(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our 2020 Form 10-K. This discussion and analysis contains forward-looking statements that are based on management's current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe in the section entitled Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q, as well as Part I, Item 1A, "Risk Factors" in our 2020 Form 10-K. OVERVIEW We are a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry. We are driven by our mission: Safeguarding Global Health(R). We provide end-to-end sterilization as well as microbiological and analytical lab testing and advisory services to help ensure that medical, pharmaceutical and food products are safe for healthcare practitioners, patients and consumers in the United States and around the world. Our services are an essential aspect of our customers' manufacturing process and supply chains, helping to ensure sterilized medical products reach healthcare practitioners and patients. Most of these services are necessary for our customers to satisfy applicable government requirements. We serve our customers throughout their product lifecycles, from product design to manufacturing and delivery, helping to ensure the sterility, effectiveness and safety of their products for the end user. We operate across two core businesses: sterilization services and lab services. The combination of Sterigenics, our terminal sterilization business, and Nordion, our Co-60 supply business, makes us the only vertically integrated global gamma sterilization provider in the sterilization industry. For financial reporting purposes, our sterilization services business consists of two reportable segments, Sterigenics and Nordion, and our lab services business consists of one reportable segment, Nelson Labs. For the three and nine months ended September 30, 2021, respectively, we recorded net revenues of $226.2 million and $690.2 million, net income of $27.4 million and $81.1 million, Adjusted Net Income of $58.7 million and $181.9 million, and Adjusted EBITDA of $116.7 million and $356.6 million. For the definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation of these non-GAAP measures from net income (loss), please see "Non-GAAP Financial Measures." STRATEGIC DEVELOPMENTS AND KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS The following summarizes strategic developments and key factors that have underpinned our operating results for the three and nine months ended September 30, 2021 and may continue to affect our performance and financial condition in future periods. Driving organic growth. During the three and nine months ended September 30, 2021, we continued to make investments to expand capacity and implement EO facility enhancements in our Sterigenics business and expand our cobalt development resources in our Nordion business. In addition, we continue to expand capacity to meet demand for microbiological testing and extractables and leachables testing in our Nelson Labs business. Disciplined and strategic M&A activity. We continue to pursue strategic acquisitions to grow our footprint and expand our capabilities. Most recently, in November 2021, we acquired Regulatory Compliance Associates Inc., for approximately $31 million, bringing expertise in regulatory, quality and compliance advisory services to our Expert Advisory Services team. On March 8, 2021, we acquired BioScience Laboratories, LLC ("BioScience Labs") with one location in Bozeman, Montana. BioScience Labs is a provider of outsourced topical antimicrobial and virology product testing in the pharmaceutical, medical device, and consumer products industries. BioScience Labs' expertise in analytical testing and clinical trial services will complement Nelson Labs' existing strengths in antimicrobial and virology testing. In July 2020, we acquired Iotron Industries Canada, Inc. ("Iotron"), an E-beam processing services and equipment provider. Additionally, on May 18, 2021, we completed the purchase of the outstanding noncontrolling interests of 15% and 33% of our two China subsidiaries, respectively, for a total purchase price of $8.6 million. On March 11, 2021, we completed the acquisition of the remaining 15% ownership of Nelson Labs Fairfield for $12.4 million. Pursuant to the terms of the transaction, we acquired 85% of the equity interests of Nelson Labs Fairfield in August 2018 and were required to acquire the 15% noncontrolling interest within three years from the date of the acquisition. Borrowings and financing costs. A combination of lower outstanding borrowings and reduced pricing on our debt resulted in a reduction in cash interest expense for the three and nine months ended September 30, 2021 compared to
the three and nine months ended September 30, 2020. On January 20, 2021 we amended our Term Loan to reduce the interest rate spread over LIBOR from 4.50% to 2.75%, and the LIBOR floor from 1.00% to 0.50%. The changes resulted in an effective reduction in current interest rates of 2.25%. We expect the amendment to provide additional cash interest savings of approximately $40.0 million per year based on the outstanding principal balance as of the date of the amendment. Interest savings in 2021 will be offset by cash and non-cash charges associated with the repricing amendment. In connection with this transaction, we wrote off approximately $11.3 million in debt issuance costs and debt discounts and incurred approximately $2.9 million in costs directly related to the refinancing transaction. On March 26, 2021, we amended our Revolving Credit Facility to reduce the interest rate spread over LIBOR applicable to revolving loans from 3.50% to 2.75%.
Nov 10, 2021
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