x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2011
|
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
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Ohio
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34-1482024
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
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|
|
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5960 Heisley Road,
Mentor, Ohio
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44060-1834
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(Address of principal executive offices)
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(Zip code)
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Large Accelerated Filer
x
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Accelerated Filer
o
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Non-Accelerated Filer
o
(Do not check if a smaller reporting company)
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Smaller Reporting Company
o
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Page
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ITEM 1.
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FINANCIAL STATEMENTS
|
|
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December 31,
2011 |
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March 31,
2011 |
||||
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(Unaudited)
|
|
|
||||
Assets
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
143,787
|
|
|
$
|
193,016
|
|
Accounts receivable (net of allowances of $10,229 and $9,085, respectively)
|
|
251,427
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|
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272,248
|
|
||
Inventories, net
|
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169,412
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|
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167,344
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|
||
Deferred income taxes, net
|
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43,881
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|
|
56,715
|
|
||
Prepaid expenses and other current assets
|
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23,447
|
|
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16,483
|
|
||
Total current assets
|
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631,954
|
|
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705,806
|
|
||
Property, plant, and equipment, net
|
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378,165
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370,402
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|
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Goodwill and intangibles, net
|
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333,819
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|
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318,810
|
|
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Other assets
|
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32,472
|
|
|
31,667
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|
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Total assets
|
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$
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1,376,410
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|
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$
|
1,426,685
|
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Liabilities and equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
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$
|
70,075
|
|
|
$
|
90,981
|
|
Accrued payroll and other related liabilities
|
|
34,257
|
|
|
52,251
|
|
||
Accrued SYSTEM 1 Rebate Program and class action settlement
|
|
100,234
|
|
|
127,683
|
|
||
Accrued expenses and other
|
|
90,729
|
|
|
73,831
|
|
||
Total current liabilities
|
|
295,295
|
|
|
344,746
|
|
||
Long-term indebtedness
|
|
210,000
|
|
|
210,000
|
|
||
Deferred income taxes, net
|
|
36,144
|
|
|
26,662
|
|
||
Other liabilities
|
|
54,566
|
|
|
56,612
|
|
||
Total liabilities
|
|
$
|
596,005
|
|
|
$
|
638,020
|
|
Commitments and contingencies (see note 10)
|
|
|
|
|
||||
Serial preferred shares, without par value; 3,000 shares authorized; no shares issued or outstanding
|
|
—
|
|
|
—
|
|
||
Common shares, without par value; 300,000 shares authorized; 70,040 shares issued; 57,639 and 59,122 shares outstanding, respectively
|
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241,787
|
|
|
241,343
|
|
||
Common shares held in treasury, 12,401 and 10,918 shares, respectively
|
|
(353,042
|
)
|
|
(305,808
|
)
|
||
Retained earnings
|
|
880,039
|
|
|
816,846
|
|
||
Accumulated other comprehensive income
|
|
10,481
|
|
|
35,188
|
|
||
Total shareholders’ equity
|
|
779,265
|
|
|
787,569
|
|
||
Noncontrolling interest
|
|
1,140
|
|
|
1,096
|
|
||
Total equity
|
|
780,405
|
|
|
788,665
|
|
||
Total liabilities and equity
|
|
$
|
1,376,410
|
|
|
$
|
1,426,685
|
|
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||||||
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2011
|
|
2010
|
|
2011
|
|
2010
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Product
|
|
$
|
239,403
|
|
|
$
|
212,622
|
|
|
$
|
664,918
|
|
|
$
|
486,986
|
|
Service
|
|
115,812
|
|
|
115,661
|
|
|
351,643
|
|
|
342,702
|
|
||||
Total revenues
|
|
355,215
|
|
|
328,283
|
|
|
1,016,561
|
|
|
829,688
|
|
||||
Cost of revenues:
|
|
|
|
|
|
|
|
|
||||||||
Product
|
|
145,976
|
|
|
123,381
|
|
|
402,214
|
|
|
340,693
|
|
||||
Service
|
|
71,233
|
|
|
67,888
|
|
|
210,107
|
|
|
198,860
|
|
||||
Total cost of revenues
|
|
217,209
|
|
|
191,269
|
|
|
612,321
|
|
|
539,553
|
|
||||
Gross profit
|
|
138,006
|
|
|
137,014
|
|
|
404,240
|
|
|
290,135
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Selling, general, and administrative
|
|
73,922
|
|
|
93,467
|
|
|
227,583
|
|
|
237,583
|
|
||||
Research and development
|
|
9,196
|
|
|
7,739
|
|
|
26,867
|
|
|
24,391
|
|
||||
Restructuring expenses
|
|
1,164
|
|
|
(23
|
)
|
|
1,522
|
|
|
423
|
|
||||
Total operating expenses
|
|
84,282
|
|
|
101,183
|
|
|
255,972
|
|
|
262,397
|
|
||||
Income from operations
|
|
53,724
|
|
|
35,831
|
|
|
148,268
|
|
|
27,738
|
|
||||
Non-operating expenses, net:
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
3,005
|
|
|
3,049
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|
|
9,083
|
|
|
9,052
|
|
||||
Interest income and miscellaneous expense
|
|
(373
|
)
|
|
(321
|
)
|
|
(948
|
)
|
|
(671
|
)
|
||||
Total non-operating expenses, net
|
|
2,632
|
|
|
2,728
|
|
|
8,135
|
|
|
8,381
|
|
||||
Income before income tax expense
|
|
51,092
|
|
|
33,103
|
|
|
140,133
|
|
|
19,357
|
|
||||
Income tax expense
|
|
17,443
|
|
|
11,338
|
|
|
48,189
|
|
|
7,091
|
|
||||
Net income
|
|
$
|
33,649
|
|
|
$
|
21,765
|
|
|
$
|
91,944
|
|
|
$
|
12,266
|
|
Net income per common share
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
0.58
|
|
|
$
|
0.37
|
|
|
$
|
1.57
|
|
|
$
|
0.21
|
|
Diluted
|
|
$
|
0.58
|
|
|
$
|
0.36
|
|
|
$
|
1.55
|
|
|
$
|
0.20
|
|
Cash dividends declared per common share outstanding
|
|
$
|
0.17
|
|
|
$
|
0.15
|
|
|
$
|
0.49
|
|
|
$
|
0.41
|
|
|
|
Nine Months Ended December 31,
|
||||||
|
|
2011
|
|
2010
|
||||
Operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
91,944
|
|
|
$
|
12,266
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation, depletion, and amortization
|
|
46,288
|
|
|
39,739
|
|
||
Deferred income taxes
|
|
22,758
|
|
|
(52,652
|
)
|
||
Share-based compensation expense
|
|
5,799
|
|
|
8,489
|
|
||
Loss on the disposal of property, plant, equipment, and intangibles, net
|
|
376
|
|
|
1,217
|
|
||
Other items
|
|
(1,595
|
)
|
|
3,637
|
|
||
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
||||
Accounts receivable, net
|
|
20,019
|
|
|
2,205
|
|
||
Inventories, net
|
|
(2,404
|
)
|
|
(44,855
|
)
|
||
Other current assets
|
|
(6,954
|
)
|
|
4,188
|
|
||
Accounts payable
|
|
(21,127
|
)
|
|
7,414
|
|
||
Accrued SYSTEM 1 Rebate Program and class action settlement
|
|
(27,449
|
)
|
|
128,770
|
|
||
Accruals and other, net
|
|
(14,816
|
)
|
|
(27,021
|
)
|
||
Net cash provided by operating activities
|
|
112,839
|
|
|
83,397
|
|
||
Investing activities:
|
|
|
|
|
||||
Purchases of property, plant, equipment, and intangibles, net
|
|
(54,238
|
)
|
|
(56,390
|
)
|
||
Proceeds from the sale of property, plant, equipment, and intangibles
|
|
—
|
|
|
1,298
|
|
||
Equity investment in joint venture
|
|
—
|
|
|
(16,900
|
)
|
||
Acquisition of business, net of cash acquired
|
|
(22,269
|
)
|
|
(4,000
|
)
|
||
Net cash used in investing activities
|
|
(76,507
|
)
|
|
(75,992
|
)
|
||
Financing activities:
|
|
|
|
|
||||
Repurchases of common shares
|
|
(56,751
|
)
|
|
(19,900
|
)
|
||
Cash dividends paid to common shareholders
|
|
(28,751
|
)
|
|
(24,344
|
)
|
||
Stock option transactions, net
|
|
3,749
|
|
|
10,813
|
|
||
Tax benefit from stock options exercised
|
|
816
|
|
|
2,197
|
|
||
Net cash used in financing activities
|
|
(80,937
|
)
|
|
(31,234
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
(4,624
|
)
|
|
1,146
|
|
||
Decrease in cash and cash equivalents
|
|
(49,229
|
)
|
|
(22,683
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
193,016
|
|
|
214,971
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
143,787
|
|
|
$
|
192,288
|
|
Three Months Ended December 31, 2011
|
Fiscal 2010
Restructuring
Plan (1)
|
||
Severance, payroll, and other related costs
|
$
|
7
|
|
Asset impairment and accelerated depreciation
|
1,157
|
|
|
Lease termination obligation and other
|
3
|
|
|
Total restructuring charges
|
$
|
1,167
|
|
(1)
|
Includes
$3
in charges recorded in cost of revenues on Consolidated Statements of Income.
