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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 221 added, 126 removed, 319 unchanged (52% of the section changed)

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• where cash will come from to fund future debt principal repayments, growth outside of core operations, repurchases of shares, cash dividends and future working capital needs.

As you read the MD&A, it may be helpful to refer to information in our consolidated financial statements contained herein, which present the results of our operations for the first quarter of fiscal 2025 and fiscal 2024.

As you read the MD&A, it may be helpful to refer to information in our consolidated financial statements contained herein, which present the results of our operations for the second quarter and first half of fiscal 2025 and fiscal 2024.

It may also be helpful to refer to our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the Securities and Exchange Commission ("SEC") on May 29, 2024, including information in Item 1, "Business," Part I, Item 1A, "Risk Factors," and Note 12 to our consolidated financial statements titled, "Commitments and Contingencies," and Part II, Item 1A, "Risk Factors" of this Quarterly Report, for a discussion of some of the matters that can adversely affect our business and results of operations.

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We operate and report our financial information in three reportable business segments:

Healthcare, Applied Sterilization Technologies ("AST"), and Life Sciences.

Healthcare, AST, and Life Sciences.

Previously, we had four reportable business segments;

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Acquisitions and Divestitures .

During the first three months of fiscal 2025, we completed several tuck-in acquisitions, which continued to expand our product and service offerings in the Healthcare and AST segments.

During the first six months of fiscal 2025, we completed several tuck-in acquisitions, which continued to expand our product and service offerings in the Healthcare and AST segments.

Total aggregate consideration was approximately $17.5 million .

On June 20, 2023, we entered into a definitive agreement to purchase the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company (NYSE:

The transaction was completed on August 2, 2023, and t he acquired assets from BD were integrated into our Healthcare segment.

On August 2, 2023 , we purchased the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company (NYSE:

The acquired assets from BD were integrated into our Healthcare segment.

The purchase price of the BD acquisition was $539.8 million.

The acquisition also qualified for a tax benefit related to tax deductible goodwill, with a present value of approximately $60.0 million .

The purchase price of the acquisition was financed with borrowings from our existing Revolving Credit Facility.

The purchase price of the acquisition was financed with borrowings from our Previous Revolving Credit Facility.

For more information, refer to Note 7 titled, " Debt."

Acquisition and integration expenses totaled $2.3 million and $2.2 million for the three months ended June 30, 2024 and 2023, respectively.

Acquisition and integration expenses are reported in the Selling, general and administrative expenses line of our Consolidated Statements of Income and include, but are not limited to, investment banker, advisory, legal and other professional fees, and certain employee-related expenses.

Acquisition and integration expenses totaled $3.2 million and $5.5 million for the three and six months ended September 30, 2024, respectively.

Acquisition and integration expenses totaled $15.8 million and $18.0 million for the three and six months ended September 30, 2023, respectively.

The decrease in acquisition and integration expenses for the three and six months ended September 30, 2024 is primarily due to charges related to the acquisition of assets from BD and a fair value adjustment related to a building held for sale from a previous acquisition during fiscal 2024.

Acquisition and integration expenses are reported in the Selling, general and administrative expenses line of our Consolidated Statements of Income and

include, but are not limited to, investment banker, advisory, legal and other professional fees, and certain employee-related expenses.

On April 1, 2024, we completed the sale of the Controlled Environment Certification Services business.

We recorded net proceeds of $41.5 million and recognized a pre-tax gain on the sale of $18.8 million in the first quarter of fiscal 2025.

We recorded net proceeds of $41.9 million and recognized a pre-tax gain on the sale of $19.2 million in fiscal 2025.

The business generated approximately $35.0 million in revenues in fiscal 2024.

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Due to the transaction closing in the first quarter of fiscal 2025, the held for sale assets and liabilities were classified as current as of March 31, 2024.

Our Consolidated Statements of Cash Flows include the financial results of the Dental segment for all periods presented.

Our Consolidated Statements of Cash Flows include the financial results of the Dental segment through the date of sale on May 31, 2024.

A majority of the proceeds received from the sale were utilized to pay off existing debt.

For more information, see Note 4 to our consolidated financial statements titled, " Discontinued Operations ."

Revenues increased 8.1% to $1,279.5 million for the three months ended June 30, 2024, as compared to $1,183.4 million for the same period in the prior year.

Revenues increased 7.3% to $1,328.9 million for the three months ended September 30, 2024, as compared to $1,238.2 million for the same period in the prior year.

Revenues increased 7.7% to $2,608.4 million for the six months ended September 30, 2024, as compared to $2,421.6 million for the same period in the prior year.

The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.

Gross profit percentage was 44.7% for both of the first three months of fiscal 2025 and fiscal 2024.

Favorable impacts from pricing and material costs were offset by unfavorable impacts from labor costs and adjustments and other charges.

Income from operations for the first three months of fiscal 2025 was $185.5 million, compared to income from operations of $197.8 million for the first three months of fiscal 2024.

The decrease in income from operations for the three month periods is primarily due to restructuring expenses associated with the restructuring plan adopted in May 2024, as well as other compensation related expenses, which was partially offset by the benefits of higher volume and pricing as well as added volume from the acquisition of assets from BD.

Cash flows from operations were $303.7 million and free cash flow was $195.7 million for the first three months of fiscal 2025 compared to cash flows from operations of $281.1 million and free cash flow of $214.5 million for the first three months of fiscal 2024 (see the subsection below titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2025 increase in cash flows from operations resulted from the increase in cash provided by working capital, primarily driven by higher collection on accounts receivable and improved inventory level management when compared to the same prior year period.

