or the “Company”) (Nasdaq: SHC), a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry, today announced financial results for the three and six months ended June 30, 2023.
Second-quarter 2023 net revenues decreased
For the first six months of 2023, net revenues decreased
“The team has been working diligently to execute on our strategy in a challenging environment,” said Chairman and Chief Executive Officer, Michael B. Petras, Jr. “All three business units have achieved significant margin expansion versus the first quarter of this year while Nordion has done an excellent job navigating the complexities of cobalt-60 logistics. Additionally, we are pleased to have completed the settlement of the Illinois EO litigation ahead of schedule with a
Petras continued, “While second-quarter results were impacted by comparisons to record-setting revenue quarters for Nordion and Nelson Labs in the prior year, we are experiencing continued volume softness at both Sterigenics and Nelson Labs. We now expect the volume softness to continue and therefore have adjusted our 2023 outlook for net revenues to be in the range of
Second-Quarter and First-Half 2023 Highlights by Business Segment
Sterigenics
For second-quarter 2023, Sterigenics’ net revenues were
Net revenue growth for the second-quarter 2023 was driven by favorable pricing as well as favorable changes in foreign exchange currency rates, partially offset by an unfavorable impact from volume and change in mix.
Segment income and segment income margin increases for the second-quarter 2023 were driven by favorable pricing, partially offset by unfavorable volume and change in mix, as well as inflation.
Nordion
For second-quarter 2023, Nordion net revenues were
Revenue decline for the second-quarter 2023 was driven by expected volume decline and a change in mix due to timing of Cobalt-60 supply harvest schedules, and an unfavorable impact from changes in foreign exchange currency rates, partially offset by favorable pricing.
Segment income and segment income margin declines for the second-quarter 2023 were also driven by the volume decline and change in mix referenced above, partially offset by favorable pricing.
Nelson Labs
For the second-quarter 2023, Nelson Labs net revenues were
Revenue decline for the second-quarter 2023 was driven by unfavorable volume and change in mix, partially offset by a favorable impact from pricing and changes in foreign currency exchange rates.
Segment income and segment income margin declines for the second-quarter 2023 were driven by volume decline and a change in mix, as well as inflation, partially offset by favorable pricing.
Balance Sheet and Liquidity
As of June 30, 2023, Sotera Health had
Updated 2023 Outlook
Today, Sotera Health is updating its 2023 outlook to the following:
- Net revenues in the range of
$1.03 5 to$1.05 5 billion, from previous guidance of$1.05 5 billion to$1.09 0 billion, representing growth of approximately3% to5% , compared to the prior year, - Adjusted EBITDA in the range of
$520 t o$535 million , from previous guidance of$530 million to$550 million , representing growth of approximately3% to6% , compared to the prior year, - Tax rate applicable to Adjusted Net Income in the range of
30% to32% , from previous guidance of30% to33% , - Adjusted EPS remains in the range of
$0.78 t o$0.86 , - A fully diluted share count remains in the range of 283 million to 285 million shares on a weighted-average basis,
- Capital expenditures in the range of
$200 t o$215 million , from previous guidance of$185 t o$215 million , and - 2023 year-end Net Leverage Ratio expected to end the year at or below 4.0x, from previous guidance of ending the year within the range of 2.0x to 4.0x.
The Company does not provide a reconciliation for non-GAAP financial measures on a forward-looking basis where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items without unreasonable effort. The Company cannot reconcile its expected Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Net Leverage Ratio without unreasonable effort because certain items that impact net income, earnings per share and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time, including uncertainties caused by changes to the regulatory landscape, restructuring items and certain fair value measurements, all of which are potential adjustments for future earnings.
The outlook provided above contains a number of assumptions, including, among others, the Company’s current expectations regarding supply chain continuity, particularly for the supply of EO and Cobalt-60, the impact of inflationary trends including the impact on energy prices and the supply of labor, and the expectation that exchange rates as of June 30, 2023 remain constant for the remainder of 2023. Our outlook is based on current plans and expectations and is subject to several known and unknown risks and uncertainties, including those set forth below under “Cautionary Note Regarding Forward-Looking Statements.”
