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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 8-K

 

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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 30, 2007

 

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STERIS Corporation

(Exact name of registrant as specified in its charter)

 

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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.)

 

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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 October 30, 2007, STERIS issued a press release announcing financial results for its fiscal 2008 second quarter ended September 30, 2007. 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 October 30, 2007 regarding its results of operations and financial condition for its fiscal 2008 second quarter ended September 30, 2007.

 

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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: October 30, 2007

 

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EXHIBIT INDEX

 

Exhibit Number		Exhibit Description
99.1		Press Release issued by STERIS Corporation on October 30, 2007 regarding its results of operations and financial condition for its fiscal 2008 second quarter ended September 30, 2007.

 

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Exhibit 99.1

STERIS CORPORATION

NEWS ANNOUNCEMENT

FOR IMMEDIATE RELEASE

STERIS CORPORATION ANNOUNCES FISCAL 2008 SECOND QUARTER RESULTS

Mentor, Ohio (October 30, 2007) - STERIS Corporation (NYSE: STE) today announced financial results for its fiscal 2008 second quarter ended September 30, 2007. Fiscal 2008 second quarter revenues increased 4% to $295.0 million compared with $283.5 million in the second quarter of fiscal 2007, primarily driven by growth in the Healthcare and Isomedix segments.

Fiscal 2008 second quarter net income was $16.0 million, or $0.25 per diluted share, compared with net income of $16.4 million, or $0.25 per diluted share, in the second quarter of fiscal 2007. Included in net income for the second quarter of fiscal 2008 and fiscal 2007 are expenses associated with the Erie to Mexico transfer of manufacturing operations. These expenses negatively impacted diluted earnings per share in the second quarter of fiscal 2008 by $0.01, compared with $0.03 per diluted share in the prior year period.

“I am excited to be on board at STERIS, and through a series of meetings with key constituents and visits to many of our facilities, I am working to immerse myself in the operations of the Company,” said Walt Rosebrough, STERIS’s president and chief executive officer. “From a performance perspective, demand appears to be improving while raw material cost pressures may continue in the short-term. Overall, I am encouraged by what I see and I believe there is an excellent opportunity to build on the strong foundation already in place.”

Quarterly Segment Results

Healthcare revenues in the quarter increased 5% to $206.7 million, compared with the second quarter of fiscal 2007. The segment experienced continued strong growth in service and consumable revenues. Capital equipment revenues increased slightly during the quarter, while order backlog levels grew to a record $94.0 million, an increase of 14% compared with the prior year period. Operating income in the Healthcare segment was $18.5 million, compared with $20.4 million in the second quarter

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STERIS Corporation

News Announcement

Page 2

 

of fiscal 2007, as the segment continued to face challenges from significant increases in raw material costs year over year. In addition, the segment incurred higher operating expenses to support growth initiatives.

Life Sciences second quarter revenues were $53.5 million, an increase of 1% compared with the second quarter of fiscal 2007. Service and consumable revenue growth were strong, while capital equipment sales were impacted by the timing of orders. Strong late quarter capital equipment demand helped drive backlog levels to a record $57.8 million, a 31% increase compared with the prior year period. Life Sciences reported operating income of $1.4 million in the quarter, compared with operating income of $0.3 million in the second quarter of fiscal 2007. The improvement in operating income was driven by higher margin service and consumable revenues during the quarter as compared with the prior year quarter.

Second quarter revenues for Isomedix Services were $34.8 million, an increase of 4% compared with the same period last year, primarily driven by increased demand from medical device customers. Operating income increased 11% to $6.5 million compared with the prior year quarter, and largely reflected increased volume throughput in existing facilities.

Cash Flow

Net cash provided by operations for the first six months of fiscal 2008 was $52.7 million, compared with net cash provided by operations of $18.3 million in the first six months of fiscal 2007. Free cash flow (see note 1) was $31.2 million in the first six months of fiscal 2008, compared with negative free cash flow of $3.2 million in the same period last year. The first six months of fiscal 2007 included a $27.6 million payment to the IRS for tax expenses previously incurred and was the primary driver of the difference in free cash flow between the periods.

During the quarter, the Company repurchased 1,244,400 shares of its common stock at an average price of $27.63 per common share for a total amount of $34.4 million. Approximately $266 million remains under the current share repurchase authorization.

Outlook

 

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STERIS Corporation

News Announcement

Page 3

 

Based upon first half results and current anticipated trends, the Company continues to expect revenue growth in the range of 4-6% and earnings per diluted share of $1.35 to $1.45 for the full fiscal year. Additionally, the Company anticipates a lower level of capital spending of approximately $55 million, which would result in free cash flow of approximately $80 million.

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-ir.com or via phone by dialing 1-888-392-9976 in the United States and Canada, and 1-517-645-6486 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 30, 2007, until 5:00 p.m. Eastern time on November 13, 2007, either over the Internet at www.steris-ir.com or via phone by calling 1-800-756-3940 in the United States and Canada, and 1-402-998-0796 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’s more than 5,000 dedicated employees around the world work 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: Aidan Gormley, Senior Director, Corporate Communications and Investor Relations at 440-392-7607.

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

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STERIS Corporation

News Announcement

Page 4

 

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 (capital expenditures) 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,” “confidence,” 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 or timing or pattern of 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 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 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, and (f) the possibility that anticipated cost savings may not be achieved, or that transition, labor, competition, timing, execution, regulatory, governmental, executive transition or other issues or risks associated with the matters described in this release, or the referenced conference call, may adversely impact Company performance, results, or value.