The fiscal 2025 decrease in free cash flow is primarily due to the timing of capital spending.

Our debt-to-total capital ratio was 26.7% at June 30, 2024 and 33.7% at March 31, 2024.

During the first three months of fiscal 2025, we declared and paid cash dividends totaling $0.52 per ordinary share.

Additional information regarding our financial performance during the first quarter of fiscal 2025 is included in the subsection below titled “Results of Operations.”

Gross profit percentage for the second quarter of fiscal 2025 was 43.6% compared to the gross profit percentage for the second quarter of fiscal 2024 of 44.1%.

Gross profit percentage for the first six months of fiscal 2025 was 44.1% compared to the gross profit percentage for the first six months of fiscal 2024 of 44.4%.

The decrease in gross profit percentage for the three and six periods reflects unfavorable impacts from labor and overhead costs, productivity, and adjustments and other charges that were partially offset by favorable impacts from pricing.

Income from operations for the second quarter of fiscal 2025 was $219.7 million, compared to income from operations of $191.6 million for the second quarter of fiscal 2024.

Income from operations for the first six months of fiscal 2025 was $405.2 million, compared to income from operations of $389.3 million for the first six months of fiscal 2024.

The increase in income from operations for the three and six month periods is primarily due to increased volume, including added volume from the acquisition of assets from BD, and pricing, which was partially offset by increased labor costs.

Cash flows from operations were $554.5 million and free cash flow was $344.5 million for the first six months of fiscal 2025 compared to cash flows from operations of $427.2 million and free cash flow of $284.7 million for the first six months of fiscal 2024 (see the subsection below titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2025 increase in cash flows from operations and free cash flow resulted from the increase in cash provided by working capital, primarily driven by higher collections on accounts receivable and improved inventory management when compared to the same prior year period.

Our debt-to-total capital ratio was 25.3% at September 30, 2024 and 33.7% at March 31, 2024.

During the first six months of fiscal 2025, we declared and paid cash dividends totaling $1.09 per ordinary share.

Additional information regarding our financial performance during the second quarter of fiscal 2025 is included in the subsection below titled “Results of Operations.”

NON-GAAP FINANCIAL MEASURES

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We use this as a measure to gauge our ability to pay cash dividends, fund growth outside of core operations, fund future debt principal repayments, and repurchase shares.

The following table summarizes the calculation of our free cash flow for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30,

The following table summarizes the calculation of our free cash flow for the six months ended September 30, 2024 and 2023:

Six Months Ended September 30,

(dollars in thousands) 2024 2023

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Results of Operations

In the following subsections, we discuss our earnings and the factors affecting them for the first three months of fiscal 2025 compared to the same fiscal 2024 period.

In the following subsections, we discuss our earnings and the factors affecting them for the second quarter and first six months of fiscal 2025 compared to the same fiscal 2024 period.

We begin with a general overview of our operating results and then separately discuss earnings for our operating segments.

The following table compares our revenues for the three months ended June 30, 2024 to the revenues for the three months ended June 30, 2023:

Three Months Ended June 30,

The following tables compare our revenues for the three and six months ended September 30, 2024 to the revenues for the three and six months ended September 30, 2023:

Three Months Ended September 30,

(dollars in thousands) 2024 2023 Change Percent Change

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Other foreign revenues 326,582 308,154 18,428 6.0 %

Revenues increased 8.1% to $1,279.5 million for the three months ended June 30, 2024, as compared to $1,183.4 million for the same period in the prior year.

The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.

Service revenues increased 9.2% for the three months ended June 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and AST segments, which was partially offset by a decline in the Life Sciences segment caused by the divestiture of the Controlled Environment Certification Services ("CECS") business.

Consumable revenues increased by 20.8% for the three months ended June 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments.

Capital equipment revenues decreased 10.3% for the three months ended June 30, 2024, as compared to the same period in the prior year, reflecting declines in the Healthcare and Life Sciences segments.

Ireland revenues increased 10.8% to $22.2 million for the three months ended June 30, 2024, as compared to $20.0 million for the same period in the prior year, reflecting growth in consumable and service revenues, partially offset by a decline in capital equipment revenues.

United States revenues increased 10.6% to $946.9 million for the three months ended June 30, 2024, as compared to $855.8 million for the same period in the prior year, reflecting growth in consumable and service revenues, partially offset by a decline in capital equipment revenues.

Revenues from other foreign locations increased 0.9% to $310.4 million for the three months ended June 30, 2024, as compared to $307.6 million for the same period in the prior year.

The increase reflects growth within the EMEA region, which was partially offset by declines primarily in the Asia Pacific region.

Revenues increased 7.3% to $1,328.9 million for the three months ended September 30, 2024, as compared to $1,238.2 million for the same period in the prior year.

The increase reflects organic growth, primarily driven by volume in the Healthcare segment, and pricing across all three segments.

Service revenues increased 9.1% for the three months ended September 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and AST segments, which was partially offset by a decline in the Life Sciences segment caused by the divestiture of the Controlled Environment Certification Services ("CECS") business.

Consumable revenues increased by 13.2% for the three months ended September 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments.

Capital equipment revenues decreased 3.6% for the three months ended September 30, 2024, as compared to the same period in the prior year, reflecting declines in the Life Sciences and Healthcare segments.

Ireland revenues increased 11.8% to $22.8 million for the three months ended September 30, 2024, as compared to $20.4 million for the same period in the prior year, reflecting growth in consumable and service revenues, partially offset by a decline in capital equipment revenues.

