- Q4 2021 net revenues increased 11% to $241 million, compared to Q4 2020
- Q4 2021 net income of $36 million or $0.13 per diluted share, compared to a net loss of $44 million or $(0.17) per diluted share in Q4 2020
- Q4 2021 Adjusted EBITDA increased 10% to $125 million, compared to Q4 2020
- Q4 2021 Adjusted EPS of $0.23 improved by $0.14 per diluted share, compared to Q4 2020
- Full-year 2021 net revenues increased 14% to $931 million, compared to full-year 2020
- Full-year 2021 net income of $117 million or $0.41 per diluted share, compared to a net loss of $39 million or $(0.16) per diluted share for full-year 2020
- Full-year 2021 Adjusted EBITDA increased 15% to $481 million, compared to full-year 2020
- December 31, 2021 total debt of $1.8 billion, net debt of $1.7 billion, and net leverage ratio further reduced to 3.5x
- Full-year 2022 outlook revenue and Adjusted EBITDA growth of 7% to 11%
- Increased investment in capacity expansions across all segments and technologies
CLEVELAND, March 01, 2022 (GLOBE NEWSWIRE) -- Sotera Health 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 fourth-quarter and full-year 2021.
Fourth-quarter 2021 net revenues increased 11.3% to $241 million, compared with $217 million in the fourth quarter a year ago. Net income attributable to Sotera Health (“net income”) was $36 million, or $0.13 per diluted share, compared with a net loss of $44 million, or $(0.17) per diluted share in the fourth-quarter 2020. Adjusted EBITDA for the fourth-quarter 2021 increased by 10.3% to $125 million over the prior-year quarter. Fourth-quarter 2021 adjusted earnings per diluted share (“Adjusted EPS”) was $0.23, an increase of $0.14 per diluted share, compared to the fourth-quarter 2020. Please refer to the section “Non-GAAP Financial Measures” provided later in this release.
For full-year 2021, net revenues increased 13.9% to $931 million, compared with $818 million for full-year 2020. Full-year 2021 net income was $117 million, or $0.41 per diluted share, compared with a net loss of $39 million, or $(0.16) per diluted share, for full-year 2020. Full-year 2021 Adjusted EBITDA increased 14.6% to $481 million, compared to full-year 2020. Adjusted EPS was $0.88 in 2021, an increase of $0.46 over 2020; this includes an interest expense reduction of approximately $141 million for full-year 2021. Please refer to the section “Non-GAAP Financial Measures” provided later in this release.
“This past year has been an exceptional one for Sotera Health as we navigated a challenging macro environment,” said Chairman and Chief Executive Officer, Michael B. Petras, Jr. “During 2021, we executed on a number of initiatives to position ourselves well for the future, which included organic investments in our facility network to better meet our customers’ needs, two tuck-in acquisitions, the creation of our Expert Advisory Services organization, the launch of a formal ESG initiative, and a significant reduction of our leverage to further strengthen our balance sheet.”
Petras continued, “We are pleased to report another quarter of strong top-line, net income, and Adjusted EBITDA growth, which translated to double-digit revenue and Adjusted EBITDA growth for both the quarter and full-year. We have now delivered double-digit revenue and Adjusted EBITDA growth in all 5 periods that we have reported as a public company. I am extremely proud of the Sotera Health team and look forward to another strong year in 2022. Our excitement for 2022 is anchored by a significant escalation in our investment in capacity expansions, which demonstrates the strength we see in long-term customer demand for our services.”
Fourth-Quarter and Full-Year 2021 Review by Business Segment
Sterigenics
For fourth-quarter 2021, net revenues from Sterigenics were $150 million, an increase of 11.4% compared to the fourth quarter a year ago. Segment income was $83 million, an increase of 12.5%.
For full-year 2021, Sterigenics net revenues were $572 million, an increase of 14.6% compared to 2020. Segment income increased 16.4% to $310 million.
Revenue and segment income growth for both the fourth-quarter and full-year 2021 were driven by organic volume growth and favorable pricing, while full-year results also benefited from the July 31, 2020 Iotron acquisition.
Nordion
For fourth-quarter 2021, net revenues from Nordion were $37 million, an increase of 27.8%, compared to the fourth quarter a year ago. Segment income increased 32.8% to $21 million.
For full-year 2021, net revenues from Nordion were $141 million, an increase of 22.5% compared to 2020. Segment income increased by 23.8% to $83 million.
Revenue and segment income growth for both the fourth-quarter and full-year 2021 were primarily driven by volume growth, a favorable impact from pricing and changes in foreign exchange rates.