Earnings Webcast
Sotera Health management will host a conference call and webcast to discuss the Company’s operating highlights and financial results at 9:00 a.m. Eastern Time today. To participate in the live call, please dial 1-877-270-2148 if dialing in from the United States, or 1-412-902-6510 if dialing in from other locations. A live webcast of the conference call and accompanying materials may also be accessed via the Investor Relations section of the Company’s website at Presentation & Events | Sotera Health. A replay of the webcast will be archived on the Company's website.
Updates on recent developments in matters relevant to investors can be found on the Investor Relations section of the Sotera Health website at Investor Relations | Sotera Health. For developments related to EO, updates can be found at Ethylene Oxide | Sotera Health.
Cautionary Note Regarding Forward-Looking Statements
Unless expressly indicated or the context requires otherwise, the terms “Sotera Health,” “Company,” “we,” “us,” and “our” in this document refer to Sotera Health Company, a Delaware corporation, and, where appropriate, its subsidiaries on a consolidated basis. This release contains forward-looking statements that reflect management’s expectations about future events and the Company’s operating plans and performance and speak only as of the date hereof. You can identify these forward-looking statements by the use of forward-looking words such as “will,” “may,” “plan,” “estimate,” “project,” “believe,” “anticipate,” “expect,” “intend,” “should,” “would,” “could,” “target,” “goal,” “continue to,” “positioned to,” “are confident” or the negative versions of those words or other comparable words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, are forward-looking statements. Any forward-looking statements contained in this release are based upon our historical performance and on our current plans, estimates and expectations of the Company’s future performance and the future performance of the markets in which the Company operates in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. These forward-looking statements are subject to various risks, uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. These risks and uncertainties include, without limitation, any disruption in the availability or supply of, or increases in the price of, EO or Cobalt-60 (“Co-60”), or our other direct materials, services and supplies, including as a result of geopolitical instability and sanctions arising from US, Canadian, UK or European Union relations with Russia; foreign currency exchange rates and changes in those rates; adverse changes in industry trends, environmental, health and safety regulations or preferences, or general economic, social and business conditions; the impact and outcome of current and future legal proceedings and liability claims, including litigation related to purported exposure to emissions of EO from our facilities in Illinois, Georgia and New Mexico and the possibility that other claims will be made in the future relating to these or other facilities; our ability to increase capacity at existing facilities, renew leases for our leased facilities and build new facilities in a timely and cost-effective manner; competition for qualified employees in the industries in which we operate; the risks of doing business internationally, including global and regional economic and political instability and compliance with numerous laws and regulations in multiple jurisdictions; and any inability to pursue strategic transactions or find suitable acquisition targets. For additional discussion of these risks and uncertainties, please refer to the Company’s filings with the SEC, such as its annual and quarterly reports. We do not undertake any obligation to publicly update or revise these forward-looking statements, except as otherwise required by law.
Non-GAAP Financial Measures.
To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted EPS, Segment income margin, Net Debt and Net Leverage Ratio and constant currency financial measures that are not based on any standardized methodology prescribed by GAAP.
We define Adjusted Net Income as net income (loss) before amortization and certain other adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period.
We define Adjusted EBITDA as Adjusted Net Income before interest expense, depreciation (including depreciation of Co-60 used in our operations) and income tax provision applicable to Adjusted Net Income.
Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net revenues.
Segment income margin is equal to segment income divided by net segment revenues.
We define Adjusted EPS as Adjusted Net Income divided by the weighted average number of diluted shares outstanding.
Our Net Debt is equal to our total debt, plus unamortized debt issuance costs and debt discounts, less cash and cash equivalents.
Our Net Leverage Ratio is equal to Net Debt divided by Adjusted EBITDA.