United States revenues increased 7.7% to $979.5 million for the three months ended September 30, 2024, as compared to $909.7 million for the same period in the prior year, reflecting growth in service and consumable revenues, partially offset by a decline in capital equipment revenues.

Revenues from other foreign locations increased 6.0% to $326.6 million for the three months ended September 30, 2024, as compared to $308.2 million for the same period in the prior year, reflecting growth in the Europe, Middle East & Africa ("EMEA"), Latin America, and Asia Pacific regions, partially offset by a decline in the Canadian region.

Six Months Ended September 30,

(dollars in thousands) 2024 2023 Change Percent Change

Total revenues $ 2,608,414 $ 2,421,590 $ 186,824 7.7 %

Revenues by type:

Service revenues 1,256,213 1,150,708 105,505 9.2 %

Consumable revenues 828,449 708,821 119,628 16.9 %

Capital equipment revenues 523,752 562,061 (38,309) (6.8) %

Revenues by geography:

Ireland revenues 44,996 40,435 4,561 11.3 %

United States revenues 1,926,418 1,765,439 160,979 9.1 %

Other foreign revenues 637,000 615,716 21,284 3.5 %

Revenues increased 7.7% to $2,608.4 million for the six months ended September 30, 2024, as compared to $2,421.6 million for the same period in the prior year.

The increase reflects organic growth, primarily in the Healthcare segment, due to the benefits of higher volume, including the added volume from the acquisition of assets from BD, and pricing.

Service revenues increased 9.2% for the six months ended September 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and AST segments, which was partially offset by a decline in the Life Sciences segment caused by the divestiture of the CECS business.

Consumable revenues increased by 16.9% for the six months ended September 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments.

Capital equipment revenues decreased 6.8% for the six months ended September 30, 2024, as compared to the same period in the prior year, reflecting declines in the Healthcare and Life Sciences segments.

Ireland revenues increased 11.3% to $45.0 million for the six months ended September 30, 2024, as compared to $40.4 million for the same period in the prior year, reflecting growth in consumable and service revenues, partially offset by a decline in capital equipment revenues.

United States revenues increased 9.1% to $1,926.4 million for the six months ended September 30, 2024, as compared to $1,765.4 million for the same period in the prior year, reflecting growth in consumable and service revenues, partially offset by a decline in capital equipment revenues.

Revenues from other foreign locations increased 3.5% to $637.0 million for the six months ended September 30, 2024, as compared to $615.7 million for the same period in the prior year.

The increase reflects growth within the EMEA, Latin America, and Asia Pacific regions, which was partially offset by declines in the Canadian region.

Gross Profit.

Our gross profit is affected by the volume, pricing, and mix of sales of our products and services, as well as the costs associated with the products and services that are sold.

The following tables compare our gross profit for the three months ended June 30, 2024 to the three months ended June 30, 2023:

Three Months Ended June 30, Change Percent

The following tables compare our gross profit for the three and six months ended September 30, 2024 to the three and six months ended September 30, 2023:

Three Months Ended September 30, Change Percent

(dollars in thousands) 2024 2023

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Total gross profit percentage 43.6 % 44.1 %

Gross profit percentage was 44.7% for both of the first three months of fiscal 2025 and fiscal 2024.

Favorable impacts from pricing (140 basis points), material costs (70 basis points), and divestitures (20 basis points) were offset by unfavorable impacts from labor costs (130 basis points), adjustments and other charges (70 basis points), productivity (20 basis points), and acquisitions (10 basis points).

Gross profit percentage for the second quarter of fiscal 2025 was 43.6% compared to the gross profit percentage for the second quarter of fiscal 2024 of 44.1%.

Unfavorable impacts from labor and overhead costs (160 basis points), productivity (60 basis points), and adjustments and other charges (50 basis points) were partially offset by favorable impacts from pricing (130 basis points), mix (40 basis points), material costs (30 basis points), and divestitures (20 basis points).

Six Months Ended September 30, Change Percent

(dollars in thousands) 2024 2023

Gross profit:

Product $ 643,061 $ 600,026 $ 43,035 7.2 %

Service 508,160 475,206 32,954 6.9 %

Total gross profit $ 1,151,221 $ 1,075,232 $ 75,989 7.1 %

Gross profit percentage:

Product 47.6 % 47.2 %

Service 40.5 % 41.3 %

Total gross profit percentage 44.1 % 44.4 %

Gross profit percentage for the first six months of fiscal 2025 was 44.1% compared to gross profit percentage for the first six months of fiscal of 2024 of 44.4%.

Unfavorable impacts from labor and overhead costs (140 basis points), adjustments and other charges (60 basis points), productivity (40 basis points), and acquisitions (10 basis points) were partially offset by favorable impacts from pricing (140 basis points), material costs (50 basis points), divestitures (20 basis points), and mix (10 basis points).

Operating Expenses.

The following table compares our operating expenses for the three months ended June 30, 2024 to the three months ended June 30, 2023:

Three Months Ended June 30, Change Percent

The following table compares our operating expenses for the three and six months ended September 30, 2024 to the three and six months ended September 30, 2023:

Three Months Ended September 30, Change Percent

(dollars in thousands) 2024 2023

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Research and development 27,031 26,268 763 2.9 %

Restructuring expenses 25,700 19 25,681 nm

Restructuring expenses (credits) 2,796 (23) 2,819 nm

Total operating expenses $ 359,125 $ 354,675 $ 4,450 1.3 %

Six Months Ended September 30, Change Percent

(dollars in thousands) 2024 2023

Operating expenses:

Selling, general, and administrative $ 664,924 $ 634,960 $ 29,964 4.7 %

Research and development 52,604 50,962 1,642 3.2 %

Restructuring expenses (credits) 28,496 (4) 28,500 nm

Total operating expenses $ 746,024 $ 685,918 $ 60,106 8.8 %

nm - not meaningful

Selling, General, and Administrative Expenses.

