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 September 30, 2017
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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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England and Wales
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98-1203539
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
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Chancery House, 190 Waterside Road, Hamilton Industrial Park Leicester, United Kingdom
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LE51QZ
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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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Emerging Growth Company
o
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Page
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ITEM 1.
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FINANCIAL STATEMENTS
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September 30,
2017 |
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March 31,
2017 |
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(Unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$
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295,628
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$
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282,918
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Accounts receivable (net of allowances of $12,684 and $10,357, respectively)
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449,371
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483,451
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Inventories, net
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224,795
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197,837
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Prepaid expenses and other current assets
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57,441
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53,596
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Total current assets
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1,027,235
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1,017,802
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Property, plant, and equipment, net
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962,515
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915,908
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Goodwill and intangibles, net
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3,091,095
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2,956,190
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Other assets
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39,431
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34,555
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Total assets
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$
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5,120,276
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$
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4,924,455
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Liabilities and equity
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Current liabilities:
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Accounts payable
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$
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129,208
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$
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133,479
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Accrued income taxes
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10,856
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14,640
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Accrued payroll and other related liabilities
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71,255
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78,575
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Accrued expenses and other
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156,151
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154,889
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Total current liabilities
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367,470
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381,583
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Long-term indebtedness
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1,445,297
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1,478,361
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Deferred income taxes, net
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178,726
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171,805
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Other liabilities
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87,978
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82,673
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Total liabilities
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$
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2,079,471
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$
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2,114,422
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Commitments and contingencies (see Note 8)
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Preferred shares, with £0.10 par value; 100 shares authorized; 100 issued and outstanding
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15
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15
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Ordinary shares, with £0.10 par value; £17,006 shares aggregate par amount authorized; 85,123 and 84,948 ordinary shares issued and outstanding, respectively
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2,081,494
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2,085,134
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Retained earnings
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1,028,543
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954,155
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Accumulated other comprehensive loss
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(80,059
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)
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(240,702
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)
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Total shareholders’ equity
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3,029,993
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2,798,602
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Noncontrolling interests
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10,812
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11,431
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Total equity
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3,040,805
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2,810,033
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Total liabilities and equity
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$
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5,120,276
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$
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4,924,455
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Three Months Ended September 30,
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Six Months Ended September 30,
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2017
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2016
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2017
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2016
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Revenues:
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Product
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$
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286,557
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$
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292,216
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$
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560,162
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$
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563,966
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Service
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347,602
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354,199
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681,961
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720,827
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Total revenues
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634,159
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646,415
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1,242,123
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1,284,793
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Cost of revenues:
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Product
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152,611
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155,110
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295,856
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297,809
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Service
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214,787
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243,397
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423,385
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499,086
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Total cost of revenues
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367,398
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398,507
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719,241
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796,895
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Gross profit
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266,761
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247,908
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522,882
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487,898
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Operating expenses:
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Selling, general, and administrative
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153,356
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163,680
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309,167
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315,566
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Research and development
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13,974
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14,617
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27,978
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29,045
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Restructuring expenses
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27
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48
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78
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202
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Total operating expenses
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167,357
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178,345
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337,223
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344,813
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Income from operations
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99,404
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69,563
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185,659
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143,085
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Non-operating expenses, net:
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Interest expense
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12,683
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10,924
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25,149
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21,995
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Interest income and miscellaneous expense
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(626
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)
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(284
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)
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(1,091
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)
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(778
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)
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Total non-operating expenses, net
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12,057
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10,640
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24,058
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21,217
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Income before income tax expense
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87,347
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58,923
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161,601
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121,868
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Income tax expense
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22,903
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18,721
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38,942
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32,955
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Net income
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64,444
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40,202
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122,659
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88,913
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Less: Net income (loss) attributable to noncontrolling interests
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(15
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)
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(214
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)
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123
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95
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Net income attributable to shareholders
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$
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64,459
