Current Report

 

 

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) November 3, 2009

 

 

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))

 

 

 


ITEM 2.02. Results of Operations and Financial Condition.

On November 3, 2009, STERIS issued a press release announcing financial results for its fiscal 2010 second quarter ended September 30, 2009. 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 9.01. Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.

  

Description

99.1    Press Release issued by STERIS Corporation on November 3, 2009 regarding its results of operations and financial condition for its fiscal 2010 second quarter ended September 30, 2009.

 

2


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/ MICHAEL J. TOKICH
  Michael J. Tokich
 

Senior Vice President

and Chief Financial Officer

Date: November 3, 2009

 

3


EXHIBIT INDEX

 

Exhibit
Number

  

Exhibit Description

99.1    Press Release issued by STERIS Corporation on November 3, 2009 regarding its results of operations and financial condition for its fiscal 2010 second quarter ended September 30, 2009.

 

4

Press Release issued by STERIS Corporation on November 3, 2009

Exhibit 99.1

LOGO

STERIS CORPORATION

NEWS ANNOUNCEMENT

FOR IMMEDIATE RELEASE

STERIS CORPORATION ANNOUNCES FISCAL 2010 SECOND QUARTER RESULTS

Second Quarter Earnings Per Share Increases 13% to $0.54

Company Increases Earnings Per Share Outlook for Fiscal 2010

Board of Directors Approves Special Dividend of $2.00 Per Share

Mentor, Ohio (November 3, 2009) - STERIS Corporation (NYSE: STE) today announced financial results for its fiscal 2010 second quarter ended September 30, 2009. Fiscal 2010 second quarter revenues were $314.2 million compared with $323.1 million in the second quarter of fiscal 2009, a decline of 3%. On a constant currency basis, revenues decreased 2%. Operating income increased 7% to $50.1 million, or 15.9% of revenues, compared with $47.0 million, or 14.5% of revenues in the second quarter of fiscal 2009. Fiscal 2010 second quarter net income was $32.1 million, or $0.54 per diluted share, compared with net income of $28.8 million, or $0.48 per diluted share, in the second quarter of fiscal 2009.

“We are pleased with the quarterly improvements in our business, in particular revenue from our healthcare capital equipment products,” said Walt Rosebrough, President and Chief Executive Officer of STERIS. “As we anticipated, our year-over-year revenue decline improved this quarter, and our expectation is that this trend will continue for the remainder of our fiscal year. We have also benefited from favorable foreign currency exchange rates and lower raw material costs so far this year, and we have continued to improve efficiencies. These trends combined to expand our operating margins even in the face of lower revenue. As a result, we are increasing our full year earnings guidance while maintaining our expectations for revenue.”

Segment Results

Healthcare revenues in the quarter were $223.0 million compared with $227.8 million in the second quarter of fiscal 2009, a decline of 2%. Strength in consumable revenues was offset by declines in capital equipment and service revenues. Backlog levels at quarter end were $129.9 million, an increase of 5% compared with the same time last year. Operating income was $36.4 million, an increase of 11% compared with the prior year period, driven by efficiency initiatives, lower raw material costs and favorable foreign currency exchange rates.

 


STERIS Corporation

News Announcement

Page 2

 

Life Sciences second quarter revenues were $54.4 million compared with $57.2 million in the second quarter of fiscal 2009, a decline of 5%. Double digit growth in consumable revenues was more than offset by declines in capital equipment and service revenues. Backlog levels at quarter end were $46.5 million, a decline of 5% compared with the prior year period. Life Sciences operating income was $8.5 million, an increase of 37% compared with the prior year period, driven primarily by improved operating efficiencies.

Fiscal 2010 second quarter revenues for Isomedix Services were $34.7 million compared with $37.0 million in the same period last year, a decline of 6%. Revenues were affected by the previously disclosed sale of two facilities during fiscal 2009. Operating income was $7.4 million in the quarter compared with $10.2 million in the second quarter of last year. Operating income in the second quarter of fiscal 2009 included the impact of a facility sale, which added $2.1 million to operating income.

Cash Flow

Net cash provided by operations for the first half of fiscal 2010 was $92.4 million, compared with net cash provided by operations of $68.7 million in the same period last year. Free cash flow (see note 1) for the first half of fiscal 2010 was $74.4 million, compared with free cash flow of $57.3 million in the prior year period. The growth in free cash flow was driven by lower working capital requirements.