Significant components of total selling, general, and administrative expenses (“SG&A”) are compensation and benefit costs, fees for professional services, travel and entertainment expenses, facility costs, gains or losses from divestitures, and other general and administrative expenses.

SG&A increased 9.5% in the first three months of fiscal 2025 over the same prior year period.

The fiscal 2025 increase is primarily attributable to increased compensation, including incentive compensation and benefit costs, as well as increases in professional fees.

SG&A increased 0.3% and 4.7% in the three and six month periods ended September 30, 2024, respectively, compared to the same prior year periods.

The fiscal 2025 increase is primarily attributable to increased compensation, including benefit costs, as well as increases in professional fees.

Research and Development.

Research and development expenses increased 3.6% in the first three months of fiscal 2025 over the same prior year period.

Research and development expenses increased 2.9% and 3.2% in the three and six month periods ended September 30, 2024, respectively, compared to the same prior year periods.

Research and development expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects.

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Fewer than 300 positions are being eliminated.

These restructuring actions are designed to enhance profitability and improve efficiency, and we expect to be substantially complete with the actions by the end of fiscal 2025.

These restructuring actions are designed to enhance profitability and improve efficiency, and we expect these actions to be substantially complete by the end of fiscal 2025.

We anticipate improvements in income from operations of approximately $25.0 million per year, with the majority of the benefit being in fiscal 2026 and beyond due to timing of actions.

The following tables summarize our total pre-tax restructuring expenses recorded in fiscal 2025 related to the Restructuring Plan:

Three Months Ended June 30, 2024 Restructuring Plan

Three Months Ended September 30, Six Months Ended September 30,

Restructuring Plan

Severance and other compensation related costs

Lease and other contract termination costs 2,970

$ 1,805 $ 23,285

Lease and other contract termination and other costs

Product rationalization (1)

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Total Restructuring Expense

$ 2,796 $ 30,878

(1) Recorded in Cost of revenues on the Consolidated Statements of Income.

The Restructuring Plan expenses incurred during the three months ended June 30, 2024 primarily related to actions taken within our Healthcare segment.

The Restructuring Plan expenses incurred during the three and six months ended September 30, 2024 primarily related to actions taken within our Healthcare segment.

Total pre-tax restructuring expense of $75.3 million has been recorded relating to the Restructuring Plan since inception, of which $20.7 million has been recorded in Cost of revenues.

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Fiscal 2025 Charges 27,246

Balance at June 30, 2024 $ 21,375

Balance at September 30, 2024 $ 21,826

Non-Operating Expenses, Net.

The following tables compare our net non-operating expenses for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30,

The following tables compare our net non-operating expenses for the three and six months ended September 30, 2024 and 2023:

Three Months Ended September 30,

(dollars in thousands) 2024 2023 Change

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(1,126) (1,237) 111

Gain on sale of business (18,803) $ — (18,803)

Loss on sale of business and equity investment, net

6,232 — 6,232

Non-operating expenses, net $ 24,774 $ 35,701 $ (10,927)

Non-operating expenses, net consists of interest expense on debt, offset by interest earned on cash, cash equivalents, short-term investment balances, and other miscellaneous (income) expense.

Interest expense decreased $2.0 million during the first three months of fiscal 2025 as compared to the prior year period, primarily due to the lower principal amount of debt outstanding.

Six Months Ended September 30,

(dollars in thousands) 2024 2023 Change

Non-operating expenses, net:

Interest expense $ 50,052 $ 69,295 $ (19,243)

Interest and miscellaneous income

(2,435) (2,614) 179

Gain on sale of business and equity investment, net

(12,571) $ — (12,571)

Non-operating expenses, net $ 35,046 $ 66,681 $ (31,635)

Non-operating expenses, net, consists of interest expense on debt, offset by interest earned on cash, cash equivalents, and short-term investment balances, and other miscellaneous income.

Interest expense decreased $17.3 million and $19.2 million during the second quarter and first six months of fiscal 2025, respectively, as compared to the prior year periods, primarily due to the lower principal amount of debt outstanding as well as lower interest rates on floating rate debt.

For more information, refer to Note 7 to our consolidated financial statements titled, "Debt."

Interest and miscellaneous income decreased $0.1 million during the first three months of fiscal 2025 as compared to the prior year period.

Gain on sale of business during the first three months of fiscal 2025 was $18.8 million and relates to the sale of our CECS business.

For more information, refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions and Divestitures."

Interest and miscellaneous income decreased $0.1 million and $0.2 million during the second quarter and first six months of fiscal 2025, respectively.

Loss on sale of business and equity investment was $6.2 million during the second quarter of fiscal 2025 and relates to a loss recorded on an equity investment.

Gain on sale of business and equity investment was $12.6 million for the first six months of fiscal 2025 and primarily relates to the sale of our CECS business, which was partially offset by a loss recorded on an equity investment.

For more information on our equity investments, refer to Note 17 to our consolidated financial statements titled, "Fair Value Measurements." For more information on our divestiture activity, refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions and Divestitures."

Income Taxes.

