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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 15, 2005

 

 

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 7.01 Regulation FD Disclosures

 

Attached hereto as Exhibit 99.1 is a copy of materials titled “STERIS Corporation’s 2005 Analyst Day” prepared with respect to an analyst conference on Tuesday, November 15 in Cleveland, Ohio where senior management will discuss the Company’s business and growth strategies.

 

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.

 

Forward-Looking Statements. The materials included in Exhibit 99.1 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,” 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. 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 or raw material cost 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 application of or compliance with laws, court rulings, regulations, 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 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.

 

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/    LAURIE BRLAS        
    Laurie Brlas
    Senior Vice President and Chief Financial Officer

 

Date: November 15, 2005

 

3

Copy of materials titled "STERIS Corporation's 2005 Analyst Day" for conference
STERIS Corporation’s 2005 Analyst Day
Exhibit 99.1

2
Except
for
historical
information
discussed,
today’s
presentation
includes
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
SEC
Filings
on
Forms
10-K
and
10-Q
and
in
its
earnings
release
dated
November
9,
2005.
Further,
these
forward-looking
statements
speak
only
as
of
November
15,
2005.
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.
Forward Looking Statements

3
Today’s Agenda
>
STERIS Overview –
Les Vinney
>
Financial Overview –
Laurie Brlas
>
Healthcare –
Chuck Immel
>
Luncheon –
Dr. Steve Gordon, Chairman, Infectious Diseases,
Cleveland Clinic Foundation
>
Life Sciences –
Gerry Reis
>
Isomedix –
Robert Moss
>
Wrap-up
and
Questions
–
Les
Vinney

4
Today’s Objectives
Our purpose in hosting this event is to provide you with:
>
An increased understanding and knowledge of STERIS
>
The opportunity to hear directly from the leadership of the Company
>
An enhanced perspective on our industry and opportunities
>
The ability to interact with our senior management team

Company Overview
Presented by Les C. Vinney
President and CEO

6
Reasons to Consider STERIS
>
We are a market leader
>
Strong underlying industry demand
>
Stable company with strong financial position
–
Solid cash generation
–
Low debt levels
>
Substantial opportunities for growth in new markets and
geographies
>
Consistent revenue stream, with 58% recurring revenues
through the sale of consumables and service

7
Over Arching Vision
To See The World Free From
Infection And Contamination

8
Unique Product Offering
This balanced revenue stream
allows us:
–
A stronger competitive position
–
Protection from capital spending
cycles
–
Higher margins from
consumables and service
–
The ability to offer customers a
total solution
Balanced Revenue Stream
YTD Fiscal 2006
Capital
Equipment
42%
Services 35%
Consumables
23%

9
Healthcare (Hospitals and Surgical Centers)
>
OR and Critical Care Equipment
>
Sterile Processing Capital Equipment
>
Consumables
>
Equipment Maintenance and Process Consulting
Life Sciences (Pharma
Production & Research, Defense)
>
Pharmaceutical Production
>
Research and Biohazard Containment Labs
>
Defense and Aerospace
>
Industrial Decontamination
STERIS Isomedix Services (Contract Sterilization)
>
Single-use Medical Devices and Surgical Kits
>
Personal Care Products
>
Packaging, Labware
Where you will find STERIS
Three Reporting Segments
YTD
Fiscal 2006 Revenues
Healthcare
68%
Isomedix
11%
Life Sciences
21%

Growth Drivers

11
Key Growth Drivers
Market Growth
Improve Execution
Diversify Revenue
Sustainable Profitable Growth

12
Industry Growth Drivers
>
Healthcare:
–
Organic growth of 3-5%
–
Drivers = aging population, surgical procedure growth, hospital spending on
construction, concerns over hospital acquired infections
>
Life Sciences:
–
Organic growth of 8-10%
–
Drivers
=
aging
population,
drug
consumption,
ongoing
investment
in
drug
production
(new
and
generic),
increased
FDA
pressure
on
cleaning
validation
>
Isomedix:
–
Organic growth of 5-7%
–
Drivers = medical device consumption, sterilization outsourcing

