SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 4, 2003
STERIS Corporation
(Exact Name of Registrant as Specified in its Charter)
| Ohio |
0-20165 | 34-1482024 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 5960 Heisley Road, Mentor, Ohio |
44060-1834 | |
| (Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s telephone number, including area code (440) 354-2600
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
| ITEM 9. | Regulation FD Disclosure |
Attached hereto as Exhibit 99 is a copy of materials dated September 3 and 4, 2003 and prepared with respect to presentations to analysts that was made by senior management of STERIS Corporation (the “Company”) on September 4, 2003. These materials will also be available on the Company’s website at www.steris.com.
The information contained in this Current Report on Form 8-K, including the exhibit attached hereto, is being furnished to the Securities and Exchange Commission and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. Furthermore, the information contained in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| STERIS Corporation | ||
| By: |
/s/ LAURIE BRLAS | |
| Laurie Brlas Senior Vice President and Chief Financial Officer | ||
Date: September 4, 2003
2
Exhibit 99
STERIS
Analyst Day
SEPTEMBER 3 and 4, 2003
[LOGO]
[LOGO]
Forward-Looking Statements
Except for historical information discussed, today’s presentations include forward-looking statements that involve risks and uncertainties. Investors are cautioned that such statements are only predictions and that actual events or results may differ materially. Some of the factors which could cause actual results to materially differ from those anticipated by the forward-looking statements are set forth in the Company’s latest Quarterly Earnings Announcement dated July 24, 2003. Further, these forward-looking statements speak only as of this date September 4, 2003. We undertake no obligation to publicly release the results of any revisions to the forward-looking statements made today to reflect events or circumstances after today or to reflect the occurrence of unanticipated events.
| ANALYST DAY 2003 |
2 |
[LOGO]
Today’s Agenda
| > | STERIS Overview – Les Vinney |
| > | Business Segment Presentations by Group Presidents |
| > | Healthcare – Chuck Immel |
| > | Life Sciences – Morten Nielsen |
| > | STERIS Isomedix Services – Robert Moss |
| > | Financial Overview – Laurie Brlas |
| > | Wrap-up and Q&A – Les Vinney |
| ANALYST DAY 2003 |
3 |
[LOGO]
Goals for Today
Our purpose in hosting this analyst day is to provide you with:
| > | An increased knowledge and understanding of STERIS |
| > | The opportunity to meet and speak with our senior management team |
| > | An informed perspective on our industry and potential opportunities |
| > | An interactive session that answers your questions about STERIS |
| ANALYST DAY 2003 |
4 |
[LOGO]
> STERIS Overview
| ANALYST DAY 2003 |
[LOGO]
STERIS’s Path to Growth
[GRAPHIC]
| ANALYST DAY 2003 |
6 |
[LOGO]
STERIS Today
| > | Leader in infection prevention equipment and related products |
| > | Restructured in April 2003 to a market-focused business organization |
| > | Three new reporting segments: Healthcare, Life Sciences and STERIS Isomedix Services |
| > | Combination of acquisitions and internal manufacturing changes contributing to growth |
| > | Newly formed “Mission, Vision, Values” statements connect the entire organization |
| ANALYST DAY 2003 |
7 |
[LOGO]
The Mission of STERIS Corporation
To provide a healthier today and a safer tomorrow through knowledgeable people and innovative infection prevention, decontamination and health science technologies, products and services.
| ANALYST DAY 2003 |
8 |
[LOGO]
Sales by Business Segment
Fiscal Year Ended March 31, 2003 (Dollars in millions)
[CHART]
HEALTHCARE ($697)
LIFE SCIENCES ($195)
STERIS ISOMEDIX SERVICES ($79)
| ANALYST DAY 2003 |
9 |
[LOGO]
Key Markets Served
HEALTHCARE
| > | Surgical Support |
| > | Sterile Processing |
| > | Applied Infection Control |
LIFE SCIENCES
| > | Pharmaceutical Production |
| > | Research |
| > | Defense and Industrial |
STERIS ISOMEDIX SERVICES (CONTRACT STERILIZATION)
| ANALYST DAY 2003 | 10 |
[LOGO]
Why STERIS: Investment Considerations
| ANALYST DAY 2003 |
[LOGO]
Investment Considerations
| > | A technology leader |
| > | Diversified and recurring revenue stream |
| > | Leading market positions |
| > | Improving market dynamics |
| > | Strong financial and operating platform |
| > | Experienced and credible management team |
| ANALYST DAY 2003 | 12 |
[LOGO]
A Technology Leader
Broad based technologies . . .
