STERIS first quarter revenue increases to $318.6 million

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.

“We are pleased to have a solid start to fiscal 2012, with growth across the business”

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 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.