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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

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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): October 23, 2003

 

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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)

 

 

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ITEM 12. Results of Operations and Financial Condition

 

Attached hereto as Exhibit 99 is a copy of a press release in connection with the fiscal 2004 second quarter results of operation issued by STERIS Corporation on October 23, 2003.

 

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.

 

 

 

Date: October 23, 2003

 

Exhibit 99

 

STERIS CORPORATION

NEWS ANNOUNCEMENT

FOR IMMEDIATE RELEASE

 

STERIS CORPORATION ANNOUNCES FISCAL 2004

SECOND QUARTER RESULTS

 

Earnings increase 11% to $0.29 per diluted share

Earnings outlook for the year remains unchanged

 

Mentor, Ohio (October 23, 2003) – STERIS Corporation (NYSE: STE) today announced financial results for its second quarter ended September 30, 2003. Fiscal 2004 second quarter net income was $20.4 million, or $0.29 per diluted share, an increase of 11% compared with net income of $18.4 million, or $0.26 per diluted share in the second quarter of fiscal 2003. For the first six months of fiscal 2004, net income was $36.8 million, or $0.52 per diluted share, an increase of 18% compared with net income of $31.2 million, or $0.44 per diluted share in the same period of fiscal 2003.

 

Fiscal 2004 second quarter total net revenues increased 11% to $257.4 million, compared with $232.7 million in the same period a year ago. Excluding the contribution of businesses acquired in fiscal 2004, revenue growth was 7%. The Company’s Life Sciences segment showed continued strong year-over-year revenue growth at double-digit levels. Revenue growth in both the Healthcare and Isomedix segments was solid, but lower than had been anticipated due to slower market penetration of certain newly introduced Healthcare products and weakness in the activity of Isomedix’s labware customers. For the first six months of fiscal 2004, revenues were $516.7 million, an increase of 14% compared with $454.1 million in the first six months of fiscal 2003. Excluding the impact of acquisitions, revenue growth was 9% in the first six months of fiscal 2004.

 

Commenting on the results, Les C. Vinney, STERIS’s President and Chief Executive Officer, said, “Our second quarter reflected another quarter of solid profit performance. However, revenue growth was not as strong as we anticipated in our Healthcare and Isomedix segments. The factors which impacted these businesses are expected to temper our revenue growth for the remainder of fiscal 2004. We believe base revenue growth will be at our targeted

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STERIS Corporation

News Announcement

October 23, 2003

Page 2

 

 

10% level in fiscal 2005, excluding acquisitions. Despite the somewhat slower revenue growth in the current fiscal year, average earnings growth of 15%, excluding acquisitions, is still achievable in both fiscal years 2004 and 2005 as we more closely control our expenditure levels. Longer term, we continue to focus on opportunities for growth, both internally and through acquisition, as we build upon our core strengths to create a higher value portfolio of products and businesses.”

 

Segment Results

 

In fiscal 2004, the Company began reporting three segments: Healthcare, Life Sciences, and STERIS Isomedix Services. The operating profit reported for the segments reflects the full allocation of all distribution, corporate, and research and development expenses to each of the business segments.

 

Healthcare revenues for the fiscal 2004 second quarter increased 9% to $179.7 million, compared with $165.0 million in the fiscal 2003 second quarter. Higher revenues primarily resulted from increased volumes and the contribution of newly acquired businesses. The increase in volume was driven by new construction and project activity at hospitals, which remained strong, but was partially offset by a slower than anticipated ramp up in new products developed internally and through marketing alliances. Operating profit in the Healthcare segment for the fiscal 2004 second quarter increased 12% to $28.9 million, compared with $25.9 million in the second quarter of fiscal 2003. The improvement in Healthcare operating margin primarily reflects increased gross margins in the service business. For the first six months of fiscal 2004, Healthcare segment revenues increased 10% to $359.3 million compared with $327.0 million in the same period a year ago. Operating profit in the Healthcare segment for the first six months of fiscal 2004 was $52.5 million, compared with $46.1 million in the fiscal 2003 period.