Dividend Announcement

The Company also announced today that STERIS’s Board of Directors has authorized a regular quarterly dividend in the amount of $0.11 per common share. In addition, the Board of Directors has authorized a special dividend of $2.00 per common share to be paid with the regular quarterly dividend. The combined dividend is payable December 22, 2009 to shareholders of record at the close of business on November 24, 2009.

“The decision by our Board of Directors to return cash to our shareholders through a special dividend is a reflection of our current cash position, free cash flow generation and the confidence we have in the Company’s future,” said Rosebrough. “STERIS’s strong balance sheet allows us to make this distribution without hindering our ability to pursue growth alternatives.”

 


STERIS Corporation

News Announcement

Page 3

 

Outlook

Based upon first half results and current anticipated trends, the Company is updating its outlook for the full fiscal year. The Company’s expectations for revenue are unchanged at flat to down mid-single digits from fiscal 2009 levels. The Company is increasing its expected range for earnings per diluted share, and currently anticipates approximately $1.90 to $2.05 for the full fiscal year, compared with prior guidance of $1.80 to $2.00. This outlook reflects certain key assumptions, some of which are listed below:

 

   

Healthcare revenues are anticipated to be flat to down mid-single digits, including the previously announced impact of reduced revenues from SYSTEM 1, which is now anticipated to reduce revenues by approximately $20 million in fiscal 2010.

 

   

Life Sciences revenues are anticipated to be flat.

 

   

Isomedix revenues are anticipated to decline in the mid-single digits.

 

   

The Company has assumed the average forward exchange rates for the U.S. dollar and key international currencies as of September 30, 2009. These rates reflect a weakening of the U.S. dollar, creating a headwind for earnings in the second half of the fiscal year.

 

   

The Company anticipates no raw material cost increases during the second half of the fiscal year.

 

   

EBIT as a percent of revenue is now anticipated to be approximately 15%.

 

   

The anticipated effective tax rate is approximately 35%.

For the full fiscal year 2010, free cash flow (see note 1) is anticipated to be approximately $125 million and capital expenditures are anticipated to be approximately $50 million.

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 November 3, 2009, until 5:00 p.m. Eastern time on November 17, 2009, either over the


STERIS Corporation

News Announcement

Page 4

 

Internet at www.steris-ir.com or via phone by calling 1-866-487-7528 in the United States and Canada, and 1-203-369-1648 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 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 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 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 or 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 outcome from litigation, regulatory action, administrative proceedings, government investigations, warning letters, cost reductions, business strategies, level of share repurchases or dividends, earnings and revenue trends, expense reduction or other 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


STERIS Corporation

News Announcement

Page 5

 

Company’s 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, regulations, regulatory actions, including without limitation previously disclosed FDA warning letters and government investigations, certifications or other requirements or standards may delay or prevent new product introductions, affect 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, and the conference call referenced here, may adversely impact Company performance, results, or value, (g) the effect of the credit crisis on our ability, 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, 2009, filed with the SEC on May 30, 2009, under Item 1A, “Risk Factors.”


STERIS Corporation

Consolidated Condensed Statements of Income

(In thousands, except per share data)

     Three Months Ended
September 30,
   Six Months Ended
September 30,
 
     2009     2008    2009     2008  
     (Unaudited)     (Unaudited)    (Unaudited)     (Unaudited)  

Revenues

   $ 314,229      $ 323,127    $ 597,772      $ 634,692   

Cost of revenues

     181,574        190,764      340,281        371,828   
                               

Gross profit

     132,655        132,363      257,491        262,864   

Operating expenses:

         

Selling, general, and administrative

     74,516        77,290      149,121        164,638   

Research and development

     8,189        8,068      15,769        16,347   

Restructuring expense

     (115     37      (327     (129
                               

Total operating expenses

     82,590        85,395      164,563        180,856   
                               

Income from operations

     50,065        46,968      92,928        82,008   

Non-operating expense, net

     2,852        1,978      5,718        3,363   

Income tax expense

     15,129        16,196      29,584        24,351   
                               

Net income

   $ 32,084      $ 28,794    $ 57,626      $ 54,294   
                               

Earnings per common share (EPS) data:

         

Basic

   $ 0.55      $ 0.49    $ 0.98      $ 0.92   
                               

Diluted

   $ 0.54      $ 0.48    $ 0.97      $ 0.90   
                               

Cash dividends declared per common share outstanding

   $ 0.11      $ 0.08    $ 0.22      $ 0.14   

Weighted average number of common shares outstanding used in EPS computation:

         