|
Three Months Ended December 31, 2010
|
Fiscal 2010
Restructuring
Plan (1)
|
Fiscal 2008
Restructuring
Plan
|
Total
|
||||||
Severance, payroll, and other related costs
|
$
|
489
|
|
$
|
—
|
|
$
|
489
|
|
Asset impairment and accelerated depreciation
|
—
|
|
(289
|
)
|
(289
|
)
|
|||
Other
|
7
|
|
—
|
|
7
|
|
|||
Total restructuring charges
|
$
|
496
|
|
$
|
(289
|
)
|
$
|
207
|
|
(1)
|
Includes
$230
in charges recorded in cost of revenues on Consolidated Statements of Income.
|
Nine Months Ended December 31, 2011
|
Fiscal 2010
Restructuring
Plan (1)
|
Fiscal 2008
Restructuring
Plan
|
Total
|
||||||
Severance, payroll, and other related costs
|
$
|
(73
|
)
|
$
|
—
|
|
$
|
(73
|
)
|
Product rationalization
|
335
|
|
—
|
|
335
|
|
|||
Asset impairment and accelerated depreciation
|
1,341
|
|
—
|
|
1,341
|
|
|||
Lease termination obligation and other
|
3
|
|
(152
|
)
|
(149
|
)
|
|||
Total restructuring charges
|
$
|
1,606
|
|
$
|
(152
|
)
|
$
|
1,454
|
|
(1)
|
Includes
$(68)
in charges recorded in cost of revenues on Consolidated Statements of Income.
|
Nine Months Ended December 31, 2010
|
Fiscal 2010
Restructuring
Plan (1)
|
Fiscal 2008
Restructuring
Plan
|
Total
|
||||||
Severance, payroll, and other related costs
|
$
|
498
|
|
$
|
—
|
|
$
|
498
|
|
Asset impairment and accelerated depreciation
|
356
|
|
(289
|
)
|
67
|
|
|||
Other
|
88
|
|
—
|
|
88
|
|
|||
Total restructuring charges
|
$
|
942
|
|
$
|
(289
|
)
|
$
|
653
|
|
|
|
Fiscal 2010 Restructuring Plan
|
||||||||||||||
|
|
|
|
Fiscal 2012
|
|
|
||||||||||
|
|
March 31,
2011 |
|
Provision
|
|
Payments/
Impairments
(1)
|
|
December 31,
2011 |
||||||||
Severance and termination benefits
|
|
$
|
1,993
|
|
|
$
|
(73
|
)
|
|
$
|
(863
|
)
|
|
$
|
1,057
|
|
Product rationalization
|
|
—
|
|
|
335
|
|
|
(335
|
)
|
|
—
|
|
||||
Asset impairments
|
|
—
|
|
|
1,341
|
|
|
(1,341
|
)
|
|
—
|
|
||||
Lease termination obligations
|
|
1,790
|
|
|
—
|
|
|
152
|
|
|
1,942
|
|
||||
Other
|
|
193
|
|
|
3
|
|
|
(107
|
)
|
|
89
|
|
||||
Total
|
|
$
|
3,976
|
|
|
$
|
1,606
|
|
|
$
|
(2,494
|
)
|
|
$
|
3,088
|
|
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||||||
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||||||
Net income
|
|
$
|
33,649
|
|
|
$
|
21,765
|
|
|
$
|
91,944
|
|
|
$
|
12,266
|
|
Change in cumulative foreign currency translation adjustment
|
|
(9,823
|
)
|
|
793
|
|
|
(23,776
|
)
|
|
8,935
|
|
||||
Amortization of pension and postretirement benefit plans costs, net of taxes
|
|
(269
|
)
|
|
(277
|
)
|
|
(809
|
)
|
|
(828
|
)
|
||||
Unrealized gain (loss) on available for sale securities
|
|
132
|
|
|
109
|
|
|
(122
|
)
|
|
118
|
|
||||
Total comprehensive income
|
|
$
|
23,689
|
|
|
$
|
22,390
|
|
|
$
|
67,237
|
|
|
$
|
20,491
|
|
|
|
December 31,
2011 |
|
March 31,
2011 |
||||
Land and land improvements (1)
|
|
$
|
32,629
|
|
|
$
|
30,194
|
|
Buildings and leasehold improvements
|
|
221,249
|
|
|
201,883
|
|
||
Machinery and equipment
|
|
302,210
|
|
|
286,103
|
|
||
Information systems
|
|
107,477
|
|
|
101,934
|
|
||
Radioisotope
|
|
206,470
|
|
|
194,882
|
|
||
Construction in progress (1)
|
|
26,478
|
|
|
40,665
|
|
||
Total property, plant, and equipment
|
|
896,513
|
|
|
855,661
|
|
||
Less: accumulated depreciation and depletion
|
|
(518,348
|
)
|
|
(485,259
|
)
|
||
Property, plant, and equipment, net
|
|
$
|
378,165
|
|
|
$
|
370,402
|
|
(1)
|
Land is not depreciated. Construction in progress is not depreciated until placed in service.