Nelson Labs
For fourth-quarter 2021, net revenues from Nelson Labs were $54 million, an increase of 2.0% compared to the fourth quarter a year ago. Segment income declined 12.6% to $20 million.
For full-year 2021, net revenues from Nelson Labs were $219 million, an increase of 7.1% compared to 2020. Segment income increased 1.9% to $88 million.
Revenue and segment income changes for both the fourth-quarter and full-year 2021 were driven by the acquisitions of BioScience Labs and Regulatory Compliance Associates (“RCA”) and favorable pricing offset by a decline in demand for testing related to new personal protective equipment.
Balance Sheet and Liquidity
As of December 31, 2021, Sotera Health had $1.8 billion in total debt, and $107 million in cash and cash equivalents, compared to $1.9 billion in total debt and $102 million in cash and cash equivalents as of December 31, 2020. Material debt balances currently outstanding do not mature until 2026. Sotera Health’s net leverage ratio as of December 31, 2021 was 3.5x, compared to 4.3x at December 31, 2020. Please refer to the section “Non-GAAP Financial Measures” provided later in this release.
Full-Year 2022 Outlook
Today, Sotera Health is providing its full-year 2022 outlook:
- Net revenues in the range of $1,000 million to $1,030 million, representing growth of approximately 7% to 11%, compared to the prior year,
- Adjusted EBITDA in the range of $515 million to $535 million, representing growth of approximately 7% to 11%, compared to the prior year,
- Tax rate applicable to Adjusted Net Income in the range of 29% to 30%,
- Adjusted EPS in the range of $0.93 to $0.99, representing growth of 6% to 13% versus the prior year,
- A fully diluted share count in the range of 280 million to 282 million shares on a weighted-average basis,
- Capital expenditures in the range of $140 million to $170 million, and
- Net leverage reduction of approximately 1/2 of a turn.
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 ethylene oxide (“EO”) and cobalt-60 (“Co-60”), the impact of inflationary trends including the impact on the supply of labor, the impact of the COVID-19 pandemic including the rate of recoveries of elective procedures and new product development testing, and the expectation that exchange rates as of Q1 2022 remain constant for the remainder of 2022. Our outlook is based on current plans and expectations and is subject to a number of known and unknown risks and uncertainties, including those set forth below under “Forward-Looking Statements.”
Upcoming Investor Events
- Barclays Global Healthcare Conference on March 15, 2022 at 9:00 a.m. Eastern
- KeyBanc Capital Markets’ Life Sciences & MedTech Investor Forum on March 22, 2022 at 10:30 a.m. Eastern
Updates can be found from time to time on recent developments in matters relevant to investors on the Investor Relations section of the Company’s website at https://investors.soterahealth.com/special-notices. For developments related to Ethylene Oxide, updates can be found at https://investors.soterahealth.com/ethylene-oxide-eo-overview.
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 today. To participate in the live call, please dial 1-833-303-1211 if dialing from within the United States and Canada or 1-918-922-6527 if dialing from other locations, using conference ID #6076057, at least 10 minutes prior to the scheduled start time. A live webcast of the conference call and accompanying materials also may be accessed via the Investor Relations section of the Company’s website at https://investors.soterahealth.com/. A replay of the webcast will be available beginning at 12:00pm Eastern on March 1, 2022 for a period of one year.
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 version of those words or other comparable words. Any forward-looking statements contained in this release are based upon our historical performance and on our current plans, estimates and expectations 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 EO or Co-60, including geopolitical risks related to the supply of Co-60 from Russia; changes in industry trends, environmental, health and safety regulations or preferences; the impact 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; and any inability to pursue strategic transactions or find suitable acquisition targets. For additional discussion of these risks and uncertainties, please refer to 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
The Company does not provide a reconciliation of the forward-looking Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Net Leverage Ratio outlook to the most directly comparable GAAP measure, as this cannot be done without unreasonable effort due to the variability and low visibility with respect to certain items, including, among others, uncertainties caused by the global COVID-19 pandemic, changes to the regulatory landscape, restructuring items and certain fair value measurements, all of which are potential adjustments for future earnings. The variability of these items could have a potentially unpredictable, and a potentially significant, impact on our future GAAP results.
To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Net Debt and Net Leverage Ratio, 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.
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.