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$
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40,416
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$
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122,536
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$
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88,818
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Net income per share attributed to shareholders
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Basic
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$
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0.76
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$
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0.47
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$
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1.44
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$
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1.03
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Diluted
|
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$
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0.75
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$
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0.47
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$
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1.43
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$
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1.03
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Cash dividends declared per share ordinary outstanding
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$
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0.31
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$
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0.28
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$
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0.59
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$
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0.53
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Three Months Ended September 30,
|
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Six Months Ended September 30,
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2017
|
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2016
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2017
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2016
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Net income
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$
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64,444
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$
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40,202
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$
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122,659
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$
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88,913
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Less: Net income (loss) attributable to noncontrolling
interests
|
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(15
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)
|
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(214
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)
|
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123
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|
95
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|
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Net income attributable to shareholders
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64,459
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40,416
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122,536
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|
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88,818
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Other comprehensive income (loss)
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|
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Unrealized gain (loss) on available for sale securities, (net of taxes of $268, $80, $483 and $67, respectively)
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1,103
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26
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1,771
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|
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(94
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)
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Amortization of pension and postretirement benefit plans costs, (net of taxes of $250, $242, $500 and $482, respectively)
|
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(404
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)
|
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(390
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)
|
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(808
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)
|
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(780
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)
|
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Change in cumulative currency translation adjustment
|
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66,819
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(7,946
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)
|
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159,680
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(24,995
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)
|
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Total other comprehensive income (loss)
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67,518
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|
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(8,310
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)
|
|
160,643
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|
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(25,869
|
)
|
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Comprehensive income
|
|
$
|
131,977
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|
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$
|
32,106
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|
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$
|
283,179
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$
|
62,949
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Six Months Ended September 30,
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2017
|
|
2016
|
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Operating activities:
|
|
|
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|
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Net income
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|
$
|
122,659
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|
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$
|
88,913
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|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
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Depreciation, depletion, and amortization
|
|
89,199
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|
|
103,861
|
|
||
Deferred income taxes
|
|
(3,272
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)
|
|
(4,606
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)
|
||
Share-based compensation expense
|
|
12,029
|
|
|
10,564
|
|
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(Gain) loss on the disposal of property, plant, equipment, and intangibles, net
|
|
(578
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)
|
|
281
|
|
||
Loss on sale of businesses, net
|
|
1,134
|
|
|
13,802
|
|
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Other items
|
|
7,521
|
|
|
5,696
|
|
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Changes in operating assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
||||
Accounts receivable, net
|
|
42,769
|
|
|
11,671
|
|
||
Inventories, net
|
|
(19,009
|
)
|
|
(21,723
|
)
|
||
Other current assets
|
|
(4,225
|
)
|
|
6,216
|
|
||
Accounts payable
|
|
(8,615
|
)
|
|
(16,954
|
)
|
||
Accruals and other, net
|
|
(22,235
|
)
|
|
(9,220
|
)
|
||
Net cash provided by operating activities
|
|
217,377
|
|
|
188,501
|
|
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Investing activities:
|
|
|
|
|
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Purchases of property, plant, equipment, and intangibles, net
|
|
(75,420
|
)
|
|
(73,866
|
)
|
||
Proceeds from the sale of property, plant, equipment, and intangibles
|
|
2,075
|
|
|
4,763
|
|
||
Proceeds from the sale of businesses
|
|
1,313
|
|
|
131,586
|
|
||
Purchase of investments
|
|
—
|
|
|
(6,356
|
)
|
||
Acquisition of businesses, net of cash acquired
|
|
(29,509
|
)
|
|
(64,872
|
)
|
||
Net cash used in investing activities
|
|
(101,541
|
)
|
|
(8,745
|
)
|
||
Financing activities:
|
|
|
|
|
||||
Payments on long-term obligations
|
|
(15,000
|
)
|
|
(10,000
|
)
|
||
Payments under credit facilities, net
|
|
(38,199
|
)
|
|
(47,646
|
)
|
||
Deferred financing fees and debt issuance costs
|
|
(44
|
)
|
|
—
|
|
||
Acquisition related deferred or contingent consideration
|
|
(1,876
|
)
|
|
(6,000
|
)
|
||
Repurchases of ordinary shares
|
|
(20,652
|
)
|
|
(59,895
|
)
|
||
Cash dividends paid to ordinary shareholders
|
|
(50,280
|
)
|
|
(45,585
|
)
|
||
Proceeds from issuance of equity to minority shareholders
|
|
—
|
|
|
5,022
|
|
||
Stock option and other equity transactions, net
|
|
6,706
|
|
|
2,494
|
|
||
Net cash used in financing activities
|
|
(119,345
|
)
|
|
(161,610
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
16,219
|
|
|
(12,636
|
)
|
||
Increase in cash and cash equivalents
|
|
12,710
|
|
|
5,510
|
|
||
Cash and cash equivalents at beginning of period
|
|
282,918
|
|
|
248,841
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
295,628
|
|
|
$
|
254,351
|
|
Standard
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Date of Issuance
|
|
Description
|
|
Date of Adoption
|
|
Effect on the financial statements or other significant matters
|
Standards that have recently been adopted
|
||||||||
ASU 2016-07, "Investments - Equity Method and Joint Ventures, Simplifying the Transition to the Equity Method of Accounting"
(Topic 323)
|
|
March 2016
|
|
The update replaces the previous requirement to retroactively adopt the equity method. The new standard requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The standard is effective for annual periods beginning after December 15, 2016 and interim periods within that period. Early adoption is permitted.
|
|
First Quarter Fiscal 2018
|
|
The prospective adoption of this standard did not have a material impact on our consolidated statements of financial position, results of operations and cash flows.
|
ASU 2015-11, "Inventory - Simplifying the Measurement of Inventory"
(Topic 330)
|
|
July 2015
|
|
The standard requires an entity to measure inventory within the scope of this update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years and should be applied prospectively. Early adoption is permitted.
|
|
First Quarter Fiscal 2018
|
|
The prospective adoption of this standard did not have a material impact on our consolidated statements of financial position, results of operations and cash flows.
|
Standards that have yet to be adopted
|
||||||||
ASU 2014-09, "Revenue from Contracts with Customers" and subsequently issued amendments
|
|
May 2014
|
|
The standard will replace existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date. The standard update is effective for annual periods beginning after December 15, 2017 and interim periods within that period. Early adoption is not permitted before the original public entity effective date of December 15, 2016.
|
|
N/A
|
|
We have started the implementation process, including a review of Customer contracts, and we are continuing to evaluate and quantify the potential impacts that the standard may have on our consolidated statements of financial position, results of operations, and related disclosures. We currently anticipate adopting this standard using the modified-retrospective method.
|
ASU 2016-01, "Financial Instruments - Overall - Recognition and Measurement of Financial Assets and Liabilities"
(Subtopic 825-10) |
|
January 2016
|
|
The standard changes how equity investments are measured and the presentation of changes in the fair value of financial liabilities measured under the fair value option. Presentation and disclosure requirements for financial instruments are also affected. Entities will be required to measure equity investments that do not result in consolidation and are not recorded under the equity method at fair value with changes in fair value recognized in net income. The standard clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale securities. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
|
|
N/A
|
|
We are in the process of evaluating the impact that the standard will have on our consolidated statements of financial position, results of operations and cash flows.
|
ASU 2016-02, "Leases"
(Topic 842)
|
|
February 2016
|
|
The update will require lessees to record all leases, whether finance or operating, on the balance sheet. An asset will be recorded to represent the right to use the leased asset, and a liability will be recorded to represent the lease obligation. The standard is effective for annual periods beginning after December 15, 2018 and interim periods within that period. Early adoption is permitted.
|
|
N/A
|
|
We are in the process of evaluating the impact that the standard will have on our consolidated statements of financial position, results of operations and cash flows.
|
ASU 2016-15, "Statement of Cash Flows"
(Topic 230)
|
|
August 2016
|
|
This update provides guidance on the following several specific cash flow issues: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The standard is effective for annual periods beginning after December 15, 2017 and interim periods within that period. Early adoption is permitted.
|
|
N/A
|
|
We are in the process of evaluating the impact that the standard will have on our consolidated statement of cash flows.
|
ASU 2016-16, "Income Taxes, Intra-Entity Transfers of Assets Other Than Inventory"
(Topic 740) |
|
October 2016
|
|
The update improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The new standard requires the recognition of income tax consequences resulting from an intra-entity transfer of an asset other than inventory when the transfer occurs. The standard is effective for annual periods beginning after December 15, 2018. Early adoption is permitted.
|
|
N/A
|
|
We are in the process of evaluating the impact that the standard will have on our consolidated financial statements.