Constant currency is a non-GAAP financial measure we use to assess performance excluding the impact of foreign currency exchange rate changes. We calculate constant currency net revenues by translating prior year net revenues in local currency at the average exchange rates applicable for the current period. The translated results are then used to determine year-over-year percentage increases or decreases. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP.
We use these non-GAAP financial measures as the principal measures of our operating performance. Management believes these are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe these measures will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses these measurements in their financial analysis and operational decision-making and Adjusted EBITDA serves as the key metric for the attainment of our primary annual incentive program. These measures may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.
About Sotera Health
Sotera Health Company is a leading global provider of mission-critical end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry. Sotera Health goes to market through three businesses – Sterigenics®, Nordion® and Nelson Labs®. Sotera Health is committed to its mission, Safeguarding Global Health®.
INVESTOR RELATIONS
Jason Peterson
Vice President & Treasurer, Sotera Health
IR@soterahealth.com
MEDIA
Kristin Gibbs
Chief Marketing Officer, Sotera Health
kgibbs@soterahealth.com
Source: Sotera Health Company
| Sotera Health Company Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues: | |||||||||||||||
| Service | $ | 226,050 | $ | 221,529 | $ | 440,560 | $ | 427,747 | |||||||
| Product | 29,232 | 45,110 | 35,312 | 75,646 | |||||||||||
| Total net revenues | 255,282 | 266,639 | 475,872 | 503,393 | |||||||||||
| Cost of revenues: | |||||||||||||||
| Service | 103,900 | 98,407 | 208,110 | 192,983 | |||||||||||
| Product | 11,794 | 17,836 | 16,671 | 31,139 | |||||||||||
| Total cost of revenues | 115,694 | 116,243 | 224,781 | 224,122 | |||||||||||
| Gross profit | 139,588 | 150,396 | 251,091 | 279,271 | |||||||||||
| Operating expenses: | |||||||||||||||
| Selling, general and administrative expenses | 60,287 | 63,132 | 122,197 | 122,674 | |||||||||||
| Amortization of intangible assets | 16,097 | 15,769 | 32,324 | 31,610 | |||||||||||
| Total operating expenses | 76,384 | 78,901 | 154,521 | 154,284 | |||||||||||
| Operating income | 63,204 | 71,495 | 96,570 | 124,987 | |||||||||||
| Interest expense, net | 30,728 | 14,044 | 59,598 | 24,448 | |||||||||||
| Impairment of investment in unconsolidated affiliate | — | 9,613 | — | 9,613 | |||||||||||
| Foreign exchange loss (gain) | 465 | (755 | ) | 812 | 33 | ||||||||||
| Other (income) expense, net | (2,474 | ) | 485 | (3,727 | ) | (2,482 | ) | ||||||||
| Income before income taxes | 34,485 | 48,108 | 39,887 | 93,375 | |||||||||||
| Provision for income taxes | 10,972 | 17,690 | 13,532 | 32,316 | |||||||||||
| Net income | 23,513 | 30,418 | 26,355 | 61,059 | |||||||||||
| Earnings per share: | |||||||||||||||
| Basic | $ | 0.08 | $ | 0.11 | $ | 0.09 | $ | 0.22 | |||||||
| Diluted | 0.08 | 0.11 | 0.09 | 0.22 | |||||||||||
| Weighted average number of common shares outstanding: | |||||||||||||||
| Basic | 280,893 | 279,990 | 280,793 | 279,910 | |||||||||||
| Diluted | 283,147 | 280,171 | 283,040 | 280,038 | |||||||||||
| Sotera Health Company Segment Data (in thousands) (unaudited) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Segment revenues: | |||||||||||||||