13
>
Increase
recurring revenues
>
Leverage
our channel
>
Introduce new technologies
>
Adapt
our technologies
>
Expand
internationally
Diversify revenue stream by product, service,
market and geography
Growth Strategy

14
Recent Progress
>
Integration of recent acquisitions going well
–
Browne product conversions in US
–
C-Max table launched in US
–
Cosmed
contributing strongly
>
New Product Pipeline Strengthening
>
New Market Opportunities
–
Ambulance decontamination first orders in
–
Prototype testing with government agencies
–
Joint ventures within food & beverage industry
>
International Offices and JV in Asia

15
New Innovations
Reliance®
Endoscope Reprocessor
HAMO LS2000 Endoclean

16
Tackling Emerging Threats -
MRSA
>
MRSA: an antibiotic-resistant
bacteria plaguing the UK.
>
Reviews of death certificates which
mention MRSA
show a
15 fold
increase since 1992.
>
300,000
cases
of
hospital
acquired
infection ,
causing
around
5,000
deaths
and
costing
the
NHS
as
much
as
£1
billion.
>
Patient transport can spread this and
other deadly diseases without proper
decontamination.

17
Actions to Improve Execution
Performance Transformation Initiative Targeting
Improvements In:
>
Business Processes
-
Becoming a market-led organization
-
Focusing on lean operations
>
Management Processes
-
Improving planning, talent and performance management
>
Mindsets & Behaviors
-
Embracing a singular culture “The STERIS Way”

18
Why own STERIS?
>
Market leader
>
Growing markets
>
Strong financial position
>
Substantial opportunities
>
Consistent revenue stream

STERIS Corporation’s 2005 Analyst Day

STERIS Corporation’s 2005 Analyst Day
Laurie Brlas, Senior Vice President and CFO

2
Fiscal 2006 Second Quarter Recap
11.7%
9.5%
Operating Margin……..
(11%)
$0.27
$0.24
Diluted EPS……………
(13%)
$18.9
$16.4
Net Income…………….
Change
2004
2005
(13%)
$30.9
$27.0
Operating Profit………..
42.1%
40.9%
Gross Margin…………..
4%
111.5
116.2
Gross Profit…………….
7%
$264.8
$284.4
Total Net Revenues…..
Fiscal 2006 Quarter Ended September 30, 2005
(in millions, except EPS)

3
Second Quarter Revenue Mix
Capital 43%
Life Sciences 21%
Isomedix 11%
Healthcare 68%
Service 35%
Consumables 22%
Fiscal 2006 Quarter Ended September 30, 2005

4
Second Quarter Segment Data
13%
4.4
5.0
Operating Profit………..
18.1%
15.5%
Operating Margin
(1.3%)
(1.2%)
Operating Margin
15.2%
11.7%
Operating Margin
Isomedix
Life Sciences
Change
2004
2005
Healthcare
32%
$24.2
$32.0
Revenues………………
N/A
(0.8)
(0.7)
Operating Profit………..
(5%)
$61.4
$58.4
Revenues………………
(16%)
27.3
22.8
Operating Profit………..
8%
$179.2
$194.0
Revenues………………
Fiscal 2006 Quarter Ended September 30, 2005 (in millions)

5
Cash Flow *
Fiscal 2006 Period Ended September 30, 2005 (in millions)
2Q06
$4.1
$28.6
Free Cash Flow…………..
15.0
14.6
Capital Spending…………….
$19.1
$43.2
Cash from Operations…..
2Q05
1H06
1H05
$84.3
$61.4
22.7
25.5
$61.6
$35.8
* Free cash flow is defined as operating cash flow less purchases of property, plant, equipment, and
intangibles, net (capital expenditures).