[GRAPHIC]
Delivered through capital equipment
chemistries and services . . .
| ANALYST DAY 2003 | 13 |
[LOGO]
Diversified and Recurring Revenue Stream
| Capital equipment drives | Consumables | and Services |
[GRAPHIC]
52% of fiscal 2003 revenues were higher margin,
recurring consumables and services
STERIS has the unique ability to offer a custom solution for a variety
of customers, industries and geographies
| ANALYST DAY 2003 | 14 |
[LOGO]
Market Leader
| > | Leading supplier of sterilization and surgical support products to U.S. healthcare facilities |
| > | Leading position in contract sterilization for medical technology manufacturers and other industries |
| > | Leading supplier of equipment and chemistries to biopharmaceutical companies for research and production facilities |
| > | STERIS has the broadest range of infection control technologies, products and services in the world |
| > | STERIS has the unique capability to offer custom solutions to a variety of indudtries |
| ANALYST DAY 2003 | 15 |
[LOGO]
Improving Market Dynamics
| > | Aging population is driving demand for healthcare services and pharmaceuticals |
| > | Increased spending by hospitals is leading to expansion and upgrading of facilities |
| > | Ongoing investment in drug production is driving manufacturing capacity and research facilities |
| > | Global awareness of infection control is growing |
| ANALYST DAY 2003 | 16 |
[LOGO]
A Strong Financial and Operating Platform
| > | Consistent revenue and earnings growth |
| > | Low level of debt |
| > | Strong free cash flow |
| > | Efficient operations |
| ANALYST DAY 2003 | 17 |
[LOGO]
Management Team
| > | 75% of management new within the last three years |
| > | All come from larger organizations |
| > | All have a proven ability to execute |
| ANALYST DAY 2003 | 18 |
[LOGO]
Strategic Direction
| ANALYST DAY 2003 |
[LOGO]
Sources of Growth
Earnings Power
| External |
Internal | |
| Improving market dynamics and growing awareness of the need for infection control |
Strategic Actions to Drive Growth and Financials | |
| ANALYST DAY 2003 |
20 |
[LOGO]
Our Growth Strategy
Enhance our revenue stream by continuing to diversify by product, service, market and geography
| > | Capitalize on installed base |
| > | Leverage our channel |
| > | Introduce new technologies |
| > | Adapt our technologies |
| > | Expand internationally |
| ANALYST DAY 2003 |
21 |
[LOGO]
Capitalize on Installed Base
| n | Large revenue opportunity in our own installed base |
| > | Capture consumable opportunity |
| > | Aggressively grow service |
| > | New capital equipment products will have an associated proprietary consumable |
| ANALYST DAY 2003 |
22 |
[LOGO]
Leverage Our Channel in Healthcare
| > | Presence in every U.S. hospital |
| > | Sales force of 250 people |
| > | Service force of 1,000 |
| > | New products, alliances, acquisitions |
| ANALYST DAY 2003 |
23 |
[LOGO]
Introduce New Technologies
| > | R&D spending to approximate $32 million in fiscal 2004 |
| > | Focused new product development effort |
| > | Areas of focus include projects for new industries and new sterilization technologies |
| > | VHP technology advancement into new product uses |
| > | Prion Decontamination |
| > | Segmented sterile processing offering |
| > | Key new products for general infection control and surgical support |
| ANALYST DAY 2003 |
24 |
[LOGO]
Adapt Our Technologies
| CURRENT |
FUTURE POSSIBILITIES | |
| Exploring new applications related to Anthrax contamination | Transportation | |
| Joint research on defense applications for biological and chemical warfare | Hotel and building decontamination | |
| Joint research in space applications |
Food and beverage packaging | |
| ANALYST DAY 2003 |
25 |
[LOGO]
International Expansion Opportunities
