STERIS plc

Good day and welcome to the Staris PLC fourth quarter 2020 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star and two. Please note, this event is being recorded. I would now like to turn the conference over to Julie Winter with Investor Relations. Please go ahead.

Thank you, Chad, and good morning, everyone. As usual, on today's call, we have Walt Rosebrough, our president and CEO, and Mike Tokich, our senior vice president and CFO. And I do have a few words of caution before we open for comments. This webcast contains time-sensitive information that is accurate only as of today. Any redistribution, retransmission, or rebroadcast of this call without the express written consent of Staris is strictly prohibited. Some of the statements made during this review are, or may be considered, forward-looking statements. Many important factors could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, those risk factors described in Steris' securities filings. The company does not undertake to update or revise any forward-looking statements as a result of new information or future events or developments. Steris' SEC filings are available through the company and on our website. In addition, on today's call, non-GAAP financial measures including adjusted earnings per diluted share, segment operating income, constant currency organic revenue growth, and free cash flow will be used. Additional information regarding these measures, including definitions, is available in today's release, along with reconciliations between GAAP and non-GAAP financial measures. Non-GAAP financial measures are presented during this call with the intent of providing greater transparency to supplemental financial information used by management and the Board in their financial analysis and operational decisions. With those cautions, I will hand the call over to Mike.

Thank you, Julie, and good morning, everyone. It is once again my pleasure to be with you this morning to review the highlights of our fourth quarter performance. For the quarter, constant currency organic revenue growth was 8%, driven by volume and 50 basis points of price. We continue to experience strong underlying growth from our customers and success with new products. A total of $14 million from tuck-in acquisitions is included in constant currency organic revenue growth, primarily in healthcare products, spread across capital, consumables, and service. Given the timing of our year end, we were fortunate to have had a relatively limited impact on our business due to COVID-19 during the fourth quarter. We estimate that revenue was negatively impacted by approximately a net $10 million. Gross margin for the quarter increased 60 basis points to 44.4% and was impacted favorably by price, productivity, and somewhat offset by higher labor costs. EBIT margin for the quarter was 21.8% of revenue, a decrease of 30 basis points from the fourth quarter last year due in part to an increase in expenses relating to higher incentive compensation related to our strong performance and an increase in R&D spending. The adjusted effective tax rate in the quarter was 17.3%. This includes the benefit related to stock compensation expense and other favorable discrete items. Net income in the quarter grew 7% to $140.5 million and earnings per share increased to $1.64. I do want to take a moment to discuss our segment changes announced in yesterday's press release. We recently made some key changes to our management structure and reviewed our go-to-market strategy, focusing on our largest customer group, healthcare providers. These changes include realigning the management of our operations to better serve our healthcare customers. Effective April 1st and consistent with the way management is now operating and viewing the business, the current healthcare products and healthcare specialty services segments will be combined and reported as one segment, simply called healthcare. We have included a recast of quarterly results for fiscal year 2020 in the press release to assist you with your modeling. Our balance sheet is a continued source of strength for the company. Considering our cash position of $319.6 million, access to available credit lines, and a leverage ratio below 1.5 times debt to EBITDA, we are well positioned from a liquidity standpoint. During the fourth quarter, capital expenditures totaled $60.9 million, while depreciation and amortization was $50.9 million. Given the uncertainty of the impact of COVID-19, one of the first steps we took was to pause capital spending where we could during the quarter. Free cash flow for the year exceeded our expectations due to lower than planned capital spending and a reduction in working capital primarily driven by accounts receivable. With that, I will turn the call over to Walt for his remarks.