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 metric for 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 CONTACTS | ||
| Sally J. Curley, IRC Curley Global IR, LLC IR@soterahealth.com |
Jenny Kobin IR Advisory Solutions IR@soterahealth.com |
|
| MEDIA CONTACT | ||
| Kristin Gibbs Chief Marketing Officer, Sotera Health kgibbs@soterahealth.com |
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Sotera Health Company
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenues: | |||||||||||||||
| Service | $ | 207,594 | $ | 189,495 | $ | 805,501 | $ | 713,520 | |||||||
| Product | 33,655 | 27,350 | 125,977 | 104,638 | |||||||||||
| Total net revenues | 241,249 | 216,845 | 931,478 | 818,158 | |||||||||||
| Cost of revenues: | |||||||||||||||
| Service | 92,429 | 85,973 | 357,205 | 333,359 | |||||||||||
| Product | 14,867 | 10,295 | 55,601 | 41,227 | |||||||||||
| Total cost of revenues | 107,296 | 96,268 | 412,806 | 374,586 | |||||||||||
| Gross profit | 133,953 | 120,577 | 518,672 | 443,572 | |||||||||||
| Operating expenses: | |||||||||||||||
| Selling, general and administrative expenses | 51,827 | 53,156 | 198,158 | 178,525 | |||||||||||
| Amortization of intangible assets | 15,700 | 15,040 | 63,781 | 59,029 | |||||||||||
| Total operating expenses | 67,527 | 68,196 | 261,939 | 237,554 | |||||||||||
| Operating income | 66,426 | 52,381 | 256,733 | 206,018 | |||||||||||
| Interest expense, net | 15,607 | 48,117 | 74,192 | 215,259 | |||||||||||
| Loss on extinguishment of debt | 4 | 44,262 | 20,681 | 44,262 | |||||||||||
| Foreign exchange (gain) loss | (65 | ) | 140 | 1,345 | (5,230 | ) | |||||||||
| Other income, net | (7,854 | ) | (5,060 | ) | (15,201 | ) | (9,413 | ) | |||||||
| Income (loss) before income taxes | 58,734 | (35,078 | ) | 175,716 | (38,860 | ) | |||||||||
| Provision (benefit) for income taxes | 22,737 | 8,308 | 58,595 | (1,369 | ) | ||||||||||
| Net income (loss) | 35,997 | (43,386 | ) | 117,121 | (37,491 | ) | |||||||||
| Less: Net income attributable to noncontrolling interests | — | 294 | 239 | 1,126 | |||||||||||
| Net income (loss) attributable to Sotera Health Company | $ | 35,997 | $ | (43,680 | ) | $ | 116,882 | $ | (38,617 | ) | |||||
| Earnings (loss) per share: | |||||||||||||||
| Basic | $ | 0.13 | $ | (0.17 | ) | $ | 0.41 | $ | (0.16 | ) | |||||
| Diluted | 0.13 | (0.17 | ) | 0.41 | (0.16 | ) | |||||||||
| Weighted average number of shares outstanding: | |||||||||||||||
| Basic | 279,616 | 253,470 | 279,228 | 237,696 | |||||||||||
| Diluted | 279,774 | 253,470 | 279,382 | 237,696 | |||||||||||
Sotera Health Company
Segment Data
(in thousands)
(unaudited)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Segment revenues: | |||||||||||||||
| Sterigenics | $ | 150,182 | $ | 134,819 | $ | 571,829 | $ | 498,773 | |||||||
| Nordion | 36,696 | 28,711 | 140,507 | 114,745 | |||||||||||
| Nelson Labs | 54,371 | 53,315 | 219,142 | 204,640 | |||||||||||
| Total net revenues | $ | 241,249 | $ | 216,845 | $ | 931,478 | $ | 818,158 | |||||||
| Segment income: | |||||||||||||||
| Sterigenics | $ | 83,096 | $ | 73,836 | $ | 310,470 | $ | 266,639 | |||||||
| Nordion | 21,388 | 16,111 | 82,673 | 66,803 | |||||||||||
| Nelson Labs | 20,191 | 23,115 | 88,086 | 86,417 | |||||||||||
| Total segment income | 124,675 | 113,062 | 481,229 | 419,859 | |||||||||||
| Less adjustments: | |||||||||||||||
| Interest expense, net | 15,607 | 48,117 | 74,192 | 215,259 | |||||||||||
| Depreciation and amortization(a) | 38,146 | 36,406 | 150,902 | 143,564 | |||||||||||
| Share-based compensation(b) | 3,381 | 6,968 | 13,870 | 10,987 | |||||||||||
| Capital restructuring bonuses(c) | — | 2,702 | — | 2,702 | |||||||||||
| Gain on foreign currency and embedded derivatives(d) | (943 | ) | (3,663 | ) | (58 | ) | (8,454 | ) | |||||||
| Acquisition and divestiture related charges, net(e) | (4,015 | ) | 962 | (6,018 | ) | 3,932 | |||||||||
| Business optimization project expenses(f) | 168 | 40 | 948 | 2,524 | |||||||||||
| Plant closure expenses(g) | 763 | 261 | 2,327 | 2,649 | |||||||||||
| Loss on extinguishment of debt(h) | 4 | 44,262 | 20,681 | 44,262 | |||||||||||