|
ASU 2017-04, "Intangibles - Goodwill and Other, Simplifying the Test for Goodwill Impairment"
(Topic 350)
|
|
January 2017
|
|
This update eliminates Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedures that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments of this standard, an entity would perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The loss should not exceed the total amount of goodwill allocated to that reporting unit. Tax effects should be considered. The standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted.
|
|
N/A
|
|
We are in process of evaluating the impact that the standard will have on our annual goodwill impairment test.
|
ASU 2017-07
"Compensation - Retirement Benefits - Improving the Presentation of Net Periodic Pension and Net Periodic Postretirement Benefit Cost"
(Topic 715)
|
|
March 2017
|
|
This standard requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside the subtotal of income from operations, if one is presented. The standard is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted.
|
|
N/A
|
|
We are in the process of evaluating the impact that the standard will have on our consolidated statements of financial position and results of operations.
|
ASU 2017-09 "Compensation - Stock Compensation" (Topic 718)
|
|
May 2017
|
|
The update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This standard is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted.
|
|
N/A
|
|
We are in the process of evaluating the impact that the standard will have on our consolidated statements of financial position, results of operations and cash flows.
|
|
|
Medisafe
|
|
Compass
|
|
Phoenix and Endo-Tek
|
||||||
Cash
|
|
$
|
3,751
|
|
|
$
|
—
|
|
|
$
|
769
|
|
Accounts receivable
|
|
3,634
|
|
|
629
|
|
|
1,123
|
|
|||
Inventory
|
|
2,454
|
|
|
659
|
|
|
950
|
|
|||
Property, plant and equipment
|
|
639
|
|
|
13
|
|
|
1,092
|
|
|||
Other assets
|
|
—
|
|
|
31
|
|
|
46
|
|
|||
Intangible assets
|
|
17,151
|
|
|
5,992
|
|
|
7,824
|
|
|||
Goodwill
|
|
19,599
|
|
|
8,987
|
|
|
5,938
|
|
|||
Total Assets
|
|
47,228
|
|
|
16,311
|
|
|
17,742
|
|
|||
|
|
|
|
|
|
|
||||||
Current liabilities
|
|
(5,562
|
)
|
|
(309
|
)
|
|
(1,373
|
)
|
|||
|
|
|
|
|
|
|
||||||
Non-current liabilities
|
|
(3,398
|
)
|
|
—
|
|
|
(1,263
|
)
|
|||
Total Liabilities
|
|
(8,960
|
)
|
|
(309
|
)
|
|
(2,636
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net Assets
|
|
$
|
38,268
|
|
|
$
|
16,002
|
|
|
$
|
15,106
|
|
|
|
September 30,
2017 |
|
March 31,
2017 |
||||
Raw materials
|
|
$
|
73,961
|
|
|
$
|
65,300
|
|
Work in process
|
|
30,933
|
|
|
26,538
|
|
||
Finished goods
|
|
158,265
|
|
|
140,559
|
|
||
LIFO reserve
|
|
(17,640
|
)
|
|
(16,706
|
)
|
||
Reserve for excess and obsolete inventory
|
|
(20,724
|
)
|
|
(17,854
|
)
|
||
Inventories, net
|
|
$
|
224,795
|
|
|
$
|
197,837
|
|
|
|
September 30,
2017 |
|
March 31,
2017 |
||||
Land and land improvements
(1)
|
|
$
|
47,214
|
|
|
$
|
46,848
|
|
Buildings and leasehold improvements
|
|
405,556
|
|
|
393,692
|
|
||
Machinery and equipment
|
|
536,556
|
|
|
508,247
|
|
||
Information systems
|
|
132,935
|
|
|
119,920
|
|
||
Radioisotope
|
|
456,982
|
|
|
436,787
|
|
||
Construction in progress
(1)
|
|
107,078
|
|
|
77,421
|
|
||
Total property, plant, and equipment
|
|
1,686,321
|
|
|
1,582,915
|
|
||
Less: accumulated depreciation and depletion
|
|
(723,806
|
)
|
|
(667,007
|
)
|
||
Property, plant, and equipment, net
|
|
$
|
962,515
|
|
|
$
|
915,908
|
|
(1)
|
Land is not depreciated. Construction in progress is not depreciated until placed in service.
|
|
|
September 30,
2017 |
|
March 31,
2017 |
||||
Private Placement
|
|
$
|
978,315
|
|
|
$
|
960,684
|
|
Deferred financing costs
|
|
(3,683
|
)
|
|
(3,927
|
)
|
||
Credit Agreement
|
|
470,665
|
|
|
521,604
|
|
||
Total long term debt
|
|
$
|
1,445,297
|
|
|
$
|
1,478,361
|
|
|
|
September 30,
2017 |
|
March 31,
2017 |
||||
Accrued payroll and other related liabilities:
|
|
|
|
|
||||
Compensation and related items
|
|
$
|
30,157
|
|
|
$
|
29,777
|
|
Accrued vacation/paid time off
|
|
10,622
|
|
|
8,651
|
|
||
Accrued bonuses
|
|
16,810
|
|
|
20,715
|
|
||
Accrued employee commissions
|
|
10,645
|
|
|
16,201
|
|
||
Other postretirement benefit obligations-current portion
|
|
2,187
|
|
|
2,187
|
|
||
Other employee benefit plans obligations-current portion
|
|
834
|
|
|
1,044
|
|
||
Total accrued payroll and other related liabilities
|
|
$
|
71,255
|
|
|
$
|
78,575
|
|
Accrued expenses and other:
|
|
|
|
|
||||
Deferred revenues
|
|
$
|
71,905
|
|
|
$
|
71,020
|
|
Self-insured risk reserves-current portion
|
|
8,730
|
|
|
6,633
|
|
||
Accrued dealer commissions
|
|
14,241
|
|
|
16,122
|
|
||
Accrued warranty
|
|
6,576
|
|
|
6,861
|
|
||
Asset retirement obligation-current portion
|
|
1,313
|
|
|
—
|
|
||
Other
|
|
53,386
|
|
|
54,253
|
|
||
Total accrued expenses and other
|
|
$
|
156,151
|
|
|
$
|
154,889
|
|
Other liabilities:
|
|
|
|
|
||||
Self-insured risk reserves-long-term portion
|
|
$
|
15,584
|
|
|
$
|
15,584
