EX-99.1 2 d580974dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

STERIS CORPORATION

NEWS ANNOUNCEMENT

FOR IMMEDIATE RELEASE

STERIS CORPORATION ANNOUNCES FISCAL 2014 FIRST QUARTER RESULTS

The Company affirms its outlook for fiscal 2014

Board of Directors increases quarterly dividend by two cents to $0.21 per share

Mentor, Ohio (August 7, 2013)—STERIS Corporation (NYSE: STE) today announced financial results for its fiscal 2014 first quarter ended June 30, 2013. Fiscal 2014 first quarter revenue increased 9% to $367.7 million compared with $337.0 million in the first quarter of fiscal 2013.

Fiscal 2014 first quarter net income was $32.3 million, or $0.54 per diluted share, compared with net income of $30.4 million, or $0.52 per diluted share in the first quarter of fiscal 2013. Included in net income and earnings per share for the first quarter of fiscal 2014 is a $9.2 million tax benefit associated with the Company’s prior European restructuring effort. Adjusted earnings were $0.44 per diluted share compared with $0.53 per diluted share in the first quarter of fiscal 2013. Please refer to the attached schedules for additional information, including reconciliations of adjusted “non-GAAP financial measures” to reported results.

“We continue to see stable market trends, good performance from the businesses we recently acquired, and strong Healthcare orders and backlog, which gives us confidence in our ability to deliver revenue and earnings in-line with our guidance for the year,” said Walt Rosebrough, President and Chief Executive Officer of STERIS. “We experienced a decline in profitability in the first quarter due to a number of factors, most of which we anticipate will abate in the coming quarters. As a result, we expect a strong second half of the year as the investments we are making begin to pay off, and revenue growth continues.”

Segment Results

Healthcare revenue in the quarter was $258.9 million, an increase of 13% compared with $229.5 million in the first quarter of fiscal 2013. Contributing to the quarter, consumable revenue increased 40% and service grew 34%, while capital equipment declined 11%. Excluding SYSTEM 1E unit sales, capital equipment revenues declined 1%. Operating income was $14.9 million compared with operating income of $22.7 million in last year’s first quarter. Adjusted operating income was $19.7 million compared with


STERIS Corporation

News Announcement

Page 2

 

$23.2 million in the prior year. The decline in adjusted operating income year-over-year was due to the Medical Device Excise Tax, increased spending on research and development, the negative impact of foreign exchange rates, investments in in-sourcing and unfavorable mix, all of which more than offset the positive impact from acquisitions.

Life Sciences first quarter revenue declined slightly to $59.9 million compared with $60.5 million in the first quarter of fiscal 2013. While consumable revenue increased 8%, it was not enough to offset a 7% decline in capital equipment and a 2% decline in service. Life Sciences operating income was $12.5 million compared with $11.9 million in last year’s first quarter. The increase in operating income was driven by improved gross margins, mainly due to favorable product mix and operating leverage.

Fiscal 2014 first quarter revenue for Isomedix Services was $48.2 million compared with $46.1 million in the same period last year, an increase of 5%. Operating income declined to $14.7 million in the quarter compared with $15.6 million in the first quarter of last year, as the increase in volume was not enough to offset the impact of our recently expanded capacity.

Cash Flow

Net cash provided by operations for the first quarter of fiscal 2014 was $32.7 million, compared with $61.3 million last year. Free cash flow (see note 1) for the first quarter of fiscal 2014 was $11.0 million, compared with $45.7 million in the prior year. The decline in free cash flow is primarily due to payments for our annual incentive compensation program as well as the impact of strong working capital improvements in the prior year.

Outlook

Based upon current trends, the Company is affirming all components of its original outlook for fiscal 2014, which includes revenue growth in the range of 8-10% and adjusted earnings per diluted share in the range of $2.47 to $2.60 for the full fiscal year. Please see the Company’s earnings release dated May 7, 2013 for a detailed outlook.

Dividend Announcement

The Company also announced today that STERIS’s Board of Directors has authorized a two cent increase in its quarterly dividend to $0.21 per common share, representing the eighth consecutive year of double digit percentage increases in the dividend. The dividend is payable September 25, 2013 to shareholders of record at the close of business on August 28, 2013.


