STERIS Corporation (NYSE: STE) today announced financial results for its
fiscal 2012 first quarter ended June 30, 2011. As reported, fiscal 2012
first quarter revenue was $318.6 million compared with $189.0 million in
the first quarter of fiscal 2011. Adjusting for the impact of recording
the $110 million liability related to the SYSTEM 1 Rebate Program,
fiscal 2011 first quarter revenue was $291.3 million. On an adjusted
basis, fiscal 2012 first quarter revenue increased 9%, with growth in
all three business segments.
As reported, fiscal 2012 first quarter operating income was $46.9
million compared with an operating loss of $63.0 million in the first
quarter of fiscal 2011. Excluding the SYSTEM 1 Rebate Program, adjusted
operating income for the first quarter of fiscal 2011 was $47.0 million.
As reported, fiscal 2012 first quarter net income was $28.7 million, or
$0.48 per diluted share, compared with a net loss of $45.2 million, or
$0.76 per diluted share in the first quarter of fiscal 2011. Excluding
the SYSTEM 1 Rebate Program, adjusted net income for the first quarter
of fiscal 2011 was $27.8 million, or $0.46 per diluted share.
"We are pleased to have a solid start to fiscal 2012, with growth across
the business," said Walt Rosebrough, President and Chief Executive
Officer of STERIS. "As we anticipated, our profitability was impacted
during the quarter by strategic investments and the continued declines
in SYSTEM 1 consumables. However, after one quarter, our outlook remains
unchanged as we are on plan to deliver earnings in the range of $2.25 to
$2.45 per diluted share for the full fiscal year."
Segment Results
As reported, Healthcare revenue in the quarter was $223.2 million
compared with $103.8 million in the first quarter of fiscal 2011.
Excluding the SYSTEM 1 Rebate Program, adjusted revenue for the first
quarter of fiscal 2011 was $206.1 million. On an adjusted basis, total
revenue increased 8%, driven by 20% growth in capital equipment and a 2%
increase in service revenue, offset by a 2% decline in consumable
revenue. As reported, operating income was $26.3 million compared with
an operating loss of $77.9 million in last year's first quarter.
Excluding the SYSTEM 1 Rebate Program, adjusted operating income was
$32.1 million in the first quarter of fiscal 2011. The decline in
adjusted operating income year over year was due to a reduction in gross
margin, higher sales related expenses and strategic investments in the
Healthcare segment.
Life Sciences first quarter revenue increased 13% to $52.9 million
compared with $46.6 million in the first quarter of fiscal 2011. Revenue
growth was driven by a 27% increase in capital equipment, 15% growth in
consumables and a modest improvement in service revenue. Life Sciences
operating income was $9.5 million compared with $6.3 million in the
prior year first quarter. The increase in operating income was driven by
higher volumes and improved operating efficiencies.
Fiscal 2012 first quarter revenue for Isomedix Services was $42.0
million compared with $37.7 million in the same period last year, an
increase of 12%. Revenue benefitted from increased volumes from core
medical device Customers as well as increased capacity at select
locations. Operating income was $13.0 million in the quarter compared
with $10.6 million in the first quarter of last year.
Cash Flow
Net cash provided by operations for the first quarter of fiscal 2012 was
$12.0 million, compared with $29.7 million last year. Free cash flow
(see note 1) for the first quarter of fiscal 2012 was negative $3.6
million, compared with $17.3 million in the prior year. The decline in
free cash is due to higher working capital requirements, primarily due
to inventory build for SYSTEM 1E, which totaled $44 million at the end
of the quarter, and higher accounts receivable balances.
During the quarter, the Company repurchased 170,000 shares of its common
stock at an average price of $34.16 per share for a total amount of $5.8
million. Approximately $169 million remains available for additional
purchases under the current share repurchase authorization.
Dividend Announcement
The Company also announced today that STERIS's Board of Directors has
authorized a two cent increase in its quarterly dividend to $0.17 per
common share, representing the sixth consecutive year of double digit
percentage increases in the dividend. The dividend is payable September
20, 2011 to shareholders of record at the close of business on August
23, 2011.
Outlook
The Company's outlook is unchanged for the fiscal year, with revenue
growth of 8-10% and earnings per diluted share in the range of $2.25 to
$2.45. Refer to the earnings announcement dated May 9, 2011 for the full
year outlook and a listing of certain assumptions.
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 beginning at 12:00 p.m. Eastern time on August 2, 2011, either
over the Internet at www.steris-ir.com
or via phone by calling 1-866-397-8266 in the United States and Canada,
and 1-203-369-0541 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.