|
|
|
December 31,
2011 |
|
March 31,
2011 |
||||
Raw materials
|
|
$
|
58,249
|
|
|
$
|
58,375
|
|
Work in process
|
|
23,989
|
|
|
16,928
|
|
||
Finished goods
|
|
87,174
|
|
|
92,041
|
|
||
Inventories, net
|
|
$
|
169,412
|
|
|
$
|
167,344
|
|
|
|
December 31,
2011 |
|
March 31,
2011 |
||||
Private Placement
|
|
$
|
210,000
|
|
|
$
|
210,000
|
|
Credit facility
|
|
—
|
|
|
—
|
|
||
Total long term debt
|
|
$
|
210,000
|
|
|
$
|
210,000
|
|
|
|
December 31,
2011 |
|
March 31,
2011 |
||||
Accrued payroll and other related liabilities:
|
|
|
|
|
||||
Compensation and related items
|
|
$
|
13,629
|
|
|
$
|
16,160
|
|
Accrued vacation/paid time off
|
|
7,638
|
|
|
6,379
|
|
||
Accrued bonuses
|
|
413
|
|
|
13,925
|
|
||
Accrued employee commissions
|
|
8,823
|
|
|
11,985
|
|
||
Other postretirement benefit obligations-current portion
|
|
3,274
|
|
|
3,274
|
|
||
Other employee benefit plans' obligations-current portion
|
|
480
|
|
|
528
|
|
||
Total accrued payroll and other related liabilities
|
|
$
|
34,257
|
|
|
$
|
52,251
|
|
Accrued expenses and other:
|
|
|
|
|
||||
Deferred revenues
|
|
$
|
46,938
|
|
|
$
|
34,396
|
|
Self-insured risk reserves-current portion
|
|
3,074
|
|
|
3,610
|
|
||
Accrued dealer commissions
|
|
8,773
|
|
|
7,354
|
|
||
Accrued warranty
|
|
10,234
|
|
|
7,509
|
|
||
Other
|
|
21,710
|
|
|
20,962
|
|
||
Total accrued expenses and other
|
|
$
|
90,729
|
|
|
$
|
73,831
|
|
Other liabilities:
|
|
|
|
|
||||
Self-insured risk reserves-long-term portion
|
|
$
|
10,233
|
|
|
$
|
10,233
|
|
Other postretirement benefit obligations-long-term portion
|
|
18,603
|
|
|
20,526
|
|
||
Defined benefit pension plans obligations-long-term portion
|
|
5,595
|
|
|
8,006
|
|
||
Other employee benefit plans obligations-long-term portion
|
|
4,061
|
|
|
3,897
|
|
||
Accrued long-term income taxes
|
|
6,432
|
|
|
9,140
|
|
||
Other
|
|
9,642
|
|
|
4,810
|
|
||
Total other liabilities
|
|
$
|
54,566
|
|
|
$
|
56,612
|
|
|
|
Defined Benefit Pension Plans
|
|
Other
Postretirement
Benefits Plan
|
||||||||||||||||||||
|
|
U.S. Qualified
|
|
International
|
|
|||||||||||||||||||
Three Months Ended December 31,
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||||||||||
Service cost
|
|
$
|
51
|
|
|
$
|
47
|
|
|
$
|
114
|
|
|
$
|
135
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
609
|
|
|
654
|
|
|
66
|
|
|
88
|
|
|
248
|
|
|
292
|
|
||||||
Expected return on plan assets
|
|
(821
|
)
|
|
(758
|
)
|
|
(67
|
)
|
|
(95
|
)
|
|
—
|
|
|
—
|
|
||||||
Recognized losses
|
|
267
|
|
|
267
|
|
|
—
|
|
|
—
|
|
|
106
|
|
|
97
|
|
||||||
Amortization of prior service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(816
|
)
|
|
(816
|
)
|
||||||
Net periodic benefit cost (income)
|
|
$
|
106
|
|
|
$
|
210
|
|
|
$
|
113
|
|
|
$
|
128
|
|
|
$
|
(462
|
)
|
|
$
|
(427
|
)
|
|
|
Defined Benefit Pension Plans
|
|
Other
Postretirement
Benefits Plan
|
||||||||||||||||||||
|
|
U.S. Qualified
|
|
International
|
|
|||||||||||||||||||
Nine Months Ended December 31,
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||||||||||
Service cost
|
|
$
|
154
|
|
|
$
|
142
|
|
|
$
|
341
|
|
|
$
|
406
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
|
1,828
|
|
|
1,963
|
|
|
198
|
|
|
262
|
|
|
743
|
|
|
876
|
|
||||||
Expected return on plan assets
|
|
(2,463
|
)
|
|
(2,275
|
)
|
|
(201
|
)
|
|
(285
|
)
|
|
—
|
|
|
—
|
|
||||||
Recognized losses
|
|
799
|
|
|
801
|
|
|
—
|
|
|
—
|
|
|
319
|
|
|
291
|
|
||||||
Amortization of prior service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,447
|
)
|
|
(2,447
|
)
|
||||||
Net periodic benefit cost (income)
|
|
$
|
318
|
|
|
$
|
631
|
|
|
$
|
338
|
|
|
$
|
383
|
|
|
$
|
(1,385
|
)
|
|
$
|
(1,280
|
)
|
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||||||
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Healthcare (1)
|
|
$
|
259,055
|
|
|
$
|
237,843
|
|
|
$
|
725,455
|
|
|
$
|
561,723
|
|
Life Sciences
|
|
55,892
|
|
|
51,247
|
|
|
167,675
|
|
|
151,374
|
|
||||
Isomedix
|
|
39,615
|
|
|
38,081
|
|
|
121,617
|
|
|
113,721
|
|
||||
Total reportable segments
|
|
354,562
|
|
|
327,171
|
|
|
1,014,747
|
|
|
826,818
|
|
||||
Corporate and other
|
|
653
|
|
|
1,112
|
|
|
1,814
|
|
|
2,870
|
|
||||
Total revenues
|
|
$
|
355,215
|
|
|
$
|
328,283
|
|
|
$
|
1,016,561
|
|
|
$
|
829,688
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
||||||||
Healthcare (2) (3)
|
|
$
|
33,951
|
|
|
$
|
20,389
|
|
|
$
|
88,213
|
|
|
$
|
(19,460
|
)
|
Life Sciences
|
|
10,297
|
|
|
7,345
|
|
|
30,820
|
|
|
23,075
|
|
||||
Isomedix
|
|
11,750
|
|
|
10,250
|
|
|
35,924
|
|
|
30,858
|
|
||||
Total reportable segments
|
|
55,998
|
|
|
37,984
|
|
|
154,957
|
|
|
34,473
|
|
||||
Corporate and other
|
|
(2,274
|
)
|
|
(2,153
|
)
|
|
(6,689
|
)
|
|
(6,735
|
)
|
||||
Total operating income (loss)
|
|
$
|
53,724
|
|
|
$
|
35,831
|
|
|
$
|
148,268
|
|
|
$
|
27,738
|
|
(1)
|
Includes a reduction of
$102,313
resulting from the SYSTEM 1 Rebate Program in the
nine
months ended
December 31, 2010
.
|
(2)
|
Includes a reduction of
$110,004
resulting from the SYSTEM 1 Rebate Program in the
nine
months ended
December 31, 2010
.
|
(3)
|
Includes a reduction of $19,796 resulting from a class action settlement in the three and nine month periods ended
December 31, 2010
.