The following tables compare our tax expense and effective income tax rates for the three months ended June 30, 2024 and June 30, 2023:

Three Months Ended June 30, Change Percent

The following tables compare our tax expense and effective income tax rates for the three and six months ended September 30, 2024 and 2023:

Three Months Ended September 30, Change Percent

(dollars in thousands) 2024 2023

Income tax expense

$ 43,506 $ 35,055 $ 8,451 24.1%

Effective income tax rate 22.3 % 22.5 %

Six Months Ended September 30, Change Percent

(dollars in thousands) 2024 2023

Income tax expense $ 78,816 $ 71,255 $ 7,561 10.6%

Effective income tax rate 21.3 % 22.1 %

We record income tax expense during interim periods based on our estimate of the annual effective income tax rate, adjusted each quarter for discrete items.

We analyze various factors to determine the estimated annual effective income tax rate, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives.

The effective income tax rates from continuing operations for the three month periods ended June 30, 2024 and 2023 were 20.1% and 21.7%, respectively.

The fiscal 2025 effective tax rate decreased when compared to fiscal 2024, primarily due to changes in geographic mix of projected profits and an increase in favorable discrete items.

The effective income tax rates from continuing operations for the three month periods ended September 30, 2024 and 2023 were 22.3% and 22.5%, respective ly.

The effective income tax rates from continuing operations for the six month periods ended September 30, 2024 and 2023 were 21.3% and 22.1%, respectively.

The fiscal 2025 effective tax rates decreased when compared to fiscal 2024, primarily due to changes in geographic mix of projected profits and an increase in favorable discrete items.

Business Segment Results of Operations.

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The accounting policies for reportable segments are the same as those for the consolidated Company.

For the three months e nded June 30, 2024 and 2023 , revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues.

For the three and six months e nded September 30, 2024 and 2023 , revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues.

A dditional information regarding our segments is included in our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

The following tables compare business segment revenues as well as impacts from acquisitions, divestitures, and foreign currency movements for the three and three months ended June 30, 2024 and 2023.

Three Months Ended June 30, (unaudited)

The following tables compare business segment revenues as well as impacts from acquisitions, divestitures, and foreign currency movements for the three and six months ended September 30, 2024 and 2023.

Three Months Ended September 30, (unaudited)

As reported, GAAP Impact of Acquisitions Impact of Divestitures Impact of Foreign Currency Movements GAAP Growth Organic Growth Constant Currency Organic Growth

2024 2023 2024 2023 2024 2024 2024 2024

Segment revenues:

Healthcare $ 944,230 $ 870,056 $ 11,397 $ — $ 748 8.5 % 7.2 % 7.1 %

AST 256,737 235,053 — — 1,250 9.2 % 9.2 % 8.7 %

Life Sciences 127,945 133,095 — $ (8,918) 59 (3.9) % 3.0 % 3.0 %

Total $ 1,328,912 $ 1,238,204 $ 11,397 $ (8,918) $ 2,057 7.3 % 7.2 % 7.0 %

Six Months Ended September 30, (unaudited)

As reported, U.S.

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Constant currency organic revenue growth is subject to a further adjustment to eliminate the impact of foreign currency movements.

Healthcare revenues increased 10.1% to $901.2 million for the three months ended June 30, 2024, as compared to $818.9 million for the same prior year period.

Healthcare revenues increased 8.5% to $944.2 million for the three months ended September 30, 2024, as compared to $870.1 million for the same prior year period.

This increase reflects growth in service and consumable revenues of 14.1% and 11.7%, respectively, which was partially offset by a decline in capital equipment revenues of 2.0%.

The constant currency organic growth of 7.1% is primarily due to increased volume, impacting revenues by a mid-single digit percentage, as well as increased pricing.

Healthcare revenues increased 9.3% to $1,845.5 million for the six months ended September 30, 2024, as compared to $1,688.9 million for the same prior year period.

This increase reflects growth in consumable and service revenues of 16.8% and 14.2%, respectively, which was partially offset by a decline in capital equipment revenues of 5.8%.

The constant currency organic growth of 5.2% is primarily due to increased volume, impacting revenues by a low single digit percentage, as well as increased pricing.

The Healthcare segment's backlog at June 30, 2024 was $362.0 million.

The Healthcare segment's backlog at June 30, 2023 was $491.7 million.

The constant currency organic growth of 6.2% is primarily due to increased volume, impacting revenues by a mid-single digit percentage, as well as increased pricing.

The Healthcare segment's backlog at September 30, 2024 was $405.3 million.

The Healthcare segment's backlog at September 30, 2023 was $457.1 million.

The decrease is due to shortened lead times in fiscal 2024 due to improving supply chains, which drove strong shipments throughout fiscal 2024.

AST revenues increased 7.2% to $249.8 million for the three months ended June 30, 2024, as compared to $233.1 million for the same prior year period.

AST revenues increased 9.2% to $256.7 million for the three months ended September 30, 2024, as compared to $235.1 million for the same prior year period.

The constant currency organic growth of 8.7% is primarily due to increased pricing, impacting revenues by a mid-single digit percentage, as well as increased volume.

Life Sciences revenues decreased 2.2% to $128.5 million for the three months ended June 30, 2024, as compared to $131.4 million for the same prior year period.

This decrease is partially due to the sale of the CECS business during the first quarter of fiscal 2025, which impacted service revenue, resulting in a decline of 16.9%.

This decrease also reflects declines in capital equipment revenues of 14.6% and was partially offset by an increase in consumable revenues of 13.2%.

AST revenues increased 8.2% to $506.5 million for the six months ended September 30, 2024, as compared to $468.2 million for the same prior year period.

The constant currency organic growth of 8.2% is primarily due to increased pricing, impacting revenues by a mid-single digit percentage, as well as increased volume.