Basic number of common shares outstanding

     58,654        59,312      58,585        59,003   

Diluted number of common shares outstanding

     59,418        60,376      59,201        60,012   

STERIS Corporation

Consolidated Condensed Balance Sheets

(In thousands)

  

  

  

     September 30,
2009
    March 31,
2009
            
     (Unaudited)                   

Assets

         

Current assets:

         

Cash and cash equivalents

   $ 223,758      $ 154,180     

Accounts receivable, net

     214,359        238,438     

Inventories, net

     128,147        130,218     

Other current assets

     27,187        30,294     
                   

Total Current Assets

     593,451        553,130     

Property, plant, and equipment, net

     349,045        350,996     

Goodwill and intangible assets, net

     312,521        305,189     

Other assets

     8,219        7,624     
                   

Total Assets

   $ 1,263,236      $ 1,216,939     
                   

Liabilities and Equity

         

Current liabilities:

         

Accounts payable

   $ 56,828      $ 68,573     

Other current liabilities

     121,472        133,453     
                   

Total Current Liabilities

     178,300        202,026     

Long-term debt

     210,000        210,000     

Other liabilities

     74,162        87,177     

Equity

     800,774        717,736     
                   

Total Liabilities and Equity

   $ 1,263,236      $ 1,216,939     
                   


STERIS Corporation

Segment Data

(In thousands)

 

     Three Months Ended
September 30,
    Six Months Ended
September 30,
 
     2009     2008     2009     2008  
     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  

Segment Revenues:

        

Healthcare

   $ 223,006      $ 227,836      $ 423,610      $ 451,901   

Life Sciences

     54,401        57,151        100,517        105,190   

STERIS Isomedix Services

     34,735        36,971        70,142        73,834   
                                

Total Reportable Segments

     312,142        321,958        594,269        630,925   

Corporate and Other

     2,087        1,169        3,503        3,767   
                                

Total Segment Revenues

   $ 314,229      $ 323,127      $ 597,772      $ 634,692   
                                

Segment Operating Income (Loss):

        

Healthcare

   $ 36,366      $ 32,698      $ 68,469      $ 61,928   

Life Sciences

     8,540        6,228        13,319        7,275   

STERIS Isomedix Services

     7,401        10,211        15,740        18,398   
                                

Total Reportable Segments

     52,307        49,137        97,528        87,601   

Corporate and Other

     (2,242     (2,169     (4,600     (5,593
                                

Total Segment Operating Income

   $ 50,065      $ 46,968      $ 92,928      $ 82,008   
                                

STERIS Corporation

Consolidated Condensed Statements of Cash Flows

(In thousands)

 

     Six Months Ended
September 30,
 
     2009     2008  
     (Unaudited)     (Unaudited)  

Operating Activities:

    

Net income

   $ 57,626      $ 54,294   

Non-cash items

     32,945        34,607   

Changes in operating assets and liabilities

     1,837        (20,210
                

Net cash provided by operating activities

     92,408        68,691   

Investing Activities:

    

Purchases of property, plant, equipment, and intangibles, net

     (18,543     (20,872

Proceeds from sale of property, plant, equipment and intangibles

     509        9,506   
                

Net cash used in investing activities

     (18,034     (11,366

Financing Activities:

    

Proceeds from the issuance of long-term obligations

     —          150,000   

Payments under credit facilities, net

     —          (79,180

Deferred financing fees and debt issuance costs

     —          (476

Repurchases of common shares

     (289     (50,210

Cash dividends paid to common shareholders

     (12,894     (8,275

Tax benefit from stock options exercised

     463        8,732   

Stock options and other equity transactions, net

     2,102        32,956   
                

Net cash (used in) provided by financing activities

     (10,618     53,547   

Effect of exchange rate changes on cash and cash equivalents

     5,822        (2,521
                

Increase in cash and cash equivalents

     69,578        108,351   

Cash and cash equivalents at beginning of period

     154,180        51,868   
                

Cash and cash equivalents at end of period

   $ 223,758      $ 160,219   
                


STERIS Corporation

Non-GAAP Disclosures (Unaudited)

(In thousands, except per share data)

The following table presents financial measures which are considered to be “non-GAAP financial measures” under Securities Exchange Commissions 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.