| Sterigenics | $ | 166,590 | $ | 157,792 | $ | 326,587 | $ | 307,254 | |||||||
| Nordion | 31,975 | 50,478 | 40,526 | 84,480 | |||||||||||
| Nelson Labs | 56,717 | 58,369 | 108,759 | 111,659 | |||||||||||
| Total net revenues | $ | 255,282 | $ | 266,639 | $ | 475,872 | $ | 503,393 | |||||||
| Segment income: | |||||||||||||||
| Sterigenics | $ | 91,450 | $ | 85,098 | $ | 174,290 | $ | 164,501 | |||||||
| Nordion | 17,784 | 29,982 | 19,310 | 48,885 | |||||||||||
| Nelson Labs | 19,251 | 21,055 | 33,353 | 38,098 | |||||||||||
| Total segment income | 128,485 | 136,135 | 226,953 | 251,484 | |||||||||||
| Less adjustments: | |||||||||||||||
| Interest expense, net(a) | 25,271 | 17,144 | 51,811 | 33,894 | |||||||||||
| Depreciation and amortization(b) | 39,490 | 36,939 | 79,028 | 72,988 | |||||||||||
| Share-based compensation(c) | 8,409 | 5,801 | 15,757 | 10,339 | |||||||||||
| Gain on foreign currency and derivatives not designated as hedging instruments, net(d) | (409 | ) | (1,430 | ) | 126 | (7,982 | ) | ||||||||
| Acquisition and divestiture related charges, net(e) | 153 | 691 | 745 | 531 | |||||||||||
| Business optimization project expenses(f) | 3,322 | 470 | 5,856 | 574 | |||||||||||
| Plant closure expenses(g) | 129 | 478 | (766 | ) | 1,149 | ||||||||||
| Impairment of investment in unconsolidated affiliate(h) | — | 9,613 | — | 9,613 | |||||||||||
| Professional services and other expenses relating to EO sterilization facilities(i) | 17,080 | 17,678 | 33,382 | 35,737 | |||||||||||
| Accretion of asset retirement obligation(j) | 555 | 598 | 1,127 | 1,118 | |||||||||||
| COVID-19 expenses(k) | — | 45 | — | 148 | |||||||||||
| Consolidated income before income taxes | $ | 34,485 | $ | 48,108 | $ | 39,887 | $ | 93,375 | |||||||
(a) The three and six months ended June 30, 2023 exclude
(b) Includes depreciation of Co-60 held at gamma irradiation sites.
(c) Represents share-based compensation expense to employees and non-employee directors.
(d) Represents the effects of (i) fluctuations in foreign currency exchange rates, (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion, and (iii) unrealized gains on interest rate caps not designated as hedging instruments.
(e) Represents (i) certain direct and incremental costs related to the acquisitions of RCA and BioScience Labs and certain related integration efforts as a result of those acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, and (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018.
(f) Represents professional fees, exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of acquisitions, operating structure realignment and other process enhancement projects.
(g) Represents professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility. The six months ended June 30, 2023 also includes a
(h) Represents an impairment charge on our equity method investment in a joint venture.
(i) Represents litigation and other professional fees associated with our EO sterilization facilities. This includes
(j) Represents non-cash accretion of asset retirement obligations related to Co-60 and gamma processing facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities (without regard for whether the decommissioning services would be performed by employees of Nordion, instead of by a third party) and are accreted over the life of the asset.
(k) Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures.