Life Sciences revenues decreased 3.9% to $127.9 million for the three months ended September 30, 2024, as compared to $133.1 million for the same prior year period.

This decrease is partially due to the sale of the CECS business, resulting in a decline of 14.2% in service revenues.

This decrease also reflects declines in capital equipment revenues of 35.1%, which was partially offset by growth in consumable revenues of 21.4%.

The constant currency organic growth of 3.0% is primarily due to increased pricing, impacting revenues by a low single digit percentage.

The Life Sciences backlog at June 30, 2024 was $72.2 million.

The Life Sciences backlog at June 30, 2023 was $104.9 million.

The decrease is primarily due to softening demand, as anticipated.

The following table compares business segment and Corporate operating income for the three months ended June 30, 2024 and 2023.

Three Months Ended June 30,

Life Sciences revenues decreased 3.1% to $256.4 million for the six months ended September 30, 2024, as compared to $264.5 million for the same prior year period.

This decrease is partially due to the sale of the CECS business, resulting in a decline of 15.6% in service revenues.

This decrease also reflects declines in capital equipment revenues of 25.5% which was partially offset by growth in consumable revenues of 17.2%.

The constant currency organic growth of 3.6% is primarily due to increased pricing, impacting revenues by a low single digit percentage.

The Life Sciences backlog at September 30, 2024 was $75.6 million.

The Life Sciences backlog at September 30, 2023 was $91.1 million.

The decrease is primarily due to softening demand.

The following table compares business segment and Corporate operating income for the three and six months ended September 30, 2024 and 2023.

Three Months Ended September 30, Six Months Ended September 30,

2024 2023 2024 2023

Segment operating income (loss):

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Acquisition and integration related charges (2)

3,205 15,808 5,459 18,045

Tax restructuring costs (3)

(561) — (43) 9

Amortization of inventory and property "step up" to fair value (1)

Restructuring charges (4)

Total income (loss) from operations $ 185,531 $ 197,761

1,402 917 2,793 2,539

Restructuring charges (credits) (4)

2,796 (23) 30,878 (4)

Total income from operations

$ 219,666 $ 191,553 $ 405,197 $ 389,314

(1) For more information regarding our recent acquisitions and divestitures, refer to Note 3 titled, "Business Acquisitions and Divestitures."

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(4) For more information regarding our restructuring efforts, refer to Note 2 titled, "Restructuring ."

The Healthcare segment’s operating income increased 9.4% to $216.9 million for the three months ended June 30, 2024, as compared to $198.2 million in the same prior year period.

The segment's operating margins were 24.1% and 24.2% for the first three months of fiscal 2025 and 2024, respectively.

The increase in operating income for the three months ended June 30, 2024 is primarily due to the benefits of higher volume, including added volume from the acquisition of assets from BD, and pricing, which were partially offset by increased compensation costs.

The decrease in operating margin for the three months ended June 30, 2024 is primarily due to increased compensation costs, primarily due to increased headcount.

The AST segment's operating income increased 7.4% to $117.7 million for the three months ended June 30, 2024, as compared to $109.6 million during the same prior year period.

The segment's operating margins were 47.1% and 47.0% for the first three months of fiscal 2025 and 2024, respectively.

The increase in operating income and operating margin for the three months ended June 30, 2024 is primarily due to favorable pricing, which was partially offset by increased labor costs.

The Life Sciences segment’s operating income increased 5.5% to $52.6 million for the three months ended June 30, 2024, as compared to $49.8 million for the same prior year period.

The segment's operating margins were 40.9% and 37.9% for the first three months of fiscal 2025 and 2024, respectively.

The increase in operating income and operating margin for the three months ended June 30, 2024 is primarily due to favorable pricing and mix following the divestiture of CECS.

The Healthcare segment’s operating income increased 11.7% to $228.0 million for the three months ended September 30, 2024, as compared to $204.1 million in the same prior year period.

The segment's operating margins were 24.1% and 23.5% for the second quarter of fiscal 2025 and 2024, respectively.

The Healthcare segment’s operating income increased 10.6% to $444.9 million for the six months ended September 30, 2024, as compared to $402.2 million in the same prior year period.

The segment's operating margins were 24.1% and 23.8% for the first six months of fiscal 2025 and 2024, respectively.

The increase in operating income and margin for the three and six month periods ended September 30, 2024 is primarily due to the benefits of higher volume, including added volume from the acquisition of assets from BD, and pricing, which were partially offset by increased compensation costs.

The AST segment's operating income decreased 0.8% to $109.9 million for the three months ended September 30, 2024, as compared to $110.8 million during the same prior year period.

The segment's operating margins were 42.8% and 47.1% for the second quarter of fiscal 2025 and 2024, respectively.

The AST segment's operating income increased 3.3% to $227.6 million for the six months ended September 30, 2024, as compared to $220.4 million during the same prior year period.

The segment's operating margins were 44.9% and 47.1% for the first six months of fiscal 2025 and 2024, respectively.

The decrease in operating income for the three month period ended September 30, 2024 as well as the decrease in operating margin for the three and six month periods ended September 30, 2024 reflects increased labor and energy costs, and a loss incurred on a large capital equipment sale.

The increase in operating income for the six month period ended September 30, 2024 is primarily due to increased pricing.

The Life Sciences segment’s operating income increased 6.8% to $53.7 million for the three months ended September 30, 2024, as compared to $50.3 million for the same prior year period.

The segment's operating margins were 42.0% and 37.8% for the second quarter of fiscal 2025 and 2024, respectively.