|
|
Other postretirement benefit obligations-long-term portion
|
|
13,284
|
|
|
13,821
|
|
||
Defined benefit pension plans obligations-long-term portion
|
|
27,539
|
|
|
27,234
|
|
||
Other employee benefit plans obligations-long-term portion
|
|
3,880
|
|
|
3,661
|
|
||
Accrued long-term income taxes
|
|
2,593
|
|
|
2,089
|
|
||
Asset retirement obligation-long-term portion
|
|
9,478
|
|
|
9,953
|
|
||
Other
|
|
15,620
|
|
|
10,331
|
|
||
Total other liabilities
|
|
$
|
87,978
|
|
|
$
|
82,673
|
|
|
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Healthcare Products
|
|
$
|
302,094
|
|
|
$
|
306,676
|
|
|
$
|
591,158
|
|
|
$
|
589,353
|
|
Healthcare Specialty Services
|
|
116,111
|
|
|
137,661
|
|
|
229,545
|
|
|
289,636
|
|||||
Life Sciences
|
|
89,461
|
|
|
81,519
|
|
|
170,396
|
|
|
162,917
|
|||||
Applied Sterilization Technologies
|
|
126,493
|
|
|
120,559
|
|
|
251,024
|
|
|
242,887
|
|||||
Total revenues
|
|
$
|
634,159
|
|
|
$
|
646,415
|
|
|
$
|
1,242,123
|
|
|
$
|
1,284,793
|
|
Segment operating income:
|
|
|
|
|
|
|
|
|
||||||||
Healthcare Products
|
|
$
|
47,493
|
|
|
$
|
50,835
|
|
|
$
|
89,730
|
|
|
$
|
86,808
|
|
Healthcare Specialty Services
|
|
9,323
|
|
|
1,370
|
|
|
15,317
|
|
|
3,843
|
|
||||
Life Sciences
|
|
27,646
|
|
|
22,471
|
|
|
49,461
|
|
|
46,715
|
|
||||
Applied Sterilization Technologies
|
|
43,394
|
|
|
41,540
|
|
|
84,592
|
|
|
81,948
|
|
||||
Corporate
|
|
(6,202
|
)
|
|
(5,149
|
)
|
|
(10,067
|
)
|
|
(6,723
|
)
|
||||
Total segment operating income
|
|
$
|
121,654
|
|
|
$
|
111,067
|
|
|
$
|
229,033
|
|
|
$
|
212,591
|
|
Less: Adjustments
|
|
|
|
|
|
|
|
|
||||||||
Restructuring charges
(1)
|
|
$
|
27
|
|
|
$
|
48
|
|
|
$
|
78
|
|
|
$
|
202
|
|
Amortization of acquired intangible assets
(2)
|
|
17,171
|
|
|
17,779
|
|
|
33,473
|
|
|
37,308
|
|
||||
Acquisition and integration related charges
(3)
|
|
3,393
|
|
|
6,640
|
|
|
7,422
|
|
|
11,873
|
|
||||
Loss on fair value adjustment of acquisition related contingent consideration
(2)
|
|
—
|
|
|
1,850
|
|
|
—
|
|
|
1,850
|
|
||||
Net loss on divestiture of businesses
(2)
|
|
1,010
|
|
|
13,802
|
|
|
1,134
|
|
|
13,802
|
|
||||
Amortization of inventory and property "step up" to fair value
(2)
|
|
649
|
|
|
1,385
|
|
|
1,267
|
|
|
4,471
|
|
||||
Total operating income
|
|
$
|
99,404
|
|
|
$
|
69,563
|
|
|
$
|
185,659
|
|
|
$
|
143,085
|
|
|
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||
Denominator (shares in thousands):
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Weighted average shares outstanding—basic
|
|
85,199
|
|
|
85,851
|
|
|
85,145
|
|
|
85,944
|
|
Dilutive effect of share equivalents
|
|
670
|
|
|
482
|
|
|
650
|
|
|
482
|
|
Weighted average shares outstanding and share equivalents—diluted
|
|
85,869
|
|
|
86,333
|
|
|
85,795
|
|
|
86,426
|
|
|
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||
(shares in thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Number of share options
|
|
416
|
|
|
627
|
|
|
492
|
|
|
496
|
|
|
|
Fiscal 2018
|
|
Fiscal 2017
|
Risk-free interest rate
|
|
2.01%
|
|
1.29%
|
Expected life of options
|
|
5.7 years
|
|
5.7 years
|
Expected dividend yield of stock
|
|
1.58%
|
|
1.54%
|
Expected volatility of stock
|
|
22.08%
|
|
22.92%
|
|
|
Number of
Options
|
|
Weighted
Average
Exercise
Price
|
|
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding at March 31, 2017
|
|
1,945,274
|
|
|
$
|
50.28
|
|
|
|
|
|
||
Granted
|
|
429,360
|
|
|
77.75
|
|
|
|
|
|
|||
Exercised
|
|
(227,914
|
)
|
|
34.53
|
|
|
|
|
|
|||
Forfeited
|
|
(15,817
|
)
|
|
66.56
|
|
|
|
|
|
|||
Outstanding at September 30, 2017
|
|
2,130,903
|
|
|
$
|
57.38
|
|
|
6.9 years
|
|
$
|
66,102
|
|
Exercisable at September 30, 2017
|
|
1,241,541
|
|
|
$
|
47.50
|
|
|
5.5 years
|
|
$
|
50,776
|
|
|
|
Number of
Restricted
Shares
|
|
Number of Restricted Share Units
|
|
Weighted-Average
Grant Date
Fair Value
|
||||
Non-vested at March 31, 2017
|
|
780,526
|
|
|
34,013
|
|
|
$
|
60.87
|
|
Granted
|
|
224,169
|
|
|
23,259
|
|
|
77.53
|
|
|
Vested
|
|
(189,141
|
)
|
|
(19,676
|
)
|
|
53.42
|
|
|
Forfeited
|
|
(27,151
|
)
|
|
(660
|
)
|
|
68.45
|
|
|
Non-vested at September 30, 2017
|
|
788,403
|
|
|
36,936
|
|
|
$
|
67.51
|
|
|
Warranties
|
||
Balance, March 31, 2017
|
$
|
6,861
|
|
Warranties issued during the period
|
5,668
|
|
|
Settlements made during the period
|
(5,953
|
)
|
|
Balance, September 30, 2017
|
$
|
6,576
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||||||
|
|
Fair Value at
|
|
Fair Value at
|
|
Fair Value at
|
|
Fair Value at
|
||||||||
Balance sheet location
|
|
September 30, 2017
|
|
March 31, 2017
|
|
September 30, 2017
|
|
March 31, 2017
|
||||||||
Prepaid & Other
|
|
$
|
502
|
|
|
$
|
160
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued expenses and other
|
|
—
|
|
|
—
|
|
|
1,247
|
|
|
35
|
|
|
|
Location of gain (loss)
recognized in income
|
|
Amount of gain (loss) recognized in income
|
||||||||||||||
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||
Foreign currency forward contracts
|
|