| Professional services relating to EO sterilization facilities(i) | 12,164 | 11,301 | 45,656 | 36,671 | |||||||||||
| Accretion of asset retirement obligations(j) | 501 | 470 | 2,252 | 1,946 | |||||||||||
| COVID-19 expenses(k) | 165 | 314 | 761 | 2,677 | |||||||||||
| Consolidated income (loss) before income taxes | $ | 58,734 | $ | (35,078 | ) | $ | 175,716 | $ | (38,860 | ) | |||||
| (a) | Includes depreciation of Co-60 held at gamma irradiation sites. |
| (b) | Includes non-cash share-based compensation expense. |
| (c) | Represents cash bonuses for members of management primarily relating to our initial public offering (“IPO”). |
| (d) | Represents the effects of (i) fluctuations in foreign currency exchange rates, and (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion. |
| (e) | Represents (i) certain direct and incremental costs related to the acquisitions of RCA, the noncontrolling interests in our China subsidiaries, and BioScience Labs in 2021; Iotron in July 2020; Nelson Labs Fairfield in 2018 (including the first quarter 2021 gain on the mandatorily redeemable noncontrolling interest), 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, (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018, (iv) a $3.4 million gain recognized in the third quarter of 2021 related to the settlement of an insurance claim for Nordion, and (v) a $5.1 million non-cash gain arising from the derecognition of an ARO liability no longer attributable to Nordion pursuant to the terms of the sale of the Medical Isotopes business in 2018. |
| (f) | Represents professional fees, contract termination and exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of acquisitions, the Sotera Health rebranding, 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. |
| (h) | Represents expenses incurred in connection with the repricing of our Term Loan in January 2021, full redemption of the First Lien Notes in August 2021, and paydown of debt following the November 2020 IPO, including accelerated amortization of prior debt issuance and discount costs, premiums paid in connection with early extinguishment and debt issuance and discount costs incurred for the new debt. |
| (i) | Represents professional fees related to litigation associated with our EO sterilization facilities and other related professional fees. |
| (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. For the year ended December 31, 2020, costs also included donations to related charitable causes and special bonuses for front-line personnel working on-site during lockdown periods. |
| As of December 31, | ||||||
| 2021 | 2020 | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 106,924 | $ | 102,454 | ||
| Accounts receivable, net | 108,183 | 91,735 | ||||
| Inventories, net | 54,288 | 34,093 | ||||
| Other current assets | 76,566 | 86,733 | ||||
| Total current assets | 345,961 | 315,015 | ||||
| Property, plant, and equipment, net | 650,797 | 609,814 | ||||
| Operating lease assets | 39,946 | 45,963 | ||||
| Other intangible assets, net | 598,844 | 643,366 | ||||
| Goodwill | 1,120,320 | 1,115,936 | ||||
| Other assets | 33,634 | 31,185 | ||||
| Total assets | $ | 2,789,502 | $ | 2,761,279 | ||
| Liabilities and equity | ||||||
| Total current liabilities | $ | 161,161 | $ | 140,598 | ||
| Long-term debt | 1,743,534 | 1,824,789 | ||||
| Other noncurrent liabilities | 164,210 | 219,502 | ||||
| Deferred income taxes | 134,501 | 121,816 | ||||
| Total liabilities | 2,203,406 | 2,306,705 | ||||
| Total equity | 586,096 | 454,574 | ||||
| Total liabilities and equity | $ | 2,789,502 | $ | 2,761,279 | ||
Sotera Health Company
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Year Ended December 31, | |||||||
| 2021 | 2020 | ||||||
| Operating activities: | |||||||
| Net income (loss) | $ | 117,121 | $ | (37,491 | ) | ||
| Non-cash items | 177,015 | 169,869 | |||||
| Changes in operating assets and liabilities | (12,591 | ) | (11,793 | ) | |||
| Net cash provided by operating activities | 281,545 | 120,585 | |||||
| Investing activities: | |||||||
| Purchases of property, plant and equipment | (102,162 | ) | (53,507 | ) | |||