First Quarter 2004, including Hamo Acquisition
REVENUE MIX BY GEOGRAPHY
[GRAPH]
| > | Market size is equivalent to U.S. |
| > | Focused on key European markets |
| > | Acquisitions to play strategic role |
| > | Enter with leading-edge technologies |
| > | Organization established in Japan |
| ANALYST DAY 2003 |
26 |
[LOGO]
> Outlook/Financial Targets
| ANALYST DAY 2003 |
Financial Targets
Average Annual Growth Rates
Current demand trends, new product initiatives, and geographical expansion opportunities to grow core businesses organically over next two years
| > | Revenue growth of 10% |
| > | Earnings growth of 15% |
| ANALYST DAY 2003 |
28 |
[LOGO]
Summary
| > | A technology leader with strong market positions |
| > | Diversified and recurring revenue stream |
| > | Improving market dynamics |
| > | Financial flexibility |
| > | Management team that can execute |
| > | Bright future |
| ANALYST DAY 2003 |
29 |
STERIS
Analyst Day
SEPTEMBER 3 and 4, 2003
[LOGO]
STERIS
Analyst Day
SEPTEMBER 3 and 4, 2003
> Healthcare
[LOGO]
[LOGO]
Healthcare Group
Agenda:
| > | Business Overview |
| > | Market and Market Drivers |
| > | Strategy |
| ANALYST DAY 2003 | 32 |
[LOGO]
Healthcare Group Business Definition
A leading provider of an integrated offering of equipment, consumables, and services to hospitals or alternative sites, enabling them to improve the safety, efficiency, and effectiveness of the Ambulatory and Acute Care environments.
| ANALYST DAY 2003 | 33 |
[LOGO]
Healthcare Group
$ 697 Million*
[GRAPH]
*Fiscal Year ending March 31, 2003
Business Units:
| > | Surgical Support—equipment and services designed to integrate new technologies and process improvements in the clinical and surgical environment |
| > | Sterile Processing—sterilization and contamination control products allowing reuse of surgical instrumentation |
| > | Service—equipment maintenance to ensure quality operation and equipment uptime |
| > | Applied Infection Control—healthcare hand soaps and sanitizers, and hard surface disinfectants |
| ANALYST DAY 2003 | 34 |
[LOGO]
Surgical Support
[LOGO]
| ANALYST DAY 2003 | 35 |
[LOGO]
Sterile Processing
[LOGO]
| ANALYST DAY 2003 | 36 |
[LOGO]
>Markets
| ANALYST DAY 2003 |
[LOGO]
Healthcare by Product Type
$Billions
[GRAPH]
| * | Other includes a broad range of OR and ICU equipment (Respiratory and Anesthesia devices, Patient Warming Systems, Fluid Waste Management) |
| > | Total market size greater than $11 billion with mid single digit growth rates |
| > | Geographies have differences in medical practice and a diverse set of competitors; STERIS has a leading position in North America |
| > | Growth is tied to replacement cycle, capacity expansion, technology innovation, and patient growth |
| ANALYST DAY 2003 | 38 |
[LOGO]
Sterile Processing by Major Product
($ in millions)
[GRAPH]
| ANALYST DAY 2003 | 39 |
[LOGO]
Surgical Support by Major Product
($ in millions)
[GRAPH]
| ANALYST DAY 2003 |
40 |
[LOGO]
Healthcare Group Core Strengths
| > | Integrated offering of capital equipment, chemistries, and services |
| > | Service force of more than 1,000 professionals |
| > | Leading brand and strong channel in North America |
| > | Significant active installed base of equipment |
| > | Base of platform sterilization and disinfection technologies |
| ANALYST DAY 2003 |
41 |
[LOGO]
Base Market Growth
[GRAPH]
“Boomers” continue to increase demand for acute care procedures driving sterilization cycle growth and hospital census
Sources: F.W. Dodge, The Outlook for Healthcare Facilities (Q2 2002)
SMG, Surgical Procedures, 1981-2007
| ANALYST DAY 2003 |
42 |
[LOGO]
Base Market Growth
[GRAPH]
| > | “Boomers” continue to increase demand for acute care procedures driving sterilization cycle growth and hospital census |