Financial Overview

7
Total Company Revenue Growth
0
50
100
150
200
250
300
350
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
2003
2004
2005
2006
(in millions)

8
Healthcare Revenue Growth
(in millions)
0
50
100
150
200
250
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
2004
2005
2006

9
Life Sciences Revenue Growth
(in millions)
0
10
20
30
40
50
60
70
80
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
2004
2005
2006

10
Isomedix Revenue Growth
(in millions)
0
5
10
15
20
25
30
35
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
2004
2005
2006

11
Gross and Operating Margins
0.0
10.0
20.0
30.0
40.0
50.0
2002
2003
2004
2005
2006
Operating Margin
Gross Margin
(percentage)
Estimate

12
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
2002
2003
2004
2005
2006
Quarterly Diluted Earnings Per Share

Current Financial Position

14
Strong Financial Picture
>
Low level of debt
>
Strong free cash flow
>
Capacity to fund growth

15
Strong Cash from Operations
Cash From Operations and Capital Spending (in
millions)
$102
$142
$133
$123
$151
$51
$66
$59
$68
$56
FY 2001
FY 2002
FY 2003
FY 2004
FY 2005
Cash from Operations
Capital Spending

16
Capital Spending
Healthcare
26%
Life
Sciences
8%
Isomedix
35%
R&D
5%
IT
12%
Other
14%
Estimated
Fiscal 2006
$60-65 million

17
Priorities for Cash
>
Fund growth through acquisitions
>
Share buybacks
–
1.6 million shares repurchased in first half fiscal 2006
>
Fund dividend payments

18
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
>
Exceed ROI hurdle rate of 15%

19
Quarterly Long-Term Debt-to-Capital
0
10
20
30
40
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
FY 2002
FY 2003
FY 2004
FY 2005
percentage
FY 2006

Outlook

21
Our Current Financial Outlook
Including acquisitions and divestitures:
>
Revenue growth of 6-8%  
>
Earnings per share of $1.30 to $1.34 (6-9% growth)
>
Free cash flow of $85-90 million  (before acquisitions)
>
Capital spending approximately $60-$65 million
>
Depreciation and amortization $55-60 million
Fiscal 2006 Outlook

STERIS Corporation’s 2005 Analyst Day
Charles L. Immel,  Healthcare

2
Business Definition
A leading provider of an integrated offering of equipment, consumables,
and services to healthcare providers, enabling them to reduce cost and
improve outcomes in the surgical and acute care environments.
Sterile
Processing
Surgical &
Critical Care
Service
Service
BUSINESS UNITS
PRODUCT MIX
FY05
$764 Million
Recurring
Revenue
Surgical Tables
and Lights
Washers and
Sterilizers
Consumables

3
Surgical Environment

4
Sterile Processing Environment

5
Core Strengths
>
Integrated offering of capital equipment, chemistries,
and services
>
Service force of more than 1,000 professionals
>
Strong brand and channel in North America
>
Significant active installed base of equipment
>
Base of platform sterilization and disinfection
technologies

Industry Overview

7
Healthcare by Product Type
STERIS
STERIS
STERIS
STERIS
$1.8B
$1.4B
$1.6B
$0.5B
$15 –
17B
Adjacent
Markets
Served
Markets
•
Total served market size
greater than $5 billion
with low to mid single
digit growth rates
•
Global markets with
regional differences in
medical practice and a
diverse set of
competitors; STERIS has
a strong competitive
position in North America
•
Growth is tied to
replacement cycle,
capacity expansion,
technology innovation,
and procedure growth
3M
Ecolab
Regent Medical
Aesculap
Cardinal
Other
J&J
Getinge
Belimed
Sakura
Cantel
Other
Getinge
Hill Rom
Berchtold
Mizuho
Other
In-house
3rd
Party
STERILE
PROCESSING
SURGICAL/
CRITICAL CARE
SERVICES
Growth rate
3 –
4%
3 –
4%
2%       
Consumables
Capital & Integrated
Consumables