STERIS Corporation

News Announcement

Page 3

 

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 either over the Internet at www.steris-ir.com or via phone by calling 1-800-568-5428 in the United States and Canada, and 1-402-344-6795 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 6,000 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 debt principal 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.

The press 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 made, 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,”


STERIS Corporation

News Announcement

Page 4

 

“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 press 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 regulatory matters related to SYSTEM 1E or its accessories). References to products, the consent decree, the transition or rebate program, or the class action settlement, are summaries only and should not be considered 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 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 notices or letters, government investigations, the SYSTEM 1E device, the outcome of any pending FDA requests, inspections or 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, economic downturn or effects of currencies, tax assessments, adjustments, or anticipated rates, raw material costs or availability, 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, new product acceptance, performance 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, the transition from the SYSTEM 1 processing system and adjustments to related reserves, or those matters described in our Form 10-K for the year ended March 31, 2013 and other securities filings, may adversely impact Company performance, results, prospects or value, (g) the possibility that anticipated financial results or benefits of recent acquisitions will not be realized or will be other than anticipated, (h) 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 (i) those risks described in our securities filings including our Annual Report on Form 10-K for the year ended March 31, 2013, and other securities filings.

Contact: Julie Winter, Director, Investor Relations at 440-392-7245.


STERIS Corporation

Consolidated Condensed Statements of Operations

(In thousands, except per share data)

 

     Three Months Ended  
     June 30,  
     2013      2012  
     (Unaudited)      (Unaudited)  

Revenues

   $ 367,652       $ 336,960   

Cost of revenues

     220,806         199,708   
  

 

 

    

 

 

 

Gross profit

     146,846         137,252   

Operating expenses:

     

Selling, general, and administrative

     93,929         79,774   

Research and development

     11,853         9,312   

Restructuring expense

     52         (136
  

 

 

    

 

 

 

Total operating expenses

     105,834         88,950   
  

 

 

    

 

 

 

Income from operations

     41,012         48,302   

Non-operating expense, net

     4,739         2,712   

Income tax expense

     3,956         15,236   
  

 

 

    

 

 

 

Net income

   $ 32,317       $ 30,354   
  

 

 

    

 

 

 

Earnings per common share (EPS) data:

     

Basic

   $ 0.55       $ 0.52   
  

 

 

    

 

 

 

Diluted

   $ 0.54       $ 0.52   
  

 

 

    

 

 

 

Cash dividends declared per common share outstanding

   $ 0.19       $ 0.17   

Weighted average number of common shares outstanding used in EPS computation:

     

Basic number of common shares outstanding

     59,005         57,911   

Diluted number of common shares outstanding

     59,790         58,312   

STERIS Corporation

Consolidated Condensed Balance Sheets

(In thousands)

 

     June 30,      March 31,  
     2013      2013  
     (Unaudited)         

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 165,838       $ 142,008   

Accounts receivable, net

     262,846         275,937   

Inventories, net

     155,148         144,443   

Other current assets

     44,236         51,552   
  

 

 

    

 

 

 

Total Current Assets

     628,068         613,940   

Property, plant, and equipment, net

     436,395         431,952   

Goodwill and intangible assets, net

     699,031         704,424   

Other assets

     10,666         10,793   
  

 

 

    

 

 

 

Total Assets

   $ 1,774,160       $ 1,761,109   
  

 

 

    

 

 

 

Liabilities and Equity

     

Current liabilities:

     

Accounts payable

   $ 78,464       $ 79,374   

Other current liabilities

     118,446         139,463   
  

 

 

    

 

 

 

Total Current Liabilities

     196,910         218,837   

Long-term debt

     513,700         492,290   

Other liabilities

     92,284         103,002   

Equity

     971,266         946,980   
  

 

 

    

 

 

 

Total Liabilities and Equity

   $ 1,774,160       $ 1,761,109   
  

 

 

    

 

 

 


STERIS Corporation

Segment Data

(In thousands)

 

     Three Months Ended  
     June 30,  
     2013      2012  
     (Unaudited)      (Unaudited)  

Segment Revenues:

     

