UNITED STATES

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) July 29, 2010

 

 

STERIS Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Ohio		1-14643		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.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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ITEM 2.02.

Results of Operations and Financial Condition.

On August 3, 2010, STERIS Corporation (“STERIS” or “Company”) issued a press release announcing financial results for its fiscal 2011 first quarter ended June 30, 2010. A copy of this press release is attached hereto as Exhibit 99.1.

The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 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 or otherwise subject to the liabilities of that Section. Furthermore, the information contained in Item 2.02 of 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.

 

ITEM 5.07.

Submission of Matters to a Vote of Security Holders.

At STERIS’s 2010 Annual Meeting of Shareholders (“Meeting”), held on July 29, 2010, shareholders voted on the matters described below, with the final voting results as specified below. According to the certified list of shareholders, there were outstanding and entitled to vote at the Meeting, 59,513,085 shares of Common Shares of the Company. There were present at the Meeting, in person or by proxy, the holders of 56,119,914 shares or 94.29% of the outstanding Common Shares of the Company, constituting a quorum.

 

1.	The nominees for election to the Board of Directors were elected, each for a one-year term, based upon the following votes:

 

Nominee		Votes For		Votes Withheld		Broker Non-Votes
Richard C. Breeden		50,865,612		1,905,018		3,349,284
Cynthia L Feldmann		52,641,373		129,257		3,349,284
Jacqueline B. Kosecoff		52,557,916		212,714		3,349,284
David B. Lewis		51,712,448		1,058,182		3,349,284
Kevin M. McMullen		51,058,917		1,711,713		3,349,284
Walter M Rosebrough, Jr.		52,639,411		131,219		3,349,284
Mohsen M. Sohi		52,642,837		127,793		3,349,284
John P. Wareham		51,079,208		1,691,422		3,349,284
Loyal W. Wilson		52,476,103		294,527		3,349,284
Michael B. Wood		52,642,439		128,191		3,349,284

 

2.	The Board of Director’s proposal to approve the STERIS Corporation Senior Executive Incentive Compensation Plan, as Amended and Restated Effective April 1, 2010, was approved based on the following votes:

 

Votes for		53,315,486
Votes against		1,040,168
Abstentions		1,764,260
Broker non-votes		Not Applicable — Brokers were permitted to cast stockholder non-votes (i.e. uninstructed shares) at their discretion on this proposal item and such non-votes are reflected in the votes for or against or abstentions.

 

2

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3.	The Board of Director’s proposal to approve a non-binding advisory proposal regarding the Company’s executive compensation policies and procedures was approved based on the following votes:

 

Votes for		49,291,663
Votes against		2,221,159
Abstentions		4,607,092
Broker non-votes		Not Applicable — Brokers were permitted to cast stockholder non-votes (i.e. uninstructed shares) at their discretion on this proposal item and such non-votes are reflected in the votes for or against or abstentions.

 

4.	The Board of Director’s proposal to ratify the Appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year ended March 31, 2011 was approved based on the following votes:

 

Votes for		55,686,468
Votes against		335,084
Abstentions		98,362
Broker non-votes		Not Applicable — Brokers were permitted to cast stockholder non-votes (i.e. uninstructed shares) at their discretion on this proposal item and such non-votes are reflected in the votes for or against or abstentions.

 

ITEM 8.01.

Other Events.

STERIS voluntarily submitted information regarding modifications to the Reliance™ EPS Endoscope Processing System (the “EPS System”) to the U.S. Food and Drug Administration (“FDA”). These incremental modifications to the EPS System were considered minor by the Company. FDA has recently advised us that it believes a new pre-market notification (510(k)) for those modifications should be submitted. We will voluntarily submit the pre-market notification to the FDA, and expect to make that submission within the next two weeks. We have suspended shipments of EPS Systems in the U.S. until we receive FDA clearance of the submission. FDA has agreed that we may continue servicing EPS Systems in the field and provide consumables necessary for the continued use of the System. The Company does not believe the impact of these events will be material with respect to its financial results.

 

ITEM 9.01.

Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.		Description
99.1		Press Release issued by STERIS Corporation on August 3, 2010 regarding its results of operations and financial condition for its fiscal 2011 first quarter ended June 30, 2010.

 

3

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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.

 

Date: August 3, 2010

 

4

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press Release issued by STERIS Corporation on August 3, 2010 regarding its results of operations and financial condition for its fiscal 2011 first quarter ended June 30, 2010.

 

5

Exhibit 99.1

STERIS CORPORATION

NEWS ANNOUNCEMENT

FOR IMMEDIATE RELEASE

STERIS CORPORATION ANNOUNCES FISCAL 2011 FIRST QUARTER RESULTS

 

—

Board of Directors Increases Quarterly Dividend by four cents to $0.15 per share

Mentor, Ohio (August 3, 2010) - STERIS Corporation (NYSE: STE) today announced financial results for its fiscal 2011 first quarter ended June 30, 2010. During the first quarter, the Company recorded the previously announced liability related to the SYSTEM 1 Rebate Program. Of the $110 million pre-tax amount recorded, $102 million is attributable to the Customer Rebate portion of the Program and was recorded as a reduction of revenues, and $8 million is attributable to the disposal of the SYSTEM 1 units to be returned and was recorded as an increase in cost of revenues.

In order to provide meaningful comparative analysis, the fiscal 2011 financial information provided in this press release excludes the $110 million pre-tax impact of the SYSTEM 1 Rebate Program unless otherwise noted. Please refer to the attached schedules for additional information, including reconciliations from these “non-GAAP financial measures” to as reported results.

Fiscal 2011 first quarter revenues were $291.3 million compared with $283.5 million in the first quarter of fiscal 2010, an increase of 3%. Operating profit increased 10% to $47.0 million, or 16.1% of revenues, compared with $42.9 million, or 15.1% of revenues in the first quarter of fiscal 2010. Fiscal 2011 first quarter net income was $28.0 million, or $0.46 per diluted share, compared with net income of $25.5 million, or $0.43 per diluted share, in the first quarter of fiscal 2010.

“Early indications are that more Customers may use the SYSTEM 1 Rebate to purchase SYSTEM 1E units than we originally anticipated, which has increased our original Rebate Program estimate,” said Walt Rosebrough, President and Chief Executive Officer of STERIS. “While it is still too early to predict what the total SYSTEM 1E demand will be, we are optimistic about Customer response to this new product. We continue to believe we will be able to manufacture 4,000 to 6,000 units this fiscal year, with shipments beginning in the next few months.”

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STERIS Corporation

News Announcement

Page 2

 

Segment Results

Healthcare revenues in the quarter were $206.1 million compared with $200.6 million in the first quarter of fiscal 2010, an increase of 3%. Double digit growth in capital equipment was somewhat offset by declines in consumables and service. Capital equipment revenue grew 16%, reflecting increases in most major product categories. Consumable revenue declined 9%, due to reductions in S20 volumes and lower H1N1 product sales as compared to the prior year. Operating income was flat with the prior year at $32.1 million primarily due to lower S20 volumes.

Life Sciences first quarter revenues were $46.6 million compared with $46.1 million in the first quarter of fiscal 2010, an increase of 1%. Strength in consumables and service was offset by a decline in capital equipment. Life Sciences operating income was $6.3 million, an increase of 32% compared with the prior year, driven by product mix and overall operating efficiencies.

Fiscal 2011 first quarter revenues for Isomedix Services were $37.7 million compared with $35.4 million in the same period last year, an increase of 6%. Revenues benefitted from an improvement in demand from core medical device Customers. Operating income was $10.6 million in the quarter compared with $8.3 million in the first quarter of last year due to the increased revenues.

As Reported Results

Reported results for the first quarter of fiscal 2011 were revenues of $189.0 million, operating loss of $63.0 million and a net loss of $45.2 million. Please refer to the attached schedules for additional information.

Cash Flow

Net cash provided by operations for the first quarter of fiscal 2011 was $29.6 million, compared with $32.6 million in the same period last year. Free cash flow (see note 1) for the first quarter of fiscal 2011 was $17.3 million, compared with $24.4 million in the prior year quarter. The decline in free cash flow was driven by increased working capital requirements and higher capital spending levels.

Quarterly Dividend Increased

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STERIS Corporation

News Announcement

Page 3

 

The Company also announced today that STERIS’s Board of Directors has authorized a four cent increase in its quarterly dividend to $0.15 per common share. The dividend is payable September 21, 2010 to shareholders of record at the close of business on August 24, 2010.

Outlook

The Company’s outlook is unchanged for the full fiscal year, with revenue growth of approximately 5%, and earnings per diluted share in the range of $2.00 to $2.30. Refer to the earnings announcement dated May 6, 2010 for the detailed full year outlook and other assumptions.

Conference Call

In conjunction with this release, STERIS Corporation management will host a conference call today at 10:00 a.m. Eastern time. The conference call can be heard live over the Internet at www.steris-ir.com or via phone by dialing 1-800-369-8428 in the United States and Canada, and 1-773-799-3378 internationally, then referencing the password “STERIS”.

For those unable to listen to the conference call live, a replay will be available from 12:00 p.m. Eastern time on August 3, 2010, until 5:00 p.m. Eastern time on August 17, 2010, either over the Internet at www.steris-ir.com or via phone by calling 1-866-415-3316 in the United States and Canada, and 1-203-369-0695 internationally.

About STERIS

The mission of STERIS Corporation is to provide a healthier today and safer tomorrow through knowledgeable people and innovative infection prevention, decontamination and health science technologies, products and services. The Company has approximately 5,000 dedicated employees around the world working together to supply a broad array of solutions by offering a combination of equipment, consumables and services to healthcare, pharmaceutical, industrial and government Customers. The Company is listed on the New York Stock Exchange under the symbol STE. For more information, visit www.steris.com.

Contact: Julie Winter, Director, Investor Relations at 440-392-7245.

 

(1)	Free cash flow is a non-GAAP number used by the Company as a measure to gauge its ability to fund

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STERIS Corporation

News Announcement

Page 4

 

future growth opportunities, repurchase common shares, and pay cash dividends. Free cash flow is defined as cash flows from operating activities less purchases of property, plant, equipment and intangibles, net, plus proceeds from the sale of property, plant, equipment and intangibles. STERIS’s calculation of free cash flow may vary from other companies.

# # #

This news release and the referenced conference call may contain statements concerning certain trends, expectations, forecasts, estimates, or other forward-looking information affecting or relating to the Company or its industry or products that are intended to qualify for the protections afforded “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 and other laws and regulations. Forward-looking statements speak only as to the date of this report, and may be identified by the use of forward-looking terms such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “outlook,” “potential,” “confidence,” “improve,” “optimistic,” “comfortable,” “trend”, and “seeks,” or the negative of such terms or other variations on such terms or comparable terminology. Many important factors could cause actual results to differ materially from those in the forward-looking statements including, without limitation, disruption of production or supplies, changes in market conditions, political events, pending or future claims or litigation, competitive factors, technology advances, actions of regulatory agencies, and changes in laws, government regulations, labeling or product approvals, or the application or interpretation thereof. Other risk factors are described in the Company’s Form 10-K and other securities filings. Many of these important factors are outside STERIS’s control. No assurances can be provided as to any outcome from litigation, regulatory action, administrative proceedings, government investigations, warning letters, consent decree, rebate program, transition, cost reductions, business strategies, earnings and revenue trends, expense reduction or other future financial results. Reference to the consent decree, transition, rebate program, or products are summaries only and do not alter or modify the specific terms of the decree, program or product clearance or literature. Unless legally required, the Company does not undertake to update or revise any forward-looking statements even if events make clear that any projected results, express or implied, will not be realized. Other potential risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, (a) the potential for increased pressure on pricing that leads to erosion of profit margins, (b) the possibility that market demand will not develop for new technologies, products or applications, or the Company’s rebate program, transition plan, or other business initiatives will take longer, cost more or produce lower benefits than anticipated, (c) the possibility that application of or compliance with laws, court rulings, certifications, regulations, regulatory actions, including without limitation previously disclosed FDA warning letters, government investigations, the December 3, 2009 FDA notice, the April 20, 2010 consent decree and related transition plan, or other requirements or standards, may delay, limit or prevent new product introductions or the production and marketing of existing products, or otherwise affect Company performance, results, or value, (d) the potential of international unrest or effects of fluctuations in currencies, tax assessments or rates, raw material costs, benefit or retirement plan costs, or other regulatory compliance costs, (e) the possibility of reduced demand, or reductions in the rate of growth in demand, for the Company’s products and services, (f) the possibility that anticipated cost savings or other results may not be achieved, or that transition, labor, competition, timing, execution, regulatory, governmental, or other issues or risks associated with the matters described in this release or the operation of the Company’s business, may adversely impact Company performance, results, or value, (g) the effect of the contraction in credit availability, as well as the ability of our customers and suppliers to adequately access the credit markets when needed, and (h) those risks described in our Annual Report on Form 10-K for the year ended March 31, 2010.

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STERIS Corporation

Consolidated Condensed Statements of Operations

(In thousands, except per share data)

 

		Three Months Ended June 30,
		2010				2009
		(Unaudited)				(Unaudited)
Revenues		$	291,293			$	283,543
SYSTEM 1 Rebate Program			(102,313	)			—
Revenues, net			188,980				283,543
Cost of revenues			163,223				158,707
Cost of revenues - SYSTEM 1 Rebate Program			7,691				—
Gross profit			18,066				124,836
Operating expenses:
Selling, general, and administrative			72,117				74,605
Research and development			8,609				7,580
Restructuring expense			341				(211	)
Total operating expenses			81,067				81,974
(Loss) income from operations			(63,001	)			42,862
Non-operating expense, net			2,845				2,865
Income tax expense			(20,636	)			14,455
Net (loss) income		$	(45,210	)		$	25,542
Earnings per common share (EPS) data:
Basic		$	(0.76	)		$	0.44
Diluted		$	(0.76	)		$	0.43
Cash dividends declared per common share outstanding		$	0.11			$	0.11
Weighted average number of common shares outstanding used in EPS computation:
Basic number of common shares outstanding			59,397				58,517
Diluted number of common shares outstanding			59,397				58,984
STERIS Corporation Consolidated Condensed Balance Sheets (In thousands)
		June 30, 2010				March 31, 2010
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	226,070			$	214,971
Accounts receivable, net			185,691				214,940
Inventories, net			131,955				121,135
Other current assets			64,158				25,411
Total Current Assets			607,874				576,457
Property, plant, and equipment, net			345,288				346,858
Goodwill and intangible assets, net			302,678				305,311
Other assets			9,766				9,776
Total Assets		$	1,265,606			$	1,238,402
Liabilities and Equity
Current liabilities:
Accounts payable		$	64,132			$	66,035
Accrued SYSTEM 1 Rebate Program			110,004				—
Other current liabilities			112,544				131,094
Total Current Liabilities			286,680				197,129
Long-term debt			210,000				210,000
Other liabilities			73,036				76,779
Equity			695,890				754,494
Total Liabilities and Equity		$	1,265,606			$	1,238,402

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STERIS Corporation

Income Reconciliation

(In thousands, except per share data)

The following table presents financial measures which are considered to be "non-GAAP financial measures" under Securities Exchange Commission rules. The Company has referred to results of operations excluding the SYSTEM 1 Rebate Program and related disposal costs to provide meaningful comparative analysis between the periods.

 

		Three months ended June 30, 2010
		Results of Operations, excluding Rebate Program				Impact of SYSTEM 1 Rebate Program				As reported
		(Unaudited)
Revenues		$	291,293			$	(102,313	)		$	188,980
Cost of revenues			163,223				7,691				170,914
Gross profit			128,070				(110,004	)			18,066
Operating expenses			81,067				—				81,067
Income (loss) from operations			47,003				(110,004	)			(63,001	)
Non-operating expenses, net			2,845				—				2,845
Income (loss) before income taxes			44,158				(110,004	)			(65,846	)
Income tax (benefit) expense			16,319				(36,955	)			(20,636	)
Net income (loss)		$	27,839			$	(73,049	)		$	(45,210	)
Net income (loss) per common share:
Basic		$	0.47			$	(1.23	)		$	(0.76	)
Diluted		$	0.46			$	(1.22	)		$	(0.76	)
Weighted average number of common shares outstanding used in EPS computation:
Basic			59,397								59,397
Diluted			60,258								59,397
Effective income tax rate			37.0	%			33.6	%			31.3	%

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STERIS Corporation

Segment Data & Income Analysis

(In thousands)

 

		Three Months Ended June 30,
		2010				2009
		(Unaudited)				(Unaudited)
Segment Revenues:
Healthcare		$	206,079			$	200,604
SYSTEM 1 Rebate Program			(102,313	)			—
Healthcare, net			103,766				200,604
Life Sciences			46,614				46,116
STERIS Isomedix Services			37,676				35,407
Total Reportable Segments			188,056				282,127
Corporate and Other			924				1,416
Total Segment Revenues		$	188,980			$	283,543

The following table presents financial measures which are considered to be “non-GAAP financial measures” under Securities Exchange Commission rules. The Company has referred to results of operations excluding the SYSTEM 1 Rebate Program and related disposal costs to provide meaningful comparative analysis between the periods.

 

		Three Months Ended June 30,
		2010												2009
		(Unaudited)												(Unaudited)
Segment Operating (Loss) Income Excluding SYSTEM 1 Rebate program:		As Reported				SYSTEM 1 Rebate Program				Total				Total As Reported
Healthcare		$	(77,912	)		$	(110,004	)		$	32,092			$	32,102
Life Sciences			6,295								6,295				4,779
STERIS Isomedix Services			10,584								10,584				8,339
Total Reportable Segments			(61,033	)			(110,004	)			48,971				45,220
Corporate and Other			(1,968	)							(1,968	)			(2,358	)
Total Operating (Loss) Income		$	(63,001	)		$	(110,004	)		$	47,003			$	42,862

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STERIS Corporation

Consolidated Condensed Statements of Cash Flows

(In thousands)

 

		Three Months Ended June 30,
		2010				2009
		(Unaudited)				(Unaudited)
Operating Activities:
Net (loss) income		$	(45,210	)		$	25,542
Non-cash items			(28,463	)			11,568
Change in Accrued SYSTEM 1 Rebate Program			110,004				—
Changes in operating assets and liabilities			(6,637	)			(4,490	)
Net cash provided by operating activities			29,694				32,620
Investing Activities:
Purchases of property, plant, equipment, and intangibles, net			(12,411	)			(8,355	)
Proceeds from sale of property, plant, equipment and intangibles			3				175
Net cash used in investing activities			(12,408	)			(8,180	)
Financing Activities:
Cash dividends paid to common shareholders			(6,546	)			(6,441	)
Stock option and other equity transactions, net			2,226				152
Tax benefit from stock options exercised			659				47
Net cash used in financing activities			(3,661	)			(6,242	)
Effect of exchange rate changes on cash and cash equivalents			(2,526	)			3,694
Increase in cash and cash equivalents			11,099				21,892
Cash and cash equivalents at beginning of period			214,971				154,180
Cash and cash equivalents at end of period		$	226,070			$	176,072

The following table presents a financial measure which is considered to be "non-GAAP financial measures" under Securities Exchange Commission rules. Free cash flow is defined by the Company as cash flows from operating activities less purchases of property, plant, equipment and intangibles, net (capital expenditures) plus proceeds from the sale of property, plant, equipment and intangibles. The Company uses free cash flow as a measure to gauge its ability to fund future growth opportunities, repurchase common shares, and pay cash dividends. STERIS's calculation of free cash flow may vary from other companies.

 

		Three Months Ended June 30,
		2010				2009
Calculation of Free Cash Flow:		(Unaudited)				(Unaudited)
Cash flows from operating activities		$	29,694			$	32,620
Purchases of property, plant, equipment, and intangibles, net			(12,411	)			(8,355	)
Proceeds from the sale of property, plant, equipment, and intangibles			3				175
Free Cash Flow		$	17,286			$	24,440

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STERIS Corporation

Unaudited Supplemental Financial Data - Excluding SYSTEM 1 Rebate Program

First Quarter Fiscal 2011

As of June 30, 2010

 

		FY 2011				FY 2010
		Q1				Q1
Total Company Revenues
Capital		$	103,252			$	92,703
Consumables			76,333				80,797
Service			111,708				110,043
Total Recurring			188,041				190,840
Total Revenues		$	291,293			$	283,543
United States Revenues		$	226,088			$	223,806
United States Revenues as a % of Total			78	%			79	%
International Revenues		$	65,205			$	59,737
International Revenues as % of Total			22	%			21	%
Segment Data		Q1				Q1
Healthcare
Revenues
Capital		$	89,338			$	76,837
Consumables			60,482				66,731
Service			56,259				57,036
Total Recurring			116,741				123,767
Total Healthcare Revenues		$	206,079			$	200,604
Operating Income (Loss)			32,092				32,102
Life Sciences
Revenues
Capital		$	13,914			$	15,866
Consumables			15,851				14,066
Service			16,849				16,184
Total Recurring			32,700				30,250
Total Life Sciences Revenues		$	46,614			$	46,116
Operating Income (Loss)			6,295				4,779
Isomedix Services
Revenues		$	37,676			$	35,407
Operating Income (Loss)			10,584				8,339
Corporate and Other
Revenues		$	924			$	1,416
Operating Income (Loss)			(1,968	)			(2,358	)
Other Data		Q1				Q1
Healthcare Backlog		$	134,181			$	132,391
Life Sciences Backlog			37,904				46,257
Total Backlog		$	172,085			$	178,648
Free Cash Flow		$	17,286			$	24,440
Net Debt		$	(16,070	)		$	33,928

This supplemental data is consistent with publicly disclosed information provided in quarterly conference calls, earnings releases and SEC filings, and is subject to all definitions, precautions and limitations contained in those disclosures. Please see the Company's most recent 10-K for definitions (and reconciliation where appropriate) of backlog, free cash flow and net debt.