| > | U.S. Hospital capacity gaps drive robust construction spend, particularly in surgical and critical care |
Sources: F.W. Dodge, The Outlook for Healthcare Facilities (Q2 2002)
SMG, Surgical Procedures, 1981-2007
| ANALYST DAY 2003 |
43 |
[LOGO]
> Strategy
| ANALYST DAY 2003 |
[LOGO]
Healthcare Group Strategy
| > | Build international presence through selected partnerships, acquisitions, and new technology introductions |
| > | Introduce new disruptive technologies in Sterile Processing |
| > | Drive growth of recurring revenues |
| > | Expand and integrate the Surgical and Critical Care offering to leverage the strength of the North American sales and service channel |
| ANALYST DAY 2003 |
45 |
[LOGO]
Healthcare Group Strategy
| > | Build international presence through selected partnerships, acquisitions, and new technology introductions |
| > | Introduce new disruptive technologies in Sterile Processing |
| > | Harness the value of the installed base and drive growth of recurring revenues |
| > | Expand and integrate the Surgical and Critical Care offering to leverage the strength of the North American sales and service channel |
| ANALYST DAY 2003 |
46 |
[LOGO]
Recurring Revenue Growth
Opportunity for Improved Recurring Revenue Growth Is
Substantial on Current Installed Base of Equipment
| WASHING SYSTEMS | HIGH TEMPERATURE STERILIZATION |
LOW TEMPERATURE STERILE PROCESSING | ||||
| Average Consumable Cost/Cycle*: |
$9.00 | $10.00 | $9.50 | |||
| Annual Consumable Revenue Opportunity: |
$125 million | $330 million | $130 million | |||
| • | Annualized value of consumable flowing through STERIS’ installed equipment base approaching $600 million |
| • | STERIS opportunity for growth >$400 million |
* Cost/Cycle includes: Detergents, Indicators, Wraps/Trays & Service
| ANALYST DAY 2003 |
47 |
[LOGO]
Technical Service Growth Opportunity
($ in millions; North America contract revenues)
Total Market $850
[GRAPH]
| ANALYST DAY 2003 |
48 |
[LOGO]
Healthcare Group Strategy
| > | Build international presence through selected partnerships, acquisitions, and new technology introductions |
| > | Introduce new disruptive technologies in Sterile Processing |
| > | Harness the value of the installed base and drive growth of recurring revenues |
| > | Expand and integrate the Surgical and Critical Care offering to leverage the strength of the North American sales and service channel |
| ANALYST DAY 2003 |
49 |
[LOGO]
Healthcare Channel Strength Offers
Opportunity in Selected Areas
[MAP]
Capabilities:
| > | Broad Hospital Reach |
| > | Capital & Consumables |
| > | Technical Sales Process |
| > | Complex Project Management |
| > | High Service Component |
| ANALYST DAY 2003 |
50 |
[LOGO]
Expanded Offering in Surgical & Critical Care
[GRAPH]
Source: MDB, CMD, ECRI, IHS
| ANALYST DAY 2003 |
51 |
[LOGO]
Healthcare Group Summary
| > | Underlying market demand driven by surgical procedure growth, new construction to address provider capacity gaps, and ongoing need to address nosocomial infections |
| > | STERIS has core strengths in channel and technology platforms |
| > | STERIS growth will be driven by expanding the offering, capitalizing on the value of the installed base and new technology introduction |
| ANALYST DAY 2003 |
52 |
STERIS
Analyst Day
SEPTEMBER 3 and 4, 2003
[LOGO]
STERIS
Analyst Day
SEPTEMBER 3 and 4, 2003
> Life Sciences
[LOGO]
[LOGO]
Life Sciences Group Definition
The STERIS Life Sciences Group is a leading global provider of integrated and validated equipment, chemistries and service solutions aiding developers and manufacturers of pharmaceutical and bio-pharmaceutical products to maximize uptime, enhance productivity and protect process integrity within aseptic and other critical environments.