| Sotera Health Company Condensed Consolidated Balance Sheets (in thousands) (unaudited) | |||||
| As of June 30, | As of December 31, | ||||
| 2023 | 2022 | ||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents, including restricted cash | $ | 270,490 | $ | 396,294 | |
| Accounts receivable, net | 117,307 | 118,482 | |||
| Inventories, net | 42,102 | 37,145 | |||
| Other current assets | 116,793 | 93,089 | |||
| Total current assets | 546,692 | 645,010 | |||
| Property, plant, and equipment, net | 859,138 | 774,527 | |||
| Operating lease assets | 25,179 | 26,481 | |||
| Other intangible assets, net | 456,120 | 491,265 | |||
| Goodwill | 1,110,498 | 1,101,768 | |||
| Other assets | 77,243 | 78,654 | |||
| Total assets | $ | 3,074,870 | $ | 3,117,705 | |
| Liabilities and equity | |||||
| Total current liabilities | $ | 200,330 | $ | 791,567 | |
| Long-term debt, less current portion | 2,221,987 | 1,747,115 | |||
| Other noncurrent liabilities | 165,992 | 160,761 | |||
| Deferred income taxes | 68,194 | 68,024 | |||
| Total liabilities | 2,656,503 | 2,767,467 | |||
| Total equity | 418,367 | 350,238 | |||
| Total liabilities and equity | $ | 3,074,870 | $ | 3,117,705 | |
| Sotera Health Company Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) | |||||||
| Six Months Ended June 30, | |||||||
| 2023 | 2022 | ||||||
| Operating activities: | |||||||
| Net income | $ | 26,355 | $ | 61,059 | |||
| Non-cash items | 101,474 | 96,513 | |||||
| Changes in operating assets and liabilities | (430,533 | ) | (49,316 | ) | |||
| Net cash provided by operating activities | (302,704 | ) | 108,256 | ||||
| Investing activities: | |||||||
| Purchases of property, plant and equipment | (98,134 | ) | (71,642 | ) | |||
| Adjustment to purchase of Regulatory Compliance Associates Inc. | — | 450 | |||||
| Other investing activities | 32 | — | |||||
| Net cash used in investing activities | (98,102 | ) | (71,192 | ) | |||
| Financing activities: | |||||||
| Proceeds from long-term borrowings | 500,000 | — | |||||
| Payment on revolving credit facility | (200,000 | ) | — | ||||
| Payments of debt issuance costs | (24,672 | ) | (27 | ) | |||
| Other financing activities | (2,122 | ) | (1,056 | ) | |||
| Net cash used in financing activities | 273,206 | (1,083 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 1,796 | (2,287 | ) | ||||
| Net increase in cash and cash equivalents, including restricted cash | (125,804 | ) | 33,694 | ||||
| Cash and cash equivalents, including restricted cash, at beginning of period | 396,294 | 106,924 | |||||
| Cash and cash equivalents, including restricted cash, at end of period | $ | 270,490 | $ | 140,618 | |||
| Supplemental disclosures of cash flow information: | |||||||
| Cash paid during the period for interest | $ | 78,352 | $ | 42,057 | |||
| Cash paid during the period for income taxes, net of tax refunds received | 27,590 | 37,340 | |||||
| Purchases of property, plant and equipment included in accounts payable | 16,986 | 17,923 | |||||
| Sotera Health Company Non-GAAP Financial Measures (in thousands, except per share amounts) (unaudited) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net income | $ | 23,513 | $ | 30,418 | $ | 26,355 | $ | 61,059 | |||||||
| Amortization of intangibles | 20,502 | 21,195 | 41,109 | 41,377 | |||||||||||
| Share-based compensation(a) | 8,409 | 5,801 | 15,757 | 10,339 | |||||||||||
| Loss (gain) on foreign currency and derivatives not designated as hedging instruments, net(b) | (409 | ) | (1,430 | ) | 126 | (7,982 | ) | ||||||||
| Acquisition and divestiture related charges, net(c) | 153 | 691 | 745 | 531 | |||||||||||
| Business optimization project expenses(d) | 3,322 | 470 | 5,856 | 574 | |||||||||||
| Plant closure expenses(e) | 129 | 478 | (766 | ) | 1,149 | ||||||||||
| Impairment of investment in unconsolidated affiliate(f) | — | 9,613 | — | 9,613 | |||||||||||
| Professional services and other expenses relating to EO sterilization facilities(g) | 17,080 | 17,678 | 33,382 | 35,737 | |||||||||||
| Accretion of asset retirement obligation(h) | 555 | 598 | 1,127 | 1,118 | |||||||||||
| COVID-19 expenses(i) | — | 45 | — | 148 | |||||||||||