8
Base Market Growth
•
“Boomers”
continue to
increase demand for
acute care procedures
•
U.S. Hospital capacity
gaps drive robust
construction spend,
particularly in surgical
and critical care
$0
$5
$10
$15
$20
$25
$30
0
5
10
15
20
25
30
35
40
45
50
Sources: F.W. Dodge, The Outlook for Healthcare Facilities (Q3 2005);
Medtech
Insight Forecasted growth in Surgical Procedures
U.S. Healthcare
Construction Spending
3% CAGR
5% CAGR
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Strategy

10
Strategy
>
Create capital equipment and recurring revenue
synergies
>
Expand product portfolio and leverage the North
American sales and service channel
>
Introduce new technologies
>
Build international presence through selected
partnerships, acquisitions, and new technology
introductions

11
Sterile Processing Needs Assessment
>
Instrument throughput, loss,
handling
>
Chemistry management
and effectiveness
>
Appropriate and consistent
use of sterility assurance
products
>
Appropriate asset and labor
utilization
Surgical
Case
Scheduled
Organization
and Preparation
of Case Carts
Transport
of
Case Carts
Opening
of
Sterile Trays
Starting
Instrument
Counts
Handling/Passing
of Instruments
During Procedure
Use of Sterilizers or
Back-up Suppliers
During Procedure
Ending
Instrument
Counts
Operating
Room
Clean-up
Transport
of
Instruments to CS
Pre-Wash
Washing
Assembly
Sterilization
Tray
Distribution/
Storage
Historical Focus
Future Opportunity for Impact
Hospital Sterile Processing
Challenges:

12
Recurring Revenue Growth
Opportunity for Improved Recurring Revenue Growth Is
Substantial on Current Installed Base of Sterile Processing Equipment
*  Cost/Cycle includes: Detergents, Indicators, Wraps/Trays & Service
$330 million
$125 million
Annual
Consumable
Revenue
Opportunity
$10.00
$9.00
Average
Consumable
Cost/Cycle*
Steam
Sterilization
Washing
Systems

13
Recurring Revenue Growth
2001
2006
>
Launch of Synergy washer with
validated chemistries, reducing cycle
time from 45 minutes to 25 minutes
>
Acquisition and North America launch
of Browne chemical indicators
>
Launch of concentrated form of liquid
cleaning chemistry
>
Introduction of Steriltek
consulting
services
Healthcare Recurring Revenue
7% CAGR

14
Revenue From New Products
2004
2005
2006
Key Product Introductions
>
Synergy
®
Washer
>
Amsco
®
Century
®
Steam Sterilizers
>
Harmony
TM
LA
Surgical
Lights
and
Equipment Management Systems
>
Surgigraphic
TM
Surgical
Table
>
Amsco
®
Containers
>
Verify
®
Chemical Indicators
>
Hamo
®
Endoclean
>
Reliance
®
EPS
>
CMAX
TM
Surgical
Table
>
SterilTek Consulting Services
15% CAGR
Healthcare New Product Revenue

15
International Expansion Update
2001
2006
>
Acquisition of Hamo
Holding AG
>
Acquisition of Albert Browne, Ltd.
chemical indicators
>
Acquisition of FH Surgical SAS
>
Joint venture with Shandong SHINVA
Medical Instrument Company Ltd.,
Chinese sterilizer manufacturer
>
Added organizational infrastructure in
Europe, Asia, and Latin America
International Revenue
20% CAGR

16
Low Temperature Processing
>
Enter higher growth
GI applications with
differentiated HLD
product offering
Hamo®
Endoclean
Reliance®
EPS
>
Improve market
segmentation
>
Maintain global
focus on surgical
applications
>
Explore alternative
technologies
Sterilization
High level disinfection
Processing
Modality
$7 -
$20
$1 -
$7
Per Cycle Cost
Johnson & Johnson
3M
Ethylene Oxide suppliers
Other
Medivators
Olympus
Custom Ultrasonics
Other
Competition
2 –
4%
5 -
7%
Growth
$500 Million
$400 Million
Market Size
Surgical Application
GI Application