| ANALYST DAY 2003 |
55 |
[LOGO]
Key Group Characteristics
Sales Revenue
| > | High double digit annual growth even past two fiscal years |
| > | Low-to-mid double digit annual growth expected for the next several years |
| > | Majority of Equipment and Chemistry sales driven from Manufacturing Process Segment |
[GRAPH]
Global Reach
| > | Present in more than 80 countries |
| > | Direct sales, service and project management representation in |
| – | USA, Canada and throughout Europe |
| > | Manufacturing Operations in |
| – | USA, Canada, Germany, Finland, Sweden and Switzerland |
| > | Dedicated Dealer and Agents in more than 60 countries |
| > | More than 650 Employees world wide |
[GRAPH]
| ANALYST DAY 2003 |
56 |
[LOGO]
Key Strengths
Technologies and equipment that are critical to the operation of aseptic pharmaceutical manufacturing
Strong field based technical expertise
Strong brand recognition with our customers
| > | US: Calgon Vestal, AMSCO |
| > | Europe: Finn-Aqua, HAMO |
Unmatched global presence
High quality equipment and cleaning chemistry
| ANALYST DAY 2003 |
57 |
[LOGO]
Evolution of a (Bio)pharmaceutical Drug
[GRAPHIC]
| ANALYST DAY 2003 |
58 |
[LOGO]
Research Business—Integrated Products and Systems
[GRAPHIC]
| ANALYST DAY 2003 |
59 |
[LOGO]
Process Business—Integrated Products and Systems
[LOGO]
| ANALYST DAY 2003 | 60 |
[LOGO]
Key Growth Drivers
[CHART]
| ANALYST DAY 2003 | 61 |
[LOGO]
Research Business Overview
| ANALYST DAY 2003 |
[LOGO]
Research Business Overview
[GRAPH]
Source: SDI, STE analysis
| ANALYST DAY 2003 | 63 |
[LOGO]
Research Business Overview
($ in millions)
Total $485 million
[GRAPH]
| ANALYST DAY 2003 | 64 |
[LOGO]
Process Business Overview
| ANALYST DAY 2003 |
[LOGO]
Process Business Growth Drivers
[GRAPH]
Source: EFPIA, Pharma, LEK, US Census,
| ANALYST DAY 2003 | 66 |
[LOGO]
Process Business Overview
[GRAPH]
| CAGR% (2001-06F) | ||
| Total |
10 | |
| Sterile Small Molecule |
15 | |
| Biologics |
20 | |
| Oral/Topical Small Molecule |
7 |
Sources : Analyst Reports, Medical Healthcare Marketplace, BCC Inc., L.E.K. Interviews and Analysis, STERIS analysis
| ANALYST DAY 2003 | 67 |
[LOGO]
Process Business Overview
| Pharma Equipment Market $12.1 billion |
Sterile Dosage $3.2 billion (inc. bulk production & purification) |
[GRAPH]
| > | Aggregate market growth rate is approximately 10% |
| > | Oral/topical 7% CAGR |
| > | Sterile Dosage ~15% CAGR |
Source: LEK, STERIS analysis
| ANALYST DAY 2003 | 68 |
[LOGO]
Process Business Overview
($ in millions)
Total $749m
[GRAPH]
Source : Analyst Reports, Medical Healthcare Marketplace, BCC Inc., L.E.K. Interviews and Analysis, STERIS analysis
| ANALYST DAY 2003 | 69 |
[LOGO]
Process Business Overview
($ in millions)
Total $450m
[GRAPHIC]
03-09 CAGR:
| ANALYST DAY 2003 | 70 |
[LOGO]
Life Sciences Group Underlying Growth Rates
| > | Portion of the Industry that STERIS’ Research Business serves is expected to grow <10% per annum over the next 3 to 5 years |
| > | Portion of the industry that STERIS process equipment and chemistries serves is expected to grow at 10-15% per annum over the next 3 to 5 years |
| ANALYST DAY 2003 | 71 |
[LOGO]
Key Growth Strategies
Strengthen Penetration in Key Growth Segments
| > | Fill and Finish |
| > | Clean Utilities |
| > | Bio-pharmaceuticals |
| > | Cleaning Chemistry |
Geographic Expansion
Leverage expansion of manufacturing operations
| > | Reduction in Lead-Times |
| > | Modularization of Custom-Build Equipment |
Adapt Technologies to New Markets
| ANALYST DAY 2003 | 72 |
[LOGO]
Life Sciences Group Summary
| > | Unique offering of broad range of capital equipment |
| > | Unique in offering capital equipment and chemistries |
| > | Growing core markets |