(1) Free cash flow is a non-GAAP number used by the Company as a measure
to gauge its ability to fund future principal debt repayments, growth
outside of core operations, 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 referenced conference call may contain
statements concerning certain trends, expectations, forecasts,
estimates, or other forward-looking information affecting or relating to
the Company or its industry, products or activities 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," "impact,"
"potential," "confidence," "improve," "optimistic," "deliver,"
"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, government regulations, labeling or product approvals or the
application or interpretation thereof. Other risk factors are described
herein and 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 result or the timing of any outcome regarding
matters described in the referenced release or conference call or
otherwise with respect to any regulatory action, administrative
proceedings, government investigations, litigation, warning letters,
consent decree, rebate program, transition, cost reductions, business
strategies, earnings or revenue trends or future financial results
(including without limitation the settlement of the SYSTEM 1 class
action litigation and the regulatory submission for the SYSTEM 1E
indicator). References to products, the consent decree, the transition
or rebate program, or the class action settlement, are summaries only
and do not alter or modify the specific terms of the decree, settlement,
program or product clearance or literature. 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 costs 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 rebate program, transition plan or other 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 those relating to FDA warning letters, government
investigations, the December 3, 2009 or February 22, 2010 FDA notices,
the April 20, 2010 consent decree and related transition plan and rebate
program, the SYSTEM 1E device,the outcome of any pending FDA
requests and submissions, or other requirements or standards may delay,
limit or prevent new product introductions, affect the production and
marketing of existing products or services or otherwise affect Company
performance, results, prospects or value, (d) the potential of
international unrest or effects of fluctuations in currencies, tax
assessments or anticipated 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 growth, cost savings, rebate assumptions, new product
acceptance or approvals, including without limitation SYSTEM 1E and
accessories thereto, or other results may not be achieved, or that
transition, labor, competition, timing, execution, regulatory,
governmental, or other issues or risks associated with our business,
industry or initiatives including, without limitation, the consent
decree, rebate program, and the transition from the SYSTEM 1 processing
system or those matters described in our Form 10-K for the year ended
March 31, 2011 and other securities filings, may adversely impact
company performance, results, prospects 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 securities filings
including our Annual Report on Form 10-K for the year ended March 31,
2011, and other securities filings.
STERIS Corporation
Consolidated Condensed Statements of Operations
(In thousands, except per share data)
Three Months Ended
June 30,
2011
2010
(Unaudited)
(Unaudited)
Revenues
$
318,639
$
291,293
SYSTEM 1 Rebate Program
-
(102,313)
Revenues, net
318,639
188,980
Cost of revenues
185,714
163,223
Cost of revenues - SYSTEM 1 Rebate Program
-
7,691
Gross profit
132,925
18,066
Operating expenses:
Selling, general, and administrative
77,009
72,117
Research and development
8,757
8,609
Restructuring expense
258
341
Total operating expenses
86,024
81,067
Income (loss) from operations
46,901
(63,001)
Non-operating expense, net
3,104
2,845
Income tax expense
15,066
(20,636)
Net income (loss)
$
28,731
$
(45,210)
Earnings per common share (EPS) data:
Basic
$
0.48
$
(0.76)
Diluted
$
0.48
$
(0.76)
Cash dividends declared per common share outstanding
$
0.15
$
0.11
Weighted average number of common shares outstanding used in EPS
computation:
Basic number of common shares outstanding
59,255
59,397
Diluted number of common shares outstanding
60,103
59,397
STERIS Corporation
Consolidated Condensed Balance Sheets
(In thousands)
June 30,
March 31,
2011
2011
Assets
(Unaudited)
Current assets:
Cash and cash equivalents
$
156,116
$
193,016
Accounts receivable, net
242,628
272,248
Inventories, net
195,048
167,344
Other current assets
69,795
73,198
Total Current Assets
663,587
705,806
Property, plant, and equipment, net
377,663
370,402
Goodwill and intangible assets, net
343,650
318,810
Other assets
32,011
31,667
Total Assets
$
1,416,911
$
1,426,685
Liabilities and Equity
Current liabilities:
Accounts payable
$
70,166
$
90,981
Accrued SYSTEM 1 Rebate Program and class action settlement
121,147
127,683
Other current liabilities
113,344
126,082
Total Current Liabilities
304,657
344,746
Long-term debt
210,000
210,000
Other liabilities
86,513
83,274
Equity
815,741
788,665
Total Liabilities and Equity