17
Expanded Offering in Surgical and Critical Care
>
Revenue per room ranges
from $35 thousand to $120
thousand
>
Develop appropriate price
point for each segment
>
Capture larger portion of
operating room spend
>
New Offerings
CMAX™
high-end surgical
tables
Lower tier surgical tables
Harmony™
“Lux
Classic”
mid-tier lighting system
3,800 Rooms
$215M
High End
800
General
1,100
Basic   
1,900
$88M
41%
$63M
29%
$64M
30%
New U.S.
Operating
Rooms / Year
Equipment
Spend
Source:
AHA
Annual
Survey,
Dec
2004;
U.S.
Market
for
Video
and
High
Tech
Devices;
Millenium
2005

18
Margin Improvement Actions
Unfavorable Factors
•
Steel, chemicals,
fuel, wage, and
benefit increases
•
Geographic mix
•
Initial impact and
integration of
acquisitions
Improvement Initiatives
•
Global strategic
sourcing investment
•
Lean initiatives
•
Manufacturing
network optimization
•
Pricing actions and
other market
initiatives
Near-term margin
pressure will begin to
improve over the next 6
to 12 months

19
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
(product/geography), capitalizing on the value of capital and
recurring revenue synergies, and new technology introductions

STERIS Corporation’s 2005 Analyst Day
Gerry Reis, Life Sciences

2
Business Definition
A
global
provider
of
decontamination
and
sterilization
technologies,
products
and
services
used
by
research
facilities,
pharmaceutical
companies,
defense
and
industrial
customers.
Our
offerings
prevent
contamination
and
the
spread
of
infection
and
enhance
the
productivity
of
our
customers’
critical
operations.

3
Revenue Mix
FY05
$251 Million
Capital Equipment
Consumables
Services
Pharma Production
Research
Defense and Industrial
BUSINESS UNITS
PRODUCT MIX

4
Pharmaceutical and Research Business
A Fundamentally Attractive Market 
Size and Growth in Current Applications
Served Market Size
(current segments)
$ Millions
Growth Rate Percent
6-8%
10-12%
Research
Pharma
632
750

5
Industry Drivers
Observations:
•
Pharmaceutical industry consolidation continues
•
Generics and bio-pharmaceutical outpacing
pharmaceutical 
•
Increased regulatory scrutiny
•
Usage of validated cleaning chemistries increasing
•
Regulatory changes forcing innovation
•
Increased demand for vaccines associated with avian flu,
bioterrorism, etc.

6
STERIS
STERIS
Getinge
Scientek
Girton
Fedegari
MECO
Mueller
Other
6-8%
North America
$106M (35%)
Europe
$111M (38%)
ROW
$79M (27%)
STERIS
Getinge
Fedegari
Christ
SBM/Bosch
Stilmas
Other
Getinge
Relimed
Sakura
SBM/Bosch
Xinhua
Zibo
Other
5%
15-20%
(‘05 –
‘10 CAGR)
Pharmaceutical Capital
Total
$300M

7
STERIS
STERIS
5-7%
North America
$200M (39%)
Europe
$162M (31%)
ROW
$154M (30%)
STERIS
5%
5-12%
Getinge
Primus
Miele
Labconco
Other
Getinge
Tuttnauer
Tecniplast
Miele
Other
Getinge
Tecniplast
Miele
Xinhua
Other
Research Capital
(‘05 –
‘10 CAGR)
Total
$520M

8
14 %
12 %
(‘05-'10 CAGR)
12 %
Pharmaceutical
Consumables
Total
$450M
Consumables
North America
$200M (44%)
Europe
$180M (40%)
ROW
$70M (16%)
STERIS
STERIS
STERIS
STERIS
STERIS
7 %
5 %
('05-'10 CAGR)
7 %
North America
$55M (49%)
Europe
$38M (34%)
ROW
$19M (17%)
Research
Consumables
Total
$112M
Commodity
Solvents
Other
Formulated
Veltek
Other SAP
Other
Commodity
Solvents
Other
Formulated
Shield
Ecolab
Other SAP
Other
Commodity
Solvents
Other
Pharmacal
Alconox
Other
Formulated
Other
Other
Formulated
Other
Commodity
Other
Formulated
Other
STERIS

9
Service –
A Competitive Advantage
Observations:
•
Our
global
network
of
service
professionals
represents
a
competitive
advantage
•
Higher
margin
services
and
spare
parts
business
is
enabled
by
our
capital
equipment
business
•
We
are
integrating
our
service
and
capital
offering

10
Growth and Profitability Strategy
•
New direction
•
Improve economics
of capital business
•
Grow recurring
revenues
Turn Around of P&R
New Market
Opportunities  
Decontamination
technologies and services
for:
•
Ambulances
•
Patient care rooms
and other facilities
•
Military/defense
applications (aircraft,
sensitive electronics
and equipment, etc.)
•
OEMs in new
segments (e.g. food
& beverage
+

11
A New Direction
New Direction
•
Under Penetrated Segments: Research,
generics, bio-tech, cosmetics, high-level
containment laboratories
•
Under Penetrated Regions: Eastern
Europe, Middle-East, China, Japan,
Singapore
Former Strategy
Depth
in the
pharmaceutical
aseptic core
One-stop shop for
capital requirements:
•
Sterilizers 
•
Water stills
•
Isolators
•
Washers
•
Handling
systems etc…
Breadth:
Leverage core technologies
(capital systems, services and formulated
chemistries) into under penetrated
market segments. Global partnerships
with the major pharmaceutical companies

12
Improve Economics of Capital Business
1.
Redesign for lower cost
manufacturing
2.
Outsource non-critical
components
3.
Implement lean
manufacturing practices
4.
Balance loading of factories
5.
Develop manufacturing
capability in China
Finn Aqua
®
Pure 
Steam Generator
Finn Aqua
®
GMP Sterilizer

13
Grow Recurring Revenues
>
Launch Albert Browne sterility
assurance products
(Steraffirm™)
>
Prioritize sales and marketing
around high-margin spare parts
>
Enhance offering around
chemical storage and delivery
>
Integrate service offering with
capital
Cage-Klenz
®
Cage Washing Detergents
CIP 100
®

14
New Market Opportunities
Life Sciences is working with defense agencies, first responders,
and other industrial customers to explore the development and
adaptation of its technologies for use in decontaminating: 
–
Airplanes
–
Ambulances
–
Buildings
–
Food and Beverage Filling Lines

15
New Market Opportunities -
Progress
•
Partnerships with U.S Army’s Edgewood Chem-Bio Center
and other organizations within the U.S. Department of
Defense
•
Development of the only known gaseous technology capable
of decontaminating both chemical and biological warfare
agents
•
Multiple successful ambulance and room decontamination
trials completed (with initial sales outside North America)
•
Joint Development Agreement with the world’s largest
packager of liquid food products

16
Summary
>
Strong underlying growth driven by generics and bio-
pharmaceuticals, increased regulatory scrutiny, and aging of
baby boomers
>
New leadership team in place along with a stabilized and
competent sales and market team
>
Well positioned to leverage our success in under penetrated
segments and regions
>
Turnaround plan in place to return Life Sciences segment to
growth and profitability

STERIS Corporation’s 2005 Analyst Day
Robert Moss, STERIS Isomedix Services

2
STERIS
Isomedix
Services
is
a
leading
provider
of
sterilization,
microbial
reduction ,
and
materials
modification
services
to
medical
supply,
pharmaceutical,
consumer ,
and
industrial
customers.
STERIS
Isomedix
Services
provides
its
customers
safe,
effective
processes
in
a
timely
and
cost
effective
manner.
Through
exemplary
customer
service ,
process
quality ,
a
focus
on
efficient
turnaround ,
and
the
ability
to
develop
and
manage
complicated
partnerships ,
we
deliver
customer
value.
STERIS Isomedix Services Definition