Healthcare

   $ 258,888       $ 229,514   

Life Sciences

     59,915         60,496   

STERIS Isomedix Services

     48,224         46,056   
  

 

 

    

 

 

 

Total Reportable Segments

     367,027         336,066   

Corporate and Other

     625         894   
  

 

 

    

 

 

 

Total Segment Revenues

   $ 367,652       $ 336,960   
  

 

 

    

 

 

 

 

     Three Months Ended  
     June 30,  
     2013     2012  
     (Unaudited)     (Unaudited)  

Segment Operating Income:

    

Healthcare

   $ 14,947      $ 22,730   

Life Sciences

     12,539        11,854   

STERIS Isomedix Services

     14,718        15,578   
  

 

 

   

 

 

 

Total Reportable Segments

     42,204        50,162   

Corporate and Other

     (1,192     (1,860
  

 

 

   

 

 

 

Total Operating Income

   $ 41,012      $ 48,302   
  

 

 

   

 

 

 


STERIS Corporation

Consolidated Condensed Statements of Cash Flows

(In thousands)

 

     Three Months Ended  
     June 30,  
     2013     2012  
     (Unaudited)     (Unaudited)  

Operating Activities:

    

Net income

   $ 32,317      $ 30,354   

Non-cash items

     23,321        15,509   

Change in Accrued SYSTEM 1 Rebate Program and class action settlement

     (163     (9,242

Changes in operating assets and liabilities

     (22,778     24,646   
  

 

 

   

 

 

 

Net cash provided by operating activities

     32,697        61,267   

Investing Activities:

    

Purchases of property, plant, equipment, and intangibles, net

     (21,741     (15,542

Proceeds from sale of property, plant, equipment and intangibles

     8        17   

Investments in businesses, net of cash acquired

     (115     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (21,848     (15,525

Financing Activities:

    

Proceeds (payments) under credit facilities, net

     21,410        —     

Deferred financing fees and debt issuance costs

     (43     —     

Repurchases of common shares

     (4,775     (1,117

Cash dividends paid to common shareholders

     (11,244     (9,867

Stock option and other equity transactions, net

     8,482        3,457   

Tax benefit from stock options exercised

     718        525   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     14,548        (7,002

Effect of exchange rate changes on cash and cash equivalents

     (1,567     (2,830
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     23,830        35,910   

Cash and cash equivalents at beginning of period

     142,008        150,821   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 165,838      $ 186,731   
  

 

 

   

 

 

 

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,  
     2013     2012  
     (Unaudited)     (Unaudited)  

Calculation of Free Cash Flow:

    

Cash flows from operating activities

   $ 32,697      $ 61,267   

Purchases of property, plant, equipment, and intangibles, net

     (21,741     (15,542

Proceeds from the sale of property, plant, equipment, and intangibles

     8        17   
  

 

 

   

 

 

 

Free Cash Flow

   $ 10,964      $ 45,742   
  

 

 

   

 

 

 

 

     Twelve Months Ended  
     March 31,  
     2014  
     (Outlook)  

Calculation of free cash flow for outlook:

  

Cash flows from operating activities

   $ 235,000   

Purchases of property, plant, equipment, and intangibles, net

     (90,000
  

 

 

 

Free Cash Flow

   $ 145,000   
  

 

 

 


STERIS Corporation

Non-GAAP Financial Measures

(In thousands, except per share data)

The Company has referred to an adjusted financial measure regarding the results of operations excluding certain items to provide meaningful comparative analysis between the periods. This financial measure is considered to be a “non-GAAP financial measure” under Securities Exchange Commission rules. Reconciliation of the financial measure to its nearest GAAP financial measure is provided in the table below.

 

     Three months ended      Twelve months ended
     June 30,      March 31,
Calculation of adjusted net income per diluted share:    2013     2012      2014
     (Unaudited)     (Unaudited)      (Outlook)

Net Income per diluted share

   $ 0.54      $ 0.52       $2.42 - $2.55

Amortization and impairment of purchased intangible assets, net of tax

     0.04        0.01       0.18

Tax benefit, European restructuring

     (0.15     —         (0.15)

Acquisition related transaction and integration expenses, net of tax

     0.01        —         0.02
  

 

 

   

 

 

    

 

Adjusted net income per diluted share

   $ 0.44      $ 0.53       $2.47 - $2.60
  

 

 

   

 

 

    

 


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 certain items 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.