| > | Opportunities to increase penetration of chemistries |
| > | System solution offering will add value to pharmaceutical and biotech customer base |
| > | Opportunities to consolidate |
| > | Consistent double-digit growth in revenues |
| ANALYST DAY 2003 | 73 |
[LOGO]
Defense and Industrial Overview
| Customer / Development Partner |
Market Drivers |
Competition |
Key Competitive Differentiators | |||
| Government Agencies (non-defense) |
• Threat of a naturally occurring biological contamination |
Technologies: | • VHP (bio) and modified VHP (bio-chem) technology, experience, expertise, and proprietary position | |||
| • Chlorine Dioxide |
||||||
|
Defense Agencies
Food & Agricultural Industry |
• Threat of unintentional or intentional biological or chemical contamination |
• Methyl Bromide
• Formaldehyde |
||||
| Beverage Industry
Recreational Activity Industry |
• Increased regulatory involvement |
• General Cleaning Chemistries |
• D & I, along with our teaming partners, offer a turnkey decontamination solution | |||
| Transportation Industry
Single Use Medical Device Manufacturers |
• Desire to partner in the development and application of new decontamination technologies and systems |
Companies:
• EcoLab |
• Knowledge base of aseptic processing, sterilization, and validation | |||
| • Need to minimize business or operational disruption due to a contamination event |
• JohnsonDiversey
• Bioquell |
• Ability to offer a combination of proven proprietary technologies and services | ||||
| • EnviroSystems |
||||||
| • Consulting Firms |
||||||
| • Remediation Companies |
||||||
| ANALYST DAY 2003 | 74 |
[LOGO]
D&I Key Current Activities
| > | U.S. Army Edgewood Chemical Biological Center—Contract R&D to further VHP as a biological and chemical decontamination system |
| > | Single Use Manufactured Medical Devices—Multiple opportunities for VHP MD |
| > | Department of State—Providing remediation services to decontaminate Sterling, Virginia mail facility contaminated by anthrax |
| > | NASA Jet Propulsion Laboratory—VHP deep vacuum system against spores on spacecraft material surfaces |
| > | Homeland Defense Labs—Equipment for modular and mobile BSL3 and BSL4 labs |
| ANALYST DAY 2003 | 75 |
STERIS
Analyst Day
SEPTEMBER 3 and 4, 2003
[LOGO]
STERIS
Analyst Day
SEPTEMBER 3 and 4, 2003
[LOGO]
[LOGO]
STERIS Isomedix Services Definition
STERIS Isomedix Services is a leading provider of sterilization, microbial reduction, and materials modification services to medical supply, consumer, and industrial customers.
STERIS Isomedix Services provides its customers safe, effective products in a timely and cost effective manner.
Through exemplary customer service, a focus on quick turnaround, and the ability to develop and manage complicated partnerships, we deliver customer value.
| ANALYST DAY 2003 | 78 |
[LOGO]
Our Business—Geographic View
[MAP]
| ANALYST DAY 2003 | 79 |
[LOGO]
Our Business—Geographic View
[GRAPHIC]
Advantages
| > | Proven reliability |
| > | Broad application |
Industries
| > | Medical |
| > | Food packaging |
Products
| > | Medical supplies |
| > | Dairy packaging |
| > | Labware |
| > | Spices |
| ANALYST DAY 2003 |
80 |
[LOGO]
Our Business—Ethylene Oxide Sterilization
[GRAPHIC]
Advantages
| > | Gentle process |
| > | High volume |
Industries
| > | Medical |
| > | Spices |
Products
| > | Surgery kits |
| > | Surgical supplies |
| ANALYST DAY 2003 |
81 |
[LOGO]
Our Business—E-Beam Processing
[GRAPHIC]
Advantages
| > | Materials enhancement |
Industries
| > | Materials modification |
Products
| > | Wire and cable |
| > | Plastic resin |
| ANALYST DAY 2003 |
82 |
[LOGO]
Sales Process
| > | 11 Direct sales representatives |
| > | Process validation |
| > | Service agreements |
| > | Process Agreement |
| > | Commitments |
| > | Slot of Time |
| ANALYST DAY 2003 |
83 |
[LOGO]
Key Strengths
| > | Responsive to customer needs |
| > | Capacity—Monitor customer needs |
| > | Proximity—Serve the US with sixteen facilities |
| > | Flexibility—Three key technologies, Gamma, EtO and E-Beam |
| > | Experience—31 years |
| ANALYST DAY 2003 |
84 |
[LOGO]
Business Model—Typical Product Life Cycle
[GRAPHIC]
| ANALYST DAY 2003 |
85 |
[LOGO]
Business Model—Isomedix Service Facility Life Cycle
[GRAPHIC]
| ANALYST DAY 2003 |
86 |
[LOGO]
Business Model—Isomedix Services Advantage
[GRAPHIC]
| ANALYST DAY 2003 |
87 |
[LOGO]
Industry Drivers
| > | Demographics increasing medical supply consumption worldwide |
| > | Medical commodity manufacturing moving to lower cost labor |
| > | In-house processing going contract/outsourcing |
| > | No rapid technology change foreseen |
| > | New applications developing |
| ANALYST DAY 2003 |
88 |
[LOGO]
Industry Size
| > | $ 390 + Million |
| > | Includes in-house operations and industrial applications |
[GRAPHIC]
$680+M Worldwide
| ANALYST DAY 2003 |
89 |
[LOGO]
Industry Competition
| > | IBA/Sterigenics—Gamma, EtO, E-Beam and X-ray in 39 locations |
| > | Cosmed—EtO and Ozone in 8 U.S. locations |
| > | Titan Scan—E-Beam in 3 U.S. locations |
| > | Isotron—Gamma, EtO, and E-Beam in 15 non-U.S. locations |
| > | Other—Multiple with 3 or less sites |
| > | In-House Captive—Trend towards outsourcing |
| ANALYST DAY 2003 |
90 |
[LOGO]
Growth Strategy—Key Strategic Imperatives
| >Business | Growth |
| > | Grow revenue 8-10% AAGR |
| > | Improve “same store” operating income year over year |
| >Customer | Focus |
| > | Improve customer satisfaction |
| >Operational | Excellence |
| > | Enhance performance |
| > | Improve business process |
| > | Control costs |
| >Leadership | Excellence |
| > | Experienced leadership team |
| ANALYST DAY 2003 |
91 |
[LOGO]
Summary
STERIS Isomedix Services is well positioned to:
| > | Take advantage of ongoing favorable market trends |
| > | Capitalize on new applications for irradiation |
| > | Expand into new geographies |
| ANALYST DAY 2003 |
92 |
S T E R I S
Analyst Day
SEPTEMBER 3 and 4, 2003
[LOGO]
S T E R I S
Analyst Day
SEPTEMBER 3 and 4, 2003
Financial Overview
[LOGO]
[LOGO]
Recent Performance
| ANALYST DAY 2003 |
[LOGO]
Fiscal 2003 Recap
Fiscal 2003 Year Ended March 31,
(In millions)
| 2003 |
2002 |
Change |
|||||||||
| Total Net Revenues |
$ | 972.1 | $ | 866.7 | 12 | % | |||||
| Gross Profit |
408.8 | 355.2 | 15 | % | |||||||
| Gross Margin |
42.1 | % | 41.0 | % | |||||||
| Operating Profit |
$ | 125.8 | $ | 80.6 | 56 | % | |||||
| Operating Margin |
12.9 | % | 9.3 | % | |||||||
| Net Income |
$ | 79.4 | $ | 46.2 | 72 | % | |||||
| Diluted EPS |
$ | 1.12 | $ | 0.65 | 72 | % | |||||
| ANALYST DAY 2003 |
96 |
[LOGO]
Fiscal 2003 Segment Data
Fiscal 2003 Year Ended March 31, 2003
(In millions)
| Healthcare |
|||
| Revenues |
$ | 697.4 | |
| Operating Profit |
114.2 | ||
| Life Sciences |
|||
| Revenues |
$ | 195.3 | |
| Operating Profit |
0.8 | ||
| Isomedix |
|||
| Revenues |
$ | 79.3 | |
| Operating Profit |
10.7 | ||
Revenues by Segment
[CHART]
Operating Profit by Segment
[CHART]
| ANALYST DAY 2003 |
97 |
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Fiscal 2004 First Quarter Recap
Fiscal 2004 Quarter Ended June 30,
(In millions)
| 2003 |
2002 |
Change |
|||||||||
| Total Net Revenues |
$ | 259.3 | $ | 221.3 | 17 | % | |||||
| Gross Profit |
106.6 | 91.8 | 16 | % | |||||||
| Gross Margin |
41.1 | % | 41.5 | % | |||||||
| Operating Profit |
$ | 26.2 | $ | 20.6 | 27 | % | |||||
| Operating Margin |
10.1 | % | 9.3 | % | |||||||
| Net Income |
$ | 16.5 | $ | 12.8 | 28 | % | |||||