 

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STERIS Corporation

Consolidated Condensed Statements of Income

(In thousands, except per share data)

 

		Three Months Ended September 30,						Six Months Ended September 30,
		2007			2006			2007			2006
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues		$	295,002		$	283,536		$	575,946		$	548,603
Cost of revenues			171,332			164,775			333,564			316,467
Gross profit			123,670			118,761			242,382			232,136
Operating expenses:
Selling, general, and administrative			87,993			82,786			174,488			161,200
Research and development			8,531			8,283			17,790			16,678
Restructuring expense			698			1,158			2,089			2,263
			97,222			92,227			194,367			180,141
Income from operations			26,448			26,534			48,015			51,995
Non-operating expense, net			864			1,575			1,637			2,665
Income from continuing operations before income tax expense			25,584			24,959			46,378			49,330
Income tax expense			9,566			8,599			17,157			18,913
Income from continuing operations			16,018			16,360			29,221			30,417
Gain on sale of discontinued operations, net of tax			—			—			—			627
Net income		$	16,018		$	16,360		$	29,221		$	31,044
Earnings per common share (EPS) data:
Basic earnings per common share
Continuing operations		$	0.25		$	0.25		$	0.45		$	0.46
Discontinued operations		$	—		$	—			—			0.01
Net income		$	0.25		$	0.25		$	0.45		$	0.47
Diluted earnings per common share
Continuing operations		$	0.25		$	0.25		$	0.45		$	0.46
Discontinued operations		$	—		$	—			—			0.01
Net income		$	0.25		$	0.25		$	0.45		$	0.47
Cash dividends declared per common share outstanding		$	0.06		$	0.04		$	0.11		$	0.08
Weighted average number of common shares outstanding used in EPS computation:
Basic number of common shares outstanding			64,207			65,567			64,612			65,882
Diluted number of common shares outstanding			65,047			66,119			65,478			66,391
STERIS Corporation
Consolidated Condensed Balance Sheets
(In thousands)
		September 30, 2007			March 31, 2007
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	61,563		$	52,296
Accounts receivable, net			211,774			251,207
Inventories, net			157,693			131,997
Other current assets			50,334			49,220
Total Current Assets			481,364			484,720
Property, plant, and equipment, net			384,947			388,899
Goodwill and intangible assets, net			334,384			332,947
Other assets			3,335			2,604
Total Assets		$	1,204,030		$	1,209,170
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	61,605		$	76,184
Other current liabilities			128,104			141,215
Total Current Liabilities			189,709			217,399
Long-term debt			124,890			100,800
Other liabilities			120,931			116,679
Shareholders’ equity			768,500			774,292
Total Liabilities and Shareholders’ Equity		$	1,204,030		$	1,209,170

 

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STERIS Corporation

Segment Data

(In thousands)

 

		Three Months Ended September 30,								Six Months Ended September 30,
		2007				2006				2007			2006
		(Unaudited)				(Unaudited)				(Unaudited)			(Unaudited)
Segment Revenues:
Healthcare		$	206,684			$	197,094			$	402,375		$	384,225
Life Sciences			53,525				52,951				103,306			98,332
STERIS Isomedix Services			34,793				33,491				70,265			66,046
Total Segment Revenues		$	295,002			$	283,536			$	575,946		$	548,603
Segment Operating Income (Loss):
Healthcare		$	18,517			$	20,426			$	33,730		$	41,539
Life Sciences			1,428				275				578			(1,038	)
STERIS Isomedix Services			6,503				5,833				13,707			11,494
Total Segment Operating Income		$	26,448			$	26,534			$	48,015		$	51,995
STERIS Corporation Consolidated Condensed Statements of Cash Flows (In thousands)
		Six Months Ended September 30,
		2007				2006
		(Unaudited)				(Unaudited)
Operating Activities:
Net income		$	29,221			$	31,044
Non-cash items			33,791				28,533
Working capital adjustments			(10,287	)			(41,317	)
Net cash provided by operating activities			52,725				18,260
Investing Activities:
Purchases of property, plant, equipment, and intangibles, net			(21,591	)			(21,419	)
Proceeds from sale of property, plant, equipment and intangibles			31				—
Proceeds from sale of discontinued operations			—				2,927
Net cash used in investing activities			(21,560	)			(18,492	)
Financing Activities:
Proceeds under credit facilities, net			24,090				32,555
Payments on long-term obligations and capital leases, net			—				(361	)
Repurchases of common shares			(54,476	)			(59,628	)
Cash dividends paid to common shareholders			(7,112	)			(5,272	)
Stock options and other equity transactions, net			13,008				2,376
Net cash used in financing activities			(24,490	)			(30,330	)
Effect of exchange rate changes on cash and cash equivalents			2,592				2,737
(Decrease) increase in cash and cash equivalents			9,267				(27,825	)
Cash and cash equivalents at beginning of period			52,296				72,732
Cash and cash equivalents at end of period		$	61,563			$	44,907
		Six Months Ended September 30,
		2007				2006
		(Unaudited)				(Unaudited)
Calculation of Free Cash Flow from continuing operations:
Cash flows from operating activities		$	52,725			$	18,260
Purchases of property, plant, equipment, and intangibles, net			(21,591	)			(21,419	)
Proceeds from the sale of property, plant, equipment, and intangibles			31				—
Free Cash Flow from Continuing Operations		$	31,165			$	(3,159	)

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. Free cash flow is a non-GAAP figure under Securities and Exchange Commission rules. 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.