$
1,416,911
$
1,426,685
STERIS Corporation
Segment Data
(In thousands)
Three Months Ended
June 30,
2011
2010
(Unaudited)
(Unaudited)
Segment Revenues:
Healthcare
$
223,224
$
206,079
SYSTEM 1 Rebate Program
-
(102,313)
Healthcare, net
223,224
103,766
Life Sciences
52,868
46,614
STERIS Isomedix Services
42,003
37,676
Total Reportable Segments
318,095
188,056
Corporate and Other
544
924
Total Segment Revenues
$
318,639
$
188,980
Three Months Ended
June 30,
2011
2010
(Unaudited)
(Unaudited)
Segment Operating Income (Loss) :
Healthcare
$
26,268
$
(77,912)
Life Sciences
9,459
6,295
STERIS Isomedix Services
12,959
10,584
Total Reportable Segments
48,686
(61,033)
Corporate and Other
(1,785)
(1,968)
Total Operating Income (Loss)
$
46,901
$
(63,001)
STERIS Corporation
Consolidated Condensed Statements of Cash Flows
(In thousands)
Three Months Ended
June 30,
2011
2010
(Unaudited)
(Unaudited)
Operating Activities:
Net income
$
28,731
$
(45,210)
Non-cash items
29,432
(28,463)
Change in Accrued SYSTEM 1 Rebate Program
(6,536)
110,004
Changes in operating assets and liabilities
(39,646)
(6,637)
Net cash provided by operating activities
11,981
29,694
Investing Activities:
Purchases of property, plant, equipment, and intangibles, net
(15,588)
(12,411)
Proceeds from sale of property, plant, equipment and intangibles
-
3
Investments in businesses, net of cash acquired
(22,269)
-
Net cash used in investing activities
(37,857)
(12,408)
Financing Activities:
Repurchases of common shares
(6,131)
-
Cash dividends paid to common shareholders
(8,913)
(6,546)
Stock option and other equity transactions, net
2,457
2,226
Tax benefit from stock options exercised
610
659
Net cash used in financing activities
(11,977)
(3,661)
Effect of exchange rate changes on cash and cash equivalents
953
(2,526)
(Decrease) increase in cash and cash equivalents
(36,900)
11,099
Cash and cash equivalents at beginning of period
193,016
214,971
Cash and cash equivalents at end of period
$
156,116
$
226,070
The following table presents a financial measure which is considered to
be "non-GAAP financial measures" under Securities Exchange Commission
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 principal debt
repayments, growth outside of core operations, repurchase common shares,
and pay cash dividends. STERIS's calculation of free cash flow may vary
from other companies.
Three Months Ended
June 30,
2011
2010
Calculation of Free Cash Flow:
(Unaudited)
(Unaudited)
Cash flows from operating activities
$
11,981
$
29,694
Purchases of property, plant, equipment, and intangibles, net
(15,588)
(12,411)
Proceeds from the sale of property, plant, equipment, and intangibles
-
3
Free Cash Flow
$
(3,607)
$
17,286
STERIS Corporation
Unaudited Supplemental Financial Data
First Quarter Fiscal 2012
As of June 30, 2011
FY 2012
FY 2011
Q1
Q1
Total Company Revenues
Capital
$
124,619
$
939
Adjusted capital revenues (1)
na
$
103,252
Consumables
77,394
76,333
Service
116,626
111,708
Total Recurring
194,020
188,041
Total Revenues
$
318,639
$
188,980
Adjusted total revenues (1)
na
$
291,293
United States Revenues
$
244,836
$
123,775
Adjusted United States revenues (1)
na
226,088
United States Revenues as a % of Total (1)
77%
78%
International Revenues
$
73,803
$
65,205
International Revenues as % of Total
23%
22%
Segment Data
Q1
Q1
Healthcare
Revenues
Capital
$
106,892
$
(12,975)
Adjusted Capital (1)
na
$
89,338
Consumables
59,105
60,482
Service
57,227
56,259
Total Recurring
116,332
116,741
Total Healthcare Revenues
$
223,224
$
103,766
Adjusted Total Healthcare Revenues (1)
na
$
206,079
Operating Income (Loss)
26,268
(77,912)
Adjusted Operating Income (Loss) (1)
na
32,092
Life Sciences
Revenues
Capital
$
17,645
$
13,914
Consumables
18,289
15,851
Service
16,934
16,849
Total Recurring
35,223
32,700
Total Life Sciences Revenues
$
52,868
$
46,614
Operating Income (Loss)
9,459
6,295
Isomedix Services
Revenues
$
42,003
$
37,676
Operating Income (Loss)
12,959
10,584
Corporate and Other
Revenues
$
544
$
924
Operating Income (Loss)
(1,785)
(1,968)
Other Data
Q1
Q1
Healthcare Backlog
$
133,816
$
132,701
Life Sciences Backlog
46,593
37,904
Total Backlog
$
180,409
$
170,605
Free Cash Flow
$
(3,607)
$
17,286
Net Debt
$
53,884
$
(16,070)
(1) Adjusted measures are presented excluding the impact of the
SYSTEM 1 Rebate Program. See attached reconciliations of these
non-GAAP financial measures to their nearest GAAP measure.
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 and 10-K for definitions
(and reconciliation where appropriate) of adjusted measures,
backlog, free cash flow and net debt.
STERIS Corporation
Non-GAAP Financial Measures
(In thousands, except per share data)
The Company has referred to certain adjusted financial measures
regarding the results of operations excluding the SYSTEM 1 Rebate
Program and related disposal costs to provide meaningful
comparative analysis between the periods. These financial measures
are considered to be "non-GAAP financial measures" under
Securities Exchange Commission rules. Reconciliation of each
financial measure to its nearest GAAP financial measure is
provided in the table below.
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