Selling, general and administrative
|
|
$
|
321
|
|
|
$
|
(531
|
)
|
|
$
|
(516
|
)
|
|
$
|
(1,550
|
)
|
Commodity swap contracts
|
|
Cost of revenues
|
|
$
|
196
|
|
|
$
|
205
|
|
|
$
|
26
|
|
|
$
|
416
|
|
|
|
|
|
|
Fair Value Measurements
|
|||||||||||||||||||||||
|
|
Carrying Value
|
|
Quoted Prices
in Active Markets
for Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||||||||||||||
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||||||||||||||
September 30
|
March 31
|
|
September 30
|
March 31
|
|
September 30
|
March 31
|
|
September 30
|
March 31
|
||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash and cash equivalents
|
|
$
|
295,628
|
|
$
|
282,918
|
|
|
$
|
295,628
|
|
$
|
282,918
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
Forward and swap contracts
(1)
|
|
502
|
|
160
|
|
|
—
|
|
—
|
|
|
502
|
|
160
|
|
|
—
|
|
—
|
|
||||||||
Investments
(2)
|
|
$
|
15,610
|
|
12,552
|
|
|
15,610
|
|
12,552
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Forward and swap contracts
(1)
|
|
$
|
1,247
|
|
$
|
35
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
1,247
|
|
$
|
35
|
|
|
$
|
—
|
|
$
|
—
|
|
Deferred compensation plans
(2)
|
|
1,732
|
|
1,677
|
|
|
1,732
|
|
1,677
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||||||
Long term debt
(3)
|
|
$
|
1,445,297
|
|
1,478,361
|
|
|
—
|
|
—
|
|
|
$
|
1,463,984
|
|
1,496,966
|
|
|
—
|
|
—
|
|
||||||
Contingent consideration obligations
(4)
|
|
8,336
|
|
4,451
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
8,336
|
|
4,451
|
|
|
|
Contingent Consideration
|
||
Balance at March 31, 2017
|
|
$
|
4,451
|
|
Additions
|
|
5,310
|
|
|
Payments
|
|
(1,535
|
)
|
|
Currency translation adjustments
|
|
110
|
|
|
Balance at September 30, 2017
|
|
$
|
8,336
|
|
|
|
|
|
|
|
Investments at September 30, 2017 and March 31, 2017
|
||||||||||||||||||||||||||
|
|
Cost
|
|
Unrealized Gains
(2)
|
|
Unrealized Losses
(2)
|
|
Fair Value
|
||||||||||||||||||||||||
September 30
|
|
March 31
|
|
September 30
|
|
March 31
|
|
September 30
|
|
March 31
|
|
September 30
|
|
March 31
|
||||||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Marketable equity securities and other
(1)
|
|
$
|
11,037
|
|
|
$
|
11,037
|
|
|
$
|
2,939
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(72
|
)
|
|
$
|
13,976
|
|
|
$
|
10,965
|
|
Mutual funds
|
|
1,059
|
|
|
1,091
|
|
|
575
|
|
|
496
|
|
|
—
|
|
|
—
|
|
|
1,634
|
|
|
1,587
|
|
||||||||
Total available-for-sale securities
|
|
$
|
12,096
|
|
|
$
|
12,128
|
|
|
$
|
3,514
|
|
|
$
|
496
|
|
|
$
|
—
|
|
|
$
|
(72
|
)
|
|
$
|
15,610
|
|
|
$
|
12,552
|
|
|
Gain (Loss) on Available for Sale Securities
(1)
|
|
Defined Benefit Plans
(2)
|
|
Currency Translation
(3)
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
|||||||||||||||||||||
|
Three Months
|
Six Months
|
|
Three Months
|
Six Months
|
|
Three Months
|
|
Six Months
|
|
Three Months
|
Six Months
|
||||||||||||||||
Beginning Balance
|
$
|
846
|
|
$
|
178
|
|
|
$
|
(2,759
|
)
|
$
|
(2,355
|
)
|
|
$
|
(145,664
|
)
|
|
$
|
(238,525
|
)
|
|
$
|
(147,577
|
)
|
$
|
(240,702
|
)
|
Other Comprehensive Income (Loss) before reclassifications
|
1,094
|
|
1,745
|
|
|
120
|
|
240
|
|
|
66,819
|
|
|
159,680
|
|
|
68,033
|
|
161,665
|
|
||||||||
Amounts reclassified from Accumulated Other Comprehensive Income (Loss)
|
9
|
|
26
|
|
|
(524
|
)
|
(1,048
|
)
|
|
—
|
|
|
—
|
|
|
(515
|
)
|
(1,022
|
)
|
||||||||
Net current-period Other Comprehensive (Loss)
|
1,103
|
|
1,771
|
|
|
(404
|
)
|
(808
|
)
|
|
66,819
|
|
|
159,680
|
|
|
67,518
|
|
160,643
|
|
||||||||
Balance at September 30, 2017
|
$
|
1,949
|
|
$
|
1,949
|
|
|
$
|
(3,163
|
)
|
$
|
(3,163
|
)
|
|
$
|
(78,845
|
)
|
|
$
|
(78,845
|
)
|
|
$
|
(80,059
|
)
|
$
|
(80,059
|
)
|
|
Gain (Loss) on Available for Sale Securities
(1)
|
|
Defined Benefit Plans
(2)
|
|
Currency Translation
(3)
|
Total Accumulated Other Comprehensive Income
(Loss) |
|||||||||||||||||||||
|
Three Months
|
Six Months
|
|
Three Months
|
Six Months
|
|
Three Months
|
Six Months
|
|
Three Months
|
Six Months
|
||||||||||||||||
Beginning Balance
|
$
|
(793
|
)
|
$
|
(673
|
)
|
|
$
|
4,718
|
|
$
|
5,108
|
|
|
$
|
(89,643
|
)
|
$
|
(72,594
|
)
|
|
$
|
(85,718
|
)
|
$
|
(68,159
|
)
|
Other Comprehensive Income (Loss) before reclassifications
|
17
|
|
(131
|
)
|
|
103
|
|
206
|
|
|
(7,946
|
)
|
(24,995
|
)
|
|
(7,826
|
)
|
(24,920
|
)
|
||||||||
Amounts reclassified from Accumulated Other Comprehensive Income (Loss)
|
9
|
|
37
|
|
|
(493
|
)
|
(986
|
)
|
|
—
|
|
—
|
|
|
(484
|
)
|
(949
|
)
|
||||||||
Net current-period Other Comprehensive Income (Loss)
|
26
|
|
(94
|
)
|
|
(390
|
)
|
(780
|
)
|
|
(7,946
|
)
|
(24,995
|
)
|
|
(8,310
|
)
|
(25,869
|
)
|
||||||||
Balance at September 30, 2016
|
$
|
(767
|
)
|
$
|
(767
|
)
|
|
$
|
4,328
|
|
$
|
4,328
|
|
|
$
|
(97,589
|
)
|
$
|
(97,589
|
)
|
|
$
|
(94,028
|
)
|
$
|
(94,028
|
)
|
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, repurchases of 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 consumable and capital equipment products.
