STERIS Corporation Announces Fiscal 2008 Second Quarter Results

Wednesday, October 31, 2007 General News
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MENTOR, Ohio, Oct. 30 STERIS Corporation(NYSE: STE) today announced financial results for its fiscal 2008 secondquarter ended September 30, 2007. Fiscal 2008 second quarter revenuesincreased 4% to $295.0 million compared with $283.5 million in the secondquarter of fiscal 2007, primarily driven by growth in the Healthcare andIsomedix segments.

Fiscal 2008 second quarter net income was $16.0 million, or $0.25 perdiluted share, compared with net income of $16.4 million, or $0.25 per dilutedshare, in the second quarter of fiscal 2007. Included in net income for thesecond quarter of fiscal 2008 and fiscal 2007 are expenses associated with theErie to Mexico transfer of manufacturing operations. These expensesnegatively impacted diluted earnings per share in the second quarter of fiscal2008 by $0.01, compared with $0.03 per diluted share in the prior year period.

"I am excited to be on board at STERIS, and through a series of meetingswith key constituents and visits to many of our facilities, I am working toimmerse myself in the operations of the Company," said Walt Rosebrough,STERIS's president and chief executive officer. "From a performanceperspective, demand appears to be improving while raw material cost pressuresmay continue in the short-term. Overall, I am encouraged by what I see and Ibelieve there is an excellent opportunity to build on the strong foundationalready in place."

Quarterly Segment Results

Healthcare revenues in the quarter increased 5% to $206.7 million,compared with the second quarter of fiscal 2007. The segment experiencedcontinued strong growth in service and consumable revenues. Capital equipmentrevenues increased slightly during the quarter, while order backlog levelsgrew to a record $94.0 million, an increase of 14% compared with the prioryear period. Operating income in the Healthcare segment was $18.5 million,compared with $20.4 million in the second quarter of fiscal 2007, as thesegment continued to face challenges from significant increases in rawmaterial costs year over year. In addition, the segment incurred higheroperating expenses to support growth initiatives.

Life Sciences second quarter revenues were $53.5 million, an increase of1% compared with the second quarter of fiscal 2007. Service and consumablerevenue growth were strong, while capital equipment sales were impacted by thetiming of orders. Strong late quarter capital equipment demand helped drivebacklog levels to a record $57.8 million, a 31% increase compared with theprior year period. Life Sciences reported operating income of $1.4 million inthe quarter, compared with operating income of $0.3 million in the secondquarter of fiscal 2007. The improvement in operating income was driven byhigher margin service and consumable revenues during the quarter as comparedwith the prior year quarter.

Second quarter revenues for Isomedix Services were $34.8 million, anincrease of 4% compared with the same period last year, primarily driven byincreased demand from medical device customers. Operating income increased11% to $6.5 million compared with the prior year quarter, and largelyreflected increased volume throughput in existing facilities.

Cash Flow

Net cash provided by operations for the first six months of fiscal 2008was $52.7 million, compared with net cash provided by operations of $18.3million in the first six months of fiscal 2007. Free cash flow (see note 1)was $31.2 million in the first six months of fiscal 2008, compared withnegative free cash flow of $3.2 million in the same period last year. Thefirst six months of fiscal 2007 included a $27.6 million payment to the IRSfor tax expenses previously incurred and was the primary driver of thedifference in free cash flow between the periods.

During the quarter, the Company repurchased 1,244,400 shares of its commonstock at an average price o

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