| Diluted EPS |
$ | 0.23 | $ | 0.18 | 28 | % | |||||
| ANALYST DAY 2003 |
98 |
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First Quarter Segment Data
Fiscal 2004 Quarter Ended June 30,
(In millions)
| 2003 |
2002 |
Change |
|||||||||
| Healthcare |
|||||||||||
| Revenues |
$ | 179.6 | $ | 161.9 | 11 | % | |||||
| Operating Profit |
23.6 | 20.2 | 17 | % | |||||||
| Life Sciences |
|||||||||||
| Revenues |
$ | 58.4 | $ | 39.7 | 47 | % | |||||
| Operating Profit |
(0.6 | ) | (3.2 | ) | N/A | ||||||
| Isomedix |
|||||||||||
| Revenues |
$ | 21.3 | $ | 19.7 | 8 | % | |||||
| Operating Profit |
3.2 | 3.5 | -10 | % | |||||||
| ANALYST DAY 2003 |
99 |
[LOGO]
Current Financial Position
| ANALYST DAY 2003 |
[LOGO]
Strong Financial Picture
| > | Consistent revenue and earnings growth |
| > | Improving key financial ratios |
| > | Low level of debt |
| > | Strong free cash flow |
| > | Capacity to fund growth |
| ANALYST DAY 2003 |
101 |
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Net Quarterly Revenues
dollars in millions
[GRAPH]
| ANALYST DAY 2003 |
102 |
[LOGO]
Quarterly Diluted Earnings Per Share
[GRAPH]
| * | A charge in the fourth quarter of fiscal 2001 resulted in a loss of $0.24 per share |
| ANALYST DAY 2003 |
103 |
[LOGO]
Improving Key Financial Ratios
| FY 2001 |
FY 2002 |
FY 2003 |
|||||||
| Return on Assets1 |
3.4 | % | 5.6 | % | 9.3 | % | |||
| Return on Average Equity2 |
6.9 | % | 10.1 | % | 15.0 | % | |||
| Return on Invested Capital3 |
4.6 | % | 7.8 | % | 13.2 | % | |||
| Long-term Debt to Capital4 |
32.7 | % | 19.1 | % | 9.5 | % |
| 1. | Average 12 months net income divided by average 12 months total assets |
| 2. | Average 12 months net income divided by average 12 months shareholder’s equity |
| 3. | Average 12 months net income divided by average 12 months shareholder’s equity + long-term debt-cash |
| 4. | Long-term debt divided by shareholder’s equity+long-term debt |
| ANALYST DAY 2003 |
104 |
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Quarterly Long-Term Debt-to-Capital
percentage
[GRAPH]
| ANALYST DAY 2003 |
105 |
[LOGO]
Strong Cash Flow
Cash From Operations and Capital Spending
(In millions)
[GRAPH]
Cash Priorities:
Fund growth through acquisitions
Modest share buy backs to offset dilutive impact of options
Cash Uses in Q1 FY’04:
$39.7 million in acquisitions
$14.1 million in share buy back
| ANALYST DAY 2003 |
106 |
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Acquisition Criteria
| > | Strong financial discipline and detailed integration |
| > | Strategic fit |
| > | Expand internationally |
| > | Leverage healthcare channel |
| > | Drive recurring revenues |
| > | Improve technology offering |
| > | Targeted accretion in year one |
| ANALYST DAY 2003 |
107 |
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Outlook/Financial Targets
| ANALYST DAY 2003 |
[LOGO]
Our Current Financial Outlook
FISCAL 2004
Including acquisitions:
| > | Revenue growth to approximate 17% |
| > | Earnings per share of $1.29 to $1.33 (15-18% growth) |
| > | Free cash flow of $60-65 million (before acquisitions) |
| > | Capital spending approximately $70-$75 million |
| > | Depreciation and amortization $50-55 million |
| ANALYST DAY 2003 |
109 |
[LOGO]
Capital Spending in Fiscal 2004
Total Fiscal 2004 Capital Spending $70-75 million
[CHART]
| ANALYST DAY 2003 |
110 |
[LOGO]
Financial Targets
Average Annual Growth Rate
Current demand trends, new product initiatives, and geographical expansion opportunities are expected to grow core businesses over the next two years
| > | Revenue growth of 10% |
| > | Earnings growth of 15% |
Acquisitions will further enhance growth
| ANALYST DAY 2003 |
111 |
STERIS
Analyst Day
SEPTEMBER 3 AND 4, 2003
[LOGO]