|
•
|
Service Revenues
– We define service revenues as revenues generated from parts and labor associated with the maintenance, repair, and installation of our capital equipment. Service revenues also include hospital sterilization services and instrument and scope repairs as well as revenues generated from contract sterilization and laboratory services offered through our Applied Sterilization Technologies segment. Service revenues also include linen management services operations divested in fiscal 2017.
|
•
|
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 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 1E consumables, V-Pro consumables, gastrointestinal endoscopy accessories, sterility assurance products, skin care products, cleaning consumables, and surgical instruments.
|
•
|
Recurring Revenues
– We define recurring revenues as revenues generated from sales of consumable products and service revenues.
|
|
|
Six Months Ended September 30,
|
||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
||||
Net cash provided by operating activities
|
|
$
|
217,377
|
|
|
$
|
188,501
|
|
Purchases of property, plant, equipment and intangibles, net
|
|
(75,420
|
)
|
|
(73,866
|
)
|
||
Proceeds from the sale of property, plant, equipment and intangibles
|
|
2,075
|
|
|
4,763
|
|
||
Free cash flow
|
|
$
|
144,032
|
|
|
$
|
119,398
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
Change
|
|
Percent Change
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Total revenues
|
|
$
|
634,159
|
|
|
$
|
646,415
|
|
|
$
|
(12,256
|
)
|
|
(1.9
|
)%
|
|
|
|
|
|
|
|
|
|
|||||||
Revenues by type:
|
|
|
|
|
|
|
|
|
|||||||
Service revenues
|
|
347,602
|
|
|
354,199
|
|
|
(6,597
|
)
|
|
(1.9
|
)%
|
|||
Consumable revenues
|
|
141,241
|
|
|
139,576
|
|
|
1,665
|
|
|
1.2
|
%
|
|||
Capital equipment revenues
|
|
145,316
|
|
|
152,640
|
|
|
(7,324
|
)
|
|
(4.8
|
)%
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Revenues by geography:
|
|
|
|
|
|
|
|
|
|||||||
United Kingdom revenues
|
|
54,587
|
|
|
53,369
|
|
|
1,218
|
|
|
2.3
|
%
|
|||
United States revenues
|
|
446,708
|
|
|
450,513
|
|
|
(3,805
|
)
|
|
(0.8
|
)%
|
|||
Other foreign revenues
|
|
132,864
|
|
|
142,533
|
|
|
(9,669
|
)
|
|
(6.8
|
)%
|
|
|
Six Months Ended September 30,
|
|
|
|
|
|||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
Change
|
|
Percent Change
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Total revenues
|
|
$
|
1,242,123
|
|
|
$
|
1,284,793
|
|
|
$
|
(42,670
|
)
|
|
(3.3
|
)%
|
|
|
|
|
|
|
|
|
|
|||||||
Revenues by type:
|
|
|
|
|
|
|
|
|
|||||||
Service revenues
|
|
681,961
|
|
|
720,827
|
|
|
(38,866
|
)
|
|
(5.4
|
)%
|
|||
Consumable revenues
|
|
289,103
|
|
|
285,241
|
|
|
3,862
|
|
|
1.4
|
%
|
|||
Capital equipment revenues
|
|
271,059
|
|
|
278,725
|
|
|
(7,666
|
)
|
|
(2.8
|
)%
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Revenues by geography:
|
|
|
|
|
|
|
|
|
|||||||
United Kingdom revenues
|
|
107,309
|
|
|
123,808
|
|
|
(16,499
|
)
|
|
(13.3
|
)%
|
|||
United States revenues
|
|
869,667
|
|
|
878,618
|
|
|
(8,951
|
)
|
|
(1.0
|
)%
|
|||
Other foreign revenues
|
|
265,147
|
|
|
282,367
|
|
|
(17,220
|
)
|
|
(6.1
|
)%
|
|
|
Three Months Ended September 30,
|
|
Change
|
|
Percent
Change
|
|||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
||||||||||
Gross profit:
|
|
|
|
|
|
|
|
|
|||||||
Product
|
|
$
|
133,946
|
|
|
$
|
137,106
|
|
|
$
|
(3,160
|
)
|
|
(2.3
|
)%
|
Service
|
|
132,815
|
|
|
110,802
|
|
|
22,013
|
|
|
19.9
|
%
|
|||
Total gross profit
|
|
$
|
266,761
|
|
|
$
|
247,908
|
|
|
$
|
18,853
|
|
|
7.6
|
%
|
Gross profit percentage:
|
|
|
|
|
|
|
|
|
|||||||
Product
|
|
46.7
|
%
|
|
46.9
|
%
|
|
|
|
|
|||||
Service
|
|
38.2
|
%
|
|
31.3
|
%
|
|
|
|
|
|||||
Total gross profit percentage
|
|
42.1
|
%
|
|
38.4
|
%
|
|
|
|
|
|
|
Six Months Ended September 30,
|
|
Change
|
|
Percent
Change
|
|||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
||||||||||
Gross profit:
|
|
|
|
|
|
|
|
|
|||||||
Product
|
|
$
|
264,306
|
|
|
$
|
266,157
|
|
|
$
|
(1,851
|
)
|
|
(0.7
|
)%
|
Service
|
|
258,576
|
|
|
221,741
|
|
|
36,835
|
|
|
16.6
|
%
|
|||
Total gross profit
|
|
$
|
522,882
|
|
|
$
|
487,898
|
|
|
$
|
34,984
|
|
|
7.2
|
%
|
Gross profit percentage:
|
|
|
|
|
|
|
|
|
|||||||
Product
|
|
47.2
|
%
|
|
47.2
|
%
|
|
|
|
|
|||||
Service
|
|
37.9
|
%
|
|
30.8
|
%
|
|
|
|
|
|||||
Total gross profit percentage
|
|
42.1
|
%
|
|
38.0
|
%
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Change
|
|
Percent
Change
|
|||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
Selling, general, and administrative
|
|
$
|
153,356
|
|
|
$
|
163,680
|
|
|
$
|
(10,324
|
)
|
|
(6.3
|
)%
|
