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STERIS Corporation Announces Fiscal 2008 Second Quarter Results
Date:10/30/2007

MENTOR, Ohio, Oct. 30 /PRNewswire-FirstCall/ -- 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 ts 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.

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 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

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 http://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 http://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 http://www.steris.com.

Note: (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 (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.

STERIS Corporation

Consolidated Condensed Statements of Income

(In thousands, except per share data)

Three Months Six Months

Ended Ended

September 30, 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, March 31,

2007 2007

Assets (Unaudited)

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

STERIS Corporation

Segment Data

(In thousands)

Three Months Ended Six Months Ended

September 30, 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 equivalen
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SOURCE STERIS Corporation
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