 

     Three months ended  
     June 30,  
     2013     2012  
     (Unaudited)     (Unaudited)  

Operating income

   $ 41,012      $ 48,302   

Amortization and impairment of purchased intangible assets

     4,290        1,026   

Acquisition related transaction and integration costs

     708        —     

Restructuring

     52        (136
  

 

 

   

 

 

 

Adjusted operating income

   $ 46,062      $ 49,192   
  

 

 

   

 

 

 

Net income

   $ 32,317      $ 30,354   

Amortization and impairment of purchased intangible assets, net of tax

     2,617        626   

Acquisition related transaction and integration costs

     432        —     

Tax benefit, European restructuring

     (9,245     —     

Restructuring, net of tax

     32        (83
  

 

 

   

 

 

 

Adjusted net income

   $ 26,153      $ 30,897   
  

 

 

   

 

 

 

Healthcare operating income

   $ 14,947      $ 22,730   

Amortization and impairment of purchased intangible assets

     3,947        627   

Acquisition related transaction and integration costs

     708        —     

Restructuring

     52        (136
  

 

 

   

 

 

 

Adjusted Healthcare operating income

   $ 19,654      $ 23,221   
  

 

 

   

 

 

 


STERIS Corporation

Unaudited Supplemental Financial Data

First Quarter Fiscal 2014

As of June 30, 2013

 

     FY 2014     FY 2013  

Total Company Revenues

   Q1     Q1  

Capital

   $ 123,894      $ 138,418   

Consumables

     99,034        75,335   

Service

     144,724        123,207   
  

 

 

   

 

 

 

Total Recurring

     243,758        198,542   
  

 

 

   

 

 

 

Total Revenues

   $ 367,652      $ 336,960   
  

 

 

   

 

 

 

United States Revenues

   $ 288,353      $ 262,404   

United States Revenues as a % of Total

     78     78

International Revenues

   $ 79,299      $ 74,556   

International Revenues as % of Total

     22     22

Segment Data

   Q1     Q1  

Healthcare

    

Revenues

    

Capital

   $ 101,674      $ 114,433   

Consumables

     78,563        56,332   

Service

     78,651        58,749   
  

 

 

   

 

 

 

Total Recurring

     157,214        115,081   
  

 

 

   

 

 

 

Total Healthcare Revenues

   $ 258,888      $ 229,514   
  

 

 

   

 

 

 

Operating Income

     14,947        22,730   
  

 

 

   

 

 

 

Adjusted Operating Income (1)

     19,654        23,221   

Life Sciences

    

Revenues

    

Capital

   $ 22,220      $ 23,985   

Consumables

     20,471        19,003   

Service

     17,224        17,508   
  

 

 

   

 

 

 

Total Recurring

     37,695        36,511   
  

 

 

   

 

 

 

Total Life Sciences Revenues

   $ 59,915      $ 60,496   
  

 

 

   

 

 

 

Operating Income

     12,539        11,854   
  

 

 

   

 

 

 

Isomedix Services

    

Revenues

   $ 48,224      $ 46,056   

Operating Income

     14,718        15,578   
  

 

 

   

 

 

 

Corporate and Other

    

Revenues

   $ 625      $ 894   

Operating Income (Loss)

     (1,192     (1,860

Other Data

   Q1     Q1  

Healthcare Backlog

   $ 120,170      $ 99,342   

Life Sciences Backlog

     44,562        47,381   
  

 

 

   

 

 

 

Total Backlog

   $ 164,732      $ 146,723   

Free Cash Flow

   $ 10,964      $ 45,742   

Net Debt

   $ 347,862      $ 23,269   

 

(1) The Company has referred to certain adjusted financial measures regarding the results of operations excluding certain items to provide meaningful comparative analysis between the periods. These financial measures are considered to be “non-GAAP financial measure” under Securities Exchange Commission rules. Reconciliation of each financial measure to its nearest GAAP financial measure is provided in the preceding tables.

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 adjusted measures, backlog, free cash flow and net debt.