|
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||
Denominator (shares in thousands):
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding—basic
|
|
57,782
|
|
|
59,233
|
|
|
58,594
|
|
|
59,329
|
|
Dilutive effect of common share equivalents
|
|
455
|
|
|
943
|
|
|
646
|
|
|
832
|
|
Weighted average common shares outstanding and common share equivalents—diluted
|
|
58,237
|
|
|
60,176
|
|
|
59,240
|
|
|
60,161
|
|
|
|
Three Months Ended December 31,
|
|
Nine Months Ended December 31,
|
||||||||
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||
|
|
(shares in thousands)
|
|
(shares in thousands)
|
||||||||
Number of common share options
|
|
1,040
|
|
|
370
|
|
|
644
|
|
|
437
|
|
|
|
Fiscal 2012
|
|
Fiscal 2011
|
||
Risk-free interest rate
|
|
2.41
|
%
|
|
2.68
|
%
|
Expected life of options
|
|
5.65 years
|
|
|
5.65 years
|
|
Expected dividend yield of stock
|
|
1.78
|
%
|
|
1.59
|
%
|
Expected volatility of stock
|
|
29.78
|
%
|
|
30.13
|
%
|
|
|
Number of
Options
|
|
Weighted
Average
Exercise
Price
|
|
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
||||||
Outstanding at March 31, 2011
|
|
3,274,395
|
|
|
$
|
25.95
|
|
|
|
|
|
|||
Granted
|
|
325,051
|
|
|
35.62
|
|
|
|
|
|
||||
Exercised
|
|
(172,592
|
)
|
|
22.38
|
|
|
|
|
|
||||
Forfeited
|
|
(11,084
|
)
|
|
27.25
|
|
|
|
|
|
||||
Canceled
|
|
(23,240
|
)
|
|
22.93
|
|
|
|
|
|
||||
Outstanding at December 31, 2011
|
|
3,392,530
|
|
|
$
|
27.07
|
|
|
5.40
|
|
|
$
|
12,354
|
|
Exercisable at December 31, 2011
|
|
2,505,105
|
|
|
$
|
25.91
|
|
|
4.41
|
|
|
$
|
10,464
|
|
|
|
Number of
Restricted
Shares
|
|
Weighted-Average
Grant Date
Fair Value
|
|||
Non-vested at March 31, 2011
|
|
400,951
|
|
|
$
|
29.70
|
|
Granted
|
|
231,215
|
|
|
35.70
|
|
|
Vested
|
|
(76,743
|
)
|
|
30.33
|
|
|
Canceled
|
|
(11,910
|
)
|
|
33.06
|
|
|
Non-vested at December 31, 2011
|
|
543,513
|
|
|
$
|
32.09
|
|
|
Fiscal 2012
|
||
Balance, March 31, 2011
|
$
|
7,509
|
|
Warranties issued during the period
|
5,624
|
|
|
Settlements made during the period
|
(2,899
|
)
|
|
Balance, December 31, 2011
|
$
|
10,234
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||
Balance Sheet
|
|
Fair Value at
|
|
Fair Value at
|
|
Fair Value at
|
|
Fair Value at
|
||||||||
Location
|
|
December 31, 2011
|
|
March 31, 2011
|
|
December 31, 2011
|
|
March 31, 2011
|
||||||||
Prepaid & Other
|
|
$
|
126
|
|
|
$
|
1,483
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued expenses and other
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,198
|
|
|
$
|
41
|
|
|
|
Location of gain (loss)
recognized in income
|
|
Amount of gain (loss)
recognized in income
|
||||||
Nine Months Ended
|
||||||||||
December 31,
|
||||||||||
2011
|
|
2010
|
||||||||
Foreign currency forward contracts
|
|
Selling, general and
administrative
|
|
$
|
(2,122
|
)
|
|
$
|
943
|
|
Commodity swap contracts
|
|
Cost of revenues
|
|
$
|
(1,371
|
)
|
|
$
|
59
|
|
|
|
|
|
Fair Value Measurements at December 31, 2011 Using
|
||||||||||||
|
|
Carrying Value
|
|
Quoted Prices
in Active Markets
for Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||
December 31, 2011
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
$
|
143,787
|
|
|
$
|
143,787
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Forward and swap contracts (1)
|
|
126
|
|
|
—
|
|
|
126
|
|
|
—
|
|
||||
Investments (2)
|
|
2,823
|
|
|
2,823
|
|
|
—
|
|
|
—
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Forward and swap contracts (1)
|
|
$
|
2,198
|
|
|
$
|
—
|
|
|
$
|
2,198
|
|
|
$
|
—
|
|
Deferred compensation plans (2)
|
|
2,823
|
|
|
2,823
|
|
|
—
|
|
|
—
|
|
||||
Long term debt (3)
|
|
210,000
|
|
|
—
|
|
|
249,795
|
|
|
—
|
|
||||
Contingent consideration obligations (4)
|
|
9,195
|
|
|
—
|
|
|
—
|
|
|
9,195
|
|
(1)
|
The fair values of forward and swap contracts are based on period-end forward rates and reflect the value of the amount that we would pay or receive for the contracts involving the same notional amounts and maturity dates.
|
(2)
|
We provide a domestic non-qualified deferred compensation plan covering certain employees, which allows for the deferral of compensation for an employee-specified term or until retirement or termination. Amounts deferred can be allocated to various hypothetical investment options. The Plan has been amended to disallow deferral elections in respect fiscal year 2013 and subsequent periods. We hold investments, primarily comprised of mutual funds, to satisfy the future obligations of the plan. Changes in the value of the investment accounts are recognized each period based on the fair value of the underlying investments. Employees making deferrals are entitled to receive distributions of their hypothetical account balances (amounts deferred, together with earnings (losses)).
|
(3)
|
We estimate the fair value of our long-term debt using discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements.
|
(4)
|
Contingent consideration obligations arise from prior business acquisitions. The fair values are based on discounted cash flow analyzes reflecting the possible achievement of specified performance measures or events and captures the contractual nature of the contingencies, commercial risk, and the time value of money. Contingent consideration obligations are classified in the consolidated balance sheets as accrued expense (short-term) and other liabilities (long-term), as appropriate based on the contractual payment dates.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
what factors affect our business;
|
•
|
what our earnings and costs were in each period presented;
|
•
|
why those earnings and costs were different from prior periods;
|
•
|
where our earnings came from;
|
•
|
how this affects our overall financial condition;
|
•
|
what our expenditures for capital projects were; and
|
•
|
where cash will come from to fund future debt principal repayments, growth outside of core operations, repurchase common shares, pay cash dividends and fund future working capital needs.
|
•
|
Backlog
– We define backlog as the amount of unfilled capital equipment purchase orders at a point in time. We use this figure as a measure to assist in the projection of short-term financial results and inventory requirements.
|
•
|
Debt-to-total capital
– We define debt-to-total capital as total debt divided by the sum of total debt and shareholders’ equity. We use this figure as a financial liquidity measure to gauge our ability to borrow and fund growth.
|
•
|
Net debt-to-total capital
– We define net debt-to-total capital as total debt less cash (“net debt”) divided by the sum of net debt and shareholders’ equity. We also use this figure as a financial liquidity measure to gauge our ability to borrow and fund growth.
|
•
|
Days sales outstanding (“DSO”)
– We define DSO as the average collection period for accounts receivable. It is calculated as net accounts receivable divided by the trailing four quarters’ revenues, multiplied by 365 days. We use this figure to help gauge the quality of accounts receivable and expected time to collect.
|
•
|
Revenues
– Our revenues are presented net of sales returns and allowances.