 

Life Sciences fiscal 2004 second quarter revenues increased 18% to $56.9 million compared with $48.1 million in the second quarter last year. The acquisition of Hamo Holding AG, completed in the first quarter of fiscal year 2004, and favorable foreign currency exchange

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STERIS Corporation

News Announcement

October 23, 2003

Page 3

 

 

rates contributed to the revenue growth. Volume growth also stemmed from increased demand from the core customer base in pharmaceutical production, particularly in Europe. In the fiscal 2004 second quarter, Life Sciences recorded operating profit of $0.5 million compared with operating profit of $0.8 million in the second quarter of fiscal 2003. Gross margin improvement was offset by higher levels of spending related to the integration of the Hamo acquisition, and efforts to fill key organizational positions within the business to support future growth initiatives. For the first six months of fiscal 2004, Life Sciences segment revenues increased 31% to $115.3 million compared with $87.8 million in the same period a year ago. For the first six months of fiscal 2004, the Life Sciences segment reported an operating loss of $0.1 million, compared with a loss of $2.4 million in the fiscal 2003 period.

 

In the Isomedix segment, fiscal 2004 second quarter revenues increased 6% to $20.8 million compared with $19.6 million in the second quarter of fiscal 2003. Revenue improvement resulted from increased pricing and ongoing growth in the medical device market. These factors were partially offset by weaker demand in the labware market. Fiscal 2004 second quarter operating profit was $3.0 million compared with $2.5 million in the second quarter last year. The increase in operating profit was primarily due to the ability of the business to leverage its existing cost base with higher revenues. For the first six months of fiscal 2004, Isomedix segment revenues increased 7% to $42.1 million compared with $39.3 million in the same period a year ago. For the first six months of fiscal 2004, Isomedix segment operating profit was $6.2 million, compared with $6.0 million in the fiscal 2003 period.

 

Total Company Costs and Expenses

 

For the total company, gross profit margin in the fiscal 2004 second quarter was 43.0% compared with 41.4% in the prior year second quarter. Improved overall product mix and pricing, and manufacturing efficiencies from expanded facilities within the Life Sciences segment, contributed to the increase. For the first six months of fiscal 2004, gross profit margin was 42.0% compared with 41.4% in the fiscal 2003 period.

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STERIS Corporation

News Announcement

October 23, 2003

Page 4

 

 

Total operating expenses for the second quarter of fiscal 2004 were $78.3 million compared with $67.2 million in the same quarter of fiscal 2003. As a percentage of revenues, operating expenses were 30.4% compared with 28.9% in the same quarter last year. The increase in operating expenses primarily reflects costs associated with the integration of newly acquired businesses and expenses associated with the Company’s transformation to a new business unit structure. These factors more than offset a $1.9 million favorable impact from foreign currency exchange rates. Research and development expenditures in the quarter were 11% higher than in the second quarter of fiscal 2003 and totaled $6.4 million. Operating margin was 12.6% for the second quarter of fiscal 2004 compared with 12.5% in last year’s second quarter. For the first six months of fiscal 2004, total operating expenses were $158.6 million compared with $138.4 million in the first six months of fiscal 2003. As a percentage of revenues, total operating expenses were 30.7% in the first six months of fiscal 2004 compared with 30.5% in the fiscal 2003 period. Operating margin was 11.3% in the first six months of fiscal 2004 compared with 11.0% in the first six months of fiscal 2003.

 

Cash Flow

 

Cash provided by operations for the second quarter of fiscal 2004 was $19.2 million, compared with $44.4 million for the second quarter of fiscal 2003, reflecting higher working capital levels in fiscal 2004 to support future growth. Free cash flow, defined as operating cash flow less capital spending, was $2.6 million compared with free cash flow of $24.4 million in the prior-year quarter reflecting the lower level of cash provided by operations. For the first six months of fiscal 2004, cash provided by operations was $27.9 million compared with $61.0 million in the first six months of fiscal 2003. Free cash flow was negative $2.8 million in the first six months of fiscal 2004 compared with positive free cash flow of $30.6 million in the fiscal 2003 period. The Company currently anticipates free cash flow for all of fiscal 2004 to be approximately $60 million.

 

Fiscal 2004 Outlook

 

The Company’s revenue growth expectations for the year have been reduced to approximately 13% but with higher overall operating margins and a lower tax rate, the

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STERIS Corporation

News Announcement

October 23, 2003

Page 5

 

 

Company’s earnings target remains in the range of $1.29 to $1.33 per diluted share. In the third quarter of fiscal 2004, the Company anticipates earnings to be in the range of $0.33 to $0.35 per diluted share.

 

Conference Call

 

In conjunction with this press 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.com (click on “Investor Relations” and then click on the link provided) or via phone by dialing 1-888-392-9976 in the United States and Canada and 1-415-228-4835 internationally, then referencing the password “STERIS” and the conference leader’s name, “Aidan Gormley.”