The Life Sciences segment’s operating income increased 6.2% to $106.3 million for the six months ended September 30, 2024, as compared to $100.1 million for the same prior year period.

The segment's operating margins were 41.4% and 37.9% for the first six months of fiscal 2025 and 2024, respectively.

The increases in segment operating income and margin for the three and six month periods ended September 30, 2024 is primarily due to favorable pricing and mix.

Liquidity and Capital Resources

The following table summarizes significant components of our cash flows for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30,

The following table summarizes significant components of our cash flows for the six months ended September 30, 2024 and 2023:

Six Months Ended September 30,

(dollars in thousands) 2024 2023

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Net cash provided by (used in) investing activities $ 582,477 $ (672,833)

Net cash used in financing activities $ (998,932) $ (213,637)

Net cash (used in) provided by financing activities $ (1,179,896) $ 256,577

Debt-to-total capital ratio 25.3 % 35.7 %

Free cash flow $ 344,493 $ 284,691

Net Cash Provided by Operating Activities – The net cash provided by our operating activities was $303.7 million for the first three months of fiscal 2025 and $281.1 million for the first three months of fiscal 2024.

Net Cash Provided by/Used In Investing Activities – The net cash provided by investing activities totaled $687.8 million for the first three months of fiscal 2025 and net cash used in investing activities totaled $66.6 million for the first three months of fiscal 2024.

The following discussion summarizes the significant changes in our investing cash flows for the first three months of fiscal 2025 and fiscal 2024:

• Purchases of property, plant, equipment, and intangibles, net – Capital expenditures totaled $108.1 million for the first three months of fiscal 2025 and $66.6 million during the same prior year period.

Net Cash Provided by Operating Activities – The net cash provided by our operating activities was $554.5 million for the first six months of fiscal 2025 and $427.2 million for the first six months of fiscal 2024.

The fiscal 2025 increase in cash flows from operations resulted from the increase in cash provided by working capital, primarily driven by higher collections on accounts receivable and improved inventory management when compared to the same prior year period.

Net Cash Provided By/Used In Investing Activities – The net cash provided by investing activities totaled $582.5 million for the first six months of fiscal 2025 and net cash used in investing activities totaled $672.8 million for the first six months of fiscal 2024.

The following discussion summarizes the significant changes in our investing cash flows for the first six months of fiscal 2025 and fiscal 2024:

• Purchases of property, plant, equipment, and intangibles, net – Capital expenditures totaled $210.0 million for the first six months of fiscal 2025 and $149.9 million during the same prior year period.

The fiscal 2025 increase is due to the timing of capital spending.

• Proceeds from the sale of businesses – During the first three months of fiscal 2025, we received proceeds of $809.6 million from the sale of our Dental segment and the sale of our CECS business.

• Acquisition of businesses, net of cash acquired – During the first three months of fiscal 2025, we used $13.7 million to acquire businesses.

• Proceeds from the sale of property, plant, and equipment - During the first six months of fiscal 2024, we received proceeds from the sale of property, plant, and equipment of $7.4 million.

The fiscal 2024 proceeds were primarily from the sale of a facility previously used by the AST segment.

• Proceeds from the sale of businesses – During the first six months of fiscal 2025, we received proceeds of $809.9 million from the sale of our Dental segment and the sale of our CECS business.

For more information, refer to Note 3 to our consolidated financial statements titled "Business Acquisitions and Divestitures" and Note 4 to our consolidated financial statements titled "Discontinued Operations." During the first six months of fiscal 2024, we received proceeds of $9.5 million from the release of funds held in escrow related to the sale of the Renal Care business during fiscal 2022.

• Acquisition of businesses, net of cash acquired – During the first six months of fiscal 2025 and 2024, we used $17.5 million and $539.8 million, respectively, to acquire businesses.

For more information, refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions and Divestitures."

Net Cash Used In Financing Activities – The net cash used in financing activities amounted to $998.9 million and $213.6 million for the first three months of fiscal 2025 and fiscal 2024, respectively.

The following discussion summarizes the significant changes in our financing cash flows for the first three months of fiscal 2025 and fiscal 2024:

• Payments on term loans – During the first three months of fiscal 2025 and 2024, we repaid $638.1 million and $15.0 million, respectively, of our term loans.

Net Cash Used In/Provided By Financing Activities – The net cash used in financing activities amounted to $1,179.9 million for the first six months of fiscal 2025 compared to net cash provided by financing activities of $256.6 million for the first six months of fiscal 2024.

The following discussion summarizes the significant changes in our financing cash flows for the first six months of fiscal 2025 and fiscal 2024:

• Payments on term loans – During the first six months of fiscal 2025 and 2024, we repaid $638.1 million and $30.0 million, respectively, of our term loans.

The fiscal 2025 increase was primarily due to the use of proceeds from the sale of the Dental segment to pay off our outstanding term loans.

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For more information regarding the sale of the Dental segment, refer to Note 4 to our consolidated financial statements titled "Discontinued Operations."

• Payments under credit facilities, net – Net payments under credit facilities totaled $253.2 million and $144.7 million for the first three months of fiscal 2025 and 2024, respectively.

The fiscal 2025 increase was primarily due to the use of proceeds from the sale of the Dental segment to pay down our outstanding Revolving Credit Facility balance.

• Payments/Proceeds under credit facilities, net – Net payments under credit facilities totaled $344.9 million for the first six months of fiscal 2025 compared to net proceeds under credit facilities of $391.0 million for the first six months of fiscal 2024.

The fiscal 2025 payments were primarily due to the use of proceeds from the sale of the Dental segment to pay down our Previous Revolving Credit Facility balance.