|
•
|
Product Revenues
– We define product revenues as revenues generated from sales of capital equipment, which includes steam sterilizers, low temperature liquid chemical sterilant processing systems, washing systems, VHP
®
technology, water stills, and pure steam generators; integrated OR; surgical lights and tables; and the consumable family of products, which includes SYSTEM 1 and SYSTEM 1E consumables, sterility assurance products, skin care products, and cleaning consumables.
|
•
|
Service Revenues
– We define service revenues as revenues generated from parts and labor associated with the maintenance, repair, and installation of our capital equipment, as well as revenues generated from contract sterilization offered through our Isomedix segment.
|
•
|
Capital Equipment Revenues
– We define capital equipment revenues as revenues generated from sales of capital equipment, which includes steam sterilizers, low temperature liquid chemical sterilant processing systems, including SYSTEM 1 and SYSTEM 1E, washing systems, VHP
®
technology, water stills, and pure steam generators; surgical lights and tables; and integrated OR.
|
•
|
Consumable Revenues
– We define consumable revenues as revenues generated from sales of the consumable family of products, which includes SYSTEM 1 and SYSTEM 1E consumables, sterility assurance products, skin care products, and cleaning consumables.
|
•
|
Recurring Revenues
– We define recurring revenues as revenues generated from sales of consumable products and service revenues.
|
•
|
Acquired Revenues
– We define acquired revenues as base revenues generated from acquired businesses or assets and additional volumes driven through acquired businesses or assets. We will use such measure for up to a year after acquisition.
|
|
|
Nine Months Ended December 31,
|
||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
||||
Net cash flows provided by operating activities
|
|
$
|
112,839
|
|
|
$
|
83,397
|
|
Purchases of property, plant, equipment and intangibles, net
|
|
(54,238
|
)
|
|
(56,390
|
)
|
||
Proceeds from the sale of property, plant, equipment and intangibles
|
|
—
|
|
|
1,298
|
|
||
Free cash flow
|
|
$
|
58,601
|
|
|
$
|
28,305
|
|
(dollars in thousands)
|
Nine Months Ended
|
||
|
December 31, 2010
|
||
|
|
||
Reported revenues
|
$
|
829,688
|
|
Impact of the SYSTEM 1 Rebate Program
|
102,313
|
|
|
Adjusted revenues
|
$
|
932,001
|
|
|
|
||
Reported capital revenues
|
256,368
|
|
|
Impact of the SYSTEM 1 Rebate Program
|
102,313
|
|
|
Adjusted capital revenues
|
$
|
358,681
|
|
|
|
||
Reported United States revenues
|
$
|
601,703
|
|
Impact of the SYSTEM 1 Rebate Program
|
102,313
|
|
|
Adjusted United States Revenues
|
$
|
704,016
|
|
|
|
||
Reported Healthcare revenues
|
$
|
561,723
|
|
Impact of the SYSTEM 1 Rebate Program
|
102,313
|
|
|
Adjusted Healthcare revenues
|
$
|
664,036
|
|
|
|
||
Reported gross profit
|
$
|
290,135
|
|
Impact of the SYSTEM 1 Rebate Program
|
110,004
|
|
|
Adjusted gross profit
|
$
|
400,139
|
|
|
|
||
Reported gross profit percentage
|
35.0
|
%
|
|
Impact of the SYSTEM 1 Rebate Program
|
7.9
|
%
|
|
Adjusted gross profit percentage
|
42.9
|
%
|
|
|
|
||
Reported operating income
|
$
|
27,738
|
|
Impact of the SYSTEM 1 Rebate Program and class action settlement
|
129,800
|
|
|
Adjusted operating income
|
$
|
157,538
|
|
|
|
||
Reported Healthcare operating (loss)
|
$
|
(19,460
|
)
|
Impact of the SYSTEM 1 Rebate Program and class action settlement
|
129,800
|
|
|
Adjusted Healthcare operating income
|
$
|
110,340
|
|
|
|
||
Reported income tax expense
|
$
|
7,091
|
|
Impact of the SYSTEM 1 Rebate Program and class action settlement
|
47,164
|
|
|
Adjusted income tax expense
|
$
|
54,255
|
|
|
|
||
Reported effective income tax rate
|
36.6
|
%
|
|
Impact of the SYSTEM 1 Rebate Program and class action settlement
|
(0.2
|
)%
|
|
Adjusted effective income tax rate
|
36.4
|
%
|
|
Three Months Ended
|
|
|
|
|
|||||||||
|
December 31,
|
|
|
|
|
|||||||||
(dollars in thousands)
|
2011
|
|
2010
|
|
Change
|
|
Percent Change
|
|||||||
|
|
|
|
|
|
|
|
|||||||
Total revenues
|
$
|
355,215
|
|
|
$
|
328,283
|
|
|
$
|
26,932
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|
|
|||||||
Revenues by type:
|
|
|
|
|
|
|
|
|||||||
Capital equipment revenues
|
165,290
|
|
|
135,121
|
|
|
30,169
|
|
|
22.3
|
%
|
|||
Consumable revenues
|
74,113
|
|
|
77,501
|
|
|
(3,388
|
)
|
|
(4.4
|
)%
|
|||
Service revenues
|
115,812
|
|
|
115,661
|
|
|
151
|
|
|
0.1
|
%
|
|||
|
|
|
|
|
|
|
|
|||||||
Revenues by geography:
|
|
|
|
|
|
|
|
|||||||
United States revenues
|
263,540
|
|
|
239,975
|
|
|
23,565
|
|
|
9.8
|
%
|
|||
International revenues
|
91,675
|
|
|
88,308
|
|
|
3,367
|
|
|
3.8
|
%
|
|||
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
||||||
|
December 31,
|
|
|
|
|
||||||
(dollars in thousands)
|
2011
|
|
2010
|
|
Change
|
|
Percent Change
|
||||
|
|
|
|
|
|
|
|
||||
Total revenues
|
$1,016,561
|
|
$829,688
|
|
$186,873
|
|
22.5
|
%
|
|||
|
|
|
|
|
|
|
|
||||
Revenues by type:
|
|
|
|
|
|
|
|
||||
Capital equipment revenues
|
439,134
|
|
|
256,368
|
|
|
182,766
|
|
|
71.3
|
%
|
Consumable revenues
|
225,784
|
|
|
230,618
|
|
|
(4,834
|
)
|
|
(2.1
|
)%
|
Service revenues
|
351,643
|
|
|
342,702
|
|
|
8,941
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
||||
Revenues by geography:
|
|
|
|
|
|
|
|
||||
United States revenues
|
766,011
|
|
|
601,703
|
|
|
164,308
|
|
|
27.3
|
%
|
International revenues
|
250,550
|
|
|
227,985
|
|
|
22,565
|
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Change
|
|
Percent
Change
|
|||||||||
|
|
December 31,
|
|