 

For those unable to listen to the conference call live, a replay will be available from 12:00 p.m. Eastern time on October 23, 2003 until 5:00 p.m. Eastern time on October 31, 2003, either over the Internet at www.steris.com (click on “Investor Relations” and then click on “Second Quarter Conference Call”) or via phone by calling 1-800-427-2095 in the United States and Canada and 1-402-220-3019 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. Additional information about STERIS can be found on the Company’s Website at www.steris.com.

 

Contact: Aidan Gormley, Director, Investor Relations, 440-392-7607.

 

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This news release and the conference call referenced here may contain statements concerning certain trends, expectations, forecasts, estimates, or other forward-looking information affecting or relating to the Company or its industry 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

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STERIS Corporation

News Announcement

October 23, 2003

Page 6

 

 

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,” 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, and changes in government regulations 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 future financial results. 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 business initiatives will take longer, cost more or produce lower benefits than anticipated, (c) the possibility that compliance with laws, court rulings, regulations, or certification requirements of domestic and foreign authorities may delay or prevent new product introductions, affect the production and marketing of existing products, or otherwise affect Company performance, (d) the potential of international unrest or effects of fluctuations in foreign currencies of countries where the Company does a sizeable amount of business, and (e) the possibility of reduced demand, or reductions in the rate of growth in demand, for the Company’s products and services.

 

(end)

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STERIS Corporation

Consolidated Statements of Income

(In thousands, except per share data)

 

		Three Months Ended September 30,						Six Months Ended September 30,
		2003			2002			2003			2002
		(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net revenues		$	257,389		$	232,732		$	516,669		$	454,083
Cost of revenues			146,775			136,337			299,484			265,874
Gross profit			110,614			96,395			217,185			188,209
Operating expenses:
Selling, general, and administrative			71,879			61,457			144,559			127,706
Research and development			6,411			5,757			14,078			10,729
			78,290			67,214			158,637			138,435
Income from operations			32,324			29,181			58,548			49,774
Interest expense, net			499			413			984			953
Income before income taxes			31,825			28,768			57,564			48,821
Income tax expense			11,456			10,357			20,723			17,576
Net income		$	20,369		$	18,411		$	36,841		$	31,245
Earnings per common share data:
Basic earnings per common share		$	0.29		$	0.27		$	0.53		$	0.45
Diluted earnings per common share		$	0.29		$	0.26		$	0.52		$	0.44
Weighted average number of common shares outstanding:
Basic number of shares outstanding			69,347			69,118			69,403			69,378
Diluted number of shares outstanding			70,570			70,373			70,667			70,727

 

 

STERIS Corporation

Consolidated Balance Sheets

(In thousands)

 

		September 30, 2003			March 31, 2003
		(unaudited)
Assets
Current assets
Cash and cash equivalents		$	12,338		$	25,941
Net accounts receivable			210,660			211,687
Net inventories			119,707			90,135
Other current assets			26,561			26,669
Total current assets			369,266			354,432
Net property, plant, and equipment			359,500			345,621
Net intangible assets			225,273			192,416
Other assets			5,010			2,523
Total assets		$	959,049		$	894,992
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable		$	57,257		$	72,969
Other current liabilities			116,445			118,082
Total current liabilities			173,702			191,051
Long-term debt			101,522			59,704
Other liabilities			78,674			74,707
Shareholders’ equity			605,151			569,530
Total liabilities and shareholders’ equity		$	959,049		$	894,992

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STERIS Corporation

Segment Data

(In thousands)

		Three Months Ended September 30,						Six Months Ended September 30,
		2003			2002			2003				2002
		(unaudited)			(unaudited)			(unaudited)				(unaudited)
Segment Revenue
Healthcare		$	179,672		$	164,980		$	359,241			$	326,921
Life Sciences			56,875			48,112			115,300				87,829
STERIS Isomedix Services			20,842			19,640			42,128				39,333
Total		$	257,389		$	232,732		$	516,669			$	454,083
Segment operating profit (loss)
Healthcare		$	28,855		$	25,866		$	52,499			$	46,103
Life Sciences			462			811			(128	)			(2,360	)
STERIS Isomedix Services			3,007			2,504			6,177				6,031
Total		$	32,324		$	29,181		$	58,548			$	49,774