The fiscal 2024 proceeds are attributable to funding of the acquisition of assets from BD.

For more information on our indebtedness, refer to Note 7 to our consolidated financial statements titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

For more information regarding the sale of the Dental segment, refer to Note 4 to our consolidated financial statements titled "Discontinued Operations."

• Repurchases of ordinary shares – During the first three months of fiscal 2025 and 2024 , we obtained 69,780 and 51,494, respectively, of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $10.3 million and $8.7 million, respectively .

During the first three months of fiscal 2025, we purchased 241,507 of our ordinary shares for the aggregate amount of $53.9 million through our share repurchase program.

During the first three months of fiscal 2024, we did not purchase any ordinary shares through our share repurchase program.

For more information on our share repurchases, refer to Note 13 to our consolidated financial

statements titled, "Repurchases of Ordinary Shares" and to our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

• Cash dividends paid to ordinary shareholders – During the first three months of fiscal 2025, we paid total cash dividends of $51.4 million, or $0.52 per outstanding share.

During the first three months of fiscal 2024, we paid total cash dividends of $46.4 million, or $0.47 per outstanding share.

• Transactions with noncontrolling interest holders – During the first three months of fiscal 2025, we received $2.5 million in contributions from noncontrolling interest holders.

• Repurchases of ordinary shares – During the first six months of fiscal 2025 and 2024 , we obtained 77,544 and 57,161, respectively, of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $10.6 million and $9.2 million, respectively .

During the first six months of fiscal 2025, we purchased 446,661 of our ordinary shares for the aggregate amount of $100.0 million through our share repurchase program.

During the first six months of fiscal 2024, we did not purchase any ordinary shares through our share repurchase program.

For more information on our share repurchases, refer to Note 13 to our consolidated financial statements titled, "Repurchases of Ordinary Shares" and to our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

• Cash dividends paid to ordinary shareholders – During the first six months of fiscal 2025, we paid total cash dividends of $107.7 million, or $1.09 per outstanding share.

During the first six months of fiscal 2024, we paid total cash dividends of $97.8 million, or $0.99 per outstanding share.

• Transactions with noncontrolling interest holders – During the first six months of fiscal 2025, we received $2.5 million in contributions from noncontrolling interest holders.

• Stock option and other equity transactions, net – We generally receive cash for issuing shares under our stock option programs.

During the first three months of fiscal 2025 and fiscal 2024, we received cash proceeds totaling $5.6 million and $1.3 million, respectively, under these programs.

During the first six months of fiscal 2025 and fiscal 2024, we received cash proceeds totaling $19.1 million and $2.7 million, respectively, under these programs.

Cash Flow Measures.

The net cash provided by our operating activities was $303.7 million for the first three months of fiscal 2025 and $281.1 million for the first three months of fiscal 2024.

Free cash flow was $195.7 million in the first three months of fiscal 2025 compared to $214.5 million in the first three months of fiscal 2024 (see the subsection above titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2025 decrease in free cash flow is primarily due to the timing of capital spending.

Our debt-to-total capital ratio was 26.7% at June 30, 2024 and 32.2% at June 30, 2023.

The net cash provided by our operating activities was $554.5 million for the first six months of fiscal 2025 and $427.2 million for the first six months of fiscal 2024.

Free cash flow was $344.5 million in the first six months of fiscal 2025 compared to $284.7 million in the first six months of fiscal 2024 (see the subsection above titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2025 increase in free cash flow is primarily due to an increase in cash provided by working capital, primarily driven by higher collections on accounts receivable and improved inventory management when compared to the same prior year period, which was partially offset by increased capital spending.

Our debt-to-total capital ratio was 25.3% at September 30, 2024 and 35.7% at September 30, 2023.

Material Future Cash Obligations and Commercial Commitments.

Information related to our material future cash obligations and commercial commitments is included in our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

Our commercial commitments were approximately $112.2 million at June 30, 2024, reflecting a net increase of $1.8 million in surety bonds and other commercial commitments from March 31, 2024.

Outstanding borrowings under our Revolving Credit Facility as of June 30, 2024 were $231.3 million.

We had $12.3 million of letters of credit outstanding under the Revolving Credit Facility at June 30, 2024.

Our commercial commitments were approximately $120.6 million at September 30, 2024, reflecting a net increase of $10.2 million in surety bonds and other commercial commitments from March 31, 2024.

Outstanding borrowings under our Previous Revolving Credit Facility as of September 30, 2024 were $141.4 million.

We had $12.3 million of letters of credit outstanding under the Previous Revolving Credit Facility at September 30, 2024.

Cash Requirements.

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Each Guarantor that makes a payment under its guarantee will be entitled upon payment in full of all guaranteed obligations under the indenture to a contribution from each Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with U.S.

The following tables present summarized results of operations for the three months ended June 30, 2024 and summarized balance sheet information at June 30, 2024 and March 31, 2024 for the obligor group of the Senior Public Notes.

The following tables present summarized results of operations for the six months ended September 30, 2024 and summarized balance sheet information at September 30, 2024 and March 31, 2024 for the obligor group of the Senior Public Notes.

The obligor group consists of the Parent Company Guarantor, Subsidiary Issuer, and Subsidiary Guarantors for the Senior Public Notes.

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Summarized Results of Operations

(in thousands) Three Months Ended

(in thousands) Six Months Ended

September 30,

Revenues $ 1,466,032

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( in thousands)

June 30, March 31,

September 30, March 31,

Receivables due from non-issuers and non-guarantor subsidiaries $ 19,577,497 $ 19,120,843

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis