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Steris Corporation Announces Fiscal 2016 Second Quarter FINANCIAL RESULTS

The following excerpt is from the company's SEC filing.

6% top-line growth, including currency headwind of 2%

U.S. GAAP earnings of $0.14 per diluted share

Adjusted earnings per diluted share increased 22% to $0.83

Synergy Health acquisition expected to close on November 2, 2015

Mentor, Ohio (October 30, 2015) - STERIS Corporation (NYSE: STE) today announced financial results for its fiscal 2016 second quarter ended September 30, 2015. Fiscal 2016 second quarter revenue increased 6% to $489.9 million compared with $462.7 million in the second quarter of fiscal 2015, with growth in all three segments. As reported, net income was $8 .7 million, or $0.14 per diluted share, compared with net income of $31.0 million, or $0.52 per diluted share in the second quarter of fiscal 2015.

Adjusted Results

Adjusted net income for the second quarter of fiscal 2016 was $50.1 million, or $0.83 per diluted share, compared with adjusted net income for the second quarter of the previous year of $40.6 million, or $0.68 per diluted share.

STERIS is in a good position heading into our second half, with solid top and bottom-line growth, said Walt Rosebrough, President and Chief Executive Officer of STERIS. We are very pleased to be days away from closing the Synergy Health acquisition. We are excited about the future, as the combined Company will bring together the many strengths of both businesses, which will allow us to accomplish more than either one of us could separately.

Segment Results

Healthcare revenue grew 3% in the quarter to $362.3 million compared with $351.2 million in the second quarter of fiscal 2015. Contributing to the quarter, service revenue increased 4%, consumable revenue grew 2% and capital equipment revenue increased 3%. Solid performance in the United States continues to be offset by weakness internationally.

As reported, Healthcare operating income was $20.3 million compared with $29.9 million in last years second quarter. Adjusted segment operating income was $45.5 million compared with adjusted operating income of $45.2 million in the second quarter of fiscal 2015. The increase in profitability was primarily due to increased volume and favorable foreign currency exchange rates.

News Announcement

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Life Sciences second quarter revenue increased 20% to $71.0 million compared with $59.1 million in the second quarter of fiscal 2015. Consumable revenue grew 32%, reflecting the recent acquisition of GEPCO, capital equipment revenue increased 25% and service revenue grew 3%. Life Sciences operating income as reported was $18.1 million compared with $13.0 million in the prior years second quarter. Adjusted segment operating income was $20.9 million compared with adjusted segment operating income of $13.2 million in the prior year quarter. The increase in profitability was primarily due to the increased volume, including GEPCO, and favorable foreign currency exchange rates.

Fiscal 2016 second quarter revenue for Isomedix Services increased 8% to $55.8 million compared with $51.9 million in the same period last year. Revenue benefited from increased volume from the segments core medical device Customers. As reported, operating income was $14.8 million in the quarter compared with $14.4 million in the second quarter of last year. Adjusted segment operating income increased to $17.5 million in the second quarter of fiscal 2016 compared with adjusted segment operating income of $14.5 million last year, due primarily to the increase in volume.

Cash Flow

Net cash provided by operations for the first half of fiscal 2016 was $79.5 million, compared with $104.9 million in fiscal 2015. Free cash flow (see note 1) for the first half of fiscal 2016 was $39.6 million compared with $69.2 million in the prior year. The decline in free cash flow is primarily due to an increased payout level in regards to the Companys prior year annual compensation program, a pension contribution made in connection with the settlement of a legacy pension obligation, and additional expenses related to the proposed Combination with Synergy Health.

Outlook

On a stand-alone basis, STERIS is confirming its previous outlook of revenue growth of 6-7% for fiscal 2016. Expectations for adjusted earnings per diluted share are unchanged in the range of $3.15 to $3.30 for the full fiscal year. The Synergy Health acquisition is anticipated to close on Monday, November 2, 2015. STERIS plans to provide an outlook inclusive of Synergy Health as soon as practical.

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Fiscal 2016 free cash flow (see note 1) is now anticipated to be approximately $130.0 million, reflecting approximately $30 million in cash expenses related to the Synergy Health acquisition. Capital expenditures are anticipated to be approximately $105.0 million, reflecting the impact of acquisitions, continued expansion within Isomedix, new product development and general maintenance and repair for existing facilities.

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 today either over the Internet at www.steris-ir.com or via phone by calling 1-888-566-0592 in the United States and Canada, and 1-203-369-3069 internationally.

About STERIS

The mission of STERIS Corporation is to help our Customers create a healthier and safer world by providing innovative healthcare and life science product and service solutions around the globe. 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. STERISs calculation of free cash flow may vary from other companies.

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U.K. Takeover Code Directors Confirmation

Under Rule 28.1 of the U.K.s City Code on Takeovers and Mergers (the Takeover Code) which applies in light of our proposed acquisition of Synergy Health, our directors must provide a so-called directors confirmation in respect of our net income for the quarter ended September 30, 2015 (the Net Income Statements) and the outlook guidance (the Outlook) contained in this announcement since they constitute unaudited profit estimates and a profit forecast respectively for the purposes of the Takeover Code. Accordingly, our directors confirm that:

the Net Income Statements and the Outlook have been properly compiled on the basis of the assumptions contained or referred in our annual report on Form 10-K for the year ended March 31, 2015 and, in the case of the Outlook, on the basis of the assumption contained in this announcement under the section captioned Outlook; and

the basis of accounting used for preparing Net Income Statements and the Outlook is consistent with our accounting policies.

Enquiries:

Investor Contact: Julie Winter, Director, Investor Relations

Tel: +1 440 392 7245

Media Contact:

Stephen Norton, Senior Director, Corporate Communications

Tel: +1 440 392 7482

Lazard & Co., Limited (Financial Adviser to STERIS and New STERIS)

Stephen Sands

Tel: +44 20 7187 2000

Nicholas Shott

Al Garner

Tel: +1 212 632 6000

Andrew Dickinson

Tel: +1 415 623 5000

Lazard & Co., Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to STERIS and New STERIS and no one else in connection with the proposed transaction pursuant to which New STERIS plc (New STERIS) will become the ultimate parent company of Synergy Health plc pursuant to an English scheme of arrangement transaction and of STERIS Corporation pursuant to the merger of STERIS Corporation with and into a subsidiary of New STERIS (the Combination) and will not be responsible to anyone other than STERIS and New STERIS for providing the protections afforded to clients of Lazard & Co., Limited nor for providing advice in relation to the Combination or any other matters referred to in this Announcement. Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with this Announcement, any statement contained herein, the Combination or otherwise.

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Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company...


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