 

    

Six Months Ended

September 30,

        

Outlook
Fiscal

2010

 
     2009     2008         
     (Unaudited)     (Unaudited)             

Calculation of Free Cash Flow:

         

Cash flows from operating activities

   $ 92,408      $ 68,691         $ 175,000   

Purchases of property, plant, equipment, and intangibles, net

     (18,543   $ (20,872        (50,000

Proceeds from the sale of property, plant, equipment, and intangibles

     509      $ 9,506           —     
                   

Free Cash Flow

   $ 74,374      $ 57,325         $ 125,000   
                   


STERIS Corporation

Supplemental Financial Data (Unaudited)

Second Quarter Fiscal 2010

As of September 30, 2009

 

         FY 2010                FY 2009  
         Q1     Q2          Q1     Q2     Q3     Q4     Total  

Total Company Revenues

                                                   

Capital

     $ 92,703      $ 119,146         $ 120,117      $ 130,313      $ 129,563      $ 156,654      $ 536,647   

Consumables

       80,797        79,989           75,465        73,543        73,745        72,129        294,882   

Service

       110,043        115,094           115,983        119,271        116,159        115,583        466,996   
                     

Total Recurring

       190,840        195,083           191,448        192,814        189,904        187,712        761,878   
                     

Total Revenues

     $ 283,543      $ 314,229         $ 311,565      $ 323,127      $ 319,467      $ 344,366      $ 1,298,525   
                     

United States Revenues

     $ 223,806      $ 238,292         $ 241,219      $ 245,139      $ 250,355      $ 256,774      $ 993,487   

United States Revenues as a % of Total

       79     76        77     76     78     75     77

International Revenues

     $ 59,737      $ 75,937         $ 70,346      $ 77,988      $ 69,112      $ 87,592      $ 305,038   

International Revenues as % of Total

       21     24        23     24     22     25     23
                   

Segment Data

       Q1     Q2          Q1     Q2     Q3     Q4     Total  

Healthcare

                         

Revenues

                         

Capital

     $ 76,837      $ 99,737         $ 100,915      $ 106,576      $ 109,221      $ 130,137      $ 446,849   

Consumables

       66,731        64,038           62,684        59,990        60,217        57,851        240,742   

Service

       57,036        59,231           60,466        61,270        60,739        61,197        243,672   
                     

Total Recurring

       123,767        123,269           123,150        121,260        120,956        119,048        484,414   
                     

Total Healthcare Revenues

     $ 200,604      $ 223,006         $ 224,065      $ 227,836      $ 230,177      $ 249,185      $ 931,263   
                     

Operating Profit/(Loss)

       32,102        36,366           29,230        32,698        32,406        38,267        132,601   
                     

Life Sciences

                         

Revenues

                         

Capital

     $ 15,866      $ 19,374         $ 18,721      $ 23,980      $ 20,292      $ 26,219      $ 89,212   

Consumables

       14,066        15,951           12,783        13,552        13,528        14,278        54,141   

Service

       16,184        19,076           16,535        19,619        18,967        18,227        73,348   
                     

Total Recurring

       30,250        35,027           29,318        33,171        32,495        32,505        127,489   
                     

Total Life Sciences Revenues

     $ 46,116      $ 54,401         $ 48,039      $ 57,151      $ 52,787      $ 58,724      $ 216,701   
                     

Operating Profit/(Loss)

       4,779        8,540           1,047        6,228        7,151        3,987        18,413   
                     
       

Isomedix Services

                         

Revenues

     $ 35,407      $ 34,735         $ 36,863      $ 36,971      $ 34,642      $ 34,169      $ 142,645   

Operating Profit (Loss)

       8,339        7,401           8,187        10,211        8,453        7,912        34,763   
                     
       

Corporate and Other

                         

Revenues

     $ 1,416      $ 2,087         $ 2,598      $ 1,169      $ 1,861      $ 2,288      $ 7,916   

Operating Profit (Loss)

       (2,358     (2,242        (3,424     (2,169     (2,192     (2,547     (10,332
                   

Other Data

       Q1     Q2          Q1     Q2     Q3     Q4     Total  

Healthcare Backlog

     $ 132,391      $ 129,937         $ 113,856      $ 124,135      $ 133,863      $ 119,790      $ 119,790   

Life Sciences Backlog

       46,257        46,492           49,776        48,712        50,170        45,231        45,231   
                     
       

Total Backlog

     $ 178,648      $ 176,429         $ 163,632      $ 172,847      $ 184,033      $ 165,021      $ 165,021   

Free Cash Flow

     $ 24,440      $ 49,934         $ 18,119      $ 39,206      $ 32,276      $ 56,235      $ 145,836   

Net Debt

     $ 33,928      $ (13,758      $ 129,222      $ 90,581      $ 104,250      $ 55,820      $ 55,820   

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 Form 10-Q for definitions (and reconciliation where appropriate) of backlog, free cash flow and net debt.

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