| Income tax benefit associated with pre-tax adjustments(j) | (13,959 | ) | (9,732 | ) | (26,351 | ) | (17,584 | ) | |||||||
| Adjusted Net Income | 59,295 | 75,825 | 97,340 | 136,079 | |||||||||||
| Interest expense, net(k) | 25,271 | 17,144 | 51,811 | 33,894 | |||||||||||
| Depreciation(l) | 18,988 | 15,744 | 37,919 | 31,611 | |||||||||||
| Income tax provision applicable to Adjusted Net Income(m) | 24,931 | 27,422 | 39,883 | 49,900 | |||||||||||
| Adjusted EBITDA(n) | $ | 128,485 | $ | 136,135 | $ | 226,953 | $ | 251,484 | |||||||
| Net Revenues | $ | 255,282 | $ | 266,639 | $ | 475,872 | $ | 503,393 | |||||||
| Adjusted EBITDA Margin | 50.3 | % | 51.1 | % | 47.7 | % | 50.0 | % | |||||||
| Weighted average number of shares outstanding: | |||||||||||||||
| Basic | 280,893 | 279,990 | 280,793 | 279,910 | |||||||||||
| Diluted | 283,147 | 280,171 | 283,040 | 280,038 | |||||||||||
| Earnings per share: | |||||||||||||||
| Basic | $ | 0.08 | $ | 0.11 | $ | 0.09 | $ | 0.22 | |||||||
| Diluted | 0.08 | 0.11 | 0.09 | 0.22 | |||||||||||
| Adjusted earnings per share: | |||||||||||||||
| Basic | $ | 0.21 | $ | 0.27 | $ | 0.35 | $ | 0.49 | |||||||
| Diluted | 0.21 | 0.27 | 0.34 | 0.49 | |||||||||||
(a) Represents share-based compensation expense to employees and non-employee directors.
(b) Represents the effects of (i) fluctuations in foreign currency exchange rates, (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion, and (iii) unrealized gains on interest rate caps not designated as hedging instruments.
(c) Represents (i) certain direct and incremental costs related to the acquisitions of RCA and BioScience Labs and certain related integration efforts as a result of those acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, and (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018.
(d) Represents professional fees, exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of acquisitions, operating structure realignment and other process enhancement projects.
(e) Represents professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility. The six months ended June 30, 2023 also includes a
(f) Represents an impairment charge on our equity method investment in a joint venture.
(g) Represents litigation and other professional fees associated with our EO sterilization facilities. This includes
(h) Represents non-cash accretion of asset retirement obligations related to Co-60 and gamma processing facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities (without regard for whether the decommissioning services would be performed by employees of Nordion, instead of by a third party) and are accreted over the life of the asset.
(i) Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures.
(j) Represents the income tax impact of adjustments calculated based on the tax rate applicable to each item. We eliminate the effect of tax rate changes as applied to tax assets and liabilities and unusual items from our presentation of adjusted net income.
(k) The three and six months ended June 30, 2023 exclude
(l) Includes depreciation of Co-60 held at gamma irradiation sites.
(m) Represents the difference between the income tax provision as determined under U.S. GAAP and the income tax provision or benefit associated with pre-tax adjustments described in footnote (j).
(n)
| Sotera Health Company Non-GAAP Financial Measures ($’s in thousands) (unaudited) | |||||||
| As of June 30, | As of December 31, | ||||||
| 2023 | 2022 | ||||||
| Current portion of long-term debt | $ | 5,225 | $ | 197,119 | |||
| Long-term debt | 2,221,987 | 1,747,115 | |||||
| Current portion of finance leases | 8,605 | 1,722 | |||||
| Finance leases less current portion | 61,283 | 56,955 | |||||
| Total Debt | 2,297,100 | 2,002,911 | |||||
| Less: cash and cash equivalents | (262,700 | ) | (395,214 | ) | |||
| Total Net Debt | $ | 2,034,400 | $ | 1,607,697 | |||
| Adjusted EBITDA(a) | $ | 481,718 | $ | 506,249 | |||
| Net Leverage | 4.2x | 3.2x | |||||
(a) Represents Adjusted EBITDA for the twelve months ended June 30, 2023 and December 31, 2022, respectively. Refer to the Adjusted EBITDA reconciliations for detail.