||||||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
||||||||||
Gross Profit:
|
|
|
|
|
|
|
|
|
|||||||
Product
|
|
$
|
93,427
|
|
|
$
|
89,241
|
|
|
$
|
4,186
|
|
|
4.7
|
%
|
Service
|
|
44,579
|
|
|
47,773
|
|
|
(3,194
|
)
|
|
(6.7
|
)%
|
|||
Total Gross Profit
|
|
$
|
138,006
|
|
|
$
|
137,014
|
|
|
$
|
992
|
|
|
0.7
|
%
|
Gross Profit Percentage:
|
|
|
|
|
|
|
|
|
|||||||
Product
|
|
39.0
|
%
|
|
42.0
|
%
|
|
|
|
|
|||||
Service
|
|
38.5
|
%
|
|
41.3
|
%
|
|
|
|
|
|||||
Total Gross Profit Percentage
|
|
38.9
|
%
|
|
41.7
|
%
|
|
|
|
|
|
|
Nine Months Ended
|
|
Change
|
|
Percent
Change
|
|||||||||
|
|
December 31,
|
|
||||||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
||||||||||
Gross Profit:
|
|
|
|
|
|
|
|
|
|||||||
Product
|
|
$
|
262,704
|
|
|
$
|
146,293
|
|
|
$
|
116,411
|
|
|
79.6
|
%
|
Service
|
|
141,536
|
|
|
143,842
|
|
|
(2,306
|
)
|
|
(1.6
|
)%
|
|||
Total Gross Profit
|
|
$
|
404,240
|
|
|
$
|
290,135
|
|
|
$
|
114,105
|
|
|
39.3
|
%
|
Gross Profit Percentage:
|
|
|
|
|
|
|
|
|
|||||||
Product
|
|
39.5
|
%
|
|
30.0
|
%
|
|
|
|
|
|||||
Service
|
|
40.2
|
%
|
|
42.0
|
%
|
|
|
|
|
|||||
Total Gross Profit Percentage
|
|
39.8
|
%
|
|
35.0
|
%
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Change
|
|
Percent
Change
|
|||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
||||||||||
Operating Expenses:
|
|
|
|
|
|
|
|
|
|||||||
Selling, General, and Administrative
|
|
$
|
73,922
|
|
|
$
|
93,467
|
|
|
$
|
(19,545
|
)
|
|
(20.9
|
)%
|
Research and Development
|
|
9,196
|
|
|
7,739
|
|
|
1,457
|
|
|
18.8
|
%
|
|||
Restructuring expenses
|
|
1,164
|
|
|
(23
|
)
|
|
1,187
|
|
|
NM
|
||||
Total Operating Expenses
|
|
$
|
84,282
|
|
|
$
|
101,183
|
|
|
$
|
(16,901
|
)
|
|
(16.7
|
)%
|
|
|
Nine Months Ended December 31,
|
|
Change
|
|
Percent
Change
|
|||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
||||||||||
Operating Expenses:
|
|
|
|
|
|
|
|
|
|||||||
Selling, General, and Administrative
|
|
$
|
227,583
|
|
|
$
|
237,583
|
|
|
$
|
(10,000
|
)
|
|
(4.2
|
)%
|
Research and Development
|
|
26,867
|
|
|
24,391
|
|
|
2,476
|
|
|
10.2
|
%
|
|||
Restructuring expenses
|
|
1,522
|
|
|
423
|
|
|
1,099
|
|
|
259.8
|
%
|
|||
Total Operating Expenses
|
|
$
|
255,972
|
|
|
$
|
262,397
|
|
|
$
|
(6,425
|
)
|
|
(2.4
|
)%
|
(dollars in thousands)
|
|
||
Three Months Ended December 31, 2011
|
Fiscal 2010
Restructuring
Plan (1)
|
||
Severance, payroll, and other related costs
|
$
|
7
|
|
Asset impairment and accelerated depreciation
|
1,157
|
|
|
Lease termination obligation and other
|
3
|
|
|
Total restructuring charges
|
$
|
1,167
|
|
(1)
|
Includes
$3
in charges recorded in cost of revenues on Consolidated Statements of Income.
|
(dollars in thousands)
|
|
|
|
||||||
Three Months Ended December 31, 2010
|
Fiscal 2010
Restructuring
Plan (1)
|
Fiscal 2008
Restructuring
Plan
|
Total
|
||||||
Severance, payroll, and other related costs
|
$
|
489
|
|
$
|
—
|
|
$
|
489
|
|
Asset impairment and accelerated depreciation
|
—
|
|
(289
|
)
|
(289
|
)
|
|||
Other
|
7
|
|
—
|
|
7
|
|
|||
Total restructuring charges
|
$
|
496
|
|
$
|
(289
|
)
|
$
|
207
|
|
(1)
|
Includes
$230
in charges recorded in cost of revenues on Consolidated Statements of Income.
|
(dollars in thousands)
|
|
|
|
||||||
Nine Months Ended December 31, 2011
|
Fiscal 2010
Restructuring
Plan (1)
|
Fiscal 2008
Restructuring
Plan
|
Total
|
||||||
Severance, payroll, and other related costs
|
$
|
(73
|
)
|
$
|
—
|
|
$
|
(73
|
)
|
Product rationalization
|
335
|
|
—
|
|
335
|
|
|||
Asset impairment and accelerated depreciation
|
1,341
|
|
—
|
|
1,341
|
|
|||
Lease termination obligation and other
|
3
|
|
(152
|
)
|
(149
|
)
|
|||
Total restructuring charges
|
$
|
1,606
|
|
$
|
(152
|
)
|
$
|
1,454
|
|
(1)
|
Includes
$(68)
in charges recorded in cost of revenues on Consolidated Statements of Income.
|
(dollars in thousands)
|
|
|
|
||||||
Nine Months Ended December 31, 2010
|
Fiscal 2010
Restructuring
Plan
|
Fiscal 2008
Restructuring
Plan
|
Total
|
||||||
Severance, payroll, and other related costs
|
$
|
498
|
|
$
|
—
|
|
$
|
498
|
|
Asset impairment and accelerated depreciation
|
356
|
|
(289
|
)
|
67
|
|
|||
Other
|
88
|
|
—
|
|
88
|
|
|||
Total restructuring charges
|
$
|
942
|
|
$
|
(289
|
)
|
$
|
653
|
|
|
|
Fiscal 2010 Restructuring Plan
|
||||||||||||||
(dollars in thousands)
|
|
|
|
Fiscal 2012
|
|
|
||||||||||
|
|
March 31,
2011 |
|
Provision
|
|
Payments/
Impairments (1)
|
|
December 31,
2011 |
||||||||
Severance and termination benefits
|
|
$
|
1,993
|
|
|
$
|
(73
|
)
|
|
$
|
(863
|
)
|
|
$
|
1,057
|
|
Product rationalization
|
|
—
|
|
|
335
|
|
|
(335
|
)
|
|
—
|
|
||||
Asset impairments
|
|
—
|
|
|
1,341
|
|
|
(1,341
|
)
|
|
—
|
|
||||
Lease termination obligations
|
|
1,790
|
|
|
—
|
|
|
152
|
|
|
1,942
|
|
||||
Other
|
|
193
|
|
|
3
|
|
|
(107
|
)
|
|
89
|
|
||||
Total
|
|
$
|
3,976
|
|
|
$
|
1,606
|
|
|
$
|
(2,494
|
)
|
|
$
|
3,088
|
|
|
|
Three Months Ended December 31,
|
|
|
||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
Change
|
||||||
Non-Operating Expenses, Net:
|
|
|
|
|
|
|
||||||
Interest expense
|
|
$
|
3,005
|
|
|
$
|
3,049
|
|
|
$
|
(44
|
)
|
Interest income and miscellaneous expense
|
|
(373
|
)
|
|
(321
|
)
|
|
(52
|
)
|
|||
Non-Operating Expenses, Net
|
|
$
|
2,632
|
|
|
$
|
2,728
|
|
|
$
|
(96
|
)
|
|
|
Nine Months Ended December 31,
|
|
|
||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
Change
|
||||||
Non-Operating Expenses, Net:
|
|
|
|
|
|
|
||||||
Interest expense
|
|
$
|
9,083
|
|
|
$
|
9,052
|
|
|
$
|
31
|
|
Interest income and miscellaneous expense
|
|
(948
|
)
|
|
(671
|
)
|
|
(277
|
)
|
|||
Non-Operating Expenses, Net
|
|
$
|
8,135
|
|
|
$
|
8,381
|
|
|
$
|
(246
|
)
|
|
|
Three Months Ended December 31,
|
|
Change
|
|
Percent
Change
|
|||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
||||||||||
Income Tax Expense
|
|
$
|
17,443
|
|
|
$
|
11,338
|
|
|
$
|
6,105
|
|
|
53.8
|
%
|
Effective Income Tax Rate
|
|
34.1
|
%
|
|
34.3
|
%
|
|
|
|
|
|
|
Nine Months Ended December 31,
|
|
Change
|
|
Percent
Change
|
||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
|||||||||
Income Tax Expense
|
|
$
|
48,189
|
|
|
$
|
7,091
|
|
|
$
|
41,098
|
|
|
NM
|
Effective Income Tax Rate
|
|
34.4
|
%
|
|
36.6
|
%
|
|
|
|
|
|
|
Three Months Ended
|
|
Change
|
|
Percent
Change
|
|||||||||
|
|
December 31,
|
|
||||||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
||||||||||
Operating Income (Loss):
|
|
|
|
|
|
|
|
|
|||||||
Healthcare
|
|
$
|
33,951
|
|
|
$
|
20,389
|
|
|
$
|
13,562
|
|
|
66.5
|
%
|
Life Sciences
|
|
10,297
|
|
|
7,345
|
|
|
2,952
|
|
|
40.2
|
%
|
|||
Isomedix
|
|
11,750
|
|
|
10,250
|
|
|
1,500
|
|
|
14.6
|
%
|
|||
Total reportable segments
|
|
55,998
|
|
|
37,984
|
|
|
18,014
|
|
|
47.4
|
%
|
|||
Corporate and other
|
|
(2,274
|
)
|
|
(2,153
|
)
|
|
(121
|
)
|
|
5.6
|
%
|
|||
Total Operating Income (Loss)
|
|
$
|
53,724
|
|
|
$
|
35,831
|
|
|
$
|
17,893
|
|
|
49.9
|
%
|
|
|
Nine Months Ended
|
|
Change
|
|
Percent
Change
|
|||||||||
|
|
December 31,
|
|
||||||||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
|
||||||||||
Operating Income (Loss):
|
|
|
|
|
|
|
|
|
|||||||
Healthcare
|
|
$
|
88,213
|
|
|
$
|
(19,460
|
)
|
|
$
|
107,673
|
|
|
NM
|
|
Life Sciences
|
|
30,820
|
|
|
23,075
|
|
|
7,745
|
|
|
33.6
|
%
|
|||
Isomedix
|
|
35,924
|
|
|
30,858
|
|
|
5,066
|
|
|
16.4
|
%
|
|||
Total reportable segments
|
|
154,957
|
|
|
34,473
|
|
|
120,484
|
|
|
NM
|
||||
Corporate and other
|
|
(6,689
|
)
|
|
(6,735
|
)
|
|
46
|
|
|
(0.7
|
)%
|
|||
Total Operating Income (Loss)
|
|
$
|
148,268
|
|
|
$
|
27,738
|
|
|
$
|
120,530
|
|
|
NM
|
|
|
Nine Months Ended
|
||||||
|
|
December 31,
|
||||||
(dollars in thousands)
|
|
2011
|
|
2010
|
||||
Operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
91,944
|
|
|
$
|
12,266
|
|
Non-cash items
|
|
73,626
|
|
|
430
|
|
||
Change in Accrued SYSTEM 1 Rebate Program and class action settlement
|
|
(27,449
|
)
|
|
128,770
|
|
||
Changes in operating assets and liabilities
|
|
(25,282
|
)
|
|
(58,069
|
)
|
||
Net cash provided by operating activities
|
|
$
|
112,839
|
|
|
$
|
83,397
|
|
Investing activities:
|
|
|
|
|
||||
Purchases of property, plant, equipment, and intangibles, net
|
|
$
|
(54,238
|
)
|
|
$
|
(56,390
|
)
|
Proceeds from the sale of property, plant, equipment, and intangibles
|
|
—
|
|
|
1,298
|
|
||
Equity investment in joint venture
|
|
—
|
|
|
(16,900
|
)
|
||
Investments in businesses, net of cash acquired
|
|
(22,269
|
)
|
|
(4,000
|
)
|
||
Net cash used in investing activities
|
|
$
|
(76,507
|
)
|
|
$
|
(75,992
|
)
|
Financing activities:
|
|
|
|
|
||||
Repurchases of common shares
|
|
$
|
(56,751
|
)
|
|
$
|
(19,900
|
)
|
Cash dividends paid to common shareholders
|
|
(28,751
|
)
|
|
(24,344
|
)
|
||
Stock option transactions, net
|
|
3,749
|
|
|
10,813
|
|
||
Tax benefit from stock options exercised
|
|
816
|
|
|
2,197
|
|
||
Net cash used in financing activities
|
|
$
|
(80,937
|
)
|
|
$
|
(31,234
|
)
|
Debt-to-total capital ratio
|
|
21.2
|
%
|
|
21.9
|
%
|
||
Free cash flow
|
|
$
|
58,601
|
|
|
$
|
28,305
|
|
•
|
Purchases of property, plant, equipment, and intangibles, net – Capital expenditures were
$54.2 million
for the first
nine
months of fiscal
2012
as compared to
$56.4 million
during the same prior year period.
|
•
|
Proceeds from the sale of property, plant, equipment, and intangibles, net - There were no sales of property, plant, equipment, and intangibles during fiscal
2012
. We received proceeds of $
1.3 million
during the first
nine
months of fiscal
2011
.
|
•
|
Equity investments in joint ventures - During fiscal
2012
, we made no additional equity investments in joint ventures. During fiscal
2011
, we increased our investment in our joint venture with VTS Medical Systems, Inc. by
$16.9
|
•
|
Investment in business, net of cash acquired – During fiscal
2012
, we used
$22.3 million
in cash to acquire the stock of a privately held company with operations located near Sao Paulo, Brazil. Total consideration is approximately $30 million, including contingent consideration obligations. The acquired company designs and manufactures small, medium, and large sterilizers used by public hospitals, clinics, dental offices and industrial companies (e.g., research laboratories and pharmaceutical research and production companies). During fiscal
2011
, we acquired a company designed to improve a hospital's perioperative process for
$4.0 million
.
|
•
|
Repurchases of common shares – The Company’s Board of Directors has provided authorization to repurchase the Company’s common shares. During the first
nine
months of fiscal
2012
, we paid for the repurchase of
1,851,510
of our common shares under this authorization at an average purchase price of
$30.21
per common share. We also obtained
22,927
of our common shares during the first
nine
months of fiscal
2012
in connection with share-based compensation award programs.
|
•
|
Cash dividends paid to common shareholders – During the first
nine
months of fiscal
2012
, we paid total cash dividends of
$28.8 million
, or
$0.49
per outstanding common share. During the first
nine
months of fiscal
2011
, we paid total cash dividends of
$24.3 million
, or
$0.41
per outstanding common share.
|
•
|
Stock option transactions, net – We receive cash in some cases for issuing common shares under our various employee stock compensation programs. During the first
nine
months of fiscal
2012
and fiscal
2011
, we received cash proceeds totaling
$3.7 million
and
$10.8 million
, respectively, under these programs.
|
•
|
Tax benefit from stock options exercised - During the first
nine
months of fiscal
2012
and fiscal
2011
, our income taxes were reduced by
$0.8 million
and
$2.2 million
, respectively. as a result of deductions allowed for stock options exercised.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
|
(a)
Total Number of
Shares Purchased
|
|
(b)
Average Price Paid
Per Share
|
|
(c)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
|
|
(d)
Maximum Dollar Value of
Shares that May Yet Be
Purchased Under the
Plans at Period End
|
||||||
October 1-31
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
128,460
|
|
November 1-30
|
|
318,900
|
|
|
28.71
|
|
|
318,900
|
|
|
119,303
|
|
||
December 1-31
|
|
28,213
|
|
|
29.89
|
|
|
28,213
|
|
|
118,460
|
|
||
Total
|
|
347,113
|
|
(1)
|
$
|
28.81
|
|
(1)
|
347,113
|
|
|
$
|
118,460
|
|
(1)
|
Does not include 14 shares purchased during the quarter at an average price of $29.07 per share by the STERIS Corporation 401(k) Plan on behalf of certain executive officers of the Company who may be deemed to be affiliated purchasers.
|
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
Exhibit Description
|
3.1
|
1992 Amended Articles of Incorporation of STERIS Corporation, as amended on May 14, 1996, November 6, 1996, and August 6, 1998 (filed as Exhibit 3.1 to Form 10-K filed for the fiscal year ended March 31, 2000 (Commission File No. 1-14643), and incorporated herein by reference).
|
|
|
3.2
|
Amended and Restated Regulations of STERIS Corporation, as amended on July 26, 2007 (filed as Exhibit 3.2 to Form 10-Q for the fiscal quarter ended June 30, 2007 (Commission File No. 1-14643), and incorporated herein by reference).
|
|
|
4.1
|
Specimen Form of Common Stock Certificate (filed as Exhibit 4.1 to Form 10-K filed for the fiscal year ended March 31, 2002 (Commission File No. 1-14643), and incorporated herein by reference).
|
|
|
10.1
|
Amendment No. 1 to STERIS Corporation Deferred Compensation Plan Document (as Amended and Restated Effective January 1, 2009) dated November 4, 2011.
|
|
|
10.2
|
Agreement dated November 4, 2011 between STERIS Corporation and Bank of America, N.A. providing Transfer and Advised Line for Letters of Credit.
|
|
|
15.1
|
Letter Re: Unaudited Interim Financial Information.
|
|
|
31.1
|
Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
EX-101
|
Instance Document.
|
|
|
EX-101
|
Schema Document.
|
|
|
EX-101
|
Calculation Linkbase Document.
|
|
|
EX-101
|
Definition Linkbase Document.
|
|
|
EX-101
|
Labels Linkbase Document.
|
|
|
EX-101
|
Presentation Linkbase Document.
|
STERIS Corporation
|
|
/
S
/ M
ICHAEL
J. T
OKICH
|
Michael J. Tokich
Senior Vice President and Chief Financial Officer
|
February 8, 2012
|
Exhibit
Number
|
Exhibit Description
|
3.1
|
1992 Amended Articles of Incorporation of STERIS Corporation, as amended on May 14, 1996, November 6, 1996, and August 6, 1998 (filed as Exhibit 3.1 to Form 10-K filed for the fiscal year ended March 31, 2000 (Commission File No. 1-14643), and incorporated herein by reference).
|
|
|
3.2
|
Amended and Restated Regulations of STERIS Corporation, as amended on July 26, 2007 (filed as Exhibit 3.2 to Form 10-Q for the fiscal quarter ended June 30, 2007 (Commission File No. 1-14643), and incorporated herein by reference).
|
|
|
4.1
|
Specimen Form of Common Stock Certificate (filed as Exhibit 4.1 to Form 10-K filed for the fiscal year ended March 31, 2002 (Commission File No. 1-14643), and incorporated herein by reference).
|
|
|
10.1
|
Amendment No. 1 to STERIS Corporation Deferred Compensation Plan Document (as Amended and Restated Effective January 1, 2009) dated November 4, 2011.
|
|
|
10.2
|
Agreement dated November 4, 2011 between STERIS Corporation and Bank of America, N.A. providing Transfer and Advised Line for Letters of Credit.
|
|
|
15.1
|
Letter Re: Unaudited Interim Financial Information.
|
|
|
31.1
|
Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
EX-101
|
Instance Document.
|
|
|
EX-101
|
Schema Document.
|
|
|
EX-101
|
Calculation Linkbase Document.
|
|
|
EX-101
|
Definition Linkbase Document.
|
|
|
EX-101
|
Labels Linkbase Document.
|
|
|
EX-101
|
Presentation Linkbase Document.
|
1.
|
A new Section 17.9 is added to the Plan providing as follows:
|
2.
|
Terms used herein that are defined in the Plan shall have the meanings specified in the Plan.
|
3.
|
Except as modified hereby, the STERIS Corporation Deferred Compensation Plan Document (as Amended and Restated Effective January 1, 2009) shall remain in full force and effect.
|
|
|
Registration
Number
|
Description
|
333-65155
|
Form S-8 Registration Statement - STERIS Corporation 1998 Long-Term Incentive Compensation Plan
|
|
|
333-32005
|
Form S-8 Registration Statement - STERIS Corporation 1997 Stock Option Plan
|
|
|
333-06529
|
Form S-3 Registration Statement - STERIS Corporation
|
|
|
333-01610
|
Post-effective Amendment to Form S-4 on Form S-8 - STERIS Corporation
|
|
|
33-55976
|
Form S-8 Registration Statement - STERIS Corporation 401(k) Plan
|
|
|
333-09733
|
Form S-8 Registration Statement - STERIS Corporation 401(k) Plan
|
|
|
333-101308
|
Form S-8 Registration Statement - STERIS Corporation 2002 Stock Option Plan
|
|
|
333-137167
|
Form S-8 Registration Statement - STERIS Corporation Deferred Compensation Plan
|
|
|
333-136239
|
Form S-8 Registration Statement - STERIS Corporation 2006 Long-Term Equity Incentive Plan
|
|
|
333-170884
|
Form S-8 Registration Statement - STERIS Corporation 401(k) Plan
|
|
|
333-176167
|
Form S-8 Registration Statement - STERIS Corporation 2006 Long-Term Equity Incentive Plan (As Amended and Restated Effective July 28, 2011)
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of STERIS Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
February 8, 2012
|
|
|
/
S
/ W
ALTER
M R
OSEBROUGH
, J
R
.
|
|
Walter M Rosebrough, Jr.
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of STERIS Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
February 8, 2012
|
|
|
/
S
/ M
ICHAEL
J. T
OKICH
|
|
Michael J. Tokich
Senior Vice President and Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
|
|
|
/
S
/ W
ALTER
M R
OSEBROUGH
, J
R
.
|
Name:
|
|
Walter M Rosebrough, Jr.
|
Title:
|
|
President and Chief Executive Officer
|
|
|
|
|
|
/
S
/ M
ICHAEL
J. T
OKICH
|
Name:
|
|
Michael J. Tokich
|
Title:
|
|
Senior Vice President and Chief Financial Officer
|