Research and development
|
|
13,974
|
|
|
14,617
|
|
|
(643
|
)
|
|
(4.4
|
)%
|
|||
Restructuring expenses
|
|
27
|
|
|
48
|
|
|
(21
|
)
|
|
NM
|
|
|||
Total operating expenses
|
|
$
|
167,357
|
|
|
$
|
178,345
|
|
|
$
|
(10,988
|
)
|
|
(6.2
|
)%
|
|
|
Six Months Ended September 30,
|
|
Change
|
|
Percent
Change
|
|||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
Selling, general, and administrative
|
|
$
|
309,167
|
|
|
$
|
315,566
|
|
|
$
|
(6,399
|
)
|
|
(2.0
|
)%
|
Research and development
|
|
27,978
|
|
|
29,045
|
|
|
(1,067
|
)
|
|
(3.7
|
)%
|
|||
Restructuring expenses
|
|
78
|
|
|
202
|
|
|
(124
|
)
|
|
NM
|
|
|||
Total operating expenses
|
|
$
|
337,223
|
|
|
$
|
344,813
|
|
|
$
|
(7,590
|
)
|
|
(2.2
|
)%
|
|
|
Three Months Ended September 30,
|
|
|
||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
Change
|
||||||
Non-operating expenses, net:
|
|
|
|
|
|
|
||||||
Interest expense
|
|
$
|
12,683
|
|
|
$
|
10,924
|
|
|
$
|
1,759
|
|
Interest income and miscellaneous expense
|
|
(626
|
)
|
|
(284
|
)
|
|
(342
|
)
|
|||
Non-operating expenses, net
|
|
$
|
12,057
|
|
|
$
|
10,640
|
|
|
$
|
1,417
|
|
|
|
Six Months Ended September 30,
|
|
|
||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
Change
|
||||||
Non-operating expenses, net:
|
|
|
|
|
|
|
||||||
Interest expense
|
|
$
|
25,149
|
|
|
$
|
21,995
|
|
|
$
|
3,154
|
|
Interest income and miscellaneous expense
|
|
(1,091
|
)
|
|
(778
|
)
|
|
(313
|
)
|
|||
Non-operating expenses, net
|
|
$
|
24,058
|
|
|
$
|
21,217
|
|
|
$
|
2,841
|
|
|
|
Three Months Ended September 30,
|
|
Change
|
|
Percent
Change
|
||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
|||||||||
Income tax expense
|
|
$
|
22,903
|
|
|
$
|
18,721
|
|
|
$
|
4,182
|
|
|
22.3%
|
Effective income tax rate
|
|
26.2
|
%
|
|
31.8
|
%
|
|
|
|
|
|
|
Six Months Ended September 30,
|
|
Change
|
|
Percent
Change
|
||||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
|
|||||||||
Income tax expense
|
|
$
|
38,942
|
|
|
$
|
32,955
|
|
|
$
|
5,987
|
|
|
18.2%
|
Effective income tax rate
|
|
24.1
|
%
|
|
27.0
|
%
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Healthcare Products
|
|
$
|
302,094
|
|
|
$
|
306,676
|
|
|
$
|
591,158
|
|
|
$
|
589,353
|
|
Healthcare Specialty Services
|
|
116,111
|
|
|
137,661
|
|
|
229,545
|
|
|
289,636
|
|||||
Life Sciences
|
|
89,461
|
|
|
81,519
|
|
|
170,396
|
|
|
162,917
|
|||||
Applied Sterilization Technologies
|
|
126,493
|
|
|
120,559
|
|
|
251,024
|
|
|
242,887
|
|||||
Total revenues
|
|
$
|
634,159
|
|
|
$
|
646,415
|
|
|
$
|
1,242,123
|
|
|
$
|
1,284,793
|
|
Segment operating income:
|
|
|
|
|
|
|
|
|
||||||||
Healthcare Products
|
|
$
|
47,493
|
|
|
$
|
50,835
|
|
|
$
|
89,730
|
|
|
$
|
86,808
|
|
Healthcare Specialty Services
|
|
9,323
|
|
|
1,370
|
|
|
15,317
|
|
|
3,843
|
|
||||
Life Sciences
|
|
27,646
|
|
|
22,471
|
|
|
49,461
|
|
|
46,715
|
|
||||
Applied Sterilization Technologies
|
|
43,394
|
|
|
41,540
|
|
|
84,592
|
|
|
81,948
|
|
||||
Corporate
|
|
(6,202
|
)
|
|
(5,149
|
)
|
|
(10,067
|
)
|
|
(6,723
|
)
|
||||
Total segment operating income
|
|
$
|
121,654
|
|
|
$
|
111,067
|
|
|
$
|
229,033
|
|
|
$
|
212,591
|
|
Less: Adjustments
|
|
|
|
|
|
|
|
|
||||||||
Restructuring charges
(1)
|
|
$
|
27
|
|
|
$
|
48
|
|
|
$
|
78
|
|
|
$
|
202
|
|
Amortization of acquired intangible assets
(2)
|
|
17,171
|
|
|
17,779
|
|
|
33,473
|
|
|
37,308
|
|
||||
Acquisition and integration related charges
(3)
|
|
3,393
|
|
|
6,640
|
|
|
7,422
|
|
|
11,873
|
|
||||
Loss on fair value adjustment of acquisition related contingent consideration
(2)
|
|
—
|
|
|
1,850
|
|
|
—
|
|
|
1,850
|
|
||||
Net loss on divestiture of businesses
(2)
|
|
1,010
|
|
|
13,802
|
|
|
1,134
|
|
|
13,802
|
|
||||
Amortization of inventory and property "step up" to fair value
(2)
|
|
649
|
|
|
1,385
|
|
|
1,267
|
|
|
4,471
|
|
||||
Total operating income
|
|
$
|
99,404
|
|
|
$
|
69,563
|
|
|
$
|
185,659
|
|
|
$
|
143,085
|
|
|
|
Six Months Ended September 30,
|
||||||
(dollars in thousands)
|
|
2017
|
|
2016
|
||||
Net cash provided by operating activities
|
|
$
|
217,377
|
|
|
$
|
188,501
|
|
Net cash used in investing activities
|
|
$
|
(101,541
|
)
|
|
$
|
(8,745
|
)
|
Net cash used in financing activities
|
|
$
|
(119,345
|
)
|
|
$
|
(161,610
|
)
|
Debt-to-total capital ratio
|
|
32.3
|
%
|
|
33.4
|
%
|
||
Free cash flow
|
|
$
|
144,032
|
|
|
$
|
119,398
|
|
•
|
Purchases of property, plant, equipment, and intangibles, net
– Capital expenditures were
$75.4 million
for the first
six
months of fiscal
2018
as compared to
$73.9 million
during the same prior year period. Capital expenditures were consistent between the first
six
months of fiscal
2018