3
Revenue Mix
Gamma
Ethylene
Oxide
MARKETS SERVED
SERVICE MIX
FY06 EST
Approx. $130 Million
Healthcare Medical
Consumer
Healthcare Other

4
>
Responsive to customer needs
>
Capacity –
monitor customer needs to meet demand
>
Proximity –
we serve all key geographies in North America with
21 facilities
>
Flexibility –
we offer all three key technologies, Gamma, EO and
E-beam
>
Experience –
we have been in the business for 32 years
>
Newer
“all-in-one”
processing
capability
–
Cosmed
acquisition
Key Strengths

5
San Diego, CA
Waukegan, IL
Grand Prairie, TX
South Plainfield, NJ
Coventry, RI
Our Business –
Geographic View

6
>
Advantages
>
Proven reliability
>
Broad application
>
Limitations
>
Pharmaceuticals
>
Plastics
>
Industries / Products
>
Medical Devices &
Supplies
>
Food Packaging &
Spices
>
Labware
Our Business –
Gamma Irradiation

7
7

8
>
Advantages
>
Gentle process
>
High volume
>
Limitations
>
Liquids
>
Industries / Products
>
Medical Supplies and 
Kits
>
Food spices
Our Business –
Ethylene Oxide
Sterilization

9
>
Sales representatives calling on key customers
>
Process validation
>
Service agreements
>
Processing
agreement
–
customer’s
products
come
at
will
>
Commitments –
a specific quantity is determined at a
specific price and schedule
>
Slot of time –
customer reserved specific time for a specific
product for a guaranteed payment
>
Customers
>
Major public medical device and supply companies
Sales Process

10
>
Provide specific treatment customer requires
>
Technical Consultation
>
Educational Seminars
>
Customers send their finished and fully packaged products to
Isomedix for sterilization treatment
>
Receive and stage in an Isomedix warehouse
>
Transfer for the sterilization processing into an irradiation cell /
EO chamber
>
Full pallets / truckloads
>
Smaller quantities
>
Remove from the special containers / chamber
>
Same configuration
>
Documentation to stringent standard (customer and regulatory) for 
proof of sterilization
>
Sterilized products are then shipped to the specified customer
location (either to a distribution point or back to the customer)
What is the Isomedix Process?

11
>
Demographics increasing medical device consumption worldwide
>
Medical commodity manufacturing moving to lower cost labor
>
In-house processing going contract / outsourcing
>
No rapid technology change foreseen
>
New applications developing
Industry Drivers

12
>
$443+ Million In NA
>
Includes in-house
operations and industrial
applications
>
Medical manufacturer
consolidation in Europe and
US
>
Migration to Asian contract
manufacturing
North America
Europe
Other
STERIS
0%
STERIS
STERIS
0%
$742+M Worldwide
$120M
$179M
$443+M
Industry Size
In-House
Sterigenics
Other
Sterigenics
Isotron
Other
Sterigenics
Isotron
Other

13
>
Sterigenics –
offers gamma, EO, E-beam and x-ray in 40
locations worldwide
>
Isotron –
gamma, EO, and E-beam in 16 locations in eight
countries (none in North America)
>
In-house
Captive
–
trend
towards
outsourcing
as
technology/facilities
age.
Few
investments
being
made
>
Other –
multiple companies with three or less sites
Industry Competition

14
>
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
Growth Strategy –
Key Strategic
Imperatives

15
Number of Years
Business Model –
Typical Product Life
Cycle

16
Number of Years
Business Model –
Isomedix Services
Facility Life Cycle

17
Number of Years
Business Model –
Isomedix Services
Advantage

18
>
STERIS Isomedix Services is well positioned to:
>
Take advantage of ongoing favorable market trends
>
Capitalize on new applications for irradiation and Ethylene Oxide
>
Expand into new geographies
>
Address strategic environment
>
Competition
>
Political and regulatory
Summary

STERIS Corporation’s 2005 Analyst Day