| Purchase of Iotron Industries Canada, Inc., net of cash acquired | — | (105,187 | ) | ||||
| Purchase of BioScience Laboratories, LLC, net of cash acquired | (13,530 | ) | — | ||||
| Purchase of mandatorily redeemable noncontrolling interest in Nelson Laboratories Fairfield, Inc. | (12,425 | ) | — | ||||
| Purchase of Regulatory Compliance Associates Inc., net of cash acquired | (31,015 | ) | — | ||||
| Other investing activities | (701 | ) | — | ||||
| Net cash used in investing activities | (159,833 | ) | (158,694 | ) | |||
| Financing activities: | |||||||
| Proceeds from revolving credit facility and long-term borrowings | — | 150,000 | |||||
| Proceeds from issuance of common stock, net of underwriting discounts and issuance costs | — | 1,155,961 | |||||
| Repurchase of common shares | — | (34,000 | ) | ||||
| Purchase of noncontrolling interests in China subsidiaries | (8,418 | ) | — | ||||
| Payments of debt issuance costs and prepayment premium | (6,792 | ) | (19,746 | ) | |||
| Payments on revolving credit facility and long-term borrowings | (100,000 | ) | (1,177,325 | ) | |||
| Shares withheld for employee taxes on equity awards | (1,434 | ) | — | ||||
| Other financing activities | (642 | ) | (1,458 | ) | |||
| Net cash (used in) provided by financing activities | (117,286 | ) | 73,432 | ||||
| Effect of exchange rate changes on cash and cash equivalents | 44 | 4,106 | |||||
| Net increase in cash and cash equivalents, including restricted cash | 4,470 | 39,429 | |||||
| Cash and cash equivalents, including restricted cash, at beginning of period | 102,454 | 63,025 | |||||
| Cash and cash equivalents, including restricted cash, at end of period | $ | 106,924 | $ | 102,454 | |||
| Supplemental disclosures of cash flow information: | |||||||
| Cash paid during the period for interest | $ | 58,772 | $ | 211,276 | |||
| Cash paid during the period for income taxes, net of tax refunds received | 52,007 | 23,988 | |||||
| Equipment purchases included in accounts payable | 14,524 | 14,288 | |||||
Sotera Health Company
Non-GAAP Financial Measures
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net income (loss) | $ | 35,997 | $ | (43,386 | ) | $ | 117,121 | $ | (37,491 | ) | |||||
| Amortization of intangible assets | 21,443 | 20,431 | 86,742 | 80,255 | |||||||||||
| Share-based compensation(a) | 3,381 | 6,968 | 13,870 | 10,987 | |||||||||||
| Capital restructuring bonuses(b) | — | 2,702 | — | 2,702 | |||||||||||
| Gain on foreign currency and embedded derivatives(c) | (943 | ) | (3,663 | ) | (58 | ) | (8,454 | ) | |||||||
| Acquisition and divestiture related charges, net(d) | (4,015 | ) | 962 | (6,018 | ) | 3,932 | |||||||||
| Business optimization project expenses(e) | 168 | 40 | 948 | 2,524 | |||||||||||
| Plant closure expenses(f) | 763 | 261 | 2,327 | 2,649 | |||||||||||
| Loss on extinguishment of debt(g) | 4 | 44,262 | 20,681 | 44,262 | |||||||||||
| Professional services relating to EO sterilization facilities(h) | 12,164 | 11,301 | 45,656 | 36,671 | |||||||||||
| Accretion of asset retirement obligations(i) | 501 | 470 | 2,252 | 1,946 | |||||||||||
| COVID-19 expenses(j) | 165 | 314 | 761 | 2,677 | |||||||||||
| Income tax benefit associated with pre-tax adjustments(k) | (5,728 | ) | (18,682 | ) | (38,500 | ) | (43,536 | ) | |||||||
| Adjusted Net Income | 63,900 | 21,980 | 245,782 | 99,124 | |||||||||||
| Interest expense, net | 15,607 | 48,117 | 74,192 | 215,259 | |||||||||||
| Depreciation(l) | 16,703 | 15,975 | 64,160 | 63,309 | |||||||||||
| Income tax provision applicable to Adjusted Net Income(m) | 28,465 | 26,990 | 97,095 | 42,167 | |||||||||||
| Adjusted EBITDA(n) | $ | 124,675 | $ | 113,062 | $ | 481,229 | $ | 419,859 | |||||||
| Net Revenues | $ | 241,249 | $ | 216,845 | $ | 931,478 | $ | 818,158 | |||||||
| Adjusted EBITDA Margin | 51.7 | % | 52.1 | % | 51.7 | % | 51.3 | % | |||||||
| Weighted average number of shares outstanding | |||||||||||||||
| Basic | 279,616 | 253,470 | 279,228 | 237,696 | |||||||||||
| Diluted | 279,774 | 253,470 | 279,382 | 237,696 | |||||||||||
| Earnings (loss) per share | |||||||||||||||
| Basic | $ | 0.13 | $ | (0.17 | ) | $ | 0.41 | $ | (0.16 | ) | |||||