| Sotera Health Company Non-GAAP Financial Measures (in thousands) (unaudited) | |||||||
| Twelve Months Ended June 30, | Twelve Months Ended December 31, | ||||||
| 2023 | 2022 | ||||||
| Net income | $ | (268,274 | ) | $ | (233,570 | ) | |
| Amortization of intangibles | 81,286 | 81,554 | |||||
| Share-based compensation(a) | 26,629 | 21,211 | |||||
| Gain on foreign currency and derivatives not designated as hedging instruments(b) | 11,258 | 3,150 | |||||
| Acquisition and divestiture related charges, net(c) | 1,612 | 1,398 | |||||
| Business optimization project expenses(d) | 7,508 | 2,226 | |||||
| Plant closure expenses(e) | 2,815 | 4,730 | |||||
| Impairment of investment in unconsolidated affiliate(f) | — | 9,613 | |||||
| Professional services and other expenses relating to EO sterilization facilities(g) | 70,284 | 72,639 | |||||
| Illinois EO litigation settlement(h) | 408,000 | 408,000 | |||||
| Accretion of asset retirement obligation(i) | 2,203 | 2,194 | |||||
| COVID-19 expenses(j) | 7 | 155 | |||||
| Income tax benefit associated with pre-tax adjustments(k) | (111,848 | ) | (103,081 | ) | |||
| Adjusted Net Income | 231,480 | 270,219 | |||||
| Interest expense, net(l) | 96,407 | 78,490 | |||||
| Depreciation(m) | 70,308 | 64,000 | |||||
| Income tax provision applicable to Adjusted Net Income(n) | 83,523 | 93,540 | |||||
| Adjusted EBITDA(o) | $ | 481,718 | $ | 506,249 | |||
| Net Revenues | $ | 976,166 | $ | 1,003,687 | |||
| Adjusted EBITDA Margin | 49.3 | % | 50.4 | % | |||
(a) Represents share-based compensation expense to employees and non-employee directors.
(b) Represents the effects of (i) fluctuations in foreign currency exchange rates, (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion, and (iii) unrealized gains on interest rate caps not designated as hedging instruments.
(c) Represents (i) certain direct and incremental costs related to the acquisitions of RCA and BioScience Labs and certain related integration efforts as a result of those acquisitions, (ii) the earnings impact of fair value adjustments (excluding those recognized within amortization expense) resulting from the businesses acquired, and (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018.
(d) Represents professional fees, exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of acquisitions, operating structure realignment and other process enhancement projects.
(e) Represents professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the Willowbrook, Illinois facility. The twelve months ended June 30, 2023 includes a
(f) Represents an impairment charge on our equity method investment in a joint venture.
(g) Represents litigation and other professional fees associated with our EO sterilization facilities. This includes
(h) Represents the cost to settle approximately 880 pending and threatened EO claims against the Settling Defendants in Illinois under settlement Agreements entered into on March 28, 2023.
(i) Represents non-cash accretion of asset retirement obligations related to Co-60 and gamma processing facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities (without regard for whether the decommissioning services would be performed by employees of Nordion, instead of by a third party) and are accreted over the life of the asset.
(j) Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures.
(k) Represents the income tax impact of adjustments calculated based on the tax rate applicable to each item. We eliminate the effect of tax rate changes as applied to tax assets and liabilities and unusual items from our presentation of adjusted net income.
(l) The twelve months ended June 30, 2023 exclude
(m) Includes depreciation of Co-60 held at gamma irradiation sites.
(n) Represents the difference between the income tax provision as determined under U.S. GAAP and the income tax benefit associated with pre-tax adjustments described in footnote (k).
(o)
