STERIS Corporation (NYSE: STE) today announced financial results for its fiscal 2011 first quarter ended June 30, 2010. During the first quarter, the Company recorded the previously announced liability related to the SYSTEM 1 Rebate Program. Of the $110 million pre-tax amount recorded, $102 million is attributable to the Customer Rebate portion of the Program and was recorded as a reduction of revenues, and $8 million is attributable to the disposal of the SYSTEM 1 units to be returned and was recorded as an increase in cost of revenues.
“Early indications are that more Customers may use the SYSTEM 1 Rebate to purchase SYSTEM 1E units than we originally anticipated, which has increased our original Rebate Program estimate”
In order to provide meaningful comparative analysis, the fiscal 2011 financial information provided in this press release excludes the $110 million pre-tax impact of the SYSTEM 1 Rebate Program unless otherwise noted. Please refer to the attached schedules for additional information, including reconciliations from these "non-GAAP financial measures" to as reported results.
Fiscal 2011 first quarter revenues were $291.3 million compared with $283.5 million in the first quarter of fiscal 2010, an increase of 3%. Operating profit increased 10% to $47.0 million, or 16.1% of revenues, compared with $42.9 million, or 15.1% of revenues in the first quarter of fiscal 2010. Fiscal 2011 first quarter net income was $28.0 million, or $0.46 per diluted share, compared with net income of $25.5 million, or $0.43 per diluted share, in the first quarter of fiscal 2010.
"Early indications are that more Customers may use the SYSTEM 1 Rebate to purchase SYSTEM 1E units than we originally anticipated, which has increased our original Rebate Program estimate," said Walt Rosebrough, President and Chief Executive Officer of STERIS. "While it is still too early to predict what the total SYSTEM 1E demand will be, we are optimistic about Customer response to this new product. We continue to believe we will be able to manufacture 4,000 to 6,000 units this fiscal year, with shipments beginning in the next few months."
Segment Results
Healthcare revenues in the quarter were $206.1 million compared with $200.6 million in the first quarter of fiscal 2010, an increase of 3%. Double digit growth in capital equipment was somewhat offset by declines in consumables and service. Capital equipment revenue grew 16%, reflecting increases in most major product categories. Consumable revenue declined 9%, due to reductions in S20 volumes and lower H1N1 product sales as compared to the prior year. Operating income was flat with the prior year at $32.1 million primarily due to lower S20 volumes.
Life Sciences first quarter revenues were $46.6 million compared with $46.1 million in the first quarter of fiscal 2010, an increase of 1%. Strength in consumables and service was offset by a decline in capital equipment. Life Sciences operating income was $6.3 million, an increase of 32% compared with the prior year, driven by product mix and overall operating efficiencies.
Fiscal 2011 first quarter revenues for Isomedix Services were $37.7 million compared with $35.4 million in the same period last year, an increase of 6%. Revenues benefitted from an improvement in demand from core medical device Customers. Operating income was $10.6 million in the quarter compared with $8.3 million in the first quarter of last year due to the increased revenues.
As Reported Results
Reported results for the first quarter of fiscal 2011 were revenues of $189.0 million, operating loss of $63.0 million and a net loss of $45.2 million. Please refer to the attached schedules for additional information.
Cash Flow
Net cash provided by operations for the first quarter of fiscal 2011 was $29.6 million, compared with $32.6 million in the same period last year. Free cash flow (see note 1) for the first quarter of fiscal 2011 was $17.3 million, compared with $24.4 million in the prior year quarter. The decline in free cash flow was driven by increased working capital requirements and higher capital spending levels.
Quarterly Dividend Increased
The Company also announced today that STERIS's Board of Directors has authorized a four cent increase in its quarterly dividend to $0.15 per common share. The dividend is payable September 21, 2010 to shareholders of record at the close of business on August 24, 2010.
Outlook
The Company's outlook is unchanged for the full fiscal year, with revenue growth of approximately 5%, and earnings per diluted share in the range of $2.00 to $2.30. Refer to the earnings announcement dated May 6, 2010 for the detailed full year outlook and other assumptions.