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) February 2, 2010

 

 

STERIS Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Ohio		1-14643		34-1482024
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

5960 Heisley Road, Mentor, Ohio		44060-1834
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (440) 354-2600

Not Applicable

(Former name or former address, if changed since last report.)

 

 

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

 

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

 

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

 

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

 

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

 

 

 

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ITEM 2.02.

Results of Operations and Financial Condition.

On February 2, 2010, STERIS issued a press release announcing financial results for its fiscal 2010 third quarter ended December 31, 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 February 2, 2010 regarding its results of operations and financial condition for its fiscal 2010 third quarter ended December 31, 2009.

 

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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: February 2, 2010

 

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EXHIBIT INDEX

 

Exhibit Number		Exhibit Description
99.1		Press Release issued by STERIS Corporation on February 2, 2010 regarding its results of operations and financial condition for its fiscal 2010 third quarter ended December 31, 2009.

 

4

Exhibit 99.1

STERIS CORPORATION

NEWS ANNOUNCEMENT

FOR IMMEDIATE RELEASE

STERIS CORPORATION ANNOUNCES FISCAL 2010 THIRD QUARTER RESULTS

• Modest Revenue Growth

• Efficiencies Drive Improved Operating Income

• Board of Directors Approves Regular Quarterly Dividend

Mentor, Ohio (February 2, 2010)—STERIS Corporation (NYSE: STE) today announced financial results for its fiscal 2010 third quarter ended December 31, 2009. Fiscal 2010 third quarter revenues were $327.8 million compared with $319.5 million in the third quarter of fiscal 2009, an increase of 3%. On a constant currency basis, revenues increased 1%.

As reported, operating income was $59.4 million, or 18.1% of revenues, compared with $45.8 million, or 14.3% of revenues in the third quarter of fiscal 2009. Operating results for the third quarter of fiscal 2009 include the impact of a $12.3 million pre-tax charge related to restructuring efforts. On the consolidated statements of income, $2.8 million of this charge was recorded as restructuring expense and $9.5 million was recorded in cost of goods sold. In addition, during the third quarter of fiscal 2009 the Company made changes to certain benefit policies which resulted in an additional $7.9 million in pre-tax income. Excluding these items, third quarter fiscal 2009 operating income was $50.2 million, or 15.7% of revenues.

Fiscal 2010 third quarter net income was $41.0 million, or $0.69 per diluted share, compared with net income of $28.6 million, or $0.48 per diluted share, in the third quarter of fiscal 2009. Excluding both the restructuring charge and the adjustment for benefit changes, net of tax, fiscal 2009 third quarter net income was $31.3 million, or $0.53 per diluted share.

“Our performance has continued to improve throughout the fiscal year as demand for our Healthcare capital equipment has improved, and order levels seem to be stabilizing,” said Walt Rosebrough, President and Chief Executive Officer of STERIS. “While we are pleased with our performance this quarter, we have so far been unable to resolve our SYSTEM 1 510(k) issue with the FDA. As a result, although our operating performance excluding SYSTEM 1 continues to be strong, given the forecast uncertainty with SYSTEM 1 we are not providing guidance for the full fiscal year 2010

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STERIS Corporation

News Announcement

Page 2

 

at this time. We have been in nearly daily communication with the FDA to develop a plan to assist healthcare facilities with their transition to acceptable alternatives. As soon as we have a definitive plan, we will provide as much clarity as possible to both our Customers and shareholders.”

Segment Results

Healthcare revenues in the quarter were $233.3 million compared with $230.2 million in the third quarter of fiscal 2009, an increase of 1%. Double-digit growth in consumable revenue, in particular demand for hand hygiene products related to H1N1 and Prolystica ultra-concentrate chemistries drove the increase. However, that strength was somewhat offset by low single-digit declines in capital equipment and service revenues. Backlog levels at quarter end were $134.4 million, essentially flat when compared with the same time last year. Operating income was $45.3 million compared with $32.4 million in the prior year period, driven by efficiency initiatives and lower raw material costs. Excluding the restructuring charge and the adjustment for benefit changes, Healthcare operating income was $36.5 million in the third quarter of fiscal 2009.

Life Sciences third quarter revenues were $58.9 million compared with $52.8 million in the third quarter of fiscal 2009, an increase of 12% Double-digit growth in capital equipment and consumables was somewhat offset by a decline in service revenues. Backlog levels at quarter end were $45.4 million, a decline of 10% compared with the prior year period, reflecting the timing of capital equipment shipments. Life Sciences operating income was $10.1 million, compared with $7.2 million in the prior year period, driven primarily by increased volumes and improved operating efficiencies. Excluding the restructuring charge and the adjustment for benefit changes, Life Sciences operating income was $8.3 million in the third quarter of fiscal 2009.

Fiscal 2010 third quarter revenues for Isomedix Services were $35.0 million compared with $34.6 million in the same period last year, an increase of 1%. Revenues were affected by the previously disclosed sale of a facility during the fourth quarter of fiscal 2009, the impact of which was partially offset by a modest improvement in demand from medical device Customers. Operating income was $6.9 million in the quarter compared with $8.5 million in the third quarter of last year. The decline in operating income was primarily related to expenses associated with the Company’s decision to consolidate a facility in the Southwest and exit the E-beam materials modification business, which combined, negatively impacted operating income by $1.7 million during the third quarter. Excluding

 

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STERIS Corporation

News Announcement

Page 3

 

those expenses, fiscal 2010 third quarter operating income was $8.6 million, compared with $7.7 million in the third quarter of fiscal 2009 excluding the adjustment for benefit changes.

Cash Flow

Net cash provided by operations for the first nine months of fiscal 2010 was $158.7 million, compared with net cash provided by operations of $108.3 million in the same period last year. Free cash flow (see note 1) for the first nine months of fiscal 2010 was $129.4 million, compared with free cash flow of $89.6 million in the prior year period. The growth in free cash flow was driven by increased earnings and lower working capital requirements.

Regular Quarterly Dividend Announced

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. The dividend is payable March 23, 2010 to shareholders of record at the close of business on February 23, 2010.

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 February 2, 2010, until 5:00 p.m. Eastern time on February 16, either over the Internet at www.steris-ir.com or via phone by calling 1-866-508-6481 in the United States and Canada, and 1-203-369-1903 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

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STERIS Corporation

News Announcement

Page 4

 

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 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, certifications, regulations, regulatory actions, including without limitation previously disclosed FDA warning letters, government investigations, and the December 3, 2009 FDA notice, 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 contraction in credit availability, as well as the ability of our customers and suppliers to adequately access the credit markets when needed, and (h) those risks described in our Annual Report on Form 10-K for the year ended March 31, 2009 and the Form 10-Q for the quarter ended September 30, 2009.

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STERIS Corporation

Consolidated Condensed Statements of Income

(In thousands, except per share data)

 

		Three Months Ended December 31,						Nine Months Ended December 31,
		2009			2008			2009				2008
		(Unaudited)			(Unaudited)			(Unaudited)				(Unaudited)
Revenues		$	327,832		$	319,467		$	925,604			$	954,159
Cost of revenues			188,349			195,400			528,630				567,228
Gross profit			139,483			124,067			396,974				386,931
Operating expenses:
Selling, general, and administrative			71,776			67,272			220,897				231,910
Research and development			8,265			8,122			24,035				24,469
Restructuring expense			14			2,855			(313	)			2,726
Total operating expenses			80,055			78,249			244,619				259,105
Income from operations			59,428			45,818			152,355				127,826
Non-operating expense, net			2,756			2,848			8,473				6,211
Income tax expense			15,666			14,395			45,250				38,746
Net income		$	41,006		$	28,575		$	98,632			$	82,869
Earnings per common share (EPS) data:
Basic		$	0.70		$	0.49		$	1.68			$	1.41
Diluted		$	0.69		$	0.48		$	1.66			$	1.39
Cash dividends declared per common share outstanding		$	2.11		$	0.08		$	2.33			$	0.22
Weighted average number of common shares outstanding used in EPS computation:
Basic number of common shares outstanding			58,962			58,660			58,711				58,889
Diluted number of common shares outstanding			59,758			59,243			59,281				59,701
STERIS Corporation
Consolidated Condensed Balance Sheets
(In thousands)
		December 31, 2009			March 31, 2009
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	265,419		$	154,180
Accounts receivable, net			207,087			238,438
Inventories, net			128,413			130,218
Other current assets			25,810			30,294
Total Current Assets			626,729			553,130
Property, plant, and equipment, net			347,346			350,996
Goodwill and intangible assets, net			311,859			305,189
Other assets			9,755			7,624
Total Assets		$	1,295,689		$	1,216,939
Liabilities and Equity
Current liabilities:
Accounts payable		$	55,703		$	68,573
Other current liabilities			120,038			133,453
Total Current Liabilities			175,741			202,026
Long-term debt			310,000			210,000
Other liabilities			76,788			86,748
Equity			733,160			718,165
Total Liabilities and Equity		$	1,295,689		$	1,216,939

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STERIS Corporation

Segment Data

(In thousands)

 

		Three Months Ended December 31,								Nine Months Ended December 31,
		2009				2008				2009				2008
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Segment Revenues:
Healthcare		$	233,277			$	230,177			$	656,887			$	682,078
Life Sciences			58,910				52,787				159,427				157,977
STERIS Isomedix Services			34,987				34,642				105,129				108,476
Total Reportable Segments			327,174				317,606				921,443				948,531
Corporate and Other			658				1,861				4,161				5,628
Total Segment Revenues		$	327,832			$	319,467			$	925,604			$	954,159
Segment Operating Income (Loss):
Healthcare		$	45,254			$	32,406			$	113,722			$	94,334
Life Sciences			10,123				7,151				23,442				14,426
STERIS Isomedix Services			6,929				8,453				22,669				26,851
Total Reportable Segments			62,306				48,010				159,833				135,611
Corporate and Other			(2,878	)			(2,192	)			(7,478	)			(7,785	)
Total Segment Operating Income		$	59,428			$	45,818			$	152,355			$	127,826
STERIS Corporation
Consolidated Condensed Statements of Cash Flows
(In thousands)
		Nine Months Ended December 31,
		2009				2008
		(Unaudited)				(Unaudited)
Operating Activities:
Net income		$	98,632			$	82,869
Non-cash items			54,304				50,606
Working capital adjustments			5,732				(25,151	)
Net cash provided by operating activities			158,668				108,324
Investing Activities:
Purchases of property, plant, equipment, and intangibles, net			(29,839	)			(29,704	)
Proceeds from sale of property, plant, equipment and intangibles			574				10,981
Equity investment in joint venture			(1,500	)			(4,150	)
Net cash used in investing activities			(30,765	)			(22,873	)
Financing Activities:
Proceeds from the issuance of long-term obligations			—				150,000
Payments on long-term obligations			—				(40,500	)
Proceeds (payments) under credit facilities, net			100,000				(79,180	)
Deferred financing fees and debt issuance costs			—				(476	)
Repurchases of common shares			(289	)			(80,466	)
Cash dividends paid to common shareholders			(137,509	)			(12,981	)
Stock option and other equity transactions, net			12,339				33,254
Tax benefit from stock options exercised			1,927				8,766
Net cash used in financing activities			(23,532	)			(21,583	)
Effect of exchange rate changes on cash and cash equivalents			6,868				(9,686	)
Increase in cash and cash equivalents			111,239				54,182
Cash and cash equivalents at beginning of period			154,180				51,868
Cash and cash equivalents at end of period		$	265,419			$	106,050

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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.

 

		Nine Months Ended December 31,
		2009				2008
		(Unaudited)				(Unaudited)
Calculation of Free Cash Flow:
Cash flows from operating activities		$	158,668			$	108,324
Purchases of property, plant, equipment, and intangibles, net		$	(29,839	)		$	(29,704	)
Proceeds from the sale of property, plant, equipment, and intangibles		$	574			$	10,981
Free Cash Flow		$	129,403			$	89,601

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STERIS Corporation

Supplemental Financial Data (unaudited)

Third Quarter Fiscal 2010

As of December 31, 2009

 

		FY 2010 Q3				FY 2009 Q3				Change
Total Company Revenues
Capital		$	132,541			$	129,563			2.3	%
Consumables			81,531				73,745			10.6	%
Service			113,760				116,159			-2.1	%
Total Recurring			195,291				189,904			2.8	%
Total Revenues		$	327,832			$	319,467			2.6	%
United States Revenues		$	244,067			$	250,355			-2.5	%
United States Revenues as a % of Total			74	%			78	%		-5.0	%
International Revenues		$	83,765			$	69,112			21.2	%
International Revenues as % of Total			26	%			22	%		18.1	%
		Q3				Q3				Change
Segment Data
Healthcare
Revenues
Capital		$	106,835			$	109,221			-2.2	%
Consumables			66,494				60,217			10.4	%
Service			59,948				60,739			-1.3	%
Total Recurring			126,442				120,956			4.5	%
Total Healthcare Revenues		$	233,277			$	230,177			1.3	%
Operating Profit/(Loss)			45,254				32,406			39.6	%
Life Sciences
Revenues
Capital		$	25,697			$	20,292			26.6	%
Consumables			15,037				13,528			11.2	%
Service			18,176				18,967			-4.2	%
Total Recurring			33,213				32,495			2.2	%
Total Life Sciences Revenues		$	58,910			$	52,787			11.6	%
Operating Profit/(Loss)			10,123				7,151			41.6	%
Isomedix Services
Revenues		$	34,987			$	34,642			1.0	%
Operating Profit/(Loss)			6,929				8,453			-18.0	%
Corporate and Other
Revenues		$	658			$	1,861			-64.6	%
Operating Profit/(Loss)			(2,878	)			(2,192	)		31.3	%
		Q3				Q3				Total
Other Data
Healthcare Backlog		$	134,400			$	133,863			0.4	%
Life Sciences Backlog			45,362				50,170			-9.6	%
Total Backlog		$	179,762			$	184,033			-2.3	%
Free Cash Flow		$	55,029			$	32,276			70.5	%
Net Debt		$	44,581			$	104,250			-57.2	%

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