and fiscal
2017
.
|
•
|
Proceeds from the sale of business
– During the first
six
months of fiscal
2018
, we received
$1.3 million
in deferred consideration related to the fiscal 2017 sale of the Synergy Health Laboratory Services. During the first six months of fiscal 2017, we received
$131.6 million
in proceeds from the sale of certain non-core businesses. For more information, refer to our note 2 to our consolidated financial statements, "Business Acquisitions and Divestitures".
|
•
|
Acquisitions of businesses, net of cash acquired
– During the first
six
months of fiscal
2018
, we used $28.9 million for acquisitions as compared to
$64.9 million
for the same prior year period. For more information on our acquisitions, refer to our Note 2 to our consolidated financial statements, "Business Acquisitions and Divestitures".
|
•
|
Purchase of investments
– During the first six months of fiscal 2017, we invested an additional $6.4 million primarily in the common stock of Servizi Italia, S.p.A., a leading provider of integrated linen washing and outsourced sterile processing services to hospital Customers.
|
•
|
Payments on long-term obligations
- Payments on long-term obligations totaled
$15.0 million
in the first
six
months of fiscal
2018
as compared to
$10.0 million
in the first three months of fiscal
2017
.
|
•
|
Proceeds (payments) under credit facility, net
– Net payments on credit facilities totaled
$38.2 million
in the first
six
months of fiscal
2018
compared to net payments of
$47.6 million
in the first
six
months of fiscal
2017
.
|
•
|
Repurchases of ordinary shares
– During the first
six
months of fiscal
2018
, we purchased 176,547 of our ordinary shares in the aggregate amount of $15.1 million. During the first
six
months of fiscal
2018
, we obtained
101,135
of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of
$5.6 million
. During the first six months of fiscal 2017, we purchased 763,171 of our ordinary shares in the aggregate amount of $54.3 million. During the first six months of fiscal 2017, we obtained 127,520 of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $5.6 million.
|
•
|
Cash dividends paid to ordinary shareholders
– During the first
six
months of fiscal
2018
, we paid total cash dividends of
$50.3 million
, or
$0.59
per outstanding share. During the first
six
months of fiscal
2017
, we paid total cash dividends of
$45.6 million
, or
$0.53
per outstanding share.
|
•
|
Stock option and other equity transactions, net
– We generally receive cash for issuing shares under our stock option programs. During the first
six
months of fiscal
2018
and fiscal
2017
, we received cash proceeds totaling
$7.7 million
and
$2.5 million
, respectively, under these programs. During the first six months of fiscal
2018
we also paid dividends in the amount of $1.1 million to minority interest shareholders.
|
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
|
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
Exhibit Description
|
|
|
3.1
|
|
|
|
3.2
|
|
|
|
4.1
|
|
|
|
10.1
|
|
|
|
10.2
|
|
|
|
10.3
|
|
|
|
10.4
|
|
|
|
10.5
|
|
|
|
10.6
|
|
|
|
15.1
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
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 plc
|
|
/s/ KAREN L. BURTON
|
Karen L. Burton
Vice President, Corporate Controller and Chief Accounting Officer
|
November 7, 2017
|
|
|
|
Registration
Number |
Description
|
|
|
|
|
333-207721
|
Form S-8 Registration Statement – STERIS plc 2006 Long-Term Equity Incentive Plan, Assumed as Amended and Restated
|
|
|
|
|
333-207722
|
Form S-8 Registration Statement – STERIS Corporation 401(k) Plan
|
|
|
|
|
333-214491
|
Form S-8 Registration Statement – STERIS plc 2006 Long-Term Equity Incentive Plan
|
|
|
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of STERIS plc;
|
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 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 the 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:
|
November 7, 2017
|
|
|
/s/ WALTER M ROSEBROUGH, JR
|
|
Walter M Rosebrough, Jr.
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of STERIS plc;
|
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 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 the 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:
|
November 7, 2017
|
|
|
|
/s/ MICHAEL J. TOKICH
|
Michael J. Tokich
Senior Vice President, 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/ WALTER M ROSEBROUGH, JR
|
Name:
|
|
Walter M Rosebrough, Jr.
|
Title:
|
|
President and Chief Executive Officer
|
|
|
|
|
|
/s/ MICHAEL J. TOKICH
|
Name:
|
|
Michael J. Tokich
|
Title:
|
|
Senior Vice President, Chief Financial Officer
|