| Diluted | 0.13 | (0.17 | ) | 0.41 | (0.16 | ) | |||||||||
| Adjusted earnings per share | |||||||||||||||
| Basic | $ | 0.23 | $ | 0.09 | $ | 0.88 | $ | 0.42 | |||||||
| Diluted | 0.23 | 0.09 | 0.88 | 0.42 | |||||||||||
| (a) | Includes non-cash share-based compensation expense. |
| (b) | Represents cash bonuses for members of management primarily relating to the IPO. |
| (c) | Represents the effects of (i) fluctuations in foreign currency exchange rates, and (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion. |
| (d) | Represents (i) certain direct and incremental costs related to the acquisitions of RCA, the noncontrolling interests in our China subsidiaries, and BioScience Labs in 2021; Iotron in July 2020; Nelson Labs Fairfield in 2018 (including the first quarter 2021 gain on the mandatorily redeemable noncontrolling interest), 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, (iii) transition services income and non-cash deferred lease income associated with the terms of the divestiture of the Medical Isotopes business in 2018, (iv) a $3.4 million gain recognized in the third quarter of 2021 related to the settlement of an insurance claim for Nordion, and (v) a $5.1 million non-cash gain arising from the derecognition of an ARO liability no longer attributable to Nordion pursuant to the terms of the sale of the Medical Isotopes business in 2018. |
| (e) | Represents professional fees, contract termination and exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of acquisitions, the Sotera Health rebranding, operating structure realignment and other process enhancement projects. |
| (f) | 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. |
| (g) | Represents expenses incurred in connection with the repricing of our Term Loan in January 2021, full redemption of the First Lien Notes in August 2021, and paydown of debt following the November 2020 IPO, including accelerated amortization of prior debt issuance and discount costs, premiums paid in connection with early extinguishment and debt issuance and discount costs incurred for the new debt. |
| (h) | Represents professional fees related to litigation associated with our EO sterilization facilities and other related professional fees. |
| (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. For the year ended December 31, 2020, costs also included donations to related charitable causes and special bonuses for front-line personnel working on-site during lockdown periods. |
| (k) | Represents the income tax impact of adjustments calculated based on the tax rate applicable to each item. We eliminate the effect of significant changes to income tax valuation allowances, tax rate changes as applied to tax assets and liabilities, and unusual items from our presentation of adjusted net income. |
| (l) | Includes depreciation of Co-60 held at gamma irradiation sites. |
| (m) | Represents the difference between income tax expense or benefit as determined under U.S. GAAP and the income tax benefit associated with pre-tax adjustments described in footnote (k). |
| (n) | $22.0 million and $20.6 million of the adjustments for the three months ended December 31, 2021 and 2020, respectively, and $85.3 million and $82.6 million of the adjustments for the year ended December 31, 2021 and 2020, respectively, are included in cost of revenues, primarily consisting of amortization of intangible assets, depreciation, and accretion of asset retirement obligations. |
Sotera Health Company
Non-GAAP Financial Measures
($’s in thousands)
(unaudited)
| Year Ended December 31, | |||||||
| 2021 | 2020 | ||||||
| Long-term debt | $ | 1,743,534 | $ | 1,824,789 | |||
| Current portion of finance leases | 1,160 | 1,173 | |||||
| Finance leases less current portion | 40,877 | 34,939 | |||||
| Total Debt | $ | 1,785,571 | $ | 1,860,901 | |||
| Add: unamortized debt issuance costs and debt discounts | 20,016 | 38,761 | |||||
| Less: cash and cash equivalents | (106,924 | ) | (102,454 | ) | |||
| Net Debt | $ | 1,698,663 | $ | 1,797,208 | |||
| Adjusted EBITDA | $ | 481,229 | $ | 419,859 | |||
| Net Leverage | 